SBA reassessing small-business IT size standards

The Small Business Administration is preparing to release later this month a proposed new regulation that could revise the annual revenue limits that determine whether information technology companies qualify as small businesses when they bid on federal IT services contracts, SBA officials said today.SBA plans to brief the administration on the proposal within the next several days, said Anthony Martoccia, associate administrator in the SBA Office of Government Contracting and Business Development.Martoccia declined to provide details of the proposal, but he described it as a positive change.Many small IT firms and procurement experts say the current cutoff of $23 million in revenue averaged over three years is too low. The IT Association of America (ITAA) said the current cap is unrealistic because companies that move out of the set-aside program at that size cannot compete in the marketplace with much larger companies.ITAA has urged SBA to define a small business as having a maximum of 500 employees or $50 million in averaged annual revenue.“We were hoping that we would see that,” Olga Grkavac, executive vice president of the public sector group at ITAA, said of the announcement.Martoccia and SBA Administrator Steven Preston insisted, however, that the agency has no plans to completely rewrite the size standards for all small business categories.Preston, reviewing his first six months as SBA administrator, said the agency is committed to helping small IT businesses win more federal contracts. “It’s not just an issue of fairness, it’s also a matter of competitiveness,” he said. “Small businesses perform well as suppliers of goods and services.”He said, however, procurement officials require “a bit more effort to find the right small business.”Preston said in 2005, the last year for which SBA had data, small businesses secured almost $80 billion in prime contracts from federal agencies. Almost $21 billion of that went to small disadvantaged businesses.Preston acknowledged that “important questions have been raised about the accuracy of small business contracting data, and how large corporate names have shown up among the contracts going to small businesses.”He said SBA is concerned, too. “If there is any illegal activity in this area, it is totally unacceptable and absolutely has to be dealt with,” he added.But Preston said several factors complicate a solution acceptable to all. He pointed out that during the life of a long-term contract small companies can grow into larger entities, and large companies may acquire small businesses. In those cases, midsize or large companies will appear in the small business contract data.That’s why SBA recently changed the size recertification rule, he said, to ensure that businesses receiving small business contracts are, in fact, small.“This new [recertification] rule will make federal contracting more relevant and, more importantly, it will increase opportunities for small businesses by encouraging federal contracting officers to expand their search to qualified small business contractors,” Preston said.He said SBA and the Office of Management and Budget will work to reduce the coding errors in small-business data and will insist that all federal agencies carefully review their 2006 small-business data to improve accuracy and transparency. “And we plan to make that data available and useful within the coming months,” he added.