A new revenueceiling proposed by the Small Business Association (SBA) couldsignificantly alter the landscape for IT resellers by excluding a large numberof small businesses from the federal IT reseller market, according to the E-Commerce Times.The SBA is proposing revisions to the size standards affecting VARs and otherIT solutions providers who provide hardware, software, or both as part ofprojects that also involve installation, systems integration, or otherIT-related services for federal agencies. The change means that companies withmore than $27.5 million in annual revenue no longer qualify for small businesspreferences.

"This proposed change is a terrible mistakethat would have extreme adverse consequences for many small businesses," The E-Commerce Times quotedLars Anderson, an attorney with Venable,in comments to the SBA on behalf of Wildflower International, a smallwoman-owned IT reseller.

"We are looking here at some highlyprofessional, qualified firms that provide efficient IT support to thegovernment with proven track records in terms of federal contract performance —but they just operate with well under 150 employees, unlike the really bigplayers," Anderson told the E-CommerceTimes.

Meanwhile, the SBA is defending the proposal,stating that the changes are necessary since the existing size standards thatinvolve references to both revenue and employees have created inconsistencies,confusion, and misuse. Further, the SBA explained, contracting officers are notable to identify size elements in a government data base, which leads tomisunderstandings about set-aside goals. Therefore, the use of employee countsinstead of revenues may have negatively affected some small businesses,according to the administration.

Since SBA issued the proposed rulein September, more than 200people have responded, mostly in opposition to anticipated change.One leading expert on federal contracting law, Professor Charles Tiefer, has joinedwith the American Small Business League (ASBL) President Lloyd Chapman inopposing the new policies, stating that they will be "devastating to thousandsof small businesses," according to apress release.

The release explains that the policy wasderived from Congress'sintent in the Small Business Jobs Act of 2010, which was "to allowsmall businesses to compete in the current federal marketplace." However,Tiefer contends, the proposed rule accomplishes exactly theopposite by "eliminating" the higher size standard of 150-employeesand using the lower size standard of $27.5 million in receipts.

"If the SBA actually adopts a final ruleeliminating IT-VAR, this will have precisely the effect Congress did not want.The final rule will decrease small business size standards in the 'solutions'sub-industry. Businesses that qualified, below the 150 employee standard, nolonger will," Tiefer argues in the release.

According to Tiefer, if the SBA adopts thefinal rule, "small businesses will be squeezed out of the federal marketplace."

"Eliminating the 150 employee ceiling puts the'high-employee-level' type of contractor out of business, because it cannot getdown under $27.5 million without a kind of radical chopping it cannot handle —i.e., switching to a business model of fewer employees, and, laying off a third(50) or more employees," states Tiefer.

"Only IT-VAR is being eliminated. Thisunfairly and inconsistently punishes the 'IT Solutions' industry," Tieferstates.

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