Industry relieved over withdrawal of small business rule

Information technology industry groups are welcoming news from the Small Business Administration that the agency would reassess its plan to change the size standards that define what constitutes a small business for the purposes of federal government contracting.

"We are pleased that the SBA has taken a step back, because the rule under consideration would dramatically decrease the number of small firms doing business in the federal marketplace," said Harris Miller, president of the Information Technology Association of America, an Arlington, Va., trade group.

"Such a change would not only hurt the small businesses themselves, but also the large companies that team with these firms to meet federal subcontracting goals for small business."

Officials of the Professional Services Council, an Arlington, Va., trade group also representing IT companies, said they approved of the SBA's action as well. Alan Chvotkin, senior vice president and counsel for PSC, said the SBA's plan would not fulfill the agency's goal of simplifying the size standards.

The Small Business Administration announced in today's Federal Register that it was withdrawing a proposed rule that would have restructured the size standards. The agency wants more input before deciding what further actions it should take to streamline the standards. The agency has already received more than 3,700 comments on its proposal, according to the Federal Register.

SBA spokesman Seth Becker said a large number of comments said the standards need simplifying, but they said the SBA's plan would have unintended consequences that would harm small businesses.

Some commenters said that the proposed rule would encourage small businesses to hire fewer employees so they would stay small longer, Becker said. Others said the SBA needed to more carefully consider how the rule would count employees involved in joint ventures, as well as part-time employees and contract employees.

"We really want to talk to more small businesses," perhaps at a series of hearings or town hall meetings, before deciding how to go forward with restructuring the size standards, Becker said.

"It is more important to do this right than to do this fast," he said.

The SBA had proposed in March to reduce the number of size standards from 37 to 10, and base all size standards on the number of employees. Currently, some size standards are based on annual revenue and others are based on employee count. Under the SBA's proposal, some industries, including IT, would get both an employee cap and a revenue cap. To be considered small, IT companies could have no more than $30 million in annual revenue and no more than 150 employees.

But many IT executives complained that the 150-employee size standard would push small companies into large-business status well before they reached the $30 million revenue cap. Those companies would no longer be able to pursue small business set-aside contracts, and they would not be able to accept subcontracts from large businesses seeking small business subcontractors, executives said.

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