New SBA Policy Threatens Small Business IT Firms

PETALUMA, Calif., Oct. 16, 2014 /PRNewswire-USNewswire/ -- The Small Business Administration (SBA) has proposed a new policy that could force thousands of small businesses in the Information Technology industry out of the federal marketplace.

The new policy involves IT Value Added Resellers that do business with the federal government and government prime contractors under NAICS code 541519, Other Computer Related Services.

The current small business size standard for IT Value Added Resellers has a maximum employee size standard of 150 employees. If the new SBA policy takes effect, current government IT suppliers will lose their small business status if their annual revenue exceeds $27.5 million. After they lose their small business status, thousands of small businesses in the IT industry will be reclassified as large businesses and will be required to hopelessly compete head to head with Fortune 500 firms and thousands of large businesses for federal contracts.

Critics of the proposed policy change believe the proposed change is an attempt by the SBA to eliminate the small business size standard of less than 500 employees to make it easier for large businesses to land small business contracts. In recent months the SBA has adopted a series of pro-big business increases in small business size standards that have redefined thousands of large businesses as small businesses. The Washington Post recently published a story on the pro-big business SBA policies titled, "How 8,500 large companies will become small businesses overnight."

Over ten years ago, the SBA originally proposed a small business size standard of 500 employees or less for NAICS code 541519, Other Computer Related Services. At that time as it is today, the average IT Value Added Reseller has less than 20 employees.  In 2004, Current American Small Business League (ASBL) President Lloyd Chapman launched a national campaign to oppose the 500 employee size standard in favor of a more appropriate and small business friendly size standard of 100 employees. Chapman was able to generate a record number of comments opposing the SBA's 500 employee size standard and the SBA was forced to drop it to 150 employees or less.

A 2004 Computer Reseller News story reported on Lloyd Chapman's successful campaign to force the SBA to lower the size standard from 500 to 150.

The ASBL has launched a national campaign to oppose the new SBA policy that could make it difficult if not impossible for IT Value Added Resellers to compete for federal contracts and subcontracts.

The ASBL believes the SBA's justification for changing the size standard is inaccurate and unjustifiable by factual industry data. They are working with attorneys in California and Washington, D.C. to prepare to file an injunction if necessary to block the implementation of the policy.

The SBA will be taking public comments on the new policy until November 10. Individuals wishing to send a comment opposing the new policy can do so by clicking "Comment Now!" on the federal regulation's website.

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SOURCE American Small Business League