SBA creates new small businesses overnight

May 6, 2012

The federal government is the world’s largest buyer of goods and services and, under its own rules, it is supposed to spend 23 percent of its contract dollars with small businesses.

It never has.

Every year since the Small Business Act first established that goal, the majority of federal agencies have missed their targets.

Now, the government looks like it might have a shot at meeting those targets — but it’s not because of a wave of innovation and start-ups.

Instead, the Small Business Administration, the arbiter of what counts as a small business in every category of goods and services the government buys, has been redefining “small.”

You may be surprised what now qualifies.

Over the past year, the SBA has revised its definition of small for 38 different categories, and the changes were anything but small. In 27 cases, the SBA increased the allowable revenue threshold by more than 50 percent.

What counts as small can vary greatly from one industry to another, regardless of whether the standards are based on employee number or revenue. For instance, size standards allow just 100 employees in some industries and up to 1,500 in others. Revenue can be as low as $4.5 million or as high as $36 million.

It makes sense to reconsider as many of the existing size standards have been in place for more than 20 years, but the impact on the market can be tremendous.

The SBA estimates the moves could add more than 8,000 newcomers to the list of companies eligible for small-business set-aside contracts. In the professional, scientific and technical services category, which covers everything from legal consulting to cartography, Deltek has found that the reevaluation of size standards brought 1,300 new companies into the fold.

If your industry has seen a revision, you’ll need to first evaluate whether your own company’s status has changed. If your company was not considered small before, there is a chance that it is now — opening the door to set-aside contracts you could not have competed for before.

It’s also time to reevaluate your partnerships. You may be teamed with companies that have new opportunities or find that a company you’re not currently working with has earned a small-business designation and might make a more attractive partner.

If your industry hasn’t seen a revised size standard, you should watch the Federal Register carefully for any announcement of a pending change. The SBA probably isn’t done with its revisions, and there is a brief window in which contractors can influence the agency’s decision.

The SBA will typically announce its intent to change a standard, invite public comments and then make changes based on those comments before finalizing the rule.

That public comment period can be an important competitive tool. In the case of architectural firms, for instance, the size standard recently increased from $4.5 million in revenue to $7 million — but the agency had first considered a threshold as high as $19 million.

Sean Tucker is assistant managing editor at Herndon-based Deltek, which researches the government contracting market and can be found at www.deltek.com.

8,000

Estimated number of new companies eligible for small-business contracts, according to the SBA.

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