Small business size standards increased for two major industry categories

December 19, 2012 by

The U.S. Small Business Administration (SBA) has published two final rules revising size definitions for small businesses in two broad industry categories: (1) Information and (2) Administrative and Support, Waste Management and Remediation Services.

SBA increased the revenue-based size standards for 15 industries and retained the current revenue-based size standards for five industries in the North American Industry Classification System (NAICS) Sector 51: Information.  SBA will review the employee-based size standards within this sector at a later date.  As a result of these revisions, the SBA estimates that up to 500 additional firms will become eligible for SBA’s loan and federal procurement programs.

Small Business Size Standards: Information (RIN 3245-AG26)
www.regulations.gov/#!documentDetail;D=SBA-2011-0017-0005

SBA also increased the revenue-based size standards for 37 industries and retained revenue-based size standards for seven industries in the NAICS Sector 56: Administrative and Support, Waste Management and Remediation Services.  SBA will review the employee-based size standards within this sector at a later date.  Up to 2,700 additional firms will become eligible for SBA’s loan and federal procurement programs because of these revisions, according to the SBA..

Small Business Size Standards: Administrative and Support, Waste Management and Remediation Services (RIN 3245-AG27)
www.regulations.gov/#!documentDetail;D=SBA-2011-0018-0023

SBA increases size standards for 58 industries in three sectors

September 28, 2012 by

The U.S. Small Business Administration (SBA) issued three final rules in the Federal Register, effective Oct. 24, 2012, increasing size standards for firms in three North American Industry Classification System (NAICS) Sectors:  Real Estate and Rental and Leasing; Educational Services; and Health Care and Social Assistance.

Size standards define the maximum size a firm can be and still be considered a small business.  The revised standards reflect changes in marketplace conditions and public comments that SBA received to the proposed rules.

New size standards will enable more businesses in these sectors to obtain or retain small business status; will give federal agencies a larger pool of small businesses from which to choose for their procurement programs; and will make more small businesses eligible for SBA’s loan programs.

SBA increased size standards for businesses in 21 industries in the Real Estate and Rental and Leasing Sector.  More than 13,000 additional firms will qualify as small under these new size standards and become eligible for SBA loan and federal procurement programs.

SBA also increased size standards for nine industries for firms in the Educational Services Sector.  More than 1,500 additional businesses will qualify as small under the new size standards and become eligible for SBA loan and federal procurement programs.

Size standards for 28 industries were also increased for firms in the Health Care and Social Assistance Sector.  More than 4,100 additional firms will qualify as small under these new size standards and become eligible for SBA loan and federal procurement programs.

To review the three rules and public comments, go to www.regulations.gov.  Each has a separate RIN number:

  • Real Estate and Rental and Leasing – (RIN 3245-AG28)
  • Educational Services – (RIN 3245-AG29)
  • Health Care and Social Assistance – (RIN 3245‑AG30)

The SBA is reviewing all size standards, and takes into account the structural characteristics of individual industries, including average firm size, the degree of competition, and federal government contracting trends.  This ensures that small business size definitions reflect current economic conditions in those industries.  Under the Small Business Jobs Act of 2010, SBA will continue its comprehensive review of all size standards for the next several years.

The SBA issued a White Paper entitled “Size Standards Methodology” which explains how SBA establishes, reviews and modifies its receipts-based and employee-based small business size standards.  It is available at http://www.sba.gov/size.  For the latest about SBA’s revisions to small business size standards, click on “What’s New with Size Standards.”

For a chart with the changes for specific business sectors, click here.

SBA proposes increases to size standards in utilities, construction, arts, entertainment and recreation categories

July 19, 2012 by

The U.S. Small Business Administration (SBA) is seeking comment on three proposed rules published in the July 18, 2012 Federal Register that would revise the size definitions for small businesses in the Utilities; Construction; and Arts, Entertainment and Recreation sectors.  The proposed revisions reflect changes in marketplace conditions.

The proposed rule for the Utilities sector will revise the size standard for nine industries.   The rule proposes changing six of the industries dealing with electric power generation, distribution and transmission from revenue-based size standards to an employee based size standard of 500 employees.

