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Statement of the Hon. Nydia M. Velazquez on Under the Microscope: Reviewing the SBA’s Small Business Size Standards

Thank you, Mr. Chairman. And thank you to our witnesses for traveling here today. The demands on a small business owner’s time are already immense. I appreciate that you are using some of your valuable time to help this committee address these important issues.

How the Small Business Administration defines “small” can have an enormous impact on the success of an individual small business, as well as the collective success of small businesses across the country.

This hearing gives us an opportunity to better understand the standards, their application for government contractors, the environments that they create, and the challenges for small businesses who approach or exceed their industry’s standard.

Right-sizing the size standards is critical to ensure fairness, promote competition and encourage small businesses to enter and remain in the industrial base.

The federal government needs to both recruit and retain small businesses, like those on our panel. Yet both tasks are becoming increasingly challenging: fewer small businesses are signing up to work with the government and many more are exiting the market sooner than expected.

This is increasingly prominent in the small business market—the government has roughly 40% fewer small businesses in its ecosystem than it did a decade ago. And it has always been a challenge in the mid-tier.

A GAO report I requested in 2019 found that most small businesses do not successfully graduate—only 2.5% of former small businesses receive contracts as midtier companies 9 years later.

This committee has regularly reviewed the size standards and tried to ensure that companies that want to grow can. We have at times provided additional runway to do it—to give small businesses additional time to build their capacity, portfolio, and workforce for long-term success.

Yet changes to small business size standards and policies can be a double-edged sword if not done correctly.

We do not want to disincentivize or punish growth but must also carefully ensure we do not prematurely push small businesses into a market where they cannot compete. The stability of contracting with the federal government provides smaller businesses with opportunities to plan, grow, and hire at a pace that is appropriate for them.

It’s important to ensure any changes to government policies account for the impact on all small businesses.

As we will hear today, the federal government imposes unique and complex requirements on government contractors. These rules impact a small business’ structure, cash flow, and workforce—as well strategic decisions about size growth and, ultimately, whether to continue to participate in the federal marketplace.

I look forward to hearing from the panel on past performance requirements, subcontracting processes, and bundling policies that would help improve the environment for small business government contractors.
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