In its Final Rule issued May 31, 2016, the SBA issued rules implementing the 2013 National Defense Authorization Act. The final rule has a myriad of implementing aspects, and this short summary is not intended to address them all; but rather instead this summarizes some of the provisions regarding performance, affiliation, and joint ventures.


The final rules expressly allows certain arrangements without them establishing affiliation, while precluding others subject to rebuttable presumptions; including:

  • Small Business Teaming Arrangements are allowable without regard to affiliation for bundled contracts so long as each team member is small for the size standard assigned to the contract or subcontract.
  • Firms owned or controlled by married couples, parties to a civil union, parents, children, and siblings are presumed affiliated if they conduct business with each other or share or provide loans, resources, equipment, locations, or employees; although the presumption can be overcome by showing clear lines of fracture between the concerns..
  • SBA may presume identity of interest based on economic dependence if 70% or more of receipts over the previously 3 fiscal years are derived from another concern; although the presumption is rebuttable by showing lack of sole dependence.
  • Business concerns owned and controlled by an Indian Tribe, ANC, NHO, CDC, or wholly owned entities of an Indian Tribe, ANC, NHO, or CDS, is not considered affiliated by another concern owed by that entity based solely on the contractual relationship between the two concerns.

Calculating Receipts:

The final rule redefines how SBA calculates annual receipts. In short, receipts include all revenue from whatever source received or accrued; generally meaning the concern's total income (or gross income for sole proprietorships) plus the cost of goods sold as defined and reported to the IRS. Limited exclusions are identified in the final rule.

Subcontracting Limits:

Limitations compliance is determined by a percentage cap on the total amount of the prime contract that may be paid to subcontractors. Using the designated approach for that calculation, the limitation on the total amount paid are:

  • 85% for general construction contract;
  • 75% for specialty trade construction contracts; and
  • 50% for service and supply contracts.

Joint Ventures:

Finally, the final rule allows a joint venture to qualify as small for any government procurement when each partner to the joint venture qualifies individually as small under the size standard corresponding to the NAICS code assigned in the solicitation.

The final rule is effective June 30, 2016.