The U.S. Small Business Administration (SBA) is implementing significant changes to its SBA recertification rules, which will take effect on January 17, 2026. These changes primarily impact small businesses involved in federal contracts, particularly those participating in multiple award contracts (MACs) and businesses undergoing mergers or acquisitions (M&A).
Understanding these new rules is crucial for small businesses that rely on government contracts and want to maintain their eligibility for set-aside opportunities. Below, we break down the key changes and what they mean for small business contractors.
Current Recertification Rules
Under existing SBA regulations, small businesses must recertify their size status under certain conditions:
- Mergers & Acquisitions: If a small business is acquired or merges with another company, it must recertify its size within 30 days of the transaction if the controlling interest changes.
- Long-Term Contracts: If a federal contract extends beyond five years, the company must recertify its size before the sixth year and before each contract renewal thereafter.
- By Government Request: Agencies may also require recertification at their discretion for specific task orders or contract modifications.
Once a business recertifies and is found to exceed the small business size standard, it no longer qualifies for new set-aside contracts, though existing contracts remain unaffected.
SBA Recertification Changes in 2026
The January 17, 2026, rule change primarily affects how small businesses maintain their eligibility under MACs and what happens when they undergo ownership changes.
1. Post-M&A Recertification Now Affects Set-Aside Orders
Previously, if a small business was acquired or merged but held a position on a set-aside MAC, it could still compete for small business orders under that contract. However, under the new rule:
- If a business recertifies as “other than small” due to M&A, it will lose eligibility for future small business set-aside orders under that MAC.
- This means large businesses can no longer acquire small businesses and continue competing for small business contracts under an existing MAC.
2. Implementation Delay Until 2026
While these changes were finalized in 2024, the SBA has delayed implementation until January 17, 2026. Any M&A transactions before that date will not impact eligibility for small business set-aside orders under existing MACs.Transactions that occur on or after January 17, 2026, will be subject to the new restrictions.
3. Exemption for Small-To-Small Acquisitions
There is an exception if both merging businesses are small at the time of the transaction:
- The newly combined entity can continue competing for set-aside orders under an existing MAC — even if its total size exceeds the small business standard after the merger.
- However, agencies will not be able to count those awards toward their small business contracting goals.
What This Means for Small Businesses
These changes will have significant implications for federal contractors, particularly with M&A timing, valuations and strategic mergers.
- M&A Timing Is Critical: If a small business is considering selling or merging, it may be beneficial to complete the transaction before January 17, 2026, to maintain eligibility for set-aside orders under current MACs.
- Valuation Impacts: The new restrictions could make small businesses less attractive to buyers, especially if they rely heavily on set-aside contracts under MACs.
- Strategic Mergers: Companies looking to grow while retaining small business benefits may seek to merge with other small businesses rather than selling to a large firm.
Final Thoughts
The SBA’s new recertification rules reflect an effort to preserve the integrity of small business programs and prevent large firms from using acquisitions to unfairly maintain access to set-aside contracts. Small businesses engaged in federal contracting should take proactive steps to assess their current contracts, plan for potential M&A scenarios and maintain compliance before the 2026 deadline. To navigate these changes effectively, Cherry Bekaert’s Government Contracting advisors are available to discuss your situation with you.
