While critics often lament how “lame duck” Congresses are typically unable to accomplish anything in the period following an election, the 115th Congress deserves some kudos for being an exception. HR 6330 titled the “Small Business Runway Extension Act of 2018,” was introduced in the House of Representatives in July and was approved by voice vote on September 25th. The identical companion bill, S. 3562, was introduced in the Senate in October and approved by voice vote on December 6th. The legislation arrived on the President’s desk on December 10th and was signed into law on December 17th.

The Small Business Runway Extension Act is designed to help growing small business government contractors successfully navigate the middle market as they reach the upper limits of their small size standards. Currently, the U.S. Small Business Administration (SBA) formula typically used for the award of services contracts calculates the size of a small business based on a firm’s average revenue for the past three (3) years (see 13 CFR 121.104). The new law amends the formula mandated by the Small Business Act to instead use the average of revenue generated by the firm for the past five (5) years. The House Report on HR 6330 indicates that Congress hopes that this modest modification of SBA’s size formula will “reduce the impact of rapid-growth years which result in spikes in revenue that may prematurely eject a small business out of their small size standard.” In fact, this change can greatly extend the length of time a company can remain “small” for multiple years even after greatly expanding their annual revenue.

This definitely could be a game changer for those small business government contractors seeking awards of services contracts. However, the law makes no changes to size standards for manufacturing contracts, which are based on a firm’s number of employees. Moreover, implementation of the new law will require the SBA to issue new regulations following the requisite notice and comment period.

For more information, contact MWL Partner Peter Fish