The U.S. Small Business Administration (SBA) recently issued a final rule adopting a 24-month — as opposed to the current 12-month — average to calculate a business’s number of employees for eligibility purposes in all SBA programs that contain employee-based size standards. SBA’s new rule — which takes effect July 6, 2022 — is discussed below.

Background

  • Previously, SBA required the use of a 12-month average to calculate a business’s number of employees for industries subject to an employee-based size standard.
  • For manufacturers subject to SBA’s employee-based size standards, the 2021 National Defense Authorization Act changed the averaging period to 24 months.
  • In November 2021, SBA issued a proposed rule to amend its regulations by changing the 12-month averaging period to 24 months for all SBA programs and all industries subject to an employee-based size standard. 

Key Features  

  • SBA’s final rule applies to all employee-based sized standards — not just those that pertain to manufacturers. 
  • Unlike SBA’s implementation of the Small Business Runway Extension Act of 2018 — which provided a two-year transition period during which a business could use either a five-year or a three-year average to calculate annual receipts for size purposes — SBA’s new rule does not provide for a transition period where businesses can use either a 24-month or a 12-month average to calculate their number of employees.
  • However, the final rule provides that, for purposes of determining eligibility in the Business Loan, Disaster Loan, Small Business Investment Company, and Surety Bond Guarantee Programs, businesses may now use either a five-year or a three-year average.
  • SBA’s final rule is effective July 6, 2022.

Conclusion

If you have any questions about SBA’s final rule or any related issues, please feel free to contact Aron Beezley or Gabby Sprio.  

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Photo of Aron C. Beezley Aron C. Beezley

Aron Beezley is the co-leader of Bradley’s Government Contracts Practice Group. Ranked nationally in Government Contracts Law by Chambers in 2019-2020, named one of the “Top Attorneys Under 40” nationwide in Government Contracts Law by Law360 in 2016-2017, and listed in Washington, D.C.

Aron Beezley is the co-leader of Bradley’s Government Contracts Practice Group. Ranked nationally in Government Contracts Law by Chambers in 2019-2020, named one of the “Top Attorneys Under 40” nationwide in Government Contracts Law by Law360 in 2016-2017, and listed in Washington, D.C. Super Lawyers as a “Rising Star” in Government Contracts Law in 2014-2020, Aron’s vast experience includes representation of government contractors in a variety of industries and in all aspects of the government-contracting process, including negotiation, award, performance and termination.

Photo of Gabrielle A. Sprio Gabrielle A. Sprio

Gabby Sprio is an associate in Bradley’s Construction Practice Group. Her practice focuses primarily on government contracts law. Prior to law school, Gabby worked for a leading global aerospace and defense company. In this role, she gained experience in government contract administration and…

Gabby Sprio is an associate in Bradley’s Construction Practice Group. Her practice focuses primarily on government contracts law. Prior to law school, Gabby worked for a leading global aerospace and defense company. In this role, she gained experience in government contract administration and financial analysis.