Petaluma, Calif. – In the Small Business Administration’s July 18th news release, they claim that it is a myth that there is a loophole in their latest five-year grandfathering/five-year re-certification policy that will allow the SBA to continue to report contracts to large business as small business awards until the year 2012.
Nationally recognized federal contracting expert Professor Charles Tiefer of the University of Baltimore School of Law disagrees. In Professor Tiefer’s December 5, 2006 opinion on the new SBA policy entitled, “Opinion on the Loophole In SBA Size Standard Regulations,” Professor Tiefer stated: “The Small Business Administration’s latest size standard regulations issued in mid-November will still result in the federal government reporting many of its prime contracts performed by large businesses, as small business contract awards, for at least five years to come. I have reviewed the new regulations. Also, I have reviewed the many independent inquiries about the government's enormous loopholes for large businesses to enjoy contracts purportedly awarded to small businesses. It is clear that, after three years of hesitation about doing something, the SBA simply ducked action for even partially closing those loopholes.”
Professor Tiefer is not alone in his opposition to the new SBA five-year grandfathering/five-year re-certification policy. In 2006, the Senate Committee on Small Business and Entrepreneurship voted to close loopholes that have allowed the SBA to report billions of dollars in contracts to many of the largest firms in America as small business awards (http://www.asbl.com/showmedia.php?id=296). They voted unanimously to endorse the annual re-certification policy that was originally proposed by the Office of Federal Procurement Policy in February of 2003 (http://www.washingtontechnology.com/print/17_22/20148-1.html). An annual re-certification policy would require all firms claiming small business status to recertify that status annually, as opposed to every five-years as dictated by the SBA’s recently implemented policy.
Under the annual re-certification policy, large businesses with existing federal small business contracts and firms holding small business contracts that were acquired or had out grown their small business status, would be allowed to keep the contracts they were awarded. However, the federal government would no longer be allowed to include those contracts towards the federal government’s 23 percent small business contracting goal. This would ensure that firms transitioning from small to large would not be punished for growing, and that only contracts to legitimate small businesses would be counted towards the government’s 23 percent small business contracting goal.
Other supporters of the annual re-certification policy included the SBA itself before the arrival of current SBA Administrator Steven Preston, the SBA Office of Inspector General, and the Office of Management and Budget.
SBA Administrator Preston ignored the overwhelming support for an annual re-certification policy and instead initiated the current five-year re-certification policy the SBA had originally proposed in 2005 as a five-year grandfathering policy.
The American Small Business League plans to file their fourth federal lawsuit against the SBA to overturn the policy. They believe the five-year grandfathering/five-year re-certification policy is an intentional loophole the SBA has created that will falsify the government’s compliance with the 23 percent small business contracting goal and divert billions of dollars in federal small business contracts to Fortune 1000 firms and other large businesses.
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