The U.S. Small Business Administration (SBA) is proposing significant changes to the way it defines a “small business” for federal contracting and other federal assistance programs—and the changes could have a substantial impact on IEC member contractors competing for federal and, where applicable, federally assisted work.
On August 20, SBA published a proposed rule that would revise small-business size standards for 338 industry groups and industries, including the construction industry. SBA is also seeking comments on a revised methodology used to calculate the proposed standards.
IEC encourages members to provide feedback to inform IEC’s comments before the SBA’s September 21 deadline. Members are asked to submit feedback to IEC by September 15.
What is changing for electrical contractors?
Today, SBA uses a receipts-based size standard for NAICS 23821, Electrical Contractors and Other Wiring Installation Contractors. The current standard is $19 million in average annual receipts.
That standard is used, among other things, to determine eligibility for federal small-business contracting opportunities and set-asides.
Under SBA’s proposal, the construction industry would move from receipts-based size standards to employee-based standards.
For IEC electrical contractors classified under NAICS 23821, the proposed standard would be 550 employees.
In other words, once the proposal is implemented, a contractor that exceeds the current SBA $19 million receipts threshold could potentially continue to qualify as a small business under the proposed standard as long as it remains below the applicable employee threshold.
Of note, the proposal would also establish a 1,500-employee standard for NAICS 23713, Power and Communication Line and Related Structures Construction, which currently has a $45 million receipts standard.
Why does this matter?
The change could create both opportunities and challenges for IEC members.
On the positive side, the proposal could address what SBA and others have described as the “small-business growth cliff.” Under the current system, a contractor can grow beyond the $19 million threshold and eventually lose eligibility for federal small-business opportunities—even if the company remains relatively small compared with many of the large firms competing in the broader construction market.
An employee-based standard could give growing electrical contractors more room to expand without immediately losing small-business status.
SBA specifically says the proposal is intended to allow businesses to grow while retaining their small-business status and reduce the disincentive to growth created by the current size standards. SBA estimates that across all industries, the proposed changes would result in approximately 114,500 additional businesses becoming eligible as small businesses, including approximately 37,000 firms with existing government contracts.
At the same time, the proposal could significantly expand the number and size of companies competing for small-business opportunities.
A 550-employee electrical contractor could potentially compete for contracts designated for small businesses alongside an electrical contractor with 50, 100, or 200 employees. For some IEC members, that could mean greater access to federal contracting opportunities. For others, it could mean substantially more competition for the same work.
SBA itself acknowledges that the proposed changes could increase competition and that businesses currently near the existing size standards are likely to experience the greatest impact from newly eligible competitors.
The Census data illustrate just how concentrated the industry’s larger employers are. According to U.S. Census Bureau data, 99.85% of electrical contractor establishments have fewer than 500 employees, while just 0.15% have 500 or more employees. At the same time, those 129 establishments with 500 or more employees account for 123,643 employees, or approximately 12.2% of total employment in the electrical contracting industry.
This illustrates the distinction between the number of businesses affected by the proposed standard and the share of industry employment represented by those businesses. Against that backdrop, the proposed 550-employee standard raises an important question about what should qualify as a “small” electrical contractor for federal contracting purposes.
IEC wants to hear from members
IEC has not yet taken a position on whether the proposed standards should be adopted. Before determining what position, if any, IEC should take, we want to hear directly from IEC members.
In particular, IEC is interested in hearing from members who:
- Currently qualify as a small business under the $19 million receipts standard;
- Have recently exceeded the current size standard and therefore lost small-business eligibility;
- Are approaching the $19 million threshold;
- Have experience bidding on or performing federal contracts;
- Have participated in federal small-business set-asides;
- Believe the proposed 550-employee standard would create meaningful opportunities for their company;
- Believe the proposed standard could expose their company to substantially greater competition from larger electrical contractors; or
- Have an opinion on whether 550 employees is an appropriate size standard for electrical contractors and, if not, what employee threshold IEC should recommend.
IEC is also interested in hearing about how the change could affect joint ventures, teaming arrangements, subcontracting opportunities, and competition for federally funded infrastructure projects.
Please share your perspective.
IEC is evaluating whether to submit comments to SBA before the September 21 deadline, and member experience and feedback will be important in determining the association’s position.
If you are an IEC member and have thoughts on how the proposed changes would affect your business, please contact IEC Senior Manager of Government Affairs Jeremy Croft at jcroft@ieci.org.
Please include, if possible:
- Your company’s approximate employee size;
- Whether you currently qualify as a small business under the SBA standard;
- Whether your company has previously exceeded the applicable SBA size standard;
- Your experience with federal small-business contracting opportunities; and
- How you believe the proposed 550-employee standard would affect your ability to compete for federal contracts;
- Whether your company has participated in a federally funded or federally assisted project where small-business status affected your eligibility to compete, subcontract, or participate in a set-aside or other small-business preference program. If so, please describe the program and how SBA size standards affected your participation.
Members are encouraged to provide feedback to IEC by September 15 to allow time for IEC to evaluate the responses and develop comments before the SBA’s September 21 deadline.
Member feedback will help IEC assess the practical consequences of the proposal and determine whether and how the association should engage with SBA during the rulemaking process. In particular, IEC wants to understand whether the proposed standards would expand meaningful opportunities for electrical contractors, increase competition for existing small-business contractors, or both.
Further Information
Small Business Size Standards, 91 Fed. Reg. 53741 (Aug. 20, 2026) (proposed rule), 13 C.F.R. pt. 121, RIN 3245-AI67, Docket No. SBA-2026-0199, https://www.federalregister.gov/documents/2026/08/20/2026-17042/small-business-size-standards
Small Business Size Standards: Revised Size Standards Methodology, 91 Fed. Reg. 54096 (Aug. 20, 2026) (notice of availability), Docket No. SBA-2026-0265, https://www.federalregister.gov/documents/2026/08/20/2026-17039/small-business-size-standards-revised-size-standards-methodology