On August 20, 2026, SBA published two Federal Register documents that, if finalized, will change the competitive math on every small-business set-aside in the federal market.[1] The first is a proposed rule rewriting size standards for 338 consolidated industry groups.  The second is a revised methodology notice explaining how SBA calculated those numbers.  Comments on both are due September 21, 2026.

What the Proposal Actually Does

SBA’s current system uses 102 size-standard levels spread across 978 six-digit NAICS industries plus 18 subindustry exceptions.  The proposed rule would collapse that structure to 338 standards set at the four- or five-digit NAICS level—a roughly 65% reduction in line items.  Every existing exception would be eliminated.[2]

The consolidation does three things at once:

1. Raises thresholds. Most proposed standards go up, some dramatically.  SBA proposes not to reduce any industry standard, even in the 45 industries where its analytics pointed to a decrease.
2. Shifts many industries from receipts to employees. Under the baseline, 496 standards are receipts-based.  Under the proposal, only 129 would be.  Construction is the most visible example: construction would move from receipts-based to employee-based standards, so contractors should map their specific NAICS codes before modeling the impact.
3. Eliminates exceptions. If you currently rely on a federal-contracting size-standard exception in your NAICS code, that exception would disappear.

Who Gains Entry

SBA estimates the proposal would increase the number of businesses classified as small from 6,344,967 to 6,459,508—a net gain of 114,541 firms, or about 1.8%.

In the federal contracting lane specifically, SBA identifies 37,002 unique firms with FY 2025 contracts that would become newly eligible small businesses.  Those firms accounted for roughly 105,655 contracts totaling more than $71 billion.

SBA is candid about the competitive effect: it expects the greatest impact to fall on businesses closest in size to firms newly classified as small.[3] Translation: if you are a mid-tier firm sitting just below the current ceiling, the firms that just joined your competitive pool are probably your size or larger.

Selected Proposed Increases

A sample of the proposed changes illustrates the scale:[4]

Here Is the Catch

A higher size standard does not hand you a set-aside win.  It hands you eligibility.  Three constraints still bind:

Affiliation.  SBA counts the receipts or employees of the concern and all its domestic and foreign affiliates.  Control is measured by power to control, whether exercised or not.  A higher ceiling means nothing if your investor’s portfolio rolls up through affiliation.  SBIC-licensed investment and SBA-approved mentor-protégé relationships have specific exceptions—but those exceptions have conditions.[5]

Socioeconomic program control.  Size is one gate.  The 8(a), WOSB, EDWOSB, VOSB, SDVOSB, and HUBZone programs each impose separate ownership, control, and management requirements that do not change with this proposal.  A firm that gains size eligibility still must satisfy every other program criterion.[6]

Recertification triggers.  A merger, acquisition, or sale that changes controlling interest requires recertification within 30 calendar days.  Long-term contracts trigger recertification no more than 120 days before the end of the fifth year and before each later option.  On pending work, the effect of a disqualifying recertification depends on the timing and award type under 13 C.F.R. § 125.12: if the triggering event occurs within 180 days after the date of an offer and before award, the concern is ineligible for the pending set-aside or reserve; if it occurs more than 180 days after the date of an offer but before award, the concern remains eligible for a pending single-award set-aside or reserve, but is ineligible for a pending award under a multiple-award small-business set-aside or reserve. After the January 17, 2026 delayed-effective-date cutoff, a disqualifying recertification following a transaction with a non-small business can also bar future set-aside orders and options under an existing MAC; a transaction with another small business leaves the concern eligible for those opportunities but eliminates small-business goal credit.[7]

Downstream Effects: JVs, Capital, and Exit Planning

If the rule finalizes as proposed, the downstream consequences are significant:

• Joint ventures. A conventional small-small JV submits as small if each member qualifies under the applicable size standard; SBA mentor-protégé JVs are a separate test.  Higher ceilings may let a larger partner qualify independently—or may invite new JV competitors into the pool.
• Growth capital and SBIC strategy. SBIC-funded companies already benefit from an affiliation exception.  A higher size standard expands the runway before that exception matters—but the structure still matters as much as the amount.[8]
• M&A and exit timing. Acquirers above the new ceiling do not fit the exception.  Recertification after a sale still governs whether the concern remains eligible for pending awards and for future small-business orders under a MAC.
• NAICS mapping. Consolidation at the four- or five-digit level may change the measure that applies to your work and may eliminate exceptions.  A firm currently operating under a six-digit receipts standard should confirm whether the proposed grouping uses receipts or employees before assuming the new rule helps.

