I'm looking to flatten this tube without losing a significant amount off the circumference of the original outer diameter, which is approximately 40". I've applied the usual method of making a small incision and then putting in a bend and flattening the object, but this results in a sheet length of 38-25/32" which is far more than I would like. I don't have much experience using the sheet metal features of Solidworks so any help would be greatly appreciated. Thank you!

I'm not sure why you would want to do that. As it is now, it is giving you the correct (or close to it depending on material) flat pattern length using a k-factor of .5. This is the neutral axis of the material where no stretching or compressing takes place (50% of the material thickness) If you bump that k-factor up to 1 you get a flat pattern length equal to your original (sketch) circumference but when you roll this (on the actual part) you will not be able to attain the diameter you started out with and you will have a much larger circumference. Forming stretches the outside surface and compresses the inside surface.