Can My Company Respond to this RFP?

The federal government establishes  formal goals to ensure that small businesses get their fair share of work with the federal government.  For the fiscal year about to end, the goal for prime contracts awarded to small businesses is 23%. SBA has established small business size standards for each North American Industry Classification System (NAICS) code.  The small business measurement is based on either the number of employees or the average of gross receipts for the prior three years as reported on your company’s income tax return.

Find your company’s NAICS code here:  NAICS Search

The procuring agency contracting officer, or authorized representative, designates the proper NAICS code and corresponding size standard in a solicitation, selecting the single NAICS code which best describes the principal purpose of the product or service being acquired. Except for multiple award contracts, every solicitation, including a request for quotations, must contain only one NAICS code and the corresponding size standard.

How do I determine if my company is small?

Click http://www.sba.gov/content/small-business-size-standards for the Small Business Size Standards by NAICS Industry expressed either in millions of dollars or number of employees CFR §121.201.

How to Calculate Size Standards under SBA Regulations:

If By Number of Employees:

In determining a concern’s number of employees, SBA counts all individuals employed on a full-time, part-time, or other basis. This includes employees obtained from a temporary employee agency, professional employee organization or leasing concern. SBA will consider the totality of the circumstances, including criteria used by the IRS for federal income tax purposes, in determining whether individuals are employees of a concern. Volunteers (i.e., individuals who receive no compensation, including no in-kind compensation, for work performed) are not considered employees.

Where the size standard is number of employees, the method for determining a concern’s size includes the following principles:

(1) The average number of employees of the concern is used (including the employees of its domestic and foreign affiliates) based upon numbers of employees for each of the pay periods for the preceding completed 12 calendar months.

(2) Part-time and temporary employees are counted the same as full-time employees.

(3) If a concern has not been in business for 12 months, the average number of employees is used for each of the pay periods during which it has been in business

(4)(i) The average number of employees of a business concern with affiliates is calculated by adding the average number of employees of the business concern with the average number of employees of each affiliate. If a concern has acquired an affiliate or been acquired as an affiliate during the applicable period of measurement or before the date on which it self-certified as small, the employees counted in determining size status include the employees of the acquired or acquiring concern.

If By Gross Receipts:

The SBA calculates annual receipts as follows:  Per  CFR §121.104: “(a) Receipts means “total income” (or in the case of a sole proprietorship, “gross income”) plus “cost of goods sold” as these terms are defined and reported on Internal Revenue Service (IRS) tax return forms (such as Form 1120 for corporations; Form 1120S and Schedule K for S corporations; Form 1120, Form 1065 or Form 1040 for LLCs; Form 1065 and Schedule K for partnerships; Form 1040, Schedule F for farms; Form 1040, Schedule C for other sole proprietorships). Receipts do not include net capital gains or losses; taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees; proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. For size determination purposes, the only exclusions from receipts are those specifically provided for in this paragraph. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, and employee-based costs such as payroll taxes, may not be excluded from receipts.

As an example, if in 2011, the company’s gross receipts as reported on line 1 of the Form 1120S are $4 million, 2012- $8 million and 2013 – $9 million.  The average gross receipts for the three years as of the measurement date are $7 million:  { ($4M + $8M +$9M)/3}.      Thus, the company would be considered a small business under NAICS limits of no greater than $7 million.