Outgrowing Your Small-Biz Contract
By Ian Mount

(FORTUNE Small Business) – 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."