Nadler: New size rules fall short

One of the government's most important policies is to provide as many opportunities as possible to small businesses and allot a fair portion of contracts to them. Government officials foster this goal by promoting various programs and setting aside certain contracts for participation only by businesses that fit the Small Business Administration's size standards.

For some time, SBA officials and the courts have been grappling with a loophole in the agency's regulations that allows a small business that has grown large to continue to receive small-business contracts after it has outgrown its size status. SBA officials, under pressure from Congress to meet small-business contracting goals, have contributed to this problem by looking the other way and awarding the contracts to firms that are now indisputably large.

SBA officials missed an opportunity to close this loophole during recent changes to size regulations. The new regulations do not substantially alter the prior rule that a contractor's size is determined by the date when the contractor submits a self-certification of the business' size status as part of its contract proposal. This presents a particular concern with governmentwide acquisition contracts (GWACs) and General Services Administration schedule contracts, given their extended terms. Under these contracts, a large business can continue to compete for small-business task orders or blanket purchase agreements (BPAs) based on a small-business size certification that may have been granted years ago.

Officials at GSA and the Office of Federal Procurement Policy (OFPP) have taken steps to address this problem. GSA officials implemented a Federal Acquisition Regulation requiring small-business owners to recertify their companies' size status every five years, at the time of option renewal under the GSA schedule. OFPP officials went a step further and required annual recertification of vendors on GWACs. SBA's new rule, however, did not adopt the annual recertification requirement OFPP instituted.

Some observers have suggested that annual recertification would make it difficult for small businesses to transition to a larger status and create an administrative burden. Although these concerns may be legitimate, they are not the point.

To allow a large business to masquerade as a small business deprives real small businesses of contract opportunities to which they are entitled. Similarly, allowing government agencies to claim small-business credit for contracts awarded to firms that are actually large misleads Congress and compromises the government's ability to meet small-business contracting goals.

SBA's failure to require annual recertification has left the door open to conflicting interpretations of the recertification requirement for GWACs and permits further mischief on GSA's schedule contracts.

Under the new rule, a large business could continue to receive small-business orders or BPAs under the GSA schedule contract program for up to five years before it has to recertify its size. Because the government's goal is to award 23 percent of its contract revenue to small businesses and the GSA schedule contract program accounts for approximately $13 billion of the federal information technology budget, a significant amount of potential small-business revenue is at stake.

SBA officials should close this loophole and require annual recertification of a vendor's size status to ensure that only bona fide small businesses receive the benefit of that status.

Nadler is a procurement attorney with Dickstein Shapiro Morin & Oshinsky LLP in Washington, D.C.

The Fed 100

Save the date for 28th annual Federal 100 Awards Gala.


  • computer network

    How Einstein changes the way government does business

    The Department of Commerce is revising its confidentiality agreement for statistical data survey respondents to reflect the fact that the Department of Homeland Security could see some of that data if it is captured by the Einstein system.

  • Defense Secretary Jim Mattis. Army photo by Monica King. Jan. 26, 2017.

    Mattis mulls consolidation in IT, cyber

    In a Feb. 17 memo, Defense Secretary Jim Mattis told senior leadership to establish teams to look for duplication across the armed services in business operations, including in IT and cybersecurity.

  • Image from

    DHS vague on rules for election aid, say states

    State election officials had more questions than answers after a Department of Homeland Security presentation on the designation of election systems as critical U.S. infrastructure.

  • Org Chart Stock Art - Shutterstock

    How the hiring freeze targets millennials

    The government desperately needs younger talent to replace an aging workforce, and experts say that a freeze on hiring doesn't help.

  • Shutterstock image: healthcare digital interface.

    VA moves ahead with homegrown scheduling IT

    The Department of Veterans Affairs will test an internally developed scheduling module at primary care sites nationwide to see if it's ready to service the entire agency.

  • Shutterstock images (honglouwawa & 0beron): Bitcoin image overlay replaced with a dollar sign on a hardware circuit.

    MGT Act poised for a comeback

    After missing in the last Congress, drafters of a bill to encourage cloud adoption are looking for a new plan.

Reader comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group