Small businesses are being squeezed out of the federal market due to contract bundling and an ever-increasing interest on the part of large businesses to enter into the market. In an effort to forestall this trend, there is currently legislation pending before Congress intended to benefit small businesses seeking federal contracting work.

The key provisions of the proposed legislation are as follows:

• All procurements under $1 million would be set aside for small businesses - representing an increase of the threshold from its current ceiling of $100,000. The likelihood that the large contractors and their lobbyists will allow this provision to pass is very slim.
• The legislation proposes that small businesses must certify their size annually. This provision is also unlikely to pass and the final, approved re-certification provision will most likely require re-certification every five years.
• The small business size standards would be simplified. The proposed new size standards are based primarily on the number of employees a company employs rather than annual revenue.

Many federal contractors are closely monitoring the proposed changes to the small business size standards. The smaller federal contractors are extremely wary of losing their small business classification. Once a contractor no longer meets the small business size standard, it immediately has to compete with the giant prime contractors even though its revenues is still relatively small (revenues under $50 million).

If the legislation is passed, the SBA's size standards will undergo a major restructuring. The 37 current size standards will be reduced to 10. The new size standards would focus, with some exceptions, on a company's number of employees. The proposed size standards for small businesses would range between 50 and 1,500 employees, depending upon the industry.

The SBA has proposed an "annual average receipts cap" for designated industries (e.g., construction, computer services, engineering, consulting and facilities support services). Small businesses in the industries listed above which meet the proposed employee-based size standard would be subject to an annual average receipts cap. Any small business that exceeded the annual average receipts cap would lose their designation as a small business.

You still have time to comment on the proposed size standards. The proposed rules have been published in the Federal Register. Public comments on the proposed rules are due on or before May 18, 2004. For further information, see http://www.sba.gov/size/indexwhatsnew.html. For public comments on the proposed rule change, e-mail your comments to restructure.sizestandards@sba.gov.

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