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Annual recertification rule draws fire.

Set-Aside Alert
July 11, 2003

A wide range of companies and industry groups raised objections to SBA's proposed rule requiring firms to recertify their small-business eligibility annually.

The proposed rule would require annual recertification for companies on GSA schedules, governmentwide acquisition contracts and other multiple award contracts. It would not affect options on individual contracts awarded by an agency. (SAA, 5/2)

Robert Fithian, CEO of UTD Inc. in Springfield, VA, summed up many small firms' objections in his comment: "The fact that a business grows during the performance periodis a good thing, not something that should be penalized."

But Mike Klewicki, government contracting administrator for Tri-Chem Corp., countered, "The intent of the (procurement) goals is to help businesses that are SBs now, not businesses that used to be SBs back when."

SBA tallied 678 comments on the rule, but more than 500 of them were identical e-mail messages in favor generated by the Microcomputer Industry Suppliers Association. The association's president, Lloyd Chapman, has been aggressively pushing the issue.

Among companies, organizations and government agencies filing individual comments, opponents outnumbered those favoring the rule by three-to-one. The comment period ended June 24.

Several commenters favored requiring recertification every five years, when options on GSA schedule contracts are exercised. GSA endorsed five-year re-certification in a directive issued last fall.

The Defense Department, the government's largest buyer, also favors a five-year period. "It is our view that re-certification once a year places an unreasonable burden on both industry and the Government, "wrote Frank Ramos, director of DOD's Office of Small and Disadvantaged Business utilization.

He said the uncertainty caused by annual recertification would hamper agencies' acquisition planning.

Rep. Tom Davis (R-VA), chairman of the House Government Reform Committee, called the proposed rule "burdensome, unnecessary ... The natural growth of small businesses should be protected in order to increase the industrial base, foster meaningful employment opportunities, and increase competition for federal work."

Several commenters objected that a firm might exceed small-business size standards one year, then drop back below the limit the next year. Larry Allen, executive vice president of the Coalition for Government Procurement, said the rule would create a "size roller coaster ... penalizing small firms that have one or two good years."

The Professional Services Council, the Contract Services Association of America and Women Impacting Public Policy also filed comments against the proposal.

WIPP president Terry Neese wrote, "(I)t fails to acknowledge that SBA should be encouraging small businesses to increase in size due to natural growth rather than creating a class of businesses penalized for being too small to be big and too big to be small."

Donald Holzworth, CEO of Constella Group Inc. in Durham, NC, said the proposal would be unfair to companies that have formulated their business plans "safe in the knowledge" that they would continue to benefit from small-business status on their GSA schedule contracts.

Several business executives also said the rule would harm teaming arrangements and mentorprotege partnerships if the small partner outgrew size standards.

Among those favoring the rule, several said that annual recertification would not create an administrative or paperwork burden on companies. They

for small business contracts. In the words of John Klein of Digital Technologies Inc. in Sterling, VA, "it will make a huge difference in fairness of competition among small business firms."

But Anthony Terrazas, president of Terra Health Inc. in San Antonio, declared, "the simple fact is that crossing a dollar threshold does not make a company wen positioned to realistically compete with full and open competition that may have billions in revenues."

Angela Styles, administrator of the Office of Federal Procurement Policy, had pushed for annual recertification, saying it "win lead to more opportunities for real small businesses."

SBA will analyze the comments before issuing a final rule.



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