SBA Has New View of "Small"

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SBA Has New View of "Small"

It toughens stand on large-firm contracts.

By Thuy-Doan Le
Sacramento Bee
December 21, 2004

Today, the federal government ends a practice that has allowed it to count contracts with large corporations as small-business awards, according to the U.S. Small Business Administration. In the past, when large companies acquired small businesses, the buyers got to keep their new additions' small-business status for the life of its contract with the federal government.

The company now has to immediately be recertified to determine whether it's still a small business, said Gary M. Jackson, assistant administrator for the agency's Office of Size Standards in Washington, D.C. For years, the SBA has added in contracts with these businesses when determining whether the federal government is meeting the goal of awarding 23 percent of contracts to small businesses.

Last year, the government purchased a total of $300 billion in goods and services. Of that figure, more than $65.5 billion went to small businesses. Jackson said he could not estimate how much of this money was going to companies that had outgrown the small-business status.

The nonprofit Center for Public Integrity estimated in September that, because of this special exemption, 30 percent of all defense contract dollars reportedly earned by small businesses and special minority-owned businesses went to the largest defense companies.

Millions of dollars have gone to large corporations, the center said. Since these dollars will no longer be counted toward the contracting goal, many small-business advocates expect businesses that actually meet the size standards to gain ground.

Lloyd Chapman, founder of the American Small Business League and an SBA critic, described the change as a major victory after years of trying to get the agency to change its policies. The elimination of the exemption will not bar a company from working on a contract previously won, Jackson said.

Up until the mid-1990s, federal contracts lasted about one to five years, but today, through multiple-award contracts, they can last anywhere from 10 to 20 years.

In a worst-case scenario, a company could have started out small but have been expanded or acquired after the first year of a contract, Jackson said. Yet, it continued to be counted under the small-business status for the next 19 years.





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