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Inspector General Disappointed by New SBA Policy

Bush Administration Overrides Key to Stopping Small Business Contract Abuse

November 30, 2006

PETALUMA, Calif., November 30, 2006 / For years, the Inspector General of the Small Business Administration (SBA) has recommended that small federal contractors be required to certify their size status annually, to curtail fraud and abuse in small business contracting. The SBA, however, has consistently refused to implement that policy. Instead, officials within the Bush administration have finalized a rule that will allow the government to continue to report contracts with large companies as small business awards through the year 2012.

Senator John Kerry, incoming chair of the Senate Committee on Small Business and Entrepreneurship, called the SBA's new policy inadequate. "If there's a way to guarantee no abuse, that's our concern," Kerry told Inc.com. "I know five years is too broad for that."

Nydia Velázquez (D-NY), current ranking member of the House Small Business Committee, concurred with Kerry's assessment. "The agency's rule fails to address the vast majority of this problem," Velázquez stated in the New York Times.

During a hearing earlier this year, SBA Inspector General Eric Thorson had urged the Senate Committee on Small Business and Entrepreneurship to enact annual recertification as law due to the SBA's reluctance to adopt it as a policy. Following the hearing, the committee voted unanimously to include annual recertification in the SBA Reauthorization Bill. Unfortunately, the bill has yet to be passed into law.

In his annual report on top SBA management challenges, Mr. Thorson cited procurement flaws as challenge number one for the second year in a row.

There have been over a dozen federal investigations that have found widespread abuse, fraud, and lack of oversight in federal small business contracting. Billions of dollars that were meant to go to the small companies where most Americans work have been diverted to some of the largest corporations in the world including Lockheed Martin, Boeing, Bechtel, General Dynamics, L-3 Communications, Raytheon, and Northrop Grumman. Forcing companies to recertify their size status annually has been seen as a way to get these mega-companies out of the government's small business database.

In 2003 when the SBA proposed a rule to adopt annual recertification, the agency received the highest number of public comments in its history. Despite the fact that eighty-seven percent of the responses were in favor of the rule, the SBA never adopted it.

"Every dollar in small business contracts that goes to a Fortune 1000 firm is a lost opportunity for America's entrepreneurs," stated Lloyd Chapman, president of the American Small Business League. "It's our hope that Congress will make annual recertification the law of the land. This is an important step toward ensuring that legitimate small businesses have fair access to the federal marketplace."

About the ASBL

The ASBL was founded on the principle that small businesses, the backbone of a vital American economy, should receive the fair treatment promised by the Small Business Act of 1953. For more information see www.asbl.com.



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