Congressman Sam Graves Joins Lloyd Chapman and Charles Tiefer in Opposing SBA

Press Release

Congressman Sam Graves Joins Lloyd Chapman and Charles Tiefer in Opposing SBA

ASBL Leads Opposition on SBA Anti-Small Business Policy

By Lloyd Chapman
American Small Business League
November 14, 2014

PETALUMA, Calif., Nov. 14, 2014/PRNewswire-USNewswire/ -- House Small Business Committee Chairman SamGraves has joined American Small Business League (ASBL) President Lloyd Chapman and Professor Charles Tiefer in opposing a new policy the SBA proposed on Sept.10 that would have pushed thousands of small businesses in theInformation Technology (IT) industry out of the federal marketplace.

The SBA had proposed to remove the 150-employee small businesssize standard for small businesses in the IT industry. If the policy wasadopted, small IT firms with a few as 10 employees could be reclassified aslarge businesses. At the same time the SBA would continue to report billions incontracts to Fortune 500 firms as small business contracts.

The ASBL launched a nationalcampaign to oppose the policy they described as "anti-small business" and retained Professor Charles Tiefer, one of the nation's leadingexperts on federal contracting law, to review the SBA's authority to proposesuch a damaging policy for small businesses.

"This proposed SBA change breaks the law by violatingCongress's statutory intent in the Small Business Jobs Act of 2010,"Professor Tiefer stated in his comment. "The SBA does not give any marketdata or other persuasive reason for the elimination," adding that thisrule does exactly the opposite of what Congress intended and that if adoptedinto a final rule, "small businesses will be squeezed out of the federalmarketplace."

In 2002, Lloyd Chapman launched a successful campaign to oppose the 500-employee smallbusiness size standard in favor of a more industry appropriate 150-employeesize standard when the SBA originally created the category Other ComputerRelated Services under NAICS code 541519.

"I believe the most compelling argument against eliminatingthe 150-employee small business size standard for 541519 comes from the SBAitself. In 2003, after months of research and deliberation in their final ruleon 541519 the SBA stated, 'An employee size standard is considered a bettermeasure of the size of ITVARs operation than receipts since a substantialproportion of their receipts merely reflect the dollar value of equipment andsoftware sold,'" said Chapman in his comment. "That statement was true in 2003 and itis still true today."

On Nov. 10, Congressman Sam Graves submitted a 12 page letter to the SBA agreeing with Professor Tieferand Lloyd Chapman that the SBA did not have theauthorization or the justifications to remove the 150-employee small businesssize standard for Information Technology Value Added Resellers.

In a Gov. Exec. article by Charles Clarktitled, "SBA Takes Flak Over Revising Company Size Standards,"Charles recognizes Congressman Graves' letter and points out that Graves warnedthe SBA of "litigation and a legislative fix" if the SBA does notwithdraw the proposed rule.

"The Proposed Rule violates the express statutory languageadded to the Small Business Act," said Graves. "The Committee urgesthe agency to withdraw the proposed rule… Should the SBA proceed with therulemaking, the Committee will consider appropriate legislative action."

Almost a month prior to the Small Business Committee's letter,the ASBLhad also proposed to consider legislative action, if necessary, by filing aninjunction against the SBA to block implementation of the rule.

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SBA proposed size standard change riles small IT resellers


SBA proposed size standard change riles small IT resellers

By Jason Miller
Federal News Radio
November 13, 2014

TheSmall Business Administration is facing rising opposition to a proposed sizestandard for some companies that are IT value-added resellers.

SinceSBA issued the proposed rule inSeptember, which would remove an exception to how these IT VARs are classifiedas small contractors, more than 200 people responded,mostly voicing their opposition to the potential change.

TheSBA wants to eliminate the 150 employee size standard for IT value-addedresellers (IT VARs) under NAICS code 541519. Instead, SBA proposed to use the$27.5 million size standard that applies to the rest of the current NAICS code.

KenDodds, SBA's director of the Office of Policy, Planning and Liaison, saidhaving an employee-based size standard under this NAICS code is inconsistentwith the rest of the 541519 NAICS code, which is based on total revenue.

Hesaid this change is necessary for several reasons.

"Ifwe go ahead and eliminate the exception, these are supply contracts and theywill be subject to all the other NAICS codes and size standards that apply tosupply contracts as well as the non-manufacturer rule, which has a sizestandard of 500 employees," Dodds said in an interview with Federal NewsRadio. "That's kind of the misconception out there. This exception is usedfor primarily supply contracts, and in any other case when you have supplycontracts, you have an employee-based size standard and you have thenon-manufacturer size standard of 500 employees."

Headded most of these companies that could be affected by this change would stillqualify under the 500 employee size standard under the non-manufacturer rule.

Differentways to buy the same thing

Doddssaid there is confusion and concern over this proposal because of theexception. SBA believes the proposed rule will help reduce or even eliminatethe confusion over services versus supplies and where value-added resellers fitin.;articletile=6;pos=left1;sz=300x250;ord=

"We'veheard from businesses on both sides, but certainly businesses that exceed the150 employee size standard that nevertheless can quality for an IT procurementusing the 500 employee size standard," he said. "So basically rightnow as a contracting officer, if you are buying IT supplies mainly, you can usethis exception with 150 employee-based size standard or you can use thecomputer manufacturing NAICS code with 1,000 employees and use the 500 employeesize standard. That's part of the additional confusion out there. The sameprocurement can be bought two different ways and it can basically exclude somefirms from competing depending on what the contracting officer selects."

ITVARs are a big market in the government with companies such as the ImmixGroupor Accelera Solutions or Red River Computer Corp, and many others bringingcommercial products such as a Dell laptop or a Cisco router to the federalmarket and offering additional services such as installation or upgrades ortraining.

