Why it Matters

The U.S. Small Business Administration (SBA) is pursuing a proposed overhaul of how it defines a "small business," implimenting a workforce reduction of roughly 43% , and proposing changes to its flagship contracting program. The Senate Committee on Small Business and Entrepreneurship is scheduled to examine those issues at the "Oversight Hearings To Examine Small Business Programs In Review, Focusing On The U.S. Small Business Administration," set for September 30, 2026, under Chair Sen. Joni Ernst (R-IA) and Ranking Member Sen. Ed Markey (D-MA).

The Big Picture

A proposed rule published in the Federal Register on Aug. 20 would replace 978 existing six-digit industry size standards with 338 standards, shift many industries from revenue-based to employee-based thresholds and newly classify an estimated 114,541 businesses as "small." The SBA estimates that 37,002 firms holding more than 105,000 federal contracts worth more than $71 billion in fiscal 2025 would become classified as small businesses under the proposed standards. The agency extended the public comment period by 60 days to Nov. 20.

The SBA announced in March 2025 that it planned to eliminate approximately 2,700 positions from an active workforce of nearly 6,500, a reduction of about 43%. The agency estimated the restructuring would save more than $435 million annually and said it would preserve core public services, including loan guarantees and disaster assistance. Critics, including the Center for American Progress, have argued that the cuts could undermine services small businesses depend on.

Broader Context

On the 8(a) Business Development Program, the SBA released a proposed rule June 11 that would eliminate the regulatory presumption of social disadvantage based on membership in specified racial or ethnic groups and require individually owned applicants to demonstrate social disadvantage through fact-based evidence. The racial presumption had already been rendered inoperative following federal litigation in 2023. Markey said the proposal "grossly diminishes the history of systemic racial and ethnic discrimination in the United States," and in July he and Sen. Mazie Hirono (D-HI) submitted a formal comment letter opposing the change.

Ernst has separately called for greater accountability over pandemic-era loan fraud. Citing an SBA Office of Inspector General estimate that more than $200 billion in Economic Injury Disaster Loan and Paycheck Protection Program funds were potentially fraudulent, Ernst has argued that the money "must be clawed back" and backed legislation extending the statute of limitations for pursuing pandemic-relief fraud.

Native American Contractors Association reported $335,000 in lobbying activity covering SBA 8(a) program requirements; ALG Senior LLC reported $320,000 on SBA federal loan programs; and NANA Regional Corp. reported $290,000 on small business policy and 8(a) contracting.

The Bottom Line

With the public comment period on the size standards overhaul running through Nov. 20, the Sept. 30 hearing gives the committee an opportunity to scrutinize the SBA's direction before that window closes.

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