It would also increase the size standards for the remaining three industries in the Utilities sector from $7 million to $25.5 million for water supply and irrigation systems, $7 million to $19 million for sewage treatment facilities, and $12.5 million to $14 million for steam and air conditioning supply.   SBA estimates as many as 400 additional firms in this sector would become eligible for SBA programs as a result of these revisions.

SBA also proposed increases in size standards for one industry and one sub-industry in the Construction sector.  Specifically, SBA proposed to increase the size standard for Land Subdivision from $7 million to $25 million and from $20 million to $30 million for businesses engaged in Dredging and Surface Cleanup activities.  SBA estimates that more than 400 additional firms will become eligible for SBA’s programs and services, if adopted.

The SBA’s third proposed rule would increase the small business size standards for 17 industries in the Arts, Entertainment and Recreation sector.   As many as 1,450 additional firms could become eligible for SBA’s programs and services if the proposed increases are adopted.

Comments can be submitted on these proposed rules on or before September 17, 2012, at www.regulations.gov, identified by the following RIN numbers:

1.         Proposed Rule:  Small Business Size Standards; Utilities (NAICS Sector 22) (RIN 3245-AG25)

2.         Proposed Rule:  Small Business Size Standards; Arts, Entertainment, and Recreation (NAICS Sector 71) (RIN 3245-AG36)

3.         Proposed Rule:  Small Business Size Standards; Construction (NAICS Sector 23) (RIN 3245-AG37)

You may also mail comments to Khem R. Sharma, Chief, Size Standards Division, 409 3rd St., SW, Mail Code 6530, Washington, DC  20416.

As part of an ongoing review of all size standards, the SBA takes into account the structural characteristics within individual industries, including average firm size, the degree of competition, and federal government contracting trends to ensure that small business size definitions reflect current economic conditions within those industries.  Under provisions in the Small Business Jobs Act of 2010, SBA is expected to be conducting a comprehensive review of all size standards for the next several years.

The SBA says the revisions to the size standards in these sectors will:

  • enable more small businesses to retain their small business status,
  • give federal agencies a larger pool of small businesses to choose from for small business procurement opportunities, and
  • help eligible small businesses benefit from SBA’s loan programs.

An SBA-issued White Paper entitled, “Size Standards Methodology”, which explains how the 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, click on “What’s New with Size Standards” on SBA’s Web site at:  http://www.sba.gov/size.

House Small Business panel prepares to mark up contractor bills

March 27, 2012 by

Adding to a series of House Republican bills aimed at reforming small business contracting, Rep. Mike Coffman, R-Colo., on Monday introduced legislation to reduce fraud by improving procurement training and referring more cases to the Small Business Administration’s inspector general.

The House Small Business Committee earlier this month approved six bills designed to help small businesses win more federal contracts. On Thursday, the panel plans to mark up several more, including the one from Coffman, who chairs the Subcommittee on Investigations, Oversight and Regulations.

The Contracting Oversight for Small Business Jobs Act (H.R. 4206) would amend the Small Business Act to boost penalties for fraud “so that the cost of litigation will no longer outweigh the government’s recovery,” Coffman’s staffer said .

The legislation also would raise penalties for companies that misrepresent their size and eligibility for small business contracts, while helping firms comply with related rules. According to an email from Coffman’s staff, the bill would provide a “safe harbor” for small businesses that make a “good faith effort” to comply while providing a new statutory framework for the SBA’s Office of Hearings and Appeals, which decides which businesses qualify.

The bill also would add new requirements for using the suspension and debarment process to pursue cases of fraud, making greater use of the SBA’s inspector general.

– by  Charles S. Clark, Government Executive, March 20, 2012, http://www.govexec.com/contracting/2012/03/house-small-business-panel-prepares-mark-contractor-bills/41516/#disqus_thread.

How The New York Times Co. became a small business

March 19, 2012 by

Perhaps for as long as the federal government has reported which of its contracts have been awarded to small businesses, critics have charged that many of those contracts have actually gone to large companies — often very large companies.

Recently, the American Small Business League, perhaps the loudest of those critics, tried to outline the scope of diversion. The association issued a report that studied the 100 companies that won the most federal small-business contract dollars in 2011 and found that at least 72 of them either had too many employees or too much revenue to be  eligible for government assistance to small business. (S.B.A. size standards vary by industry and sector, but generally a company must have fewer than 500 employees or less than $7 million to be considered small.)

The federal government, the world’s largest buyer of goods and service, is obliged by law to try to direct 23 percent of its purchases to small businesses, though there are no penalties for failure. The government hasn’t reached that goal in years, and while recording a deal with a bigger business as a small-business contract — whether by mistake or by fraud — does not necessarily mean that a small company has been denied an opportunity, it does exaggerate the government’s contracting achievement. In the view of Elliott Rosenfeld, of the league, said that in turn undermined the case for stronger enforcement of contracting rules. And by inflating an agency’s sense of achievement, it could weaken the agency’s drive to award more contracts to small businesses.

S.B.A. officials, for their part, insist the league’s analysis is premature. This summer, the S.B.A. will release its own report on the government’s contracting efforts in 2011, said a spokeswoman, Hayley Meadvin, after spending months reviewing the records. “By the time we release our fiscal year report, we have corrected these mistakes,” she said. “We spend a lot time making sure our data is as clean as can be.”

Moreover, the league has been prone to sweeping accusations. The group called this latest report, for instance, “strong evidence that large companies are the fraudulent recipients of the majority of federal small-business contracts every year.” But even if improperly coded contracts are as pervasive as the association claims, is it necessarily the result of fraud?

The Agenda decided to look at one large company, mentioned incidentally in the report, that won small business contracts in 2011, to try to find out: The New York Times Company. The Times was not among the league’s list of 100; it was identified as one of 55 well-known corporations that received small-business contracts last year when it sold $56,821 worth of newspapers to the United States Military Academy at West Point, N.Y. — 500 daily subscriptions for the 28 weeks school is in session, according to Carol D’Andrea, The Times’s circulation manager for sales to schools and colleges.

In the government’s record of the West Point transaction, known as a contact action report, The Times is described as having $3 billion in revenue — and 10 employees. (Both figures were wrong: in 2011, the company’s revenue was $2.3 billion and the work force totaled 7,273 employees, according to the most recent annual report.) In a field labeled “Contracting Officer’s Business Size Selection,” the document describes The Times as a “small business.” Under government size standards, newspaper publishers must have fewer than 500 employees to be considered small.

Our inquiry began with a call to West Point. The contracting officer who approved the deal, Kathleen Judson, said in a brief interview that she had not designated The New York Times as a small business. “The only way that could have happened is that it must have been prepopulated,” she said. “Sometimes the fields come through on the contract action report prepropulated. I know The New York Times is a large company.”

Here’s where it starts to get complicated — and government officials contacted by The Agenda offered little help in clearing up the confusion. S.B.A. officials spoke authoritatively about the agency’s efforts to correct contracting records, but referred our questions about how those records are created to the General Services Administration, which oversees the procurement infrastructure used across the government. The G.S.A.’s deputy press secretary, Adam Elkington, initially sent us to the Army for answers, then later promised to find us a colleague who could answer basic contracting questions. (He never did.) A spokesman for West Point, Frank DeMaro, wrote down our questions but did not answer them. Eventually, Daniel Elkins, a spokesman for the Army’s Mission and Installation Contracting Command at Fort Sam Houston, in Texas, fielded some of our queries.

This is what we know: every entity selling to the government must sign up with the G.S.A.’s Central Contractor Registration with a unique identification number, known as a DUNS number, from Dun & Bradstreet. The vendor supplies its annual revenue and employee headcount for the entire organization, which the S.B.A. uses to determine whether the entity is a small business. What complicates things is that companies must register each legal division, or any office with a separate location or address separately. The New York Times currently has at least three active contractor registrations. One of these was set up by Ms. D’Andrea and her colleagues in The Times’s Education Sales department in order, she said, to sell the subscriptions to West Point.

The Times is not identified as a small business in the Education Sales department’s registration. It turns out, though, that West Point did not use this registration to pay The Times. Instead, the contract refers to the DUNS number used by another registered Times Company entity, this one made by the TimesCenter, an event hall at the company’s headquarters on Eighth Avenue. In that registration, The Times did identify itself as a small business.

A Times Company spokeswoman, Eileen Murphy, said by e-mail that the employees who initially registered the TimesCenter were no longer employed there. But, she said, when the TimesCenter first opened, “it was operated as an independent business, separate from The New York Times Company. It is possible that the small-business designation was one that fit at the time, but again, we do not know for sure.” Ms. Murphy said she did not know whether the TimesCenter was independently owned at the time or just operated as if it were. Today, she said, it is operated as part of The New York Times. Nor could she say whether, or why, a Times employee entered the inaccurate revenue and headcount figures.

At West Point, neither Ms. Judson or Mr. DeMaro have explained why Ms. Judson used the registration from the TimesCenter rather than the one from the Education Sales department. (In an e-mail, the Army’s Mr. Elkins said “multiple actions between the N.Y. Times registration of DUNS numbers and contracting officer actions makes it difficult to identify the exact sequence of events.”) But Ms. Meadvin of the S.B.A. disputed the claim that the business size field was automatically filled in, saying, “to our knowledge” it is “the only field that is manually entered.” Mr. Elkington of the G.S.A. did not respond to our request seeking clarification.

In any event, government contracting officers like Ms. Judson are not supposed to rely on information from the Central Contractor Registration to determine whether a business is small — the registration record says as much at the very top. Instead, they are obligated to verify size, or any other claims a company makes, with a separate database known as the Online Representations and Certifications Application, or ORCA — which imports size information from the Central Contractor Registration. (Filling out this form, Ms. D’Andrea said, “is worse than filling out your taxes. Just the password is 16 digits and you can’t have repeating letters and numbers.”)

However, while the Education Sales department submitted an ORCA form — and did not claim small-business status — the TimesCenter, the entity on the contract, never did complete the form. According to Mr. Elkins of the Army, “Before the contracts were awarded, the contracting officer observed that there were no Online Representations and Certifications Application records for The New York Times.” The officer then tried to verify The Times’s size, Mr. Elkins said, by turning to yet another database, the Dynamic Small Business Search maintained by the S.B.A., “using the DUNS that was initially provided by The N.Y. Times.” But, said Mr. Elkins, “this procedure was improper and led to the miscoded award; the Army should have asked for this information from the N.Y. Times, rather than relying upon the D.S.B. search engine.”

But if a record for a Times entity existed in the Dynamic Small Business database last year, it is gone now, and this explanation raises additional questions. Which DUNS number did The Times provide to the Army — the one that ended up on the contract, from the TimesCenter, or one from the education sales department? Moreover, if Ms. Judson knew The Times was in fact a large business, why would she conduct a Dynamic Small Business search in the first place? Finally, the actions described here suggest Ms. Judson did in fact have to manually enter the vendor’s business size in the contract, as the S.B.A. has maintained. (Mr. Elkins has not responded to requests for further explanation.)

As it happens, three other federal agencies have used the TimesCenter registration as the basis for contracts in recent years — apparently erroneously, since these agencies were buying newspaper ads, not renting out an event space — and in most of those contract action reports, The Times is described as “other than small.” And yet, for one contract with the Securities and Exchange Commission, The Times was again deemed a small business. The contract officer in that instance referred the Agenda to the S.E.C. press office to set up an interview, which a spokesman has thus far declined to do.

And that’s as far as we have been able to get. We still can’t say with certainty how The Times ended up with a small-business contract. What we did find was a record-keeping system so complex that it invites confusion and error from all parties. “We hear from our small-business members that navigating the federal marketplace is extremely confusing and complex,” said Molly Brogan, a spokeswoman for the National Small Business Association, an advocacy group based in Washington. “Perhaps some level of simplification — along with enhanced oversight and repercussions for those that knowingly miscode a large business as small — would alleviate some of these issues.”

Things may improve this year, when the G.S.A. is to merge the two separate contractor databases into one as part of a bigger move to consolidate all of the different systems — nine of them! — that constitute the government’s “Integrated Acquisition Environment.” According to Ms. Meadvin, the S.B.A. believes that eventually the system will operate the way the people at West Point seem to believe it already does: business size representations from ORCA will be among the data automatically entered into the contract action report.

But for now, small-business advocates bemoan a system that allows everyone involved to evade responsibility for their actions. “The ‘pass the blame’ game you’ve seen from the S.B.A. and the Army is highly indicative of a lack of accountability by the federal employees whose duty it is to ensure that the contracting process is handled professionally and fairly,” said Mr. Rosenfeld of the league. “The erroneous entry into C.C.R. by The Times is also an example of how a large company’s negligence can contribute to the problem.

“Contract error and mismanagement amounts to tens of billions of dollars’ worth of contracts a year being diverted away from small business,” he added. “With such faulty standards of oversight, accountability and transparency, we wonder how easy it must be to hide fraud in the federal contracting process.”

– by ROBB MANDELBAUM, The New York Times, Mar. 15, 2012; this article appears at http://boss.blogs.nytimes.com/2012/03/15/how-the-new-york-times-became-a-small-business.

House passes 6 bills to promote small business contracting

March 9, 2012 by

The House Small Business Committee passed six bills on Wednesday (3/7/2012) through a voice vote to promote small business contracting.

The 2012 Government Efficiency through Small Business Contracting Act imposes a quota that agencies must use small businesses for 25 percent of their contracting work.

It also aims to expand the varieties of contracts by using the Small Business Administration’s formula in comparing agency performance against small business goals and endorses increased liability for senior agency officials by withholding bonuses.

The 2012 Small Business Advocate Act gives the Offices of Small and Disadvantaged Business Utilization more authority.

The act also requires officers within the offices to review and revise agency resolutions and insource work performed by a small business.

The 2012 Subcontracting Transparency and Reliability Act modifies subcontracting provisions that guarantee small businesses will be designated a majority of the work and receive succeeding income.

Restrictions in subcontracting will not be measured by the amount given to the small business or the cost of the whole project.

Decisions must also be made public to give small businesses the chance to challenge resolutions in court.

The 2012 Small Business Opportunity Act encourages small business advocates within federal government to participate in federal procurement and acquisition planning proposal request announcements.

The 2012 Small Business Procurement Act extends an agency’s small business contracting goals to commission orders against multiple contract awards, including those with the General Services Administration’s Federal Supply Schedule Program.

Finally, the 2012 Early Stage Small Business Contracting Act launches an independent project to stimulate contract awards given to early-stage small businesses.

Early-stage small businesses have a maximum of 15 employees and report annual revenue of less than $1 million.

In February the Small Business Administration issued a ruling outlining revenue guidelines for small business consideration.

The ruling increased 37 small businesses standards for 34 industries and three sub-industries.

– by Gino Troiani, published ExecutiveGov on Mar. 8, 2012 at http://www.executivegov.com/2012/03/house-passes-6-bills-to-promote-small-business-contracting-2/.

 

Report: Billions in federal small-business contracts go to large firms

March 2, 2012 by

Here are just a few of the companies that were considered a small business in the past year: Apple, Chevron, Verizon, Bank of America and Disney.   At least, that’s what one advocacy group found when it perused the Federal Procurement Data Systems for government contracts for the past year.

Each year, the government attempts to award at least 23 percent of all federal contracts to small businesses. But new research from the American Small Business League (ASBL) shows that 72 large companies received $16.4 billion in federal small-business contracts, which the group attributes to a combination of policy loopholes, human error and mis-categorization.

“It’s really hard for a small company to compete with a company that has 5,000 employees,” said Brian Reeder, communications director for the ASBL. “When bigger companies are actually receiving the contracts, there’s nothing left for small businesses.”

The Small Business Administration cautions that it has not yet released its official data on contracting for 2011 and therefore can’t speak to the accuracy of ASBL’s findings. SBA will publish its official 2011 Small Business Procurement Scorecard this summer

“Each federal agency is responsible for ensuring the quality of its own contracting data, but SBA conducts an additional analysis to help agencies identify any potential data anomalies,” said John Shoraka, the SBA’s Associate Administrator for Government Contracting and Business Development in an e-mail statement. “As part of its ongoing data quality efforts, SBA is continuing to work with federal agency procurement staff to provide tools to facilitate review of data, implement improvements to procurement systems and conduct training to improve accuracy.”

Holes in the system

The ASBL report, released Thursday morning, found that of the top 100 companies receiving federal small business contracts, 72 were large companies that exceeded the SBA’s small-business size standards, which vary depending on the sector.

It’s difficult to identify just one reason why the contracts are awarded as they are, but experts say there are countless small leakages in the government procurement process that can cause large businesses, either purposefully or indirectly, to occasionally win out over small ones.

Ray Bjorklund, chief knowledge officer with the government-contractor software company Deltek, said it can be hard for the SBA to pick the “right” size for a company to be considered a small business under the North American Industry Classification System (NAICS) codes, the government’s business classification system.

“When SBA is looking at one class of establishment, such as a corn farmer, there are a lot of small-business corn growers, but also large corporate growers,” Bjorklund said. “It’s not an easy thing to maintain size standards in a way that keeps up with growth in the economy and changing relationships between sectors.”

Beyond that, when agencies begin feeling the pressure to meet their 23 percent goal, Bjorklund said they sometimes choose NAICS codes that have larger-sized caps if they want a large company to fit into a small-business contract.

“If the agency is anxious to meet its socioeconomic goals, they say, ‘I can make this a small-business set aside if I can justify it this way,’” he said. “All of this is legal, but they should have been more judicious in their acquisition strategy.”

Not close enough for government work

Reeder said human error is another problem in how contracts are coded. For example, Apple was likely never registered as a small business, but Reeder speculates an agency simply needed something only Apple could provide — iPads, for example — and then neglected to change the code from “small” to “not small” before the transaction was completed. That contract would ultimately be counted toward an agency’s small-business goal.

“There are a lot of those examples, and they really add up,” he said.

The errors may stem from a larger problem in the contracting world — the thin ranks of the acquisition workforce and the paucity of the available funds to train them.

“The acquisition workforce is not as big as it should be, and they’re not as qualified, because years ago, their funding was slashed,” Bjorklund said. “These people have inboxes stacked very high, and they want to do the very best possible job, but sometimes mistakes get made.”

The SBA drew a similar conclusion in a report it issued on the same topic last October, saying, “While some contractors may misrepresent or erroneously calculate their size, most of the incorrect reporting results from errors made by government contracting personnel.”

Small, then big, but still small

There is also a loophole that allows small businesses that are bought by large companies to continue to count as “small” for the purposes of contracting for years after they’re purchased. For example, the report says that CapRock Government Solutions, which ASBL asserts received more than $200 million in small business contracts last year, is a subsidiary of Harris Corporation, a multi-billion dollar company.

“We’re not arguing the companies should lose those contracts, but it seems silly to count them as small when they’re not small,” Reeder said.

Many of these contracts were awarded to small businesses that are actually subsidiaries of large companies, Reeder said, and they, therefore, don’t face the same odds that independent small companies do.

Bjorklund said he believes there are not quite as many large companies receiving small-business contracts as the ASBL has found. Still, he said, “the problem still exists, there’s no denying that.”

Last year, the ASBL found that there were 60 large companies included among the top 100 federal small business contractors, so they say the problem has “at best, stayed the same, if not gotten worse.”

Reeder called for better enforcement of contracting standards by the SBA, but Bjorklund explained that the SBA is largely “hands-off,” and that the ultimate responsibility falls on the agency issuing the contract.

In the October report, the SBA’s Office of the Inspector General said it had made “mixed progress” on the issue of small-business contracts going to large businesses. The agency has developed a program to ensure that contracting personnel review contractor sizes, but it has made “limited progress” in developing regulations to correct the misapplication of industry codes.

So how big of a problem is this for small contractors? Medium, according to Bjorklund. Contractors of every size are losing business as the Department of Defense and other agencies cut back. Small firms don’t have quite the same lobbying clout that larger ones do, he explained, so the impacts for them might be greater — especially if they aren’t getting all the contracts they should be. Then again, at least the government is doing something for small firms.

“At least there are small-business goals that the government is trying to meet,” he said. “That makes it a little better than it would be in the commercial marketplace — where everyone is fending for themselves.”

