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SBA Looks to Reform Contracting Laws

By Valerie Miller
Las Vegas Business Press
May 9, 2005

Jeanne Jones says she is thrilled that the U.S. Small Business Administration is taking steps to weed out companies falsely claiming to be small or disadvantaged businesses. As a certified disadvantaged business owner, the Las Vegan doesn't have much sympathy for pretenders.

The entrepreneur predicts the legitimately disadvantaged firms will benefit from recent SBA moves to correct the problem. Those measures are designed to stop the so-called "self-certifying." While never legally certifying themselves, some businesses were simply marking off all the disadvantaged business categories on a federal database. Those companies could then market themselves to federal contractors as being certified disadvantaged. It would then be up to the contractors to cross reference with the SBA's database.

"We had one check off every single block," recalls SBA Procurement Analyst Diane Heal. "We were getting complaints from contractors saying, 'How come the ... data doesn't match?'"

Another problem was that once-small businesses continued with lucrative federal contracts after they no longer qualified as such. Some had already been acquired by large firms with the contract included, explains SBA Nevada District Director John Scott.

To remedy that, last month the SBA merged its Pro-Net data base with that of the Department of Defense (DOD). The move made the DOD's Central Contractor Registration (CCR) data base the central site for all small businesses to register on, while the SBA's old Pro-Net site becomes the contractor's search source. Renamed the Dynamic Small Business Search, the old Pro-Net now functions to determine the business size and status. It compares that listing to other North American businesses in its classification.

All must register with the CCR. The SBA evaluates the data. Businesses already in the database will have to update their information annually, Scott adds.

Plenty is at stake. For fiscal year 2003, small businesses nationwide received $65.5 billion in federal contract dollars, according to the federal government's General Services Administration (GSA), with $19.5 billion going to Small Disadvantaged Businesses (SDBs) and $8.3 billion to Women-Owned Small Businesses. Another $549 million was received by Service-Disabled Veteran-Owned Businesses and small businesses certified under the section 8(a) program (those classified as socially- and economically-disadvantaged) received $10.1 billion.

Nevada small businesses received $346.1 million in government contracts in fiscal year 2003, compared to $1 billion for large business in the state, according to the Federal Procurement Data System. The Procurement Outreach Program (POP), run by the Nevada Commission on Economic Development, reported $1.35 billion in federal contracts for the approximately 800 companies in its programs. Its director, Rick Horn, says it's a voluntary reporting system for companies, lowering the figure.

"I guarantee you, that is just a drop in the bucket," he says of the $1.35 billion. "I think I only had 15 percent of my clients reporting their data." The POP is funded by both the state and the DOD.

Nevada Congressman Jon Porter says the changes will help small businesses. The Republican offered workshops on winning federal contracts and more are planned for this July or August.

"The problem was that it was very confusing and didn't include all the information," Porter says of the multiple database system used before. "There were questions as to what category the businesses actually belonged in."

SBA officials concur.

"Under the CCR, a company could indicate that they were an 8(a), even if they hadn't received that designation from the SBA," explains SBA Assistant Administrator for Size Standards Gary Jackson. "I don't know if it was a problem, but it was getting out of hand."

Whether by accident or intentionally, companies mislabeled themselves. Did that result in any federal contract awards to unqualified companies? "That's hard to say," Jackson admits.

Small businesswoman Jones is just happy that won't happen again. Firms that used to just point and click instead of submitting their company data to the SBA will be in for a rude awakening, she says.

"When people would self-certify, they would put in information that was not accurate," she says. "Now, the SBA will have to be held accountable for the information on the 8(a), SDB and HUBZone (Historically Underutilized Business Zone) certification."

Businesses can still self-certify as simply a small business, or as one of the subcategories that include veteran- , women-, disabled- or minority-owned, according to the local SBA. The test is at least 51 percent ownership by a member of one of those groups.

The founder of Alpha Services knows a little bit about the process. Jones' firm is certified as a HUBZone, as well as being recognized as a minority- and women-owned business. She was also previously certified 8(a) business. Since starting Alpha in 1993, those certifications has been the source of contracts for her technology services with agencies like the Department of Defense. Contracts like that have helped Alpha grow to a tri-state firm with about 90 employees.

Jones' Alpha is among the 95 HUBZone businesses in the state. The certification is given to qualified business located in an economically disadvantaged areas that employs residents of that area. There are 44 8(a) certified small businesses in Nevada and 72 SBDs in the state. The maximum net worth allowed for a business ownerin the 8(a) program is $250,000, while the SDB caps the net worth at $750,000.

Robert Gomez can attest that the agency holds companies to those caps. He bought into his father-in-law's janitorial service in 1993 and become sole owner in 1996. His father-in-law's net worth stood in the way of getting the firm 8(a) certification. After three tries, and buying out his in-law, Gomez was finally successful.

Las Vegas-based Magic Brite Janitorial is certified as minority-owned, HUBZone and 8(a) certified. Its prime government contracts include providing cleaning services for Hoover Dam. Last year, it reported revenues of $3.5 million.

Gomez says he's happy to see the SBA do a little of its own housekeeping. "This should clean it up the misrepresentation," he says of the reforms.

vmiller@lvpress.com | 702-871-6780 x331


WHAT: Applying for SBA certification as an 8(a), HUBZone, or Small Disadvantaged Business to potentially secure government contracts

HOW: Apply online. Go to "www.sba.gov" and click on "Hot items."

REQUIREMENTS: Listed on site, but generally include demonstrating a social and economic disadvantage. Applicants may be asked to supply financial information.

WAIT TIME: Currently 30-90 days



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