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AIA Member Testifies Before House Small Business Committee on Barriers to Federal Design Work

AIA Position

The American Institute of Architects (AIA) supports policies that open doors for small design firms to create jobs and economic opportunity in every community in the country. The AIA strongly opposes policy proposals that discriminate against small design firms and place barriers in the way of their survival. The AIA urges the Congress and the administration to recognize the unique needs of smaller architecture firms as they develop and implement policy proposals, and oppose proposals that disproportionately affect small firms.

Background

    • Small architecture firms and sole practitioners work in every community in the country to help homeowners and businesses design better buildings. Architecture is by and large a small business profession: 95 percent of architecture firms in the United States employ 50 or fewer people. Every architect hired to design a project leads to nearly 30 other jobs in engineering, construction, and other building trades.

    • However, the triple challenges of the recession, high tax rates, and burdensome paperwork have forced many small firms to shut their doors. Federal policies that affect the design and construction industry should ensure that small design firms have the tools they need to thrive.

    Tax Reform and Small Firms. Because the bulk of architecture firms are small, they are especially sensitive to changes in tax policy. In 2010 and again in 2012, the AIA helped defeat a plan in Congress to increase payroll taxes on thousands of small architecture firms that organize as S corporations. In 2011, the AIA helped repeal paperwork and tax withholding laws that would place huge burdens on small firms. As Congress looks to reform the tax code and reduce the budget deficit, it needs to ensure that tax rates on small entrepreneurs are reduced and prevent any other efforts to penalize smaller design firms.

    Small Business Lending. Tight credit markets for small businesses have made SBA loans a lifeline for many small design firms—and for their clients. In particular, the 504 loan program, which finances the purchase, construction, and renovation of buildings, helps small businesses hire architects and other design and construction professionals to rejuvenate communities, creating direct and indirect economic benefits for small entrepreneurs. Congress needs to ensure that the 7(a) and 504 loan programs are adequately funded so that small firms do not have to shut their doors due to a lack of financing.

    Opening Doors for Small Businesses in Federal Procurement. Small design firms provide the federal government with new ideas and talent to solve large design challenges. However, when the federal government uses Design-Build as a procurement methodology, small firms can be shut out. On average, it costs $260,000 for a firm to prepare a design-build solicitation. When agencies require five to 10 firms to compete for one project, the odds of recouping those funds become exceedingly slim. As a result, many small firms are effectively blocked from entering the federal marketplace. The AIA urges Congress to update federal law to limit the number of finalists in design-build competitions, which will enable more small design firms to take part.

Useful Links

AIA Small Business Policy Resource Page

U.S. Small Business Administration

House Committee on Small Business

Senate Committee on Small Business and Entrepreneurship

 

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