Risk to Small Business Federal Contract Access

By NSBA

WASHINGTON, DC—The National Small Business Association (NSBA) warns of a newly proposed size standards change that would upend small business access to federal contracts.
 

On August 20, 2026, the United States Small Business Administration (SBA) issued a new proposed rule which would dramatically increase the size of companies considered “small” for purposes of federal programs, including procurement preferences. While the proposed rule cites a goal of simplification, it upends decades of precedent and is a major revamp that would merge nearly 1,000 categories under the North American Industry Classification System (NAICS) to just 338, and would create a significant competitive disadvantage for many small businesses.
 

“The SBA estimates that an additional 114,541 firms will now be classified as small, which may sound small given there are millions of small businesses, but don’t be fooled: Those companies have significant economic heft and already have federal contracts worth more than $71 billion, 40 percent of the total held by the entire small business community last year,” stated NSBA President and CEO Todd McCracken.
 

Many of the NAICS categories would undergo massive size increases, such as Custom Computer Programing Services—it would skyrocket in revenue caps from $34 million today to a whopping $531 million, a 1,462 percent increase. This means that a company with around $20 million in revenue, because many of these contractors are far under the current cap, would compete with a company earning more than $500 million. This is not the only massive increase.
 

Further complicating matters, the proposal allows only a 30-day comment period (until September 21, 2026), a wildly expedited timeline for such a massive rewrite of rules that impact millions of small businesses.
 

“If simplification is truly the goal here, why give small businesses just 30 days to respond? Do we as small businesses want regulatory simplification? Of course, but the simplification in this rule will actually benefit large businesses and federal contractors far more,” stated NSBA Board Chair Bill Belknap of AEORNG, a federal contracting firm in Pennsylvania. “The so-called 'solution' this rule provides is actually far worse than the clunky nature of the current NAICS.”