When the U.S. Congress first established the Small Business Administration (SBA) in 1953, a numerical definition of what constitutes a small business was needed to determine which businesses were eligible for the SBA's programs. Over the years the SBA has established a set of numerical definitions for all for-profit industries. This numerical definition is called a "size standard." It is usually stated either as the number of employees or average annual receipts of a business concern.
In addition to establishing eligibility for the SBA programs, all federal agencies must use SBA's size standards for their Federal Government contracts identified as a small business contracts. Agencies must also use SBA's size standards for their other programs and regulations, unless they are authorized by Federal statute to use something else.
The Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation." The law also says that in determining what constitutes a small business, the definition will vary from industry to industry to reflect industry differences accurately. The SBA's Small Business Size Regulations implement the Small Business Act's mandate to the SBA. The SBA has also established a table of size standards, matched to North American Industry Classification System (NAICS) industries.
The SBA's Office of Size Standards develops and recommends small business size standards to the Size Policy Board and to the Administrator of SBA. These include recommendations on small business definitions that other Federal agencies propose. Under the Small Business Act, Federal agencies must obtain the approval of the SBA Administrator before adopting a size standard different than the SBA's size standard.
