At last there will be some answers to the questions of whether and on what scale companies are falsely claiming they are small to get preference in federal procurement.

The House Small Business Committee sets a May 7 hearing date for General Accounting Office officials to report on their study of the matter.

Other witnesses will include Angela Styles, administrator of the Office of Federal Procurement Policy; Fred Armendariz, associate deputy administrator for the Office of Government Contracting & Business Development in the Small Business Admin.; and Lloyd Chapman, president of the Microcomputer Industry Suppliers Assn., the person who raised the issue of size fraud.

Meanwhile, the Office of Inspector General in the Small Business Administration conducts a criminal investigation that already has resulted in a memo recommending changes to guard against fraud. GC/BD tells MBI it is getting ready to implement virtually all the recommendations.

In addition, the SBA, OFPP and the General Services Administration are working to develop a consistent policy for requiring firms on government-wide acquisition contracts set aside for small businesses to recertify annually.

GSA is requiring companies on the Federal Supply Schedules to recertify at the start of each five-year option period (MBI, 11/27/02p1). The comment period has ended on regulations proposed by SBA to require certification for follow-on contracts but not for the exercise of options. The majority of commenters favored the GSA system (MBI, 3/12p4).

SBA's OIG recommends annual recertification in a Program-Vulnerability Memorandum to the government contracting office. The PVM notes OIG discovered in the course of an ongoing criminal investigation there are systemic problems with oversight of whether companies claiming to be small really are.

The criminal investigation was started last year when Chapman brought allegations of fraud to OIG, GC/BD and the U.S. Attorney's Office for the District of Columbia (MBI, 11/13p3). Eventually, the U.S. Attorney's Office sent the information to OIG, which opened the criminal investigation.

The PVM recommends:

• A certification statement be on the agency's PRO-Net website.
• Procedures must address the problems caused by the recent integration of PRO-Net and the Central Contracting Register (MBI, 12/24/02p5). The consolidation requires firms to register with CCR and the names are automatically placed into PRO-Net, creating an additional layer between PRO-Net registrants and SBA. One possibility, suggests OIG, is to have the entry of each new PRO-Net registrant trigger an e-mail outlining the criminal statutes, regulations and penalties.
• Similar information should be incorporated in the certification.
• PRO-Net should include guidance to federal contracting officials on the proper use of PRO-Net and requirements for independent certifications relative to size.
• Annual recertification should be implemented by sending an email to firms on PRO-Net requiring them to state their size qualifications and warning them of the penalties for falsifying information.
• The changes should be coordinated with the CCR.

GC/BD tells MBI it is making changes in PRO-Net "that essentially adopts OIG's recommendations."

The contradiction between information in a letter to Chapman and a statement given to MBI about practices GC/BD plans to follow when it removes firms from PRONet have been resolved in favor of the letter (MBI, 4/9p3), reports SBA.

SBA methodology

Those companies determined to be other than small via a formal protest will be posted on SBA's website separately from PRO-Net. SBA reports there were 383 size protests in FY 2002. The agency dismissed 110, found 85 firms to be other than small and determined 165 were small. Another 27 complaints were still being processed at year end.

Outside the size-protest process, SBA has found 540 firms to be other than small and notified them they were removed from PRO-Net. The agency plans no further action.

In addition, SBA says another 100,000 companies were removed from PRO-Net when it was integrated with CCR MBI, 1/16p2). In most cases the action was taken because companies had not updated their information for more than 18 months.

If GC/BD suspects fraud, the case is referred to OIG. None of the FY 2002 cases was forwarded to OIG.

Size Standards, Net Worth Under Review

The Small Business Admin. is considering raising size and net-worth standards, Fred Armendariz, associate deputy administrator for government contracting and business development, tells a Senate Small Business & Entrepreneurship roundtable.

Currently, an entrepreneur can qualify as an 8(a) company or a small disadvantaged business if his/her net worth is no greater than $250,000, not counting equity in the business or a home.