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.

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"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.

Toview full article, click here: http://www.federalnewsradio.com/239/3741430/SBA-proposed-size-standard-change-riles-small-IT-resellers

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.

To view full article, click here: http://www.govexec.com/oversight/2014/11/sba-takes-flak-over-revising-company-size-standards/98795/?oref=river