SBA targets small-biz mergers

Editor's note: This story was updated at 2:20 p.m. July 5, 2007. Please go to Corrections & Clarifications to see what has changed.

A new recertification rule will remove large corporations listed as small businesses from the government’s database within a year, the Small Business Administration said today.

The new rule, which took effect last week, requires a small business that merges with or is acquired by another company to immediately recertify its size.

When a small business loses its status, federal contracts with the company will continue, but agencies can no longer count them as small-business contracts, according to SBA.

Furthermore, agencies must immediately modify all existing long-term contracts –- those lasting at least five years -- to require small businesses to recertify their size status in the event of acquisitions or mergers.

Verifying a company’s size will increase pressure on agencies to contract with new small businesses so they can meet their small-business contracting goals. Congress mandated that agencies award 23 percent of their contract dollars to small businesses.

This summer SBA will offer new ways for agencies to match small businesses to contracts. The Quick Market Search tool will enable contracting officers to find vendors under socioeconomic preference programs.

In addition, SBA will work on cross-agency agreements that increase the number of contracts under those preference programs to help agencies that have failed to reach their goals.

“SBA is making tremendous progress improving federal contracting opportunities for small businesses,” SBA Administrator Steven Preston said in a statement.

SBA officials say recertification is necessary because agencies have been able to count all contracts originally awarded to small businesses as small-business contracts for up to 20 years, even if large corporations acquired those companies during that time period.

According to a notice in the July 5 Federal Register, this recertification rule will become part of the Federal Acquisition Regulation, although the interim rule is open for comment. While matching SBA’s rule, the FAR rule would go a step further by requiring the contracting officers to document in the contract file the date the contractor did its verification.

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