On December 17, 2018, President Trump signed Public Law No. 115-324, the Small Business Runway Extension Act of 2018 (Runway Extension Act). The Runway Extension Act amends section 3(a)(2)(C)(ii)(II) of the Small Business Act. This Act modifies the method for prescribing size standards for small businesses. Under prior law, firms in industries with receipts-based size standards, calculated size based on annual average gross receipts over three years. The Runway Extension Act provides that, unless specifically authorized by statute, receipts-based size standards be based on annual average gross receipts over five years.
The Small Business Act still requires that new size standards be approved by the Administrator through a rulemaking process. The Runway Extension Act does not include an effective date. As a result, it is the opinion of many that organizations hoping to take advantage of the Runway Extension Act immediately, will have to wait until the SBA changes regulations, including 13 C.F.R. § 121.104 (“How does SBA calculate annual receipts?”), and potentially also issue guidance to contractors on how to use the new rule.
There is, however, a point of contention regarding the effective/start date of the Runway Extension Act. Federal courts have previously ruled in Johnson v. United States that, “absent clear congressional direction, it [the act] takes effect on its enactment date,” which for the Runway Extension Act would be as of the date the act was enacted. Based on this legal understanding, some contractors may choose to make bids on contracts based on the five-year look-back period. Doing so, however, may have consequences for a contractor’s proposals and their standing with the SBA.
The Office of Government Contracting and Business Development (GCBD) is drafting revisions to SBA’s regulations and SBA’s forms to implement the Runway Extension Act. Until the Small Business Administration promulgates regulations in accordance with the Act, there simply is no easy or definitive answer to the magical question of: “Does the calculation of three years or five years apply to firms in industries with size standards calculated based on average annual gross receipts?”
Stay Tuned …