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Congress has created numerous federal lending programs, set-asides, and tax preferences designed to help small businesses succeed.  However, the advantages conferred by these programs have led to an on-going debate about the proper definition of a “small business” and what small business size standards should be used to determine eligibility for these initiatives.  Size classification is especially important for firms that seek SBA loans, technical assistance, and federal contracts.

Defining a small business has proven to be a challenging endeavor.  While one definition may work for a business in one context, it may be unsuitable in another. For instance, what works for a manufacturing company in California may not be appropriate for a tech startup in Florida.

On numerous occasions, the SBA has proposed a comprehensive revision of its size standards.  However, it remains critical for policymakers to engage directly with stakeholders about any potential revisions and their impact on middle-market businesses—that is, firms that have grown out of their small size status but are not considered large, billion-dollar enterprises.  This hearing gives us an opportunity to better understand how well small business size standards are working in practice, and the challenges that advanced small and mid-size businesses are currently facing, especially as it relates to federal procurement.

For example, mid-size businesses are too large to qualify for small business set-aside contracts, yet must compete on the full and open marketplace against billion-dollar firms.  Reports suggest that mid-size firms have limited options.  Those that forego competing in full and open markets often settle for subcontracting opportunities or decide to sell their company at a devalued rate.

Access to federal contracting opportunities is critical for small and mid-size firms and essential to job creation and economic growth.  While increasing competition for federal contracts is a bipartisan goal on this committee, we must consider whether revisions to the “small business” definition will prove to be insufficiently inclusive or overly-inclusive of mid-size firms to the detriment of small businesses.

On the one hand, advanced small and mid-size firms that are excluded from the “small business” definition are often barred from participating in some small business contracting programs. On the other hand, if a size standard were to become overly-inclusive, businesses that could otherwise be considered large would be able to compete in these programs, depriving small businesses of contracting opportunities.

Today, we will hear from multiple industries that have been affected by the standards in place as of October 2017.  I want to be clear that the purpose of today’s hearing is not to advocate for one size standard over another, but rather to better understand the industry perspective and ways we can encourage as much competition in the federal marketplace as possible.