Small Business Savvy? Senate Bill Would Undercut New SBA Regulations

On February 11, 2011, the Small Business Administration issued final regulations addressing an array of issues relating to the agency’s programs, including the size standards applicable to nonmanufacturers or dealers, the elimination of the vexing use of both SIC and NAICS codes for size standards and adoption of the latter as the sole criteria for use in the standards, and the 8(a) mentor-protégé program. 76 Fed. Reg. 8222 (Feb. 11, 2011).

On September 22, 2011, Senator Claire McCaskill (D-Mo.), acting as though the new SBA regulations had never been promulgated, introduced the “Fairness for Small Businesses in Federal Contracting Act of 2011,” which, if enacted, would require substantial changes to the current system for contracting under the Small Business Regulations. The Senator believes that her Subcommittee on Contracting Oversight's investigation of SBA size standards has established, among other things, that because the size standard for “nonmanufacturers”, i.e., distributors of or dealers in products manufactured by others, allows the entity to have up to 500 employees, it allows large distributors or dealers to be awarded contracts which should go to small ones. 13 C.F.R. § 121.406(b)(1)(i). The Senator also takes issue with so-called loopholes she contends allow large businesses to perform contracts intended for small businesses – e.g., the size status of a small business is determined as of the date of contract award, but the determination remains valid for the life of the contract – thus, formerly small businesses continue to perform contracts even though they have grown into large ones.

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