Jan. 9, 2005--Following on the heels of a report that found that the government has been shortchanging small businesses when doling out federal contracts, the Small Business Administration announced a new policy to help define what a small business is.

The SBA's Office of Advocacy announced recently that roughly $2 billion in federal contracting money that was believed to have gone to small businesses actually went to large companies in fiscal year 2002. The reason: Larger companies like Titan, Raytheon, General Dynamics and Hewlett-Packard bought the small businesses that originally received the contracts.

Since the government strives to award 23% of all prime-contract dollars to small businesses, the SBA has implemented a new monitoring system that will force companies to recertify their small business status if they take part in an acquisition.

"This new policy will improve upon the accuracy of the federal government's reporting of small business achievements by requiring small businesses to reaffirm their small business status to contracting officers once it has been acquired by another business," said Hector V. Barreto, head of the administration.

The rule change has special importance because federal contracts issued through agencies like the General Services Administration and the Department of Defense may last as long as 20 years--counting against the wrong side of the small business ledger for that entire time period.