On June 24, 2019, the U.S. Small Business Administration (SBA) released its proposed new rule on the calculation of annual average receipts. This much anticipated, proposed rule is the first step to implementing the Small Business Runway Extension Act (Runway Act). The Runaway Act had bipartisan support, and was signed into law last December, but has lagged in implementation. The SBA has been criticized because, generally, this change is seen as supporting small businesses.

In January, we published an article about the Runway Act changing the calculation period for revenue-based size standards from a three-year period to a five-year period, and the SBA’s decision to delay implementation of the change until the implementing regulations in 13 CFR Part 121 were revised.

Six months later, the SBA has published its proposed rule, which will implement the Runway Act. The proposed rule is open for public comment until Aug. 23 here. Once implemented, small businesses will benefit from a seemingly small but critical change: the calculation period for average annual receipts will increase from the current three-year period to a five-year period. In most instances, this will give small businesses more time to compete in small business set-aside procurements. The new five-year calculation will also allow those small businesses with an outlier year of significant revenue more time to sustain the growth and prepare to compete in unrestricted competitions.