Small-Business Eligibility, Pricing Discipline, and Data Quality Take Center Stage
Each month, the Greg and Camille Baroni Center for Government Contracting highlights federal acquisition policy signals GovCon practitioners should not miss. This is a practical readout on how policy movement may affect the way agencies buy, how contractors compete, and where acquisition judgment matters.
August brought a concentrated set of acquisition signals around eligibility, pricing discipline, data quality, defense industrial-base capacity, and the practical costs of compliance. SBA moved on both 8(a) eligibility and size standards. The Department of War increased review of sole-source facilitization costs while asking where accounting and audit requirements create unnecessary friction. GSA’s Inspector General also raised a basic but important acquisition-management issue, showing that pricing tools are only as useful as the data beneath them.
1. SBA proposes major rewrite of small-business size standards
On August 20, SBA proposed a major overhaul of small-business size standards, with new standards for 338 industry groups and industries and a concurrent notice seeking comment on a revised methodology for calculating size standards. Comments are due September 21.
The proposal would simplify the current structure by reducing the number of size-standard categories from nearly 1,000 to 338. SBA says the changes would expand small-business eligibility by more than 110,000 firms. The proposal would move size standards from the 6-digit NAICS level to a combination of 4-digit industry groups and 5-digit industries.
Size standards shape who can compete as a small business, qualify for set-asides, participate in SBA programs, and count toward agency small-business goals. If finalized, the proposal could reshape competitive dynamics in affected industries, especially where growing firms may remain small longer or some firms that exceed current thresholds may again qualify as small.
Acquisition planning would need to account for changes in market research, NAICS-code selection, set-aside decisions, and small-business goaling. Contractors should also reassess size status, teaming strategy, recompete positioning, and subcontracting plans under affected industry codes.
2. SBA finalizes new 8(a) social-disadvantage standard
SBA also finalized its rule removing the 8(a) program’s rebuttable presumption of social disadvantage for individually owned firms, replacing it with a revised standard for demonstrating social disadvantage. The final rule was published on August 11 and takes effect 30 days after publication.
The final rule applies to individually owned firms with pending applications as of the effective date. Existing individually owned 8(a) participants previously determined to be socially disadvantaged do not need to reestablish social disadvantage. Entity-owned firms, including those owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations, and Community Development Corporations, are not affected.
Prospective and pending individually owned applicants will need to satisfy the new test by showing group discrimination or bias and certifying material harm. Acquisition teams may need to watch how the new test affects pending and future applicant pipelines, even though SBA states the rule does not affect current participants or the dollar value of federal contract requirements.
3. SBA and Department of War establish Smaller War Plants Commission
SBA and the Department of War announced the creation of the Smaller War Plants Commission through a new memorandum of understanding. The Commission is intended to coordinate federal resources to support small suppliers, expand defense industrial-base capacity, and connect small manufacturers to lending, capital, contracting, and technical-assistance tools.
The effort focuses on defense-critical sectors and industrial focus areas, including munitions, drones, microelectronics, critical minerals, shipbuilding and repair components, sensors, batteries, castings and forgings, and textiles. It also points to the Civil Reserve Manufacturing Network as a way to identify production capacity and connect small manufacturers to defense needs.
The Commission is another example of small-business policy being tied to industrial-base execution. SBA’s size-standard proposal and 8(a) final rule address eligibility. The Smaller War Plants Commission turns toward capacity, supplier development, financing, and demand signals in defense-critical production areas.
The practical test will be whether these tools translate into acquisition planning, supplier discovery, and production capacity. Small manufacturers and suppliers may see new points of entry into defense-relevant markets, but participation will still depend on readiness, quality systems, financing, security requirements, and the ability to meet mission-driven production needs.
4. Department of War expands review of sole-source facilitization costs
The Department of War’s Defense Pricing, Contracting, and Acquisition Policy office established a tiered peer-review process for noncompetitive sole-source acquisitions involving contractor facilitization costs. Facilitization costs generally refer to long-term, non-recurring investments in production capacity, such as facilities, tooling, test equipment, and manufacturing equipment. The new process applies immediately and implements a May 4 Under Secretary of War for Acquisition and Sustainment memorandum focused on how the Department evaluates contractor capacity-related costs in sole-source negotiations.
