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Committee Republicans urge for investigation into SBA nonmanufacturer rule
WASHINGTON, D.C. – Today, Republican Members of the Subcommittee on Contracting and Infrastructure sent a letter to SBA Administrator Isabel Guzman and SBA Office of Size Standards Chief Khem R. Sharma urging the SBA to investigate the nonmanufacturer rule. The SBA must foster an environment of increased transparency for small businesses while also preventing large businesses from exploiting rules in place meant to protect small manufacturers.
Excerpts and the link to the full letter can be found below.
"Under this proposed rule, the SBA is considering retaining the current 500-employee size standard for Federal procurement of supplies under the nonmanufacturer rule. We take this opportunity to share our concerns regarding the nonmanufacturer rule and suggest a new analyses that may contribute to a more equitable environment for all small businesses operating as nonmanufacturers under this rule.
"To state simply, our concern is that the alternative size standard of 500 employees established by the nonmanufacturer rule may be abused by large companies seeking to enrich themselves through contracts set aside for small businesses. This 500-employee threshold is the sole measurement of size for companies operating as nonmanufacturers under the SBA’s rule, meaning that any other measurement, such as revenue, is immaterial to whether the company is considered small or other than small. This creates a situation where companies can obtain exorbitant amounts of revenue by winning awards intended for small businesses and continue to retain their small size status, even though they may be considered large or dominant by any other measure.
"A second concern we raise are waivers to the nonmanufacturer rule. The SBA may waive the requirement that the nonmanufacturer supply the product of a small business manufacturer if certain elements are met; see 13 C.F.R. 121.1201-1206. Issuance of a waiver permits procuring agencies to purchase items made by other-than-small manufacturers, through the small business nonmanufacturer. While there are instances in which such waivers may be appropriate, there are other instances in which waivers are granted resulting in large sums of federal funds, intended for small businesses, to be passed through the small manufacturer into the pocketbooks of other-than-small businesses and be counted towards the government’s small business goals.
"These instances create distortions in the SBA’s reporting of the government’s small business goal achievements, inflating the dollar amounts reported as going to small businesses. The government has reported meeting its 23% small business goal since 2013, yet accurate reporting of dollars actually received by small businesses, like in the circumstances described above, would reduce the actual dollars reported as distributed to small businesses, which may impact whether or not the government had actually met its small business goals."
Excerpts and the link to the full letter can be found below.
"Under this proposed rule, the SBA is considering retaining the current 500-employee size standard for Federal procurement of supplies under the nonmanufacturer rule. We take this opportunity to share our concerns regarding the nonmanufacturer rule and suggest a new analyses that may contribute to a more equitable environment for all small businesses operating as nonmanufacturers under this rule.
"To state simply, our concern is that the alternative size standard of 500 employees established by the nonmanufacturer rule may be abused by large companies seeking to enrich themselves through contracts set aside for small businesses. This 500-employee threshold is the sole measurement of size for companies operating as nonmanufacturers under the SBA’s rule, meaning that any other measurement, such as revenue, is immaterial to whether the company is considered small or other than small. This creates a situation where companies can obtain exorbitant amounts of revenue by winning awards intended for small businesses and continue to retain their small size status, even though they may be considered large or dominant by any other measure.
"A second concern we raise are waivers to the nonmanufacturer rule. The SBA may waive the requirement that the nonmanufacturer supply the product of a small business manufacturer if certain elements are met; see 13 C.F.R. 121.1201-1206. Issuance of a waiver permits procuring agencies to purchase items made by other-than-small manufacturers, through the small business nonmanufacturer. While there are instances in which such waivers may be appropriate, there are other instances in which waivers are granted resulting in large sums of federal funds, intended for small businesses, to be passed through the small manufacturer into the pocketbooks of other-than-small businesses and be counted towards the government’s small business goals.
"These instances create distortions in the SBA’s reporting of the government’s small business goal achievements, inflating the dollar amounts reported as going to small businesses. The government has reported meeting its 23% small business goal since 2013, yet accurate reporting of dollars actually received by small businesses, like in the circumstances described above, would reduce the actual dollars reported as distributed to small businesses, which may impact whether or not the government had actually met its small business goals."