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13 CFR Part 121 is the part of the Code of Federal Regulations in which the U.S. Small Business Administration (SBA) sets out how a business is classified as “small”: the size standards, the way receipts and employees are counted, the affiliation rules that pull related companies into the count, and the procedures for challenging a size claim. This guide maps the part to the questions research offices, university spinouts and small-business subawardees actually ask, so you can find the right section quickly.
What 13 CFR 121 is and who runs it
Part 121 sits in Title 13 (Business Credit and Assistance), Chapter I, which is the SBA’s chapter. SBA administers it. The size standards in the part apply to all SBA programs unless the part says otherwise (13 CFR 121.201), and they are the standards that federal contracting officers use when they set work aside for small businesses. The text is published on the eCFR page for 13 CFR Part 121; the eCFR itself is an editorial compilation and not the official legal edition, so cite the Federal Register or the official CFR when a legal citation is required.
SBA’s own size standards page summarizes the idea: a size standard is the largest a business, including its affiliates, can be and still be considered small. Standards differ by industry, and a business self-certifies its size in SAM.gov.
Which section answers which question
Most readers need one or two sections, not the whole part. The table below covers the sections most often needed.
| Question | Section | What it says |
|---|---|---|
| Who counts as an affiliate? | 121.103 | Concerns are affiliates when one controls or has the power to control the other. |
| How are receipts calculated? | 121.104 | Average annual receipts over the most recent five completed fiscal years, with affiliates added. |
| How are employees counted? | 121.106 | Average of each pay period over the preceding 24 completed calendar months, with affiliates added. |
| What is the size limit for my industry? | 121.201 | Table of size standards by NAICS code, in employees or millions of dollars of receipts. |
| Which standard applies to a federal contract? | 121.402 | The standard for the single NAICS code the contracting officer specifies in the solicitation. |
| Who can challenge a size claim, and how fast? | 121.1001 and 121.1004 | Defines who may protest; protests by most parties are due within 5 business days of the triggering event. |
How size is measured
Receipts-based standards (121.104)
Receipts means “all revenue in whatever form received or accrued from whatever source”, less returns and allowances, and it is generally taken from federal income tax returns. Net capital gains and losses, certain taxes collected for a taxing authority, proceeds of transactions between affiliates, and amounts collected for another entity by an agent (for example travel, real estate, advertising or conference management agents, freight forwarders and customs brokers) are excluded. Subcontractor costs, investment income and payroll-type employee costs are not excluded.
The standard method is an average over the most recent five completed fiscal years (121.104(c)(1)). A business in operation fewer than five years uses total receipts divided by the weeks in business, multiplied by 52 (121.104(c)(2)). For the SBA loan, surety bond and SBIC programs, a firm in business three or more years may elect a three- or five-year average (121.104(c)(4)). Affiliates’ average receipts are added (121.104(d)).
Employee-based standards (121.106)
Employees include full-time, part-time and other-basis workers, including staff obtained from temporary agencies, professional employer organizations and leasing concerns; unpaid volunteers are excluded. The count is the average over each pay period for the preceding 24 completed calendar months, and part-time or temporary workers count the same as full-time ones. A firm with fewer than 24 months of history counts only the pay periods it has had. Affiliates’ headcounts are added, and in an acquisition the acquired and acquiring firms are counted together for the entire period.
Illustrative measurement (not a real firm)
Suppose a company’s receipts over five completed fiscal years were $4M, $5M, $6M, $7M and $8M. The average is $6M. If an affiliate’s five-year average is $2.5M, the figure compared against a receipts-based standard is $8.5M, not $6M. For employees, if the company averaged 40 over 24 months and an affiliate averaged 15, the count is 55. The arithmetic is simple; what changes outcomes is who is an affiliate.