ITVARs are big under governmentwide acquisition contracts (GWACs) such as NASASEWP V or other multiple award contracts such as the Homeland SecurityDepartment's First Source and the Air Force's NetCents.

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Republican Congress Predicted To Resurrect Regan Plan To Close SBA

Press Release

Republican Congress Predicted To Resurrect Regan Plan To Close SBA

ASBL's Lloyd Chapman To Oppose Republican Plan To Close SBA

By Lloyd Chapman
American Small Business League
November 13, 2014

PETALUMA, Calif., Nov. 13, 2014/PRNewswire-USNewswire/ -- American Small Businesses League (ASBL) President Lloyd Chapman is preparing a nationalcampaign to resist a possible effort by the Republican controlled Congressto try and close the Small Business Administration (SBA).

Chapman believes the Republican Congress will resurrect former PresidentRonald Reagan's plan to permanently close the SBA by combining it with theDepartment of Commerce.

According to the latest data from the U.S. CensusBureau, 98 percent of all U.S. firms have less than 100 employees. Those 28million small businesses are responsible for over 90 percent of the nation'snet new jobs, over 50 percent of the private sector work force and over 50percent of the GDP. The Small Business Act mandates that not less than 23 percent of all federal contracts be awarded tosmall businesses.

"Awarding 23 percent of all federal contracts to smallbusinesses is the most efficient and effective economic stimulus program inU.S. history. Dismantling the SBA and that program would be economicsuicide," Chapman stated.

Former President George Bush Jr.tried to shut down the SBA by starvingthe agency of funds and staffing. The agency was crippled when their budgetand staffing was cut nearly in half.

Bush allegedly told Hector Barreto,who was appointed to head the SBA, that he wanted the agency closed by the endof his first term.

Chapman and Barreto battled in the press over the Bush Administration's efforts to close the SBA and the BushAdministration's policy of diverting billions of dollars a month in federalsmall business contracts to Fortune 500 firms and thousands of other largebusinesses. The SBA survived the Bush Administration and Barretoultimately quietly left the SBA under circumstances that were neverpublicized.

A February 24, 2003 article in WashingtonTechnology reported, "The General Accounting Office began its owninvestigation based on information Chapman provided, said David Cooper, director of GAO's Acquisitionand Sourcing management office."

The GAO investigation uncovered over 5,000 large businesses werereceiving billions of dollars in federal contracts that were being reported asawards to small businesses.

Since that original GAO investigation there have been over adozen federalinvestigations that have found hundreds of Fortune 500 firms that were theactual recipients of federal small business contracts.

NBCCBS,ABCCNN,CNBCMSNBCRTTV and Fox News haveall reported on the diversion of federal small business contracts to corporategiants.

Chapman believes the Republican Congress will attempt to closethe SBA to obscure the hundreds of billions of dollars in fraud and abuse thatfederal investigations and the media have uncovered in federal small businesscontracting programs, primarily at the Pentagon.

"It's obvious the Pentagon is desperate to close the SBA tocover up over 20 years of blatant fraud and corruption in their small businesscontracting programs. I wouldn't be surprised if Senator Burr tries again to lead the Republican assault to close the SBA and kill federal small business programs," Chapman stated.

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SBA Takes Flak Over Revising Company Size Standards


SBA Takes Flak Over Revising Company Size Standards

Rep. Sam Graves says SBA's proposed rule could prompt litigation.

By Charles S. Clark
Government Executive
November 12, 2014

A Small Business Administration's bid to modernize its classifications ofcompanies eligible for contracts and loans has drawn venom from a powerfulHouse committee chairman and some in the information technology industry.

A proposed rule to revise employee-based size standards is "arbitraryand capricious" and "irrational," Rep. Sam Graves, R-Mo., chairman of the SmallBusiness Committee, said in a Nov.10 letter to SBA. The draftrule also "disregarded the express language" of the 2013 National DefenseAuthorization Act requiring SBA to publicly document its reasoning for changingclassifications, added Graves, who warned of litigation and a legislative fix.

Critics worry that too many IT companies wouldbe dealt out of SBA's programs.

In September, the SBA published in the Federal Register aproposal to change national industry classifications, as part of itsfour-year-old review of size standards under the 2010 Small Business Jobs Act.The proposed process would base classification of companies more on annualrevenues more than number of employees. The comment period ended Monday.

Together with other changes, the new rule would define as small businessesthose IT firms with $27.5 million or less in annual sales, making nearly 1,650more firms eligible for federal procurement and SBA's loan programs, accordingto the agency.

Among other changes, the proposal would no longer allow some computerservices firms with 150 employees or fewer to qualify for a separatesub-category for Information Technology Value Added Resellers.

"For size standards review, SBA takes into account the structuralcharacteristics of individual industries, including average firm size, startupcost and entry barriers, the degree of competition, and small business share offederal government contracting dollars," SBA said in the proposed rule. "Thisensures that small business size definitions reflect current economicconditions and federal marketplace in those industries."

The Petaluma, Calif.-based American Small Business League has longcriticized SBA's methods, saying they allow large companies to masqueradeas small businesses to win contracts.

"If the new SBA policy were adopted, small businesses that provide a widerange of information technology products would lose their small businessstatus and be forced out of the federal marketplace," said league founder LloydChapman. "At the same time thousands of small businesses in the IT industrywill be reclassified as large businesses, the SBA will continueto report billions of dollars in awards to Fortune 500 firms andtheir subsidiaries as small business contracts."

The league estimates 12,000 companies would adversely affected by theproposed rule, and it plans to file an injunction.

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