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Wrong! Try Again

It's back to square one for the SBA and its small-business size standards.

The SBA is headed back to the drawing board to make new size standards for small businesses. Each U.S. industry is assigned a size standard, which sets the maximum number of employees a firm can have and still qualify for SBA programs, exclusions from federal rules, and contracting opportunities. The SBA's first proposal for changing size standards was released in March. It would have consolidated current size standards, which are based on annual receipts, number of employees and other measures, into 10 categories based on employee numbers. (See "Capitol Issues", June 2004.)

It received a blistering critique from the SBA Office of Advocacy: "Some small businesses are concerned that adoption of the proposed size standards will force them to reduce the size of their work forces to retain their small business designation." The SBA withdrew the proposal.

Gary Jackson of the SBA Office of Size Standards says the SBA is starting over and will issue an "advanced notice of proposed rule making"-the first step in a rule-making process-before the end of 2004. That's likely to be preceded by public meetings. (Meeting details will be announced in the Federal Register.)

The SBA's initial analysis of its March proposal stated that, as a result of the reduction to 10 size standards, 35,200 new small businesses would be eligible for federal programs, while 34,100 would lose their small-business designation-a positive net effect of 1,100 businesses. The Office of Advocacy argued that the SBA should have quantified the benefits and adverse impacts for each group and compared them before deciding the proposal was a net "plus." Stay tuned.



Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.

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This article was originally published in the October 2004 print edition of Entrepreneur with the headline: Wrong! Try Again.

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