How small businesses are officially defined by the Small Business Administration can have a dramatic impact on their rate of success, according to testimony heard before the House Committee on Small Business.
In commenting on that testimony, Missouri Republican Representative Mark Alford noted that “since 2010, the number of small businesses winning federal contracts has dropped by 50%.”
Calling that a “stark decline,” Alford went on to remark that the federal government’s “sizing standards,” which he said are out of date, are a major factor in that decrease.
Committee members have been particularly critical of SBA’s operating definitions owing to the negative impact they have on small businesses being competitive in the federal procurement marketplace.
In remarks during the hearing, Jay Lambke, president of a business called Government Acquisitions, Incorporated, which is based in Cincinnati, said that while his company has had decades-long success in providing information technology services for the federal government, it has been hampered by the SBA categorizations.
Not only are the definitions of what constitutes a small business becoming increasingly restrictive, said Lampke, but the wait times involved in getting an answer on a contract bid are longer. Lambke added that such challenges “create the need for more government contracting professionals on staff, which include lawyers, technical writers, and subject matter experts.”
“Not only does this add significant expense for business,” said Lambke, “but it also adds to the number of employees.”
Texas Republican Representative Roger Williams, who is the chairman of the House Committee on Small Business, noted that size standards were generally established in the 1950s and designed to “protect small businesses by ensuring that only small firms received SBA assistance, in addition to determining eligibility for federal contracts.”
But in recent years, continued Williams, small businesses have begun to see their chances for securing federal contracts decline. “Many agencies use a receipt-based standard, and if it is too low, it may prevent the business from fully participating because they can lose their size status due to a high revenue-generating contract.”
“This,” added Williams, “is nothing more than punishment for a business succeeding, which is antithetical to the American dream.”
In a public posting, the SBA has noted that the agency’s size standards are “reviewed every five years.”
The agency added: “SBA takes comments from the public into consideration before finalizing proposed rules on size standards.”
The agency adds that SBA welcomes suggestions on “alternative methodologies, factors, datasets, effects on competition, and approaches that make sense in the current economic environment.”
By Garry Boulard
