|Posted:||March 2, 2016 10:54 AM|
|From:||Senator Camera Bartolotta|
|To:||All Senate members|
|Subject:||Modernizing financial statement requirements for road projects under $500,000|
|In the near future, I will introduce legislation amending the State Highway Law and abrogating 67 Pa. Code § 457.4 (a)(5) to exempt companies bidding on state road projects of $500,000 or less from certain financial statement filing requirements that have proven to undermine the ability of a small business to bid on these projects.
PA Code 67.457 requires businesses bidding on these projects to provide the Commonwealth with a "reviewed" financial statement to determine the maximum bid capacity of the contractor. However, changes in accounting principles have made the cost associated with obtaining a reviewed financial statement prohibitively expensive for small businesses.
While the requirement for reviewed financial statements is understandable for large projects, current law does not distinguish between large and small projects nor does it take into consideration the effect this requirement has on the ability of small companies to meet it.
For example in 2005, a small business owner in my district applied for and was accepted as a State Prequalified Prime Contractor for the Commonwealth. At the time, the cost associated with providing a reviewed financial statement was relatively modest ($500). When this business owner attempted to renew his status as a prequalified bidder, the cost associated with obtaining a reviewed financial statement was as much as $10,000 because of changes in accounting principles.
As an alternative, my legislation will allow a business placing a bid on a state project valued at $500,000 or less to submit a "compiled" financial statement in order to be qualified as a bidder.
Unlike a “reviewed” financial statement which requires extensive accounting techniques associated with large businesses with complex lending arrangements, a “compiled” statement provides a general understanding of a business’s finances that is often sufficient information for it to obtain a bank loan. In fact many times, lenders require even less documentation such as tax returns to validate a company’s finances in order for it to receive a loan.
Please join me to cosponsor this legislation to ensure our small businesses are not disadvantaged from bidding on state contracts due to a current standard that is outdated and unnecessary for contracts under $500,000.
Introduced as SB1181