This story appears in the
April 2005 issue of
Entrepreneur.
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The SBA is cutting the fat from small-business procurement
statistics. The changes would prevent small businesses that have
grown large, or have been acquired by big business, from continuing
to be counted as small businesses by federal agencies when
reporting procurement data.
A study by the SBA's Office of Advocacy published last
December found that, of the $54.1 billion in federal procurement
funds supposedly paid to small businesses in 2002, $2 billion
actually went to big businesses. Among the tubbies was Raytheon
Co., which the Office of Advocacy said won small-business contracts
worth $126.7 million.
Federal agencies are supposed to work toward a goal of awarding
23 percent of their purchases to small businesses. Thomas M.
Sullivan, the SBA's chief counsel for advocacy, says the
too-big companies did nothing illegal; they just took advantage of
a legal loophole.
The SBA has made one final and one proposed change aimed at
sewing that loophole shut. First, the agency said that as of
December 2004, large companies that get novated contracts--that is,
they acquire small companies that are selling goods to federal
agencies--must immediately inform the federal agency's
contracting officer. That officer then takes the contract off his
agency's small-business tally.
A bigger change would be the SBA's proposed dictate that all
companies listed as small recertify their status every five years.
The General Services Administration already requires that of small
companies who regularly do business with the government; the
proposed rule would make the requirement apply to all federal
contracts. The rule is expected to be finalized during the first
half of 2005.
Stephen Barlas is a freelance business reporter who covers
the Washington beat for 15 magazines.