SBA Seeks to Clean Up Procurement Database SBA says “nearly all” large businesses will be deleted from the government’s small business database within a year as a result of new initiatives to improve the accuracy of procurement data. The recertification rule that took effect June 30 requires a company to recertify its eligibility for small business programs if it is acquired or merged and when options are exercised on contracts lasting more than five years. In addition, SBA Administrator Steven Preston is writing to chief executives of up to 800 of the largest federal contractors, asking them to voluntarily correct records on any contracts that identify their corporations or subsidiaries as small firms. The moves are an attempt to close regulatory loopholes that allow agencies to take small business credit for contracts that are actually performed by large corporations. SBA contends that most often happens when a small firm has been acquired by a large one or because of data-entry errors. If the company is no longer small at the time of recertification, the contract continues but will no longer be credited toward an agency’s small business goal. The new rule does not affect companies that outgrow their size standard during the life of a contract lasting five years or less. They will continue to be counted as small on that contract. But longer-term awards, such as GSA schedules, will require size recertification when options are exercised after five years. After SBA released the five-year recertification rule in November, the House passed legislation requiring annual recertification. (SAA, 5/18) The Senate Small Business Committee also favored annual recertification last year. SBA Inspector General Eric Thorson called for annual recertification in his 2006 report to Congress. Thorson said contracting is the number-one management challenge facing the agency. (SAA, 12/8/2006) Several studies of federal procurement records have found large numbers of contracts were credited to small businesses, but actually awarded to large ones. Democrats on the House Small Business Committee said they identified $12 billion in such contracts in 2005, about 15% of all small business awards. (SAA, 8/11/2006) Lloyd Chapman, president of the American Small Business League, says innocent errors are not the only explanation. “There’s been three federal investigations now that have found fraud as one of the reasons why large firms are getting small business contracts,” he told public radio’s “Marketplace.” In his letter to corporate CEOs, Preston asked them to take steps “to identify any small business contracts that your corporation, subsidiaries and divisions may have, so they can be correctly recorded. Second, please flag any short-term federal contracts that have options greater than one year, and voluntarily recertify those contracts as ‘other than small.’ “With your cooperation, we can correct remaining discrepancies so that all large firms are removed from the small business database within the year.” Preston said records of recertifications will be publicly available through the Federal Procurement Data System in November. “At that time we will be asking the small business community and other stakeholders to weigh in on any remaining oversights and inaccuracies,” he wrote. When the database is corrected, SBA said, “federal agencies will need to increase efforts to identify and contract with new small businesses” to meet the 23% small business contracting goal. SBA had earlier asked agencies to verify the accuracy of their small-business contracting information in the Federal Procurement Data System. The annual report on contracting in fiscal 2006 has not yet been published. An SBA spokesman said it is due later this month.