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SBA Opens Hearings on "Small"

Under fire for allowing major corporations to slip through a loophole to land key contracts, the SBA presents proposals for change.

By Stacy Zhao
Inc Magazine
June 6, 2005

Small businesses unhappy with the Small Business Administration's current definition of the word "small" are having their say this month as the government agency holds a series of 11 hearings around the country.

The hearings were called after complaints by small business owners and members of Congress that some government contracts were being unfairly distributed to large companies who used the SBA's definition of "small business" to land contracts for their smaller operating units.

Currently under debate is a series of restructuring proposals the SBA is considering, including a "grandfathering" proposal that would allow corporate giants to keep their existing small-business contracts up to five more years, even if size standards were reduced in the future.

Small business owners and advocates have met these proposals with apprehension, flooding the SBA with over 6,000 comments-the most the SBA has ever received in response to any proposal. The owners contend that the SBA has failed to represent the interests of small businesses in favor of larger companies' own.

Concerns over the uneven competition between small businesses and larger ones first came to light when a report found that the government was not fulfilling its promise to reserve 23% of its contracts for small businesses.

Due to loopholes in the definition of a business's "small" size, a company can remain certified as a small business for the life of its contract-some of which last two decades-even if it grows, is acquired, or goes public. As a result, roughly $2 billion in federal contracting money that was believed to have gone to small businesses actually went to large companies in fiscal year 2002, according to the SBA's Office of Advocacy.



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