Annual Re-Certification Plan Draws Fire The Bush administration is moving to close regulatory loopholes that allow large companies to claim small-business status, but many fast-growing firms say they will lose federal contracts as a result of the changes. The administration is taking three steps to require contractors to re-certify their small-business status more frequently: •The Small Business Administration has issued a proposed rule requiring GSA schedule contractors to re-certify their eligibility as small businesses annually. SBA also said buyers may require a contractor to certify its small-business status every time it is awarded a task order under the schedules. •The Office of Management and Budget ordered agencies to require annual re-certification on governmentwide acquisition contracts, although that directive is now on hold. •SBA plans changes to ensure that companies listed on its PRO-NET small-business database really are small. What started out as a “black and white” issue – stopping large companies from posing as small ones – has run afoul of “unintended consequences,” acknowledged Angela Styles, administrator of OMB’s Office of Federal Procurement Policy. Some small firms say one big contract can push their revenues above the size standard for a small business. If they are required to re-certify annually – or even more often – they will lose the procurement preferences that go to small firms. “This is going to be a serious hit,” one advocate said. “It will very likely drive some of them out of business.” At an April 28 workshop in Arlington, VA, sponsored by the National Association of Small Disadvantaged Businesses, Styles said the re-certification initiative is based on a simple premise: “if it’s not a small business you don’t count it as a small business.” Styles told agencies that operate governmentwide acquisition contracts to require contractors to re-certify their small-business status annually beginning April 1. (SAA, 2/21) But she acknowledged that the directive is on hold while objections are worked out. She emphasized that no contractor would be kicked off a GWAC if it exceeds size standards; however, orders awarded to that company would no longer be credited toward an agency’s small business procurement goals. The re-certification requirements may also threaten subcontractors that outgrow small-business size standards, said Michael Bush, head of Lockheed Martin’s supplier diversity program. Because its subcontracts are so large, he said, “We can make one award and by definition that company will no longer be a small business.” That means the prime contractor would no longer get small-business credit for dealing with that subcontractor. Current rules require a company to certify its small-business status only when it is originally awarded a GSA schedule or GWAC contract. Schedule contracts, with options, can last up to 20 years. “(E)vidence indicates that agencies may be counting orders issued pursuant to a (GSA schedule) or other multiple award contract as awards to small businesses when, in reality, the order is actually made to an entity other than a small business,” SBA said in its notice in the April 25 Federal Register. The proposed rule is open for comment until June 24. SBA is proposing no change in regulations that allow a small firm to be awarded options on an individual contract (outside GSA schedules and GWACs) without re-certifying its eligibility under size standards. SBA’s inspector general has recommended that each company listed on PRO-NET be required to certify its small-business status annually; that a “certification/warning” statement be posted on PRO-NET reminding companies that deliberate misrepresentation is a crime; and that the PRO-NET website should include a notice to contracting officers that they should get independent certification of a company’s small-business status. The agency will adopt changes in PRO-NET that are “consistent” with the IG’s recommendations, said Gary Jackson, assistant administrator for size standards. In the discussion with Styles, several small-business executives said re-certification after three to five years would be more reasonable. Styles has often said that her goal is to expand the government’s small-business supplier base by bringing new companies into the federal marketplace. “I think it will lead to more opportunities for real small businesses,” she said. But critics say it will squeeze out companies that have grown because they have been successful in winning set-aside contracts.