Wehrmeyer: Say no to yearly certification

Few rules issued by Small Business Administration officials for comment last year would have required small-business owners to annually recertify their eligibility for certain contracts reserved for them. Officials intended the rule to winnow small businesses that outgrow their size limitations during the course of a contract.

Many small-business officials complained that SBA's proposed rule didn't substantially change the practice of awarding contracts to firms that grew during the life of a contract.

Small-business owners should applaud the intent of ensuring that only small businesses compete for and receive small-business awards. They should also applaud SBA officials' determination to create the rule to help small businesses.

The proposed rule change was based on several assumptions. An important one was that the transition from being a small business to a business qualified to compete in a full and open marketplace occurs when a revenue threshold is passed. The simple fact is that crossing a revenue threshold does not make a company well-positioned to realistically compete fully and openly with competitors that may have billions in revenues.

Smaller companies seldom — if ever — are able to match the qualifications of large competitors, and government decision-makers are reluctant to accept the risk of choosing a smaller company when they could opt for a multinational one.

Moreover, the proposed rule could have had many other unintended results. Program managers and contracting officials might be reluctant to set aside opportunities because they may fear a small firm would become large within two or three years, forcing them to award another contract.

The proposed rule change could have forced agency officials to hold annual competitions on multiple-award contracts to replace graduated small businesses. This burden could severely discourage the use of small-business set-asides.

Larger, well-established contractors would have little or no incentive to team with transitional small businesses. Company officials would worry that the small-business credit required by many multiple-award contracts would not come to fruition when the small-business partner grows.

Additionally, officials at small but transitional businesses might be reluctant to spend thousands of dollars to bid on multiyear contracts, even if they possess the best qualifications and expertise, because they fear they may graduate from a particular size limitation.

The fact is that some larger companies generate more revenue in a week than some companies graduating from small-business designations generate in a year. As a result, their competitive position in the full and open marketplace presents a significant barrier to the growth — or even survival — of smaller companies. This is not wrong; it is simply reality.

SBA officials recognized that the health and competitiveness of the U.S. small-business community is best served if small-business award holders on multiple-award contracts are not required to recertify annually.

Wehrmeyer is an attorney in private practice in San Antonio who represents small companies doing business with the federal government.

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