US Federal Agency Proposes New Threshold for Small Language Businesses

The US Small Business Administration (SBA), a cabinet-level federal agency that provides contracting expertise to small businesses, has proposed a series of new, higher receipts-based thresholds for certain small businesses interested in working with the government.

The thresholds vary by sector and industry within the North American Industry Classification System (NAICS). For small businesses providing translation and interpreting services under NAICS code 541930, the proposed threshold would jump from USD 8m to USD 20m. At the time of writing, there are 3,640 language service providers (LSPs) listed in SBA’s Dynamic Small Business Search database.

Classification as a small business can make a big difference when it comes to working with the US government. According to SBA, between 2016 and 2018, over 71% of small business contract dollars were awarded to small businesses through a variety of set-aside programs. It also impacts a business’ eligibility for certain loans, with SBA reporting about USD 2.9bn in loans to small businesses through the 7(a) and 504/CDC loan programs between 2016 and 2018.

Based on data from the same two-year period, SBA estimates that the proposed modified size standards could lead about 464 firms already active in federal contracting to gain small business status, enabling them to receive federal small business contracts totaling around USD 752.6m annually.

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SBA explained that federal agencies would likely respond by setting aside “more contracts for small businesses under the proposed increases to size standards.” Additionally, the shift “might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers under the proposed size standards.”

SBA is required by law to review and, as needed, adjust size standards every five years, taking into consideration public input, the economic characteristics of businesses in each industry, and recent market trends. The first five-year review was completed in early 2016.

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In a December 2020 action alert, the Association of Language Companies encouraged members to comment on the proposed new small business threshold; the organization itself has taken a neutral stance on the advice of ALC’s Advocacy Team. Since then, a few dissenting voices have made their opinions known in comments on SBA’s proposal.

Wendy Bertone, owner of Interpreting Solutions in Kansas, wrote that “increasing the size standard for NAICS code 541930 from $8m to $20m will only HURT the VERY SMALL businesses. In large metro areas, there is plenty of competition and MORE is NOT needed.”

One anonymous commenter recommended reducing the threshold to USD 4m instead, arguing that LSPs are often able to grow their businesses past the USD 8m threshold by working with many contractors and few employees.

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“Increasing the cap means that a 16M company, which is clearly not a sole proprietor, doing its own work, would be competing with a sole proprietor. That is not the goal of the small business cap, which protects small businesses,” the commenter concluded.

SBA will accept comments on the proposed thresholds until January 12, 2021.