Size Standards: SBA Urged to Consider Impact Industry-by-Industry “On the cusp.” That’s how a group of small business owners and executives described their precarious position as SBA moves to overhaul size standards. They included architects, engineers, wholesalers and executives of environmental and IT firms. At a Jan. 26 forum organized by the National Procurement Council in Washington, representatives of several dozen companies said they would have suddenly been declared “large” if SBA had gone through with its 2004 proposal to rewrite the standards. SBA withdrew its proposal in July, then published an advance notice of proposed rulemaking in December making it clear that the overhaul was only delayed, not dropped. (SAA, 12/17/04) Executives at the Washington conference sounded similar themes in similar words as they described the impact of the proposed standards: will be out of business…lose 40% of our revenue…destroy our business plan…devastating impact. Now that the 2004 proposal is dead, SBA has asked for comments on a wide range of issues before it proposes a new rule. Comments are due April 3. (The notice is available at www.sba.gov/size/anprm.html.) A former chief counsel of SBA’s Office of Advocacy, Jere Glover, said the agency must change its approach to the overhaul and “analyze the impact on each small business” by considering each NAICS code separately. He said the original SBA proposal did not do that, and so would not have stood up to a legal challenge. Glover, now a Washington lawyer, said that process could take up to five years. SBA’s 2004 proposal would have based size standards on a company’s employment rather than its revenues. But it would have required companies in 31 industries, including construction and many services, to stay below a receipts cap as well as an employment cap to be eligible for federal small-business programs. (SAA, 4/2/04) The agency said it converted current dollar-based standards to employment-based ones by using 1997 Census figures to determine average receipts per employee in each industry. Many comments on the proposal questioned that methodology, but SBA’s December notice did not ask for comment on the issue. Glover’s comment echoed complaints by House Small Business Committee Chairman Donald Manzullo (R-IL) and the committee’s ranking minority member, Nydia Velazquez (D-NY). In a letter to SBA after the 2004 proposal was withdrawn, they described the proposal as an “arbitrary and capricious” rulemaking that violated the Administrative Procedures Act. The Congress members said SBA had violated its own regulations in the proposed rule: “Those regulations require that the agency examine the structure of a particular industry including, but not limited to: the degree of competition, average firm size, start-up costs, entry barriers, growth trends, and historical activity within an industry.” Some participants in the National Procurement Council forum said they will continue meeting to work on comments for SBA. Fernando Galaviz, chairman of the Association of Small Businesses in Technology, said, “Think of SBA as being a customer and you’re being asked to develop a proposal for them.” But Mike Mullen of Indus Corp. remarked, “We are never going to get consensus on what are we going to call small and what are we going to call large, not only across industries but even within industries.” Glover, the former SBA official, cautioned that the size standard revision is a “long-distance project.” He urged affected businesses to file comments each time SBA publishes a new request for information. SBA has told some advocates that it plans 10 public meetings on the issue, one in each of its regions. No dates or places have been announced. The National Minority Supplier Development Council is working with other business organizations to provide witnesses at each of the meetings, said its vice president, Steve Syms. Comments on the size standards revision may be sent to restructure.sizestandards@sba.gov. Put the identifier RIN 3245-ZA02 in the subject line.