PETALUMA,Calif., Oct. 7, 2014 /PRNewswire-USNewswire/ -- A new government policy that was posted in the Federal Registeron September 10 could be devastating to thousandsof small businesses that supply IT products to the federal government andgovernment prime contractors.

Underthe new proposed rule, all small business that fall under theexemption under NAICS code 541519 titled, Information Technology Value AddedResellers, with annual sales in excess of $27.5 millionwill become large businesses by the end of the year.

Ifthe new rule is adopted, thousands of legitimate small businesses in the ITindustry will be forced to close their doors when they are required to competehead to head with corporate giants like IBM, Dell, Hewlett-Packard, OfficeDepot and Staples for even the smallest government orders for IT products.

Atthe same time the government decided to make small businesses in the IT industrylarge, other new federal policies have allowed thousands of large businesses tosuddenly qualify as small. The Washington Post released a story on the issuetitled, "How 8,500 large companies will become small businessesovernight."

Asthe government plans to adopt policies that will cost thousands of small ITfirms their federal small business status, contracts to many Fortune 500 firmswill continue to be counted as small business contracts.

Thelatest data from the Federal Procurement Data System indicatesthat hundreds of large businesses are currently receiving federal small business contractsincluding a who's who of Fortune 500 defense giants like Boeing, Lockheed Martin,Northrop Grumman, General Dynamics and Raytheon.

NewSBA Administrator Maria Contreras-Sweet was chastised in a hearing by members of the House SmallBusiness Committee for diverting billions of dollars in federal small businesscontracts to corporate giants.

Thediversion of billions of dollars in federal small business contracts to Fortune500 firms has been uncovered in dozens of federal investigations andinvestigative reports by NBC, CBS, ABC, Fox News, CNN, RTTV, CNBC and MSNBC. On September 24, the SBA Office of Inspector General (OIG)uncovered up to two billion dollars in federalcontract actions that were awarded to ineligible firms. A similar investigationin 2008 reported the same widespread evidence of fraud.

TheSBA has recently faced a barrage of bad press after the SBA Inspector General's report wasreleased.

TheAmerican Small Business League (ASBL) is coordinating a national effort todefeat the proposed policy. ASBL President Lloyd Chapmanstated, "Think about the insanity of a new federal policy that willreclassify thousands of legitimate small IT firms as large businesses whilethousands of large businesses are inexplicably redefined as small businessesand federal contracts to some of the largest corporate giants in the U.S.continue to be reported as small business contracts."

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