Small biz recertification irks industry

Proposed rule

Two industry groups have filed comments with the Small Business Administration, opposing an SBA proposal that would require agencies that manage governmentwide acquisition contracts to recertify small businesses once a year.

The purpose of the proposal is to ensure that companies getting work under small business set-asides, or counting as credit toward larger companies' subcontracting goals, are actually small. Currently, a business has to certify its status only when a contract is first awarded. A company could outgrow the small designation but continue to do business under that label for years.

The Information Technology Association of America and the Professional Services Council both argue the proposed rule is too burdensome.

ITAA agrees with the rule's intent, said Olga Grkavac, executive vice president of the association's enterprise solutions division. "Recertification requires administrative hurdles for companies large and small, and the costs of those efforts should not be imposed unnecessarily. We urge SBA to revise the proposed rule and adopt a more moderate approach," she said.

ITAA suggests that businesses recertify their size on the anniversary of the contract award and then once every five years.

The Professional Services Council, in a 10-page letter, outlined a series of objections while also emphasizing their support for the rule's objective. "The proposed rule needs substantial additional work and public comments thereafter before it is implemented," wrote Alan Chvotkin, the Council's senior vice president and counsel.

When a contract award or benefit is intended only for small businesses, the agency should ensure that it goes only to those businesses, Chvotkin wrote. "More frequently, however, size status is only relevant to prime contractors reporting against their subcontracting goals and federal agencies reporting against their prime and subcontract awards," he said. Because of that, an across-the-board annual recertification requirement is more burdensome than it is justified.

The proposed rule also does not specify what mechanism is to be used for firms to validate their size status, Chvotkin wrote. He recommended that agencies require only the contractor's own affirmation, with penalties for giving false statements.

The council is also concerned with the effect that a sudden change in size status will have on businesses, questions not answered by the proposed rule. Small businesses are generally not required to submit a small-business subcontracting plan, for example. They are usually exempt from federal cost accounting standards. The proposed rule does not address whether a loss of small status would require them to immediately begin to comply with those requirements.

Chvotkin also wondered if a small business that loses its status during a re-evaluation could revert back to small if a later examination showed it had subsequently contracted enough.

The proposed rule appeared in the Federal Register April 25. The public comment period closed June 24.