Under the new approach, sole-source actions greater than $50 million and less than $500 million will follow a streamlined peer-review process focused on key pricing elements, including facilitization costs, prime and major supplier historical costs incurred, and realized profits on prior efforts. Sole-source actions greater than or equal to $500 million and less than $1 billion will follow the peer-review approach currently required by DFARS and PGI 201.170. Actions at or above $1 billion remain subject to the existing sole-source peer-review process.
At the center of the review is how the Department recognizes capacity-expansion costs in sole-source defense pricing. The May 4 memorandum states that it does not amend or override FAR Part 31 cost principles. It requires contracting officers to present pre-negotiation objective positions for peer review to determine what, if any, facilitization costs should be recognized.
This puts more weight on pre-negotiation objectives, historical cost information, DCAA/DCMA support, and supplier-level pricing visibility. Sole-source defense suppliers should expect closer review of proposed capacity-related costs and stronger support for why those investments should be recognized in government pricing rather than treated as investments contractors are expected to make with their own capital.
5. GSA OIG flags pricing-data weaknesses in MAS product buying
GSA’s Office of Inspector General issued an August audit finding that Federal Acquisition Service processes for awarding and collecting accurate product data are ineffective. The report focused on product data in GSA Advantage! catalogs and Transactional Data Reporting data, including manufacturer names and part numbers.
Pricing tools, transaction data, and catalog platforms depend on the quality of the data underneath them. When manufacturer names, part numbers, or other product identifiers are inconsistent or inaccurate, those tools have a harder time identifying identical products and supporting reliable price analysis.
The report reinforces that acquisition modernization still depends on product-data discipline. Better tools do not automatically produce better price analysis if the underlying data is unreliable. Clean catalog data, accurate manufacturer information, and reliable part-number reporting are more than administrative details. They affect how products are compared, priced, and purchased across the federal market.
Watch Notes
Department of War asks industry for contract-accounting reform ideas
The Department of War released an open letter to defense industrial base and acquisition stakeholders seeking suggestions for streamlining contract accounting, data, audit, and business-system requirements. The letter asks industry to identify practical changes that could reduce compliance costs, support commercial supplier participation, and better align Department data and audit requirements with commercial accounting and internal-control environments.
Contract accounting, audit, and business-system requirements can shape whether commercial and nontraditional suppliers view defense work as accessible, manageable, or too burdensome. Industry input will matter most where it identifies requirements that create unnecessary friction while preserving confidence in cost data, internal controls, and business-system integrity.
Skills-based contracting bill advances in Senate committee
H.R. 5235, the Skills-Based Federal Contracting Act, advanced in the Senate Homeland Security and Governmental Affairs Committee in August after passing the House earlier this year. The bill would limit the use of minimum education requirements for proposed contractor personnel unless an agency provides a written justification and would direct OMB to issue implementation guidance if enacted.
The bill raises a practical question about how agencies define the qualifications needed for contract performance. Education requirements can be appropriate for some roles, but they can also become a proxy for capability when skills, certifications, experience, or demonstrated performance may be more relevant. The bill would raise the importance of explaining why degree requirements are necessary and could make skills-based personnel evidence more important in proposal strategy.
GSA expands contractor-integrity reviews using procurement data
GSA announced in August that it had identified more than $13 billion in suspected procurement fraud through a review using governmentwide contracting data, public reporting, and enforcement information. The agency says the review spans areas such as COVID-19 spending, 8(a) program integrity, contractor eligibility, bid rigging, cybersecurity false claims, bribery, and other contractor-integrity risks.
The figures should be treated as suspected fraud indicators rather than adjudicated findings. More broadly, the announcement shows how procurement data is being used to identify contractor-integrity risk. As procurement data becomes more central to risk identification, contractors should anticipate continued attention to eligibility representations, cybersecurity claims, subcontracting arrangements, and documentation of who is performing the work.
Where policy meets practice, the Greg and Camille Baroni Center for Government Contracting is shaping the business of government. Follow us on LinkedIn and visit our website for access to thought leadership, educational products, training offerings, and convening events that bridge government and industry stakeholder interests. Organizations looking for a deeper read on how acquisition policy shifts may affect strategy, market positioning, and government-customer engagement can connect with the Baroni Center at govcon.gmu.edu.