Size Matters in Business

Recent news stories have suggested that the U.S. Small Business Administration is shortchanging Maine by allowing big companies to get contracts that are meant to help small ones. SBA officials will likely hear such complaints when they come to Maine next week as part of a national series of public hearings on its size standards.

The complaints, however, may not be accurate. Maine has done quite well securing business capital, according to former and current development officials. Overall, however, more funding, from government and private sources, is needed.

How businesses are classified as small is currently under routine review by the SBA. Depending on the industry, businesses are qualified as small based on their number of employees or their annual revenue. For many businesses, the threshold is 500 employees. This sounds large by Maine standards. But, when it comes to business size, small is a matter of perspective. Small businesses in Maine would likely be tiny by national standards and our big businesses would be considered small.

Lincoln Paper and Tissue, for example, funded the restarting of its mill, in part, with SBA funding. The company employs 350 people. Creative Apparel, which employs about 350 people making military clothing in five Maine locations, has also benefited from small business set asides.

If the small business size standard is dropped significantly, these businesses could lose SBA funding. That would harm them and the many smaller Maine companies they contract with. Mainers can weigh in on the size standards at a public hearing beginning at 9 a.m. June 7 at Portland City Hall.

There are problems, however, with the policing of small business set asides, the government practice of dedicating a portion – 23 percent – of its contracts to small companies. A recent SBA office of advocacy report found that some large companies got contracts meant for small businesses. The SBA allows companies to self- certify that they are small. There are penalties, both civil and criminal, for falsely presenting a large business as a small one. However, the agency does not aggressively pursue companies that file false information.

Like other agencies, the SBA has limited resources and personnel, few of which are devoted to routing out fraud. Sen. Olympia Snowe, chair of the Senate’s Committee on Small Business, and her committee colleagues have proposed increasing the agency’s funding, an unlikely possibility given the president’s mandate to cut government costs. She has also proposed increasing the penalties for businesses that say they are small when they are not.

Sen. Snowe and other members of Maine’s congressional delegation have also succeeded in getting disadvantaged areas, such as Aroostook County, designated as special zones, entitling them to easier access to federal funding and government contracts.

The many programs SBA offers have helped Maine businesses. Fine tuning them and their management will help more.