Proposed Size Standards: Industry Suggestions This spring Set-Aside Alert and the National Federal Contractors Association organized a series of forums where small business owners and executives discussed different solutions to improve the size standards process. Working groups developed a series of recommendations as to how size standards could be changed to promote the growth and viability of small businesses in the federal market. SBA is accepting public comment until June 15 on its proposed changes to size standards for NAICS sector 54, covering professional, scientific and technical services. A full explanation of the proposed changes appeared in the March 18 issue of Set-Aside Alert. Here is a summary of the recommendations of the various working groups. For a more complete discussion of each one, visit http://setasidealert.com/summit or http://nafcausa.com. Solution 1: Implement a multidisciplinary statement of work (SOW) small business procurement strategy. As many as 80% of small federal contractors perform not just one service but a range of technical support services, categorized in various NAICS-coded industries. These multidisciplinary companies are involved in activities such as computer networks, telecommunications, computer hardware installation, research and development, help desk operations, cyber-security, acquisition support, human resources management, financial/audit services, engineering, training and other activities that defy a single stovepipe NAICS code identification. The multidisciplinary small business strategy focuses attention on modernizing size standards policy to become more relevant to federal market realities. The working group recommends using a tiered approach, similar to the one successfully used in the Department of Commerce’s COMMITS small business GWAC and the Department of Homeland Security’s EAGLE programs. For example, one suggestion would set the small business size standard at 2% of the average size of the top 10 businesses in the industry. If the average size of the top 10 is $30 billion in receipts, small would be defined as $600 million in receipts or 2,600 employees. Solution 2: Increase the number of years currently used to calculate size standards. Currently a company’s eligibility for receipts-based small business thresholds is determined by the average of three years of receipts. Gain or loss of just one significant contract can cause companies to teeter on the edge of the threshold. Five years is a more equitable approach, allowing a little more time for companies to grow before they are considered large businesses. Solution 3: Rewrite NAICS 517110, wired telecommunications services. While most IT companies operate under a size standard of $25 million, the one NAICS code that does permit growing small businesses to participate in IT small business set-asides is 517110, which has a standard of 1,500 employees. That NAICS code should be rewritten to include many categories of IT services. Solution 4: Use a tiered size standard based on the number of employees. The tiered approach has been used successfully in the COMMITS GWAC and the Homeland Security Department’s EAGLE programs. The working group recommends that this tiered approach should be expanded to assure that the smallest firms, including startups and developing firms, are protected while providing them with the unrestricted ability to bid up to the higher tiers. A tier concept will provide government managers with the ability to increase their support to small business contractors, while still enabling them to procure niche capabilities. Solution 5: Create a multidisciplinary GWAC at GSA. Such multidisciplinary contracts have already been established by the Army and NASA. They recognize that professional and administrative services often do not fit into a single NAICS stovepipe. Solution 6: Base “small” on a percentage of the dominant firms in each industry. In this simplified approach, SBA would no longer use its complicated mathematical/statistical methodology to define size standards. Instead, it would define the size of the 10 dominant firms in each industry, and then multiply that number by 20% or some other logical percentage, based on industry analysis, to establish the small business size standard. The percentage will likely vary considerably depending on the characteristics of each industry. Solution 7: Assign responsibility for federal small business procurement management to GSA. GSA has a history of successfully managing governmentwide contract vehicles covering a wide range of technical support services and products. GSA works both with large companies in open competitions and small businesses in set-aside competitions. It should assume SBA’s responsibilities for all federal contracting small business programs. Solution 8: Merge the Commerce Department’s Minority Business Development Agency into SBA. These two agencies provide nearly identical small business technical support services, with duplication of home and district offices and duplication by support contractors. Solution 9: Develop a new NAICS IT code. The new code would encompass the full life cycle of IT services, from design and development to sustaining operation and maintenance. The working group proposes a size standard of 1,500 employees. Executives from many companies participated in this effort. The working groups met numerous times to develop and offer these ideas for consideration by the small business community. The deadline for comments is June 15. Go to http://www.regulations.gov and enter ID SBA-2011-0008-0001 to participate in the process.