Changes to federal Small Business Administration (SBA) regulations designed to stimulate more business for smaller architectural firms may have the exact opposite effect if a controversial regulation to raise the current $4.5 million annual receipts size standard to $19 million goes into effect. With the current total SBA set-aside in federal contracting at about $190 billion, the AIA sees the upcoming decision as critical to the future economic livelihood of its members.

The higher size standard definition, proposed by the SBA in March, would mean a larger pool of architecture firms could be eligible to compete for federal contracts that specify and set-aside the selection of small firms, allowing federal agencies to achieve their small business contracting goals more easily. However, as this will put small firms in the same category as much larger ones with more resources available to win business, firms now defined as small under the current standard may obtain far fewer, if any, federal contracts.

“The AIA estimates that over 91 percent of architecture firms fall under the current $4.5 million standard,” said Walter Hainsfurther, FAIA, in his May 5 testimony before the U.S. House of Representatives subcommittee on Economic Growth, Capital Access, and Tax. “If the standard is raised to $19 million, over 97 percent of firms will qualify as a small business. In short, the SBA is asking firms that have five employees to compete against those that have 50 employees. As you can see, the SBA’s goal of increasing participation in the architectural market is too broad, and their proposal has over-reached.”

Hainsfurther, president of Kurtz Associates Architects, a seven-person architectural firm based in Des Plaines, Ill., is among hundreds of AIA members who have commented to the AIA and the SBA in attempts to educate the agency about the adverse impacts of the proposed measure. Following a recommendation from a task force of AIA Small Firm Round Table members and with extensive member input, the AIA Board of Directors unanimously adopted a resolution during the AIA National Convention in May that opposes any change to the current $4.5 million size threshold. The proposal’s official SBA comment period ended June 15.

Following a concerted national advocacy effort by the AIA—including action alerts, teleconferences, and testimony before Congress—AIA members submitted some 650 comments to the SBA. In total, SBA received approximately 1,400 comments from all industries and professions affected by its review of small business size standards. The number of comments from the architecture profession alone made a huge statement to the SBA.

There is reason to believe that SBA regulations already portray small architecture firm revenues inaccurately. The SBA’s size definition is based on total revenue receipts, not net business income. So for many smaller firms who pass large percentages of earned income to on contractors, the gross receipts definition already overstates the size of their businesses.

At the crux of the matter are methodologies the SBA uses to define “small,” which AIA members say does not match the realities of today’s architectural practice. To begin with, the federal government already considers the vast majority of architecture firms to be small businesses. “Architectural firms do things differently than lots of other businesses in the United States,” says Paul Mendelsohn, AIA vice president of government and community relations. “The set-aside program objective is for 42 percent of the category’s participants to benefit, but even under the current threshold, we have 91.7 percent of architecture firms eligible. So there is something wrong there.”

These numerical standards vary to reflect industry differences, and have the sole purpose of identifying a target population eligible for federal small business assistance programs. A third of all industry standards, including the NCAIS 541310 classification for architectural services, are under SBA review this year.