Today is the ninth anniversary of the first congressional hearing on the diversion of federal small business contracts to large companies, including some of the largest corporations in the world.
On May 7, 2003 the House Small Business Committee heard testimony from the Small Business Administration’s Inspector General as well as small business advocates including American Small Business League President and founder Lloyd Chapman, on how fraud and abuse in federal small business contracting programs allows large companies to hijack tens of billions of dollars worth of federal small business contracts every year.
That hearing was the first federal acknowledgement of a problem that has continued to bankrupt the nation’s small businesses. Since 2003, over a dozen additional federal investigations have found hundreds of billions worth of federal small business contracts that were diverted to large companies, including Fortune 500 firms like Apple, Time Warner, Chevron, General Electric, Boeing, Lockheed Martin, Raytheon, AT&T, Bank of America, The New York Times Company, and Italian Defense giant Finnmeccanica, which has over $32 billion annual revenue and more than 75,000 employees.
Despite these numerous federal investigations and the ASBL’s decade-long history of pointing out fraud and abuse in federal small business contracting programs, politicians during the last three Presidential administration have failed to do anything to stop the rampant fraud and abuse that severely disadvantages our nation’s 28 million small businesses and brings down our national economy.
The U.S. government is the world’s largest buyer of goods and services, spending over $500 billion annually on federal “acquisition.” Acquisition, also known as “procurement,” is a term for when the government contracts with private vendors.
Federal law states that 23 percent of all federal acquisitions spending must be with small businesses, so small business contractors should receive over $100 billion in federal contracts annually. However, due to fraud and abuse, large companies receive a majority of federal small business contracts every year. In total, tens of billions of dollars worth federal small business contracts are diverted to large companies every year.
The latest data from the Federal Procurement Data System shows that 72 of the top 100 federal small business contractors were actually large companies that significantly exceeded federal small business size standards.
In 2005, the Small Business Administration’s Office of the Inspector General released Report 5-15, which stated that the diversion of federal small business contracts was “one of the largest problems facing the Small Business Administration and the entire federal government today.”
In October 2011, SBA Inspector General Peggy Gustafson testified before the House Small Business Committee, stating that the diversion of federal small business contracts to large companies continued to be the “top management challenge” for the SBA, for the seventh year in a row.