The Small Business Runway Extension Act of 2018 Is Law, So It’s Five Years Instead of Three, But Starting When?

Miles & Stockbridge P.C.

On Monday, December 17, 2018, President Trump signed into law the Small Business Runway Extension Act of 2018. To determine whether a federal contractor qualifies as a small business, the yardstick will now be the average of five years’ gross receipts, instead of the previous average of three years.

The small business community generally welcomes the change, because many contractors will now retain small business status for longer, giving them more time to mature and become competitive in the federal marketplace. Our previous blog discusses the rationale behind the law in more depth.

Enactment of the legislation further establishes the Montgomery County Chamber of Commerce Government Contractor Network, which spearheaded the change, as a national thought leader for small business procurement issues. Miles & Stockbridge is a proud member of the GovConNet Council, which manages the affairs of the group.  Miles & Stockbridge’s own Stephen P. Ramaley, working with MCCC GovConNet, provided expert testimony in support of legislative change before the House committee that advanced the legislation.

But when will the change become effective? A statute is presumed to be effective immediately unless it says otherwise (and this one does not), but the law amends the Small Business Act in a way that may require additional rulemaking before contractors can use it. SBA will need to change 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.  

But beyond this legal uncertainty, there are also practical hurdles., the federal System for Award Management website on which all contractors must register, displays a firm’s size status using a three-year average. The Government needs to update the website’s interface and underlying architecture to allow contractors to report five years of data. If a firm not listed as a small business in were to now represent itself as small using the five-year lookback, the two representations would conflict — unacceptably forcing contracting officers to choose which representation to accept.  

The Miles team is working with SBA and other stakeholders to provide clarity to the contractor community, and we will update this blog posting when new developments arise. But for now, to extend the metaphor, that new longer runway, tantalizingly close to completion, appears to still be under construction. 
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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