February 2007

A change in SBA standards | Focus

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A change in SBA standards

by Ambika Puniani Bailey
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In November 2006, the Small Business Administration (SBA) announced a rule that will require small businesses to recertify their "small" status. (The definition of small business varies among industries. For roofing contracting companies, a business is considered small if it has less than $13 million in annual receipts. SBA bases its size requirements on the North American Industry Classification System.)

The changes in procedure, which take effect June 30, will require small businesses to recertify their small-business status if they have long-term contracts with federal government agencies seeking a contract option, are purchased by or merged with another business, or at the end of the first five years of a contract.

The changes are meant to provide a more accurate classification of small businesses. According to SBA, size status used to be determined at the time a federal contract was signed, and the status remained for the life of the contract. But because federal contracts often can extend to 20 years, previously small companies were growing considerably during that time frame.

If, after review, a company no longer is considered small per SBA size standards, the company will lose its designation. However, it still will be permitted to fulfill the terms of its contract. Importantly, the agency hiring the company no longer will be able to count the company toward its...

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