AICPA Urges Increase to SBA Size Standard at House Hearing

May 25, 2011

Odysseus Lanier, CPA, a partner in the firm of McConnell Jones Lanier & Murphy LLP, Houston, testified on behalf of AICPA on May 5 before the House Small Business Subcommittee on Economic Growth, Tax and Capital Access. Lanier called for an increase in the U.S. Small Business Administration’s size standard that would allow small accounting firms to better compete for federal government contracts.

The AICPA believes that to fully define which small accounting firms have the adequate resources in infrastructure, personnel, and revenue to properly perform services in the federal small business contract arena, the size limit needs to be raised. The current SBA size standard for accounting firms is $8.5 million in revenues, and except for cost-of-living adjustments, hasn’t been increased in more than 25 years. The SBA proposed raising the standard to $14 million on March 16.

Several AICPA members recently met with SBA officials to better understand the SBA’s approach to calculating the new proposed standard and, as result of that meeting, determined that the SBA’s increase would still exclude many small very capable small accounting firms. Using SBA’s methodology, the AICPA determined that the data used by the SBA did not adequately reflect the structure of today’s accounting profession and that by applying better data, a new size standard should be higher. The AICPA provided this analysis to the SBA in a May 2 letter that shows under the SBA’s methodology, even the $14 million size standard was low.

“It is unconscionable to think that firms like ours and others, that have made the appropriate investments to grow their businesses, are required to compete with the titans of our profession for federal contracts rather than our peer accounting and consulting firms because we exceeded an anachronistic small business size standard for our profession,” Lanier said. “I strongly believe that it is time to consider leveling the playing field and allowing small accounting firms to provide our value-added services in an expanded federal marketplace by increasing the small business size standard to $25.5 million.”

The AICPA also looked at other secondary factors that inhibit the ability of small accounting firms to effectively compete for contracts in the federal marketplace. Importantly, two of those factors are driven by government policy – an acquisition policy designed to reduce the number of vendors and increase the size of federal procurements and the use of “Sources Sought/RFI” notices to determine if small contractors are qualified prior to issuing an RFP.

A higher SBA limit and removal of these impediments is necessary to promote growth of small accounting firms and avoid an arbitrary cutoff in the middle of the market segment where a firm would quickly outgrow a lower size standard and be forced to compete in “full and open competition” (most likely unsuccessfully) with the largest of firms, the letter said.

The AICPA has been working with the National Association of Black Accountants on this issue, and NABA has filed a formal comment letter regarding the SBA’s proposed rule.

Read the AICPA testimony.

Read the AICPA’s comment letter to the SBA.