New Federal Policy Could Devastate Thousands Of Small IT Firms

American Small Business League Fights To Save Small Business IT Firms

Oct 07, 2014, 07:00 ET from American Small Business League

PETALUMA, Calif., Oct. 7, 2014 /PRNewswire-USNewswire/ -- A new government policy that was posted in the Federal Register on September 10 could be devastating to thousands of small businesses that supply IT products to the federal government and government prime contractors.

Under the new proposed rule, all small business that fall under the exemption under NAICS code 541519 titled, Information Technology Value Added Resellers, with annual sales in excess of $27.5 million will become large businesses by the end of the year.

If the new rule is adopted, thousands of legitimate small businesses in the IT industry will be forced to close their doors when they are required to compete head to head with corporate giants like IBM, Dell, Hewlett-Packard, Office Depot and Staples for even the smallest government orders for IT products.

At the same time the government decided to make small businesses in the IT industry large, other new federal policies have allowed thousands of large businesses to suddenly qualify as small. The Washington Post released a story on the issue titled, "How 8,500 large companies will become small businesses overnight."

As the government plans to adopt policies that will cost thousands of small IT firms their federal small business status, contracts to many Fortune 500 firms will continue to be counted as small business contracts.

The latest data from the Federal Procurement Data System indicates that hundreds of large businesses are currently receiving federal small business contracts including a who's who of Fortune 500 defense giants like Boeing, Lockheed Martin, Northrop Grumman, General Dynamics and Raytheon.

New SBA Administrator Maria Contreras-Sweet was chastised in a hearing by members of the House Small Business Committee for diverting billions of dollars in federal small business contracts to corporate giants.

The diversion of billions of dollars in federal small business contracts to Fortune 500 firms has been uncovered in dozens of federal investigations and investigative reports by NBC, CBS, ABC, Fox News, CNN, RTTV, CNBC and MSNBC.  On September 24, the SBA Office of Inspector General (OIG) uncovered up to two billion dollars in federal contract actions that were awarded to ineligible firms. A similar investigation in 2008 reported the same widespread evidence of fraud.

The SBA has recently faced a barrage of bad press after the SBA Inspector General's report was released.

The American Small Business League (ASBL) is coordinating a national effort to defeat the proposed policy. ASBL President Lloyd Chapman stated, "Think about the insanity of a new federal policy that will reclassify thousands of legitimate small IT firms as large businesses while thousands of large businesses are inexplicably redefined as small businesses and federal contracts to some of the largest corporate giants in the U.S. continue to be reported as small business contracts."

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SOURCE American Small Business League