In a move which should serve as a wake-up call to any small company manufacturing bearings in the United States, the Small Business Administration (SBA) has now suspended its Nonmanufacturer Rule for all types of bearings. Small bearing manufacturers are now set to lose this protected market niche.

The SBA's stated basis for the waiver is, "no small business manufacturers are available to participate in the Federal market for these products."

The SBA administers a law (Public Law 100-656) requiring that a portion of U.S. Federal contracts be set aside for small businesses. A small business winning one of those contracts (called SBA 8(a) Program contracts) must then supply either its own product or a product manufactured by another small business. This requirement is known as the Nonmanufacturer Rule.

However, the law also provides that the SBA can waive this rule for any "class of products" for which there are no small business manufacturers involved the Federal contract market.

The SBA has been investigating North American Industry Classification System (NAICS) 333613: Bearings, plain, unmounted and bearings, mounted. There has been no small manufacturer participation in the Federal market for this classification in over two years.

In order to be considered available to participate in the Federal market for these products, a small business manufacturer must have submitted a proposal for a contract solicitation or received a contract from the Federal Government within the last 24 months.

Neither has happened, indicating either that small manufacturers are not interested in government contracts or that they simply are not aware of the opportunities.

Whatever the reasoning, not one small bearing manufacturer has pursued a Federal contract for well over two years. On April 4, 2002, the SBA proposed that the Nonmanufacturer Rule be waived for bearings. No comments were received during the comment period ending May 8, 2002 and so the waiver has been approved without debate.

Now, small businesses bidding on and winning SBA 8(a) Program contracts for bearings do not have to source those bearings from a U.S. small business. They can source the bearings from anywhere they choose; small manufacturers will be hard-pressed to compete with large multinationals for these sales.

The ruling takes effect June 14, 2002.

If you wish more information or to comment to the SBA regarding this matter, please contact: