Outgrowing small-business contracts

Soon, firms that get federal small-business contracts will have to certify that they haven't grown too big to qualify.

By Ian Mount, FSB Magazine contributor

(FSB Magazine) -- For years the term "federal small-business contract" has contained an internal contradiction: Many firms receiving the deals had outgrown the designation or been acquired by large corporations.

According to data from Eagle Eye, a Fairfax, Va., publisher of federal-procurement intelligence, giant corporations such as General Dynamics pulled in more than $2.3 billion in money earmarked for small businesses in 2005. In November, SBA officials introduced a new rule that they say will rectify the situation: As of June 30, companies receiving small-business contracts must recertify their small-business status every five years and must report mergers and acquisitions within 30 days.

"It's correcting a big hole in the regulations," says Karen Hontz, counselor to the SBA administrator, Steven Preston.

But Hontz's enthusiasm is not shared by John Kerry (D-Massachusetts), the new chairman of the Senate Committee on Small Business and Entrepreneurship.

"Five years is a long time and takes away opportunities for oversight and checks and balances," he says. "This is an issue I plan to take a serious look at."

Should small firms have to recertify their status more frequently than every five years? Should they have to recertify their status at all? Have you lost out on a federal contract to a big business? E-mail the editors here and let us know.

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