Rules for Small Businesses Will Recertify Their Sizes

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Rules for Small Businesses Will Recertify Their Sizes

By Ron Nixon
New York Times
November 15, 2006

The Small Business Administration announced new rules yesterday intended to help small businesses obtain more federal contracts and to assure that contracts set aside for small businesses are not going to larger companies.

The new rules will require small businesses to recertify their size when they are purchased by or merged with a larger business, or at the end of the five-year point of a contract.

In the past, size has been determined at the beginning of a contract and was retained over the life of that contract.

A company that was small at the time it received a contract would continue to be listed that way throughout the life of the award, which is some cases could be up to 20 years. (A small business is determined by revenue and number of employees. For manufacturers, the threshold is fewer than 500 workers. For the service and retail industries, it is typically $6.5 million in revenue.) This allows concerns that had grown large to compete for small- business set-asides despite their size. The new regulation does not require the government to terminate an existing contract if a company's size changes.

"This regulation will go a long way toward ensuring that contract awards get in the hands of small-business owners, federal agencies get the proper credit toward their small-business contracting goals and small-business contract awards are fairly and accurately reported," Steven C. Preston, the S.B.A. administrator, said in a statement.

The agency has long been criticized for allowing larger companies to win contracts that are set aside for small businesses. By law, 23 percent of federal contracts are supposed to go to small firms, but several studies have shown that billions of dollars in small-business contracts instead went to corporate giants. A Congressional study in June found that companies like Microsoft, Google and Exxon Mobil were among the recipients of small-business contracts. The report said the contracts were a result of inaccuracies in the government database that tracks contracts.

The S.B.A. said the new rules were not in response to criticism.

"This is something that has been proposed since 2003," said Karen Hontz, counselor to the S.B.A. administrator. "The rules took time to develop."

In addition to the size recertification, the agency also announced the development of a Small Business Procurement Scorecard for 24 federal agencies that will track and monitor the status of each agency's small-business goal achievement.

The S.B.A said it would also hire employees to help identify government contracting opportunities for small businesses.

Representative Nydia M. Velázquez, Democrat of New York, the expected next chairwoman of the House Small Business Committee, said the rules did not go far enough.

"The agency's rule fails to address the vast majority of this problem," she said in a statement. "Eighty percent of the contracts miscoded were due to other factors than small businesses simply growing too large, which is all this regulation focuses on."





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