–by Olga Khazan, The Washington Post, Published: February 22, 2012 and updated: Thursday, February 23, 8:00 AM at http://www.washingtonpost.com/business/on-small-business/report-billions-in-federal-small-business-contracts-go-to-large-firms/2012/02/22/gIQA0EV4TR_story.html.

Signs of friction in contractor-government relations

March 1, 2012 by

Contractor relationships with federal auditors and contracting officers
deteriorated somewhat during the past year as government agencies scaled back
programs in an effort to reduce the budget deficit, according to a recent
survey.

A separate study released Thursday found that large companies were securing a
high percentage of federal contracts set aside for small businesses. In the 17th Annual Government Contractor Industry Survey released Monday by Grant Thornton LLP, contractor relationships with auditors were rated
either fair or poor by 19 percent of surveyed companies, up from 11 percent the
previous year. Relationships with contracting officers were rated fair or poor
by 10 percent of respondents, double the previous year’s total.

Only 22 percent of respondents said the government resolved contract disputes
efficiently, a drop from previous surveys.

Revenue from government contracts during the past year grew for 50 percent of
the companies, was flat for 21 percent and declined for 29 percent, the survey
found. “The fact that the highest percentage of companies experienced revenue
growth continues a long-term trend reported in previous surveys, indicating that
government contractors are far less vulnerable than commercial companies to
recessions or slow growth in the overall economy,” Grant Thornton analysts
said.

“However, the 29 percent of companies experiencing revenue reductions is the
highest percentage reported in several surveys, indicating that government
efforts to reduce deficits are adversely impacting government contractor
revenue.”

The survey went out to an unspecified number of companies, in 24 states, that
depend primarily on federal contracts; most of them are for-profit and
two-thirds provide services to the Defense Department. Forty-six percent are
small businesses.

The survey also found that profits improved slightly from the previous year.
The biggest cost factor within these firms was executive compensation, and
survey analysts said they disagreed with the methods the Defense Contract Audit
Agency uses in determining whether to allow such costs.

“While government contracting has never been a model of efficiency, it is our
view that the decline in efficiency and business relationships during the past
few years can be traced directly to changes in DCAA policy adopted after
[Government Accountability Office] reports were issued in July 2008 and
September 2009,” they wrote.

“Unfortunately, the GAO criticized the DCAA for having a management and
agency culture that focused on a production-oriented mission, emphasizing the
need for timeliness in supporting the needs of contracting officers in the
procurement process,” the survey said.

Regarding the average time for contractors to collect accounts receivable
from the government, results showed the period was less than 30 days for 21
percent of survey participants, while 60 percent reported receivables were
collected within 30 to 60 days. The remaining 19 percent reported waiting more
than 60 days.

The average win rate on proposals submitted in a competitive environment was
30 percent.

On the topic of revenue by type of contract, the companies said, on average,
45 percent of revenue was from cost-reimbursable contracts and 35 percent was
from time-and-materials contracts. The remaining 20 percent was from firm
fixed-price contracts.

When asked how often they were required to perform out-of-scope work without
a contract modification, 81 percent said frequently or occasionally. Only 16
percent said they refused such requests.

A separate contracting study by the Petaluma, Calif.-based American Small Business
League found that of the top 100 companies receiving federal small business
contracts, 72 were large companies that “significantly exceed” the Small
Business Administration’s small business size standards; only 24 were
“legitimate small business,” the league said.

The large companies — among them Lockheed Martin Corp., Rolls-Royce, Boeing
Co., General Dynamics and Blue Cross Blue Shield — accounted for $16 billion of
the $21 billion total for the top 100, the study found.


– by Charles S. Clark, Government Executive, February 23, 2012 at
http://www.govexec.com/contracting/2012/02/signs-friction-contractor-government-relations/41283

SBA redefinition of small business draws mixed reactions

February 23, 2012 by

As the Small Business Administration redefines exactly how big a small business can be, it faces mixed reactions from lawmakers and small business groups.

SBA published its new guidelines in the Federal Register on Feb. 10, with the rules scheduled to go into effect March 12. The comprehensive review in size standards, the first SBA has undertaken since the early 1980s, determined that larger businesses in 34 industries and three sub-industries in the professional, scientific and technical services sector could be considered small businesses.

