A proposedchange to Small Business Administration rules governing small IT resellercontractors will have dire consequences for those businesses, a longtime criticof the agency contends.

The proposed changes,announced by the SBA in August, would take away an exemption for InformationTechnology Value Added Resellers (ITVAR) under North American IndustryClassification System rule 541519. Under the proposed change, IT businesseswith annual sales of more than $27.5 million would be considered large, andthus ineligible for small business preferences.

SBA contendsthe change, which is included in a number of other alterations for other setsof vendors, is needed to make the categories more coherent and current.Comments on the proposal are due Nov. 10.

LloydChapman, president of the Petaluma, Calif.-based American Small BusinessLeague, contends that the proposed ITVAR changes, would be devastating forsmall IT resellers that sell to federal agencies -- bankrupting "90percent of IT value-added resellers" with 150 or fewer employees, andbenefitting large contractors in the process.

Chapman hasbeen a harsh critic of theadministration's stance on small business policy for years. And "accordingto this new policy, if you are a small business IT reseller and you use NAICScode 541519 and have revenues over $27.5 million, you will no longer beconsidered a small business," he said. "At the same time, Fortune 500companies like Lockheed Martin, Boeing and Raytheon are still receiving smallbusiness contracts and credit towards their small business goals."

The move,Chapman said in an interview with FCW, is part of a larger administration effort to fold the SmallBusiness Administration into a consolidated Commerce/Labor Department in aneffort to streamline government operations.

Others in thefederal acquisition community, meanwhile, said they're still mulling theimplications of the SBA's proposal.

While somesaid there was validity to the notion that the changes might hurt smaller resellers,they also said other resellers that have been successful and outgrown the smallbusiness category might be freer to compete in a larger field for largercontracts.

"Thereis a lot of angst out there," said one acquisition industry official.

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