Note: Current size standards remain in effect unless and until a final rule is published.  This is a proposed rule with a 30-day comment period, not an immediate change.  SAM size status still requires a separate annual size certification.[9]

30-Day Checklist (Before September 21, 2026)

1. Map your NAICS codes to the proposed four-digit groups. Identify which proposed standard applies to each revenue line.  Flag any code where your standard changes from receipts to employees or where the grouping pulls in different competitors.
2. Model your size under the new thresholds. Run the receipts or employee calculation that applies to your proposed grouping, including affiliates.  Most firms will either remain small or become newly small, but give closer attention to any code where the proposal changes the measure from receipts to employees or eliminates an exception you currently use.
3. Assess affiliation exposure. If you have investors, JV partners, or relationships that create affiliation, confirm that the combined entity still fits under the proposed standard.
4. Review pending and planned transactions. A deal that closes after a final rule could trigger recertification under a new standard.  Model timing scenarios now.
5. Evaluate your comment strategy. If the proposed consolidation or threshold shift disadvantages your competitive position, September 21 is the deadline.  Comment on Docket No. SBA-2026-0199 (standards) and Docket No. SBA-2026-0265 (methodology).  SBA is required to respond to substantive comments.
6. Check downstream program eligibility. Size eligibility alone does not confer 8(a), WOSB, SDVOSB, or HUBZone status.  Confirm you still meet the separate ownership, control, and location requirements for each program you rely on.

How We Can Help

Maynard Nexsen’s Government Solutions team advises contractors on size and status strategy across the full transaction lifecycle—comment drafting, NAICS mapping, eligibility modeling, joint venture structuring, mentor-protégé agreements, SBIC-funded growth capital, recertification planning, and M&A timing.  If this proposal changes your competitive position, we should talk before September 21.

_{This article is for informational purposes only and does not constitute legal advice.  Specific situations require analysis of specific facts.}

_{[1]Small Business Size Standards, 91 Fed. Reg. 53741 (Aug. 20, 2026) (proposed rule), 13 C.F.R. pt. 121, RIN 3245-AI67, Docket No. SBA-2026-0199, https://www.federalregister.gov/documents/2026/08/20/2026-17042/small-business-size-standards; Small Business Size Standards: Revised Size Standards Methodology, 91 Fed. Reg. 54096 (Aug. 20, 2026) (notice of availability), Docket No. SBA-2026-0265, https://www.federalregister.gov/documents/2026/08/20/2026-17039/small-business-size-standards-revised-size-standards-methodology.}

_{[2]91 Fed. Reg. at 53741, 54099, 54103 (102 current size-standard levels covering 978 NAICS industries and 18 subindustries; 338 proposed standards—276 at the four-digit industry-group level and 62 at the five-digit industry level; 496 current receipts-based industry standards reduced to 129; 45 industries would retain current standards rather than take an analytically indicated decrease; all size-standard exceptions would be removed).}

_{[3]91 Fed. Reg. at 53770–71.}

_{[4]SBA, SBA Proposes Overhaul to Simplify Small Business Classification and Expand Access to Federal Programs (Aug. 20, 2026); see proposed table to 13 C.F.R. § 121.201, 91 Fed. Reg. 53741.}

_{[5]13 C.F.R. § 121.103(a)(1), (a)(6), (b)(1); 13 C.F.R. § 125.9.}

_{[6]See 13 C.F.R. §§ 124.105–.106; 126.200, 126.202; 127.201–.202; 128.202–.203.}

_{[7]13 C.F.R. § 125.12(a), (e)(2)(i)–(iii), (g).  See also 13 C.F.R. § 121.404(i) (directing recertification questions to § 125.12).}

_{[8]See Maynard Nexsen, SBIC Article Series, https://www.maynardnexsen.com/tag-sbic-article-series.}

_{[9]91 Fed. Reg. at 53741; 13 C.F.R. § 121.110.}