SBA proposes revisions to employee-based size standards for manufacturing and other industry sectors

September 11, 2014 by

The U.S. Small Business Administration (SBA) has published two proposed rules to revise small business size standards in North American Industry Classification System (NAICS) Sector 31-33 (Manufacturing) and industries with employee-based size standards that are not a part of NAICS Sector 31-33, Sector 42 (Wholesale Trade), and Sector 44-45 (Retail Trade).  The proposed rules were published in the Federal Register on Sept. 10, 2014.

As part of its comprehensive size standards review required by the Small Business Jobs Act of 2010, the SBA evaluated employee-based size standards for all 364 industries in NAICS Sector 31-33 and 57 industries and five exceptions that are not in NAICS Sectors 31-33, 42, or 44‑45 to determine whether they should be retained or revised.

In the first rule, SBA proposes to increase size standards for 209 industries in Sector 31-33.  The SBA also proposes to increase the refining capacity component of the Petroleum Refiners (NAICS 324110) size standard to 200,000 barrels per calendar day total capacity for businesses that are primarily engaged in petroleum refining.  The proposed rule also eliminates the requirement that 90 percent of a refiner’s output being delivered should be refined by the bidder.

In the second rule, SBA proposes to increase the employee-based size standards for 30 industries and three exceptions and decrease them for three industries that are not in Sectors 31-33, 42, or 44‑45.

Additionally, SBA proposes to remove the Information Technology Value Added Resellers exception under NAICS 541519 (Other Computer Related Services) together with its 150-employee-based size standard.  Similarly, SBA also proposes to eliminate the Offshore Marine Air Transportation Services exception under NAICS 481211 and 481212 and Offshore Marine Services exception under NAICS Subsector 483 and their $30.5 million receipts based size standard.  Accordingly, the second proposed rule also removes Footnotes 15 and 18 from the table of size standards.

If the changes in the two rules are adopted as proposed, nearly 1,650 more firms will become small and eligible for federal procurement and SBA’s loan programs.

Comments can be submitted on the proposed rules on or before November 10, 2014 at www.regulations.gov, identified by the following RIN numbers: (RIN 3245-AG50 for Sector 31‑33) and (RIN 3245-AG51 for employee-based size standards for industries that are not part of Sector 31-33, Sector 42 or Sector 44-45).  You may also mail comments to Khem R. Sharma, Chief, Office of Size Standards, 409 3rd St., SW, Mail Code 6530, Washington, DC  20416.

For size standards review, SBA takes into account the structural characteristics of individual industries, including average firm size, startup cost and entry barriers, the degree of competition, and small business share of federal government contracting dollars.  This ensures that small business size definitions reflect current economic conditions and federal marketplace in those industries.

An SBA-issued White Paper entitled, “Size Standards Methodology,” which explains how SBA establishes, reviews and modifies its receipts-based and employee-based small business size standards, can be viewed at http://www.sba.gov/size.

For more information about SBA’s revisions to its small business size standards for various industry sectors, click on “What’s New with Size Standards” on SBA’s Web site at http://www.sba.gov/size.

Family relationship, revenues and subcontracts caused affiliation, says SBA

September 5, 2014 by

A small business was affiliated with companies owned by the business owner’s father and siblings, based on the family relationship and the companies’ ongoing history of doing business together.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the small business had not successfully rebutted the regulatory presumption that companies owned by close family members are affiliated, because the small business had earned substantial revenues from the alleged affiliates, and intended to issue a subcontract to both affiliates with respect to the procurement at issue.

SBA OHA’s decision in Size Appeal of Industrial Support Service, LLC, SBA No. SIZ-5576 (2014) involved an Army Corps of Engineers solicitation seeking a contractor to provide certain repair work.  The solicitation was issued as a small business set-aside under NAICS code 238290 (Other Building Equipment Contractors).

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/family-relationship-plus-revenues-subcontracts-caused-affiliation-says-sba-oha/

How many big contractors are actually posing as small businesses?

August 25, 2014 by

In the sixth of its annual studies, a small business advocacy group has again blasted the government for allegedly awarding contracts to major corporations when policy intends for them to go to legitimate small businesses. The Small Business Administration offered other possible explanations for the apparent discrepancies.

The Petaluma, Calif.-based American Small Business League’s new study of fiscal 2013 procurement data concluded that of the top 100 companies receiving the highest-valued small business federal contracts, “79 were large companies that exceeded the SBA’s small business size standards, five were anomalous and 16 were legitimate small businesses.”

The group’s annual studies also show that the number of top-100 contracting companies that are large firms has risen steadily, from 60 in fiscal 2009 to 84 in fiscal 2013.