Under the new rules, more weight is placed on business structural characteristics, including average firm size, the degree of competition and federal government contracting trends, in order to cast a broader net over businesses eligible for government programs. SBA estimates that as many as 8,350 additional firms will become eligible for its programs as a result.

The National Federation of Independent Business, a lobbying organization that represents about 350,000 small businesses across the country, defines anything that is not publicly held as a “small business” for purposes of membership. NFIB spokeswoman Jean Card, however, emphasized that more than 70 percent of the group’s members have 10 employees or fewer, and 97 percent have 50 or fewer.

Card noted that defining small business is no easy task. “I don’t envy them,” she told Government Executive, but added she was “not real clear on why the definition changed.”

Small businesses, Card said, are looking for more government help with issues like tax regulation and health care policy.

The National Small Business Association, a nonprofit membership organization, will be talking with its members next week regarding the advantages and disadvantages of SBA’s move. NSBA limits its membership to businesses with fewer than 500 employees and does not distinguish by industry or revenue.

“We have a few general concerns with it lumping together businesses that have different interests and concerns — for example, the lumping together of architecture and engineering firms,” NSBA spokeswoman Molly Brogan said of the new classification system.

Some congressional lawmakers unhappy with SBA are seeking to implement new legislation that would require the government to see small businesses in a different light.

“If the size standards are adjusted then we don’t need to change the definition, but we do need complementary incentives for advanced [and] growing small businesses,” said Rep. Gerry Connolly, D-Va., co-author of the Small Business Protection Act, which was introduced in the House on Feb. 8.

The bill, also co-authored by Rep. Joe Walsh, R-Ill., seeks to redefine the size standard for each small business category so that it remains within each group’s North American Industry Classification System code, according to a Feb. 8 press release from Walsh’s office.

As part of President Obama’s fiscal 2013 budget proposal, SBA received a 30-percent boost in federal funding from fiscal 2011 actual discretionary expenditures.

– by Andrew Lapin - Government Executive – February 15, 2012 – http://www.govexec.com/contracting/2012/02/sba-redefinition-small-business-draws-mixed-reactions/41215/.

SBA opens doors to more firms by increasing size limits

February 20, 2012 by

Federal agencies soon will have a larger pool to draw from for their small-business procurement programs.

The Small Business Administration increased the size standard for technology companies as well as for 33 other industries under a final rule published Feb. 10 in the Federal Register.

The move means about 8,350 additional companies are now eligible to compete for federal contracts as a small business.

The final rule will increase 37 of the revenue-based size standards in 34 industries and three sub-industries in the “Professional, Scientific and Technical Services” sector. It will also increase one size standard in the “Other Services” sector.

Size standards are used to determine eligibility for federal small-business assistance programs. SBA measures “size” for most industries by receipts and number of employees. It defines receipts as the total income plus cost of goods sold.

The higher revenue limits cover the professional, technical and scientific sectors and will take effect on March 12.

Technology firms offering computer programming, maintenance and design services, for example, can now earn $25.5 million, up from $25 million.

The Management, Scientific and Technical Consulting Services sector received an increase from $7 million to $14 million. Public commenters in this sector, who supported the increase, highlighted that the higher size standard will help small businesses to develop to be able to compete against large businesses for federal contracting opportunities.

“Over the years, SBA has received comments that its size standards have not kept up with the changes in the economy, in particular, that they do not reflect changes in the federal contracting marketplace and industry structure,” the final rule noted.

“SBA recognizes that changes in industry structure and the federal marketplace since the last overall review have rendered existing size standards for some industries no longer supportable by current data,” it adds. Size standards were last comprehensively reviewed in the early 1980s.

With more than 8,000 newly defined small firms under the revised size standards, there may be some additional administrative costs to the federal government associated with additional bidders for federal small-business procurement opportunities and more companies seeking SBA guaranteed lending programs or eligibility for enrollment in the Central Contractor Registration’s Dynamic Small Business Search database, the Federal Register said.

Click here to find a summary of size standard changes.

About the Author: Alysha Sideman is the online content producer for Washington Technology.  This article was published on Feb. 10, 2012 at http://washingtontechnology.com/articles/2012/02/10/sba-increases-size-limits.aspx?s=wtdaily_140212.