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US Government Contracts Quick Hit Briefing: Small Business Runway Extension Act Becomes Law, Yet Implementation Halted by Government Shutdown

On December 17, 2018, President Trump signed into law the Small Business Runway Extension Act of 2018 (HR 6330) (the Act), which modifies the period to measure small business size status from three fiscal years of average annual receipts to five fiscal years.

What This Means

Based on this amendment, government contractors that would have outgrown small business status under revenue-based North American Industry Classification System codes may gain additional years to transition from small business status to having to compete in full and open competitions with large businesses.

The Act does not make any additional amendments to the Small Business Act. It simply states: “Section 3(a)(2)(C)(ii)(II) of the Small Business Act (15 U.S.C. 632(a)(2)(C)(ii)(II)) is amended by striking ‘3 years’ and inserting ‘5 years.’”

However …

Following the passage of the Act on December 17, 2018, SBA issued an internal Information Notice on December 21, 2018, to address inquiries about whether the Act would be effective immediately. According to the SBA, since the Act still requires approval through a rulemaking process, the change is not effective immediately and is not applicable to present contracts, offers or bids. Therefore, until the regulations are amended, the SBA explains, “…businesses still must report their receipts based on a three-year average.” While the SBA’s position may be open to challenge, it is important for businesses to be aware that at this point, the use of the five-year period would be contrary to the SBA’s guidance.

Please note: Prior to issuance of this blog post, we attempted outreach to SBA about the Information Notice but to no avail due to the ongoing partial government shutdown. We will continue to monitor this situation and issue additional updates if any developments occur. 

© Copyright 2019 Squire Patton Boggs (US) LLP

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