Bill would let firms that outgrow their size status retain set-aside contracts

Legislation introduced this week to allow incumbent contractors to recompete for small business set-asides even if they no longer qualify as small is causing a stir in the contracting community.

The Small Business Fair Competition Act (H.R. 3558) introduced by Rep. Parker Griffith, D-Ala., would let companies that have outgrown the Small Business Administration's size and economic thresholds for certification compete with small firms to keep their current contract as long as they can show they were small at the time of the initial award. The companies also must prove to the government that they would slip back under SBA's thresholds if they lost the work.

"If passed, this bill will put an end to an outdated regulation on small business that punishes our entrepreneurs for their own success," Griffith said in a statement. "This regulation puts a ceiling on motivation to grow small business, effectively putting a cap on how far our local economies can develop. That is the exact opposite of the American dream. This is a pro-small business bill that supports and promotes our men and women who build success stories from the ground up."

But small business advocates don't see it that way. Lloyd Chapman, president of the American Small Business League, called the bill "a colossal, anti-small business loophole to divert federal small business funds to some of [Griffith's] largest campaign contributors." Chapman said it's not credible to expect a politician whose top contributors include major Defense contractors such as Northrop Grumman Corp. and Boeing Co. to write legislation supporting small businesses.

"This is one of the most egregious examples I have ever seen of a member of Congress selling legislation to the highest bidder," Chapman said.

Griffith spokesman Sean Magers said the congressman's office became aware of the American Small Business League's concerns only after they were released to the press. Magers said Griffith is in the process of contacting the group and "he looks forward to working with them to address each and every concern they have with the bill."

Chapman's concern, however, was echoed by Kenneth Weckstein, a partner in Brown Rudnick's government contracts and litigation group. "When I see legislation like this, I think there's some company behind it that may have asked to promote it," Weckstein said.

Small business set-asides are designed to help small firms become successful so they can compete against large companies, he noted. "I sort of understand the intent and there are small businesses that once they lose their big contract they may have trouble surviving or go back to the way they were before," he said. "But they're not taking advantage of what they're learning and gaining from that set-aside."

According to Weckstein, the legislation also has the potential to create an almost permanent monopoly on a contract.

The legislation is awaiting consideration from the House Small Business Committee and the House Oversight and Government Reform Committee.