New SBA Policy Opposed by Small IT Firms

PETALUMA, Calif., March 31, 2015 /PRNewswire-USNewswire/ -- If a new SBA policy takes effect, thousands of small businesses in the IT industry will be reclassified as large businesses. At the same time existing SBA policies will continue to report billions of dollars in contracts to Fortune 500 firms as small business contracts.

The SBA reopened a policy for public comments that is attempting to make amendments to small business government contracting and the National Defense Authorization Act of 2013 involving small business set aside contracts and small business subcontracting. The SBA proposed changes to the standard for subcontracting by small business primes from no more than 50% of personnel costs performing the set aside contract to no more than 50% of the award amount received by the prime contractor.

There is no logical justification for making this change in policy. It is inconsistent with the SBA's primary mission and seems outrageous in comparison to the current SBA policies that allow contracts to Fortune 500 firms to be reported as small business contracts. This change will have a devastating impact on IT Value Added Resellers who currently provide services and supplies to Federal agencies.

A number of investigative stories in the main stream media and a long series of federal investigations have found widespread fraud and abuse in federal small business contracting programs. A number of congressional hearings have found lack of oversight on the part of the SBA that has allowed widespread fraud to permeate virtually every program managed by the SBA.

This policy comes on the heels of another anti-small business policy, the "safe harbor from fraud penalties" policy that would allow firms to commit Federal contracting fraud. Large businesses that misrepresent themselves as small businesses and commit Federal contracting fraud to illegally receive federal contracts to avoid all prosecution can simply claim they "acted in good faith." Opponents of the new policy are concerned this is just another policy that appears to be designed to weaken and dismantle federal small business contracting programs and create more loopholes and channels where federal small business dollars can be diverted to large businesses.

When the SBA tried a similar policy in October of 2014, Professor Charles Tiefer and the U.S. House Small Business Committee released legal opinions that found the SBA did not have the legal authority to make that change.

"Based off of Professor Tiefer's legal opinion from November of 2014, I don't believe the SBA has the legal authority to make this change. This is yet another anti-small business policy from the SBA. The agency that continues to report billions a year in contracts to Fortune 500 firms as small business contracts. And if this policy is passed it will reclassify thousands of legitimate small businesses in the IT industry as large businesses while the SBA continues to convert billions in small business contracts to Fortune 500 firms," stated Lloyd Chapman, President of the American Small Business League.

The SBA is taking public comment until April 6, 2015.

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SOURCE American Small Business League

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