Differing Views on Size Standards at Hearing “There is a joke that if you ask any business, they will tell you that they are definitely small, but that their next largest competitor is clearly large,” Rep. Joe Walsh, R-IL, said as he opened a May 5 hearing on size standards before his House Small Business Subcommittee on Economic Growth, Capital Access and Tax. The subcommittee heard representatives of architects and engineers complain that SBA wants to set their industry’s size standard too high. A representative of certified public accountants protested that the proposed accounting standard is too low. SBA has proposed raising the size standards for 36 professional, scientific and technical services categories in NAICS sector 54. Walsh’s subcommittee staff estimated that sector 54 accounts for nearly one-third of all federal contract spending with small businesses, about $32 billion in 2010. According to SBA, the increased standards—as much as four times as large as the current standard in some industries—would make about 9,450 new companies eligible for small business set-asides. Architects and engineers currently operate under a $4.5 million size standard; the SBA proposal would increase it to $19 million. The American Institute of Architects said that would mean 97% of all architectural firms would qualify as small businesses, up from 91% today. Architect Walter Hainsfurther of Des Plaines, IL, said small firms are already suffering as a result of the downturn in residential and commercial construction, which leads larger firms to bid on smaller jobs. “We are losing some of the contracts available because larger firms are ‘bottom feeding,’” he testified. The architects association also urged that its size standard be based on employment rather than receipts. The group said architectural firms typically pass a hefty chunk of their revenue on to subcontractors, but they must still count the dollars as receipts for size standards purposes. Engineering companies would also see an increase to a $19 million size standard. The American Council of Engineering Companies estimated 90% of its member companies would be small under the proposed standard, up from 70% under the current rule. The size standard for accounting firms would increase to $14 million, from $8.5 million. The American Institute of Certified Public Accountants wants $25 million; the group said the growing size of federal contracts means firms need more resources to be able to compete for the work. Roger Jordan, vice president of the Professional Services Council, a leading industry group, urged SBA to consider a higher size standard for federal contractors, separate from the standards for SBA loan programs. He said PSC believes federal policy should be aimed at enabling small businesses to grow. Jordan said higher standards are justified because the majority of professional services contracts are now awarded as task orders under IDIQ vehicles, making it more expensive to contractors to compete in the federal market. The subcommittee did not hear from representatives of the IT industry, which has expressed disappointment in the tiny proposed increase in size standard from $25 million to $25.5 million. But subcommittee Chairman Walsh questioned the small increase, saying the IT industry has “seen major changes in the past few years.” Comments on the SBA proposal are due May 16, but the comment period may be extended.