SBA gets many opinions on proposed small-biz rule changes, but no easy fix
If Small Business Administration officials really want to know what their constituents think about size standards, they have no shortage of opinions.
SBA was deluged with about 3,700 written comments about proposed rule changes, which agency officials subsequently withdrew. Business owners, advocacy group leaders and analysts have also expressed their opinions in other ways above and beyond the voluminous filings.
Unfortunately for agency officials, the interested parties who are quick to point out how SBA officials got it wrong don't fully agree on what would be right.
SBA officials proposed to cut the number of size standards from 37 to about 10, and measure as many small businesses as possible based on the number of employees. Right now, some are measured based on headcount and others on annual receipts.
A handful of issues generated most of the objections. For one, the rule would have immediately pushed an estimated 34,100 small businesses out of the classification, making them suddenly ineligible for SBA loans and benefits. They also would no longer count against small-business contracting goals or be eligible for small-business set-aside contracts.
"Companies with diverse information technology portfolios often expand rapidly in the early years because of the ebb and flow of technology cycles," said Harry Howton, chairman and chief executive officer of Gray Hawk Systems Inc., in a written comment. "When size ceilings are too low, these firms do not have sufficient time to mature before graduating from small to big status."
The proposed size standards did not offer a transition period or grandfather clause, even though "the future of these new 'big' firms can be turbulent and short," Howton said. Company owners would have no choice but to allow their companies to be bought or try to grow rapidly through acquisition, he added.
He proposed a sliding scale approach to create a middle ground between small and big businesses. After a company is too large to be a small business, it should remain eligible for some small-business benefits and opportunities, which would taper off and ultimately disappear as it continued to grow, Howton suggested.
Similarly, Alan Chvotkin, senior vice president and counsel of the Professional Services Council, advocated multiple small-business standards that would apply to different activities. For example, "small" would be defined one way for the purpose of winning federal contracts, another way for determining eligibility for small-business loan programs and differently for providing management assistance.
Such a system would be more complex than the goal SBA officials have been trying to reach, but also more fair and attuned to the realities of business, he said.
"What it takes to do business in the federal marketplace bears little resemblance to what it takes to do business as a restaurant in Kansas and be eligible for federal lending programs," Chvotkin said.
SBA officials said that the proposed rule changes would have redefined 35,200 businesses as small that currently don't have that status, making for a net gain of 1,100.
Some comments came from organized groups. Members of the Microcomputer Industry Suppliers Association, whose president Lloyd Chapman believes that small businesses should be defined as having 100 or fewer employees, sent in 2,350 nearly identical comments supporting that position.
Tim Long, vice president of customer operations at Optimus Corp., said the proposal would have made it more difficult for agencies to hire smaller contracting firms that are already familiar with the agencies' needs.
Chapman, who also serves as a consultant to GC Micro Corp., added that as written, the rule would have defined most nonmanufacturing businesses
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