Affiliation: where size claims go wrong
Under 121.103(a), concerns are affiliates when one controls or has the power to control the other; the power to control is enough, even if never exercised. Negative control (for example blocking rights), control through a third party and the totality of the circumstances can all count. The section then lists specific situations:
| Situation | Where | Point to check |
|---|---|---|
| Stock ownership | 121.103(c) | Ownership and voting power across holders. |
| Options, convertible securities, agreements to merge | 121.103(d) | Rights that could change control are considered. |
| Common management | 121.103(e) | Shared officers, directors or managers. |
| Identity of interest | 121.103(f) | SBA may presume economic dependence where a concern received 70 percent or more of its receipts from another concern over the previous three fiscal years. |
| Newly organized concern | 121.103(g) | Rebuttable by showing a clear line of fracture. |
| Joint ventures | 121.103(h) | An ostensible subcontractor (not similarly situated, performing the primary and vital requirements) can make an offeror ineligible as small. |
| Franchise and license agreements | 121.103(i) | Addressed in their own paragraph. |
Size standards table and NAICS
Section 121.201 is a long table that assigns each NAICS industry code a standard expressed in employees or millions of dollars of receipts. Look up the row for your code on the eCFR rather than relying on a remembered figure, because SBA adjusts standards. For a federal contract, 121.402 ties the applicable standard to the single NAICS code the contracting officer specifies in the solicitation, using the standard in effect on the date the solicitation is issued. See the NAICS code lookup guide for finding a code. According to SBA’s size standards guidance, a NAICS designation can be appealed to SBA’s Office of Hearings and Appeals within 10 days of the solicitation’s publication.
Typical steps for a size check
- Identify the NAICS code on the solicitation and the matching row in 121.201.
- Decide whether the standard is receipts-based or employee-based.
- List every concern that controls, or could control, yours or that you control, using 121.103.
- Compute your average (five fiscal years of receipts or 24 months of employees) and add each affiliate’s average.
- Compare the total with the standard, then represent your status in SAM.gov.
How the result is used depends on the program; the FAR 19.5 set-aside guide and the Rule of Two guide explain the procurement side.
Common mistakes
- Measuring the company alone and forgetting that affiliates’ receipts or employees are added.
- Counting calendar-year receipts for one year instead of the five-year average, or leaving out temporary-agency staff from the headcount.
- Treating a minority investor’s blocking rights as irrelevant when 121.103(a) allows negative control to count.
- Ignoring the 70 percent dependence presumption when one customer provides most revenue.
- Assuming a subcontractor arrangement is harmless when 121.103(h)(3) can make an offeror ineligible if the subcontractor performs the primary and vital requirements.
- Using a standard from memory instead of the one in effect on the solicitation date.
Related pages
| Topic | Relationship to Part 121 |
|---|---|
| Small business subcontracting plan | Subcontracting plans apply to larger primes; size is judged against the NAICS standard. |
| FAR 52.212-3 representations | Where small-business status is represented in an offer. |
| SBIR reauthorization | SBIR and STTR protests are covered by 121.1001. |
FAQ
What is 13 CFR 121?
It is SBA’s regulation on small business size: size standards, how receipts and employees are counted, affiliation, and size protests.
Does it apply to grants as well as contracts?
Section 121.201 says the standards apply to all SBA programs unless otherwise specified. Check the program’s own rules for how it uses them. SBIR and STTR solicitations are named in the protest provisions of 121.1001.
How long can a size protest wait?
Under 121.1004, a protest from an entity other than the contracting officer or SBA generally must reach the contracting officer by the close of business on the fifth day, excluding weekends and legal holidays, after the triggering event, which differs for sealed bids and negotiated procurements.
Do part-time employees count?
Yes. Under 121.106(b)(2), part-time and temporary employees count the same as full-time employees.
Sources
- eCFR, 13 CFR Part 121 (sections 121.103, 121.104, 121.106, 121.201, 121.402, 121.1001, 121.1004), https://www.ecfr.gov/current/title-13/chapter-I/part-121, checked 2026-10-29. The eCFR is not an official legal edition.
- U.S. Small Business Administration, Size Standards, https://www.sba.gov/federal-contracting/contracting-guide/size-standards, checked 2026-10-29.