The large corporations that received the contracts in question in fiscal 2013 included Lockheed Martin Corp., General Dynamics Corp., Boeing Co., General Electric, Oracle Corp., Apple Inc., Verizon, Bank of America Corp., Citigroup Inc., PepsiCo, Comcast Corp., Intel Corp., John Deere Co. and many more, said the league, which published brief company-by-company profiles.

Keep reading this article at: http://www.govexec.com/contracting/2014/08/how-many-big-contractors-are-actually-posing-small-businesses/91694 

Where the heck are the SBA SDVOSB mentor-protégé programs?

August 7, 2014 by

A recent Gallup poll puts Congress’s approval rating at 15 percent (which is actually up six points since November).

But service-disabled veteran-owned small businesses (SDVOSBs) hoping to participate in strong federal mentor-protégé programs shouldn’t blame Congress, which has twice passed legislation authorizing — and in one case requiring — the SBA to create or strengthen federal mentor-protégé programs affecting SDVOSBs.

Instead, it is the SBA that has dragged its feet, leaving SBVOSBs to wonder if and when 8(a) firms’ monopoly on SBA mentor-protégé programs will end.

Keep reading this article at: http://vetlikeme.org/where-the-heck-are-the-sba-sdvosb-mentor-protege-programs 

SBA will help you determine your 8(a) or HUBZone eligibility on Aug. 13

August 6, 2014 by

The Georgia District Office of the Small Business Administration will be conducting its monthly 8(a) and HUBZone Eligibility Workshop on Wednesday, August 13, 2014, from 10:00 a.m. to 12:00 Noon.

At this event attendees will be given an overview of the eligibility requirements for 8(a) and HUBZone certifications, and other procurement-related information.

The workshop will be held at 233 Peachtree St., NE, Ste. 1900, Harris Tower, Peachtree Center Mall, Atlanta, GA 30303.

You must pre-register in order to attend.  Register on-line at: http://events.sba.gov/EventManagement/EventRegistration.aspx?id=5340c13a-395d-e311-9914-02bfa56e2a24.

Note: This workshop will be repeated on Sept. 10, 2014.  You may register for it at: http://events.sba.gov/eventmanagement/EventRegistration.aspx?id=8131b924-3a5d-e311-9914-02bfa56e2a24.

SBA announces federal government met its small business goal in FY13

August 4, 2014 by

The U.S. Small Business Administration (SBA) announced on August 1, 2014 that the federal government reached its small business federal contracting goal for the first time in eight years, awarding 23.39% in federal contracts to small businesses totaling $83.1 billion of eligible contracting dollars.  The government’s annual small business contracting goal is 23%.

The SBA’s report is for FY13, or the 12-month period ending September 30, 2013.

“When we hit our small business procurement target, it’s a win.  Small businesses get the revenue they need to grow and create jobs, and the federal government gets the chance to work with some of the most responsive, innovative and nimble companies in the U.S. while the economy grows,” said SBA Administrator Maria Contreras-Sweet.

Performance in four out of five of the small business prime contracting categories showed significant improvement, with increases in performance against statutory goals. While contract dollars have gone down in all categories as a result of overall reduced federal spending, small businesses still secured a greater percentage of the contracting dollars.

FY13 Government-Wide Small Business Contracting - Goals and Actual

Alongside the announcement, the SBA released its FY 2013 Small Business Procurement Scorecard, which provides an assessment of each federal agency’s yearly small business contracting achievement against its goal.   Overall, the federal government received an “A” on SBA’s government-wide Scorecard.   Twenty individual agencies receiving an A or A+.   Three agencies were given a B.  One agency, the Department of Energy, received a failing grade, awarding only 7% of its contracts to small businesses in FY13.

The individual agency scorecards released by the SBA, as well as a detailed explanation of the scorecard methodology, is available online at http://go.usa.gov/Nxxd.

Man sentenced to 42 months in prison for defrauding SBA and IRS of more than $7 million

July 21, 2014 by

Earlier this month, Vernon J. Smith III, age 61, of Edgewater, Maryland, was sentenced to 42 months in prison, followed by three years of supervised release, for conspiring to defraud the United States in connection with schemes to fraudulently seek federal contracts under a Small Business Administration (SBA) program to assist disadvantaged small businesses, and to defraud the IRS.

U.S. District Judge Paul W. Grimm found that the actual loss to the government as a result of Smith’s offenses was $7,033,844, and entered an order requiring Smith to pay that amount in restitution and forfeiture.

