SBA’s Non-Manufacturer Rule Gets a Major Overhaul—Here’s What Small Businesses Must Know

The Small Business Administration (SBA) just dropped a major update that every product reseller, distributor, and VAR in federal contracting needs to have on their radar. As of July 14, 2025, the SBA clarified the Non-Manufacturer Rule (NMR), tightening the screws on who can qualify for set-aside supply contracts—and when. If you supply goods to the federal government, especially under programs like 8(a), HUBZone, SDVOSB, or WOSB, this is going to impact how you bid, win, and stay compliant.

Here’s what’s changed and why it matters.

In plain language, the Non-Manufacturer Rule is what stops large businesses from using small resellers as a pass-through to win small business set-asides. The 2025 fact sheet doesn’t change the law—it clarifies it. For any small business contractor, here are the key takeaways:

• The NMR now applies to all socio-economic set-asides (like 8(a), HUBZone, SDVOSB, WOSB) above $10,000. For regular small business set-asides, it only applies above the Simplified Acquisition Threshold (currently $250,000).

• Your NAICS code matters more than ever. The NMR applies when your contract has a supply or manufacturing NAICS code (or the ITVAR NAICS 541519). It doesn’t apply to services or construction codes, which means misclassified solicitations could derail your bid.

• IT resellers get clarity but no free pass. IT VARs under NAICS 541519 have a 150-employee size cap, but they must comply with the NMR, including sourcing products from small manufacturers or having an SBA waiver.

• There are no special carve-outs for 8(a), HUBZone, SDVOSB, or WOSB—NMR applies to all. Whether it’s a sole-source or competitive award, the same rules apply.

• Kit assembler exceptions are being phased out. If you relied on this in the past, be prepared to shift your strategy.

SBA’s new guidance is a wake-up call for any small business involved in federal supply contracts, especially those offering products they don’t manufacture themselves.

Why should you care? Because this impacts how you can legally bid and perform on federal contracts without risking protests or losing awards.

For small product resellers and VARs, it’s a clear message: you must meet four tests to qualify under the NMR:

• Stay under the applicable employee cap.

• Be primarily engaged in selling the type of product.

• Take ownership or possession of the product (no shell companies or brokers).

• Supply products made by a small U.S. manufacturer—unless there’s a valid waiver.

If you miss one, your eligibility for set-asides evaporates. Worse, missteps can trigger protests, contract terminations, or even False Claims Act penalties. This is particularly crucial for industries like IT products, medical supplies, and industrial equipment, where class waivers are often in play but under review.

What does this mean practically? Here’s what your business should be doing now:

• Double-check the NAICS code on every solicitation. If it’s a supply contract, NMR applies—plan accordingly.

• Know your manufacturer. Have documentation ready that your products come from small manufacturers, or know if a class waiver applies.

• Be proactive on waivers. If there’s no small manufacturer, raise it early with the contracting officer so they can request a waiver.

• Stay compliant post-award. Keep supply chain records and be ready for SBA audits or protests.

• Don’t rely on “sole-source forgiveness.” Even on direct 8(a) or SDVOSB awards, NMR compliance is mandatory.

Consider this your checklist: NAICS check, manufacturer validation, waiver status, supply chain documentation. If you’re shaky on any of these, fix it before your next bid.

From a strategic angle, this is a reminder that the SBA and federal agencies are tightening controls on supply chain integrity. There’s a real push to prevent large businesses from gaming small business programs through resellers while boosting actual small manufacturers. Staying ahead means tightening your own internal compliance—and possibly rethinking how you partner with manufacturers or use teaming strategies.

For contractors who resell IT products, medical supplies, or industrial goods, you’ll want to monitor SBA’s waiver list closely—it changes frequently. With rising scrutiny, expect fewer blanket waivers and more enforcement of U.S. small-manufacturer sourcing.

Want more tips on making the most of federal contracting programs? Check out our post onCongress Is Rethinking Small Business Contracting. Here’s What You Need to Know for insights on getting certified and staying compliant.

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