What is a small business?
How small business is defined makes a difference. You and I think we know what a small business is. Most of us think of small business as the local folks in downtown Pasco or Kennewick or along the Parkway or Uptown Shopping Center in Richland who run barber shops and restaurants, accounting firms and insurance agencies, the little guys who have a few trucks and excavate for Hanford jobs, the computer nerds who open shop and act as network administrators and telephone system installers. But the federal government has adopted a definition of small business that causes most of us to scratch our head. In most industries small business for federal set-aside programs and Small Business Administration loans is any business with 500 employees or fewer.
Now lets stop right there for a second. According to Tridecs most recent online listing of the twenty largest Mid-Columbia employers, the Department of Energy in Richland is 20th in size with 414 employees. It is not a business, but if it were, it would qualify for assistance under the SBAs loan assistance and the vaunted U.S. governments set-aside program, which reserves for small business a significant portion (usually between 10 and 23 percent) of an agencys federal procurement dollars. This is so even though DOE Richland occupies most of the six floors in the biggest building in all of southeast Washington.
Let me ask this, what objective is achieved in helping businesses that large? And doing so under a program nominally aimed at helping small business? The Australians have had a program since 2009 called the Fair Work Act to assist small businesses with fewer than 15 employees.
In America, businesses with 500 or fewer employees make up 97 percent of the business community. In fact, recent U.S. Census data reports companies with fewer than 10 employees make up 95 percent of the our free market. Seventy-four percent of U.S. businesses are run by a sole proprietor without any employees.
What conceivable goal is to be achieved by setting aside 10 percent of procurements and more to 97 percent of the business community? Isnt that like giving 10 percent of the contracting dollars to those who are right handed?
What is accomplished?
And does it not follow that agencies are therefore entitled to lavish the rest of government procurement on the top 3 percent of businesses, those huge companies with thousands of employees.
Because of this definition, these SBA and other federal programs help large businesses and hence completely fail truly small businesses. When you have a very limited supply of loans or procurement and you give most of it to large companies, the small ones are left out, even hurt. Either the SBA should be scrapped entirely to save precious federal resources or the definition of small business should reflect small business, say 15 employees, like the Australians.
Does it not make much more sense to partner with small companies with 15 or fewer employees? Who needs this type of assistance anyway? Is it the businesses in our town or the huge, but under 500 employee, firms in major metropolitan areas? Who needs government loans? Since when does a healthy 350-employee firm not have access to credit from normal, private channels?
Will this defect in federal agency and SBA programs be corrected? I predict not, if members of Congress are let off the hook for perpetuating this. They respond to the squeaky wheel which means the large small companies that dominate such organizations as the National Federation of Independent Business and U.S. Chamber of Commerce. Employees and officers in these companies also raise funds for congressional candidates and then benefit from federal agencies and SBA officials who hand them low-interest guaranteed loans and government procurement contracts.
What should stay the same is always in flux and what should change seems to hang on and hang on. Greg Dow owns Dow Law Firm in Richland, which specializes in bankruptcy cases. He was legislative assistant to Sen. Bob Packwood from 1975 to 1980, handling small business and farming concerns.