“When individuals defraud the government by falsely claiming eligibility for SBA’s 8(a) Business Development Program, the biggest victims are the taxpayers and legitimate small businesses,” said Inspector General Peggy E. Gustafson of the Small Business Administration.

Thomas J Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington D.C. Field Office pointed out that “Americans were victimized twice by the greed of Vernon Smith. Not only did Smith decide not to pay his fair share of federal taxes and ultimately defraud the IRS out of $839,016, his actions also denied legitimate business owners of socially and disadvantaged groups the opportunity to receive government contracts to which they were entitled.  [This] sentencing should put corrupt business owners like Vernon Smith on notice that the government will get to the truth no matter how they may try to conceal their involvement and income.”

Vernon Smith was the president and sole owner of Capitol Contractors since 2002. Capitol Contractors was a Maryland corporation with its headquarters in Capitol Heights, Maryland and later Edgewater, Maryland. Capitol Contractors had provided roofing and construction services, but was largely dormant after 2002.

In 1999, Vernon Smith caused a new roofing and construction company, Platinum One Contracting, Inc. (“Platinum”) to be incorporated in Maryland. Although Vernon Smith installed Anthony Wright, an African-American who was a former roofer and project manager at Capitol Contractors, to be the president and 60% owner, and Smith’s son was vice president and owned the remaining 40% of Platinum, Vernon Smith exercised complete and undisclosed control over Platinum’s business operations. Vernon Smith’s wife, Georgia Smith was in charge of Platinum’s accounting, and acted as the de facto Controller for the company.

Vernon Smith admited that from August 1999 to June 2013, he conspired to defraud the SBA in several ways. For example, Smith directed Wright to submit an application to the SBA for certification in the Section 8(a) program which did not reveal that Vernon Smith exercised control over the company, had previously supervised Wright, owned more than 10% of Capitol Contractors, and was related to an owner of Platinum. From May 2004 through April 2010, Vernon Smith also caused Platinum to submit annual updates to the SBA Section 8(a) program that contained false information, including that the company was controlled by a socially and economically disadvantaged individual, and that no non-disadvantaged member of Platinum’s management received compensation that exceeded that received by Wright. In fact, Vernon Smith controlled the company, and Platinum’s payments to Vernon Smith and other corporate officers far exceeded payments received by Wright for 2004 through 2009. Based on the fraudulent application and annual updates, Platinum One received more than $52 million in contracts from the federal government under the Section 8(a) program, to which it was not entitled. The total loss to the government resulting from Vernon Smith’s illegal conduct, regarding the illicit profit he received by defrauding the SBA, and depriving a legitimate Section 8(a) contractor of such profit, is $6,194,828

Vernon Smith and his wife, Georgia Smith, also transferred millions of dollars from Platinum to bank accounts in their own names, to casinos on their own behalf, to Capitol Contracting and another company owned by Vernon Smith, and to credit card companies to pay for personal expenses that Vernon and Georgia Smith charged to Platinum’s corporate credit cards, including extensive dental work, veterinary visits for personal pets, lavish vacations, a Royal Caribbean cruise, limousine transportation to casinos in Atlantic City, N.J., funeral expenses for a family relative, fencing for their personal residence, among others. Georgia Smith also mischaracterized numerous payments to casinos as subcontractor expenses.

In addition, Vernon and Georgia Smith signed false corporate and personal tax returns for 2005 and 2006. The Smiths knew that the cost of goods sold and payments to contractors reported on the corporate returns were false because almost all of that money was paid to, and for the benefit of, Georgia and Vernon Smith at casinos. They also knew that the income reported on their personal income taxes omitted hundreds of thousands of dollars that Capitol Contractors had paid to, and for their benefit. As a result, the Smith’s owed additional personal income tax to the IRS totaling $264,105, and Capitol Contractors owed an additional $574,911 to the IRS for tax years 2005 and 2006. The total tax loss resulting from Georgia and Vernon Smith’s conspiracy to defraud the IRS is $839,016.

Georgia Smith, age 52, of Edgewater, Maryland, pleaded guilty to conspiring to defraud the United States by filing false tax returns and is scheduled to be sentenced on July 21, 2014 at 11:00 a.m. Anthony Wright, age 42, of Bowie, Maryland, pleaded guilty to his role in the scheme and will be sentenced on September 15, 2014, at 9:30 a.m.

The full DOJ announcement report may be found at: http://www.justice.gov/usao/md/news/2014/EdgewaterMarylandManSentencedTo42MonthsInPrisonForDefraudingSBAAndIRSOfMoreThan7Millio.html

See April 2, 2014 report of guilty please in this case at: http://gtpac.org/?p=7780

Family ties plus business ties may equal affiliation

July 14, 2014 by

The SBA affiliation rules are not always intuitive, and perhaps no SBA affiliation rule is as little understood as the so-called “identity of interest” rule under 13 C.F.R. 121.103(f).

