Earlier this year the Obama Administration abandoned plans to close the Small Business Administration under the guise of streamlining the government. After a series of articles appeared that agreed with American Small Business League (ASBL) President, Lloyd Chapman, Obama’s plan to shutter the agency came to an end.
Having failed to close the Small Business Administration under the guise of streamlining government and combining agencies, the Obama Administration has adopted a new strategy to close the agency with a series of policies that appear to be designed to dilute and dismantle federal small business programs.
Starting in May of this year the SBA announced a sweeping series of policies that dramatically increased the federal definition of a small business in hundreds of categories. According to the latest data from the U.S. Census Bureau 89% of all U.S. firms have less than 20 employees. Under the new small business size standards firms with up to 1500 employees qualify as small businesses.
A Washington Post story described the new small business size standards as, “How 8,500 large companies will become small businesses overnight.”
The net result is that programs to help legitimate small businesses will be dismantled, as small businesses must now compete head to head with some of the largest firms in their respective industries for federal small business contracts.
In addition to the skyrocketing new definition of a small business, the Obama Administration has continued their policy of diverting billions of dollars in federal small business contracts to Fortune 500 firms.
Another new policy that received no media coverage is the “safe harbor from fraud penalties” policy. Under current federal law, misrepresenting a firm’s status as a small business to illegally land federal small business contracts is punishable by up to 10 years in prison, a $500,000 fine, or both.
Under the “safe harbor from fraud penalties” policy, a large business can avoid any penalties for committing felony federal contracting fraud by simply claiming they “acted in good faith”. The “safe harbor from fraud penalties” policy will obviously promote more fraud in federal small business contracting programs and push legitimate small businesses out of the federal marketplace, as more large businesses will be encouraged to illegally go after federal small business contracts and subcontracts.
Now the Obama Administration is proposing another new policy that could force thousands of legitimate small businesses in the IT industry out of the federal market place. Under the new proposed rule, SBA proposes to remove the Information Technology Value Added Resellers exception under NAICS 541519, making firms that provide a wide range of computer products to the federal government lose their small business status if their annual sales exceed $27.5 million.
If the new rule is adopted a small IT business with annual sales in excess of $27.5 million will be considered a large business whilecontracts to firms like Lockheed Martin, Northrop Grumman and Raytheon will continue to be counted as small business contracts.
Former Pentagon PR executive Terry Sutherland was likely assigned to head the SBA Press Office and block any media coverage on the covert effort to close the SBA.
SOURCE: American Small Business League