Identity of interest affiliation can arise in several ways, including when close family members also have business ties.  As demonstrated in a recent SBA Office of Hearings and Appeals decision, a close family relationship between two business owners, plus significant business ties, may cause affiliation between the businesses.

SBA OHA’s decision in Size Appeal of Knight Networking & Web Design, Inc., SBA No. SIZ-5561 (2014) involved a Navy procurement for ship and shore satellite communications support services.  The solicitation was issued as a small business set-aside under NAICS code 541330.

After evaluating competitive proposals, the Navy announced that Knight Networking & Web Design, Inc. was one of several awardees.  An unsuccessful competitor subsequently filed a size protest, claiming that Knight was affiliated with various other entities.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/sba-affiliation-rules-family-ties-plus-business-ties-may-equal-affiliation/

Small biz size status ordinarily is based on underlying GSA Schedule contract

July 8, 2014 by

When a small business submits an offer for a Blanket Purchase Agreement issued against a GSA Schedule contract, the offeror does not automatically recertify its size.  Rather, a new regulation effective December 31, 2013 provides that an offeror’s size status for a BPA issued against a GSA Schedule ordinarily is determined by looking to the offeror’s self-certification for the underlying GSA Schedule contract.

In a recent size appeal decision, the SBA Office of Hearings and Appeals relied, in part, on the new regulation to find that an offeror had not recertified its small business status by submitting a quotation for a BPA to be issued against the offeror’s GSA Schedule contract.

SBA OHA’s decision in Size Appeal of Total Systems Technologies Corp., SBA No. SIZ-5562 (2014) involved a Homeland Security RFQ for business management support at the Coast Guard’s C4IT Service Center.  The Coast Guard issued the RFQ under the MOBIS Schedule 874, and stated that the RFQ would result in the award of a single BPA.  The RFQ was set aside for HUBZone firms.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/gsa-schedule-bpa-awards-size-status-ordinarily-is-based-on-underlying-gsa-schedule-contract/

 

Revenue-based small business size standards to increase on July 14

July 8, 2014 by

You probably know that the federal government’s definition of a small business is based on either the number of people that a company employs or the amount of revenue it earns annually.  The number-of-employees or the gross-revenue standards are applied to individual North American Industrial Classification System (NAICS) codes.  One or more NAICS codes apply to every business.

Thus, in order to determine whether a company is a small business in the eyes of the government, one must first determine which NAICS code or codes apply to the business, and then see what size standard (employees or revenue) applies to each NAICS code.  If a business has fewer employees or earns less annual revenue (averaged over the past three years) than the standard, then that business can represent itself to the federal government as a small business.  This is an important determination to make since the federal government sets an annual goal of awarding 23 percent of its contract dollars to small businesses.

It’s been more than five years since the Small Business Administration (SBA) updated the revenue size standards for small businesses.  Therefore, as of July 14, 2014, the SBA is adjusting virtually all of its size standards that are based upon revenue, to account for the years of inflation since the last adjustment. 

The forthcoming adjustment affects almost half of all NAICS code categories.    In all,  476  industrial categories will be affected by the update,  including most service, construction, retail, agricultural and transportation industries. 

With these increases, the new small business size standards range between $5.5 million and $38.5 million.

Using the Gross Domestic Product price index to obtain the most comprehensive measure of inflation, the SBA determined that the amount of inflation that occurred between the first quarter of 2008 and the last quarter of 2013 was 8.73 percent.   The SBA then calculated the new size standards by multiplying the current size standards by 1.0873 and then rounding that total to the nearest $500,000.  After these adjustments,

This latest adjustment of the revenue-based size standards for inflation is separate from the comprehensive review of all size standards that the SBA is supposed to perform at least every five years.

The new size standards can be found at: http://www.regulations.gov/#!documentDetail;D=SBA-2014-0009-0001.  Busineeses have until August 11, 2014 to submit any comments on these rules which technically are “interim final rules” at this point.

Because these new size standards will apply to certificates of small business size status signed on or after July 14, 2014, small (and near-small) businesses should review the new size standards to determine whether they now qualify as a small business concern.   Businesses also should visit the System for Award Management (SAM) and verify that their profile and certifications are up to date based on the revised size standards.

See more details on the SBA’s website at: http://www.sba.gov/content/what%27s-new-with-size-standards.