Small-business owners and advocates are wondering whether the economic-stimulus plan will fully address their three main concerns: access to government contracts, access to loans and consumers' reluctance to spend.

"I'm curious to see what it does," said Kevin O'Brien, a Denver general contractor and president of O'Brien Construction Inc. "The hole that we dug might be too big to get out of, and I'm thinking sometime in mid-2010 it might turn around."

O'Brien remodels kitchens, bathrooms and basements and said his business has slowed. At this time last year, he was booked through May.

"Right now, I have projects going on hold. Everyone is waiting to see how the market turns," he said.

The stimulus plan, which still requires congressional approval, does include references to tax incentives for job creation and investments including provisions aimed at small businesses, but it does not do enough, some small-business advocates say.

It fails to close loopholes that allow large companies to win government contracts intended for small businesses. It also doesn't ensure that small businesses would be able to access capital, said Chris Gunn, spokesman for the American Small Business League.

"The hope is that it's going to trickle down to small business, but I really question whether or not it will," Gunn said.

The U.S. Census reports that 90 percent of businesses nationwide have fewer than 20 employees and are responsible for 97 percent of net new jobs.

"You have to look at the companies that are going to provide the biggest boost here, and our small businesses are a major engine for economic growth," Gunn said.

Diane Matava, who owns Polkadot, a women's boutique at 1577 S. Pearl St. in Denver, said the stimulus plan has potential but that she is waiting to see how it's implemented.

"It's an excellent idea, but there have to be guidelines as to how the money is given," she said.

Elizabeth Aguilera: 303-954-1372 or eaguilera@denverpost.com

Source:  http://www.denverpost.com/business/ci_11693061

As a long time advocate for legitimate small businesses across the country, I have to disagree with Jerry Grossman’s comments and suggestions on federal small business contracting policy.

Mr. Grossman talks primarily about the needs and concerns of the government and government contractors. What about the needs and concerns of the American people? After all, we do live in a democracy, and the sole purpose of the government and government contractors is to carry out the will of the people.

The primary problems with federal small business contracting programs are not that goals are too high, size standards are too low, or that there is not enough “liquidity to investors.”

The real problems with federal small business contracting programs can be found in the 15 federal investigations into small business contracting programs, which have been released since 2003. In each case, federal investigators found that billions of dollars in federal small business contracts have been diverted to large businesses through fraud, abuse, loopholes, intentional mismanagement and a blatant lack of oversight. Just this summer, four federal investigations have been released, which found dramatic abuses in federal small business contracting programs.

Report 5-15 from the Small Business Administration Office of Inspector General provides the most accurate and objective assessment of this issue. It states, “One of the most important challenges facing the Small Business Administration and the entire federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.”

I believe Mr. Grossman, his clients and every federal employee should consider this.

Washington represents only a miniscule percentage of this country’s population and any federal policy regarding small business contracting programs needs to address the best interest of the entire country, not just firms in Washington.

President Bush said, “We are a nation of laws,” and federal law states a minimum of 23 percent of the total value of all prime contracts and subcontracts should go to small businesses. In 1953, the Small Business Act was passed because it is in the best interest of our country to have programs to direct federal funds to the small businesses where most Americans work.

Census Bureau statistics tell us 98 percent of all U.S. firms have less than 100 employees. Over 56 percent of all Americans work in those 27 million firms. Those firms are responsible for over 90 percent of the new jobs in this country, exports and technical innovations.

I am always surprised when I hear people who do not think it is reasonable for 27 million small businesses and the 168 million Americans that work in those firms to receive a paltry 23 percent of government contracts and subcontracts. Even a 30 percent small business goal would still leave 70 percent of all federal contracts for large businesses.

Small businesses are the heart and soul of the American economy. Most of the tax revenue, which funds the Department of Defense, NASA and every other federal agency comes from American small businesses. There is no better use for federal funds than to reinvest them in the small businesses where most Americans work.

The defense and aerospace industry should realize they are shooting themselves in the foot by opposing federal small business programs. The Small Business Act was an economic stimulus program to create jobs, boost the national economy and generate more revenue for the federal government.

If the defense and aerospace industry would begin to make a sincere effort to comply with small business contracting programs there would be more federal funds available to spend on defense and aerospace programs.

Too many individuals in Washington that oppose federal small business contracting programs are prospering financially from the subversion of those programs. They may be able to delude themselves with discussions of what is best for the government and contractors, but they are not fooling anyone out here in the rest of America.

Federal programs to direct contracts to small business are not going away. Its time for the defense and aerospace industry to stop trying to circumvent the will of the American people and begin to fully comply with all federal small business contracting programs for the benefit and future of our government and all Americans.

Lloyd Chapman is the president of the American Small Business League. For more information, visit www.asbl.com.

Each year, the federal government awards more than $400 billion in contracts, and Congress requires that 23 percent of those lucrative awards be set aside for small business.

The point of the mandate is to encourage and strengthen the sector that employs more than half of American workers and generates many of our most important innovations.

But a disturbing trend appears to be developing.

Corporate giants, including Fortune 500 companies and even foreign firms, are elbowing in on awards that are intended for small businesses.

This can happen in a number of ways. The Small Business Administration acknowledges that small businesses that win lucrative multiyear government contracts often grow into major corporations, but are allowed to keep their status as small businesses. In other cases, small companies that win long-term government contracts are acquired by corporate giants that inherit the contracting windfall.

Then there are the companies that make “false certifications” about their size, as the SBA Office of Inspector General reported in a 2005 report.

The companies are not the only problem. The federal agencies themselves have been caught fudging on exactly how many of their contracts went to small business. For example, the inspector general for the U.S. Department of the Interior noted in July that the DOI misrepresented its performance on small business goals by including awards to companies like John Deere, which employs 52,000 and has annual revenues $23 billion.

As it is, the SBA has a rather liberal definition of a “small business.” Generally, the cutoffs are: fewer than 500 employees for most manufacturers or 100 employees for wholesale trade industries, $33.5 million in annual sales for most general industry and $7 million for retail and service industries.

Does that sound confusing? The Bush administration isn’t making things any clearer. Under a 2008 policy, companies will no longer be required to list their annual revenues or number of employees on the federal government’s Central Contractor Registration database.

The policy helps muddy the waters for those trying to protect small businesses’ rightful share of government contracts, according to the American Small Business League, a California-based association that has been campaigning for years for small business contract rights.

Lloyd Chapman, president of the ASBL, argues that shortchanging small business interests in federal contracting is a bipartisan game.

Chapman notes that House Speaker Nancy Pelosi, a Democrat from California, pushed a bill through the House this summer that would allow a company to retain its small business status for contracting purposes even if a major venture capital firm owns up to 98 percent of the company.

Chapman argues that the biotechnology industry and the venture capital giant Kleiner Perkins Caufield & Byers, who have contributed heavily to Pelosi’s campaigns, stand to gain from the legislation.

Last year, the SBA issued a press release that said it was a “myth” that “large multinational companies are taking away federal contracts specifically intended for small business.”

But Chapman said 10,000 pages of government contracting documents he later obtained by federal court order over the SBA’s objections show that the Bush administration has “fabricated small business contracting data and lied to the public.”

The congressional mandate to help small business is valid and needs to be enforced, if not expanded.

For the sake of a healthy economy, the interests of small businesses and their workers need protection from the more powerful.

SACRAMENTO - Just when California is poised to ramp up road construction, Caltrans may roll back a civil rights program that has steered tens of thousands of federally funded contracts to woman- and minority-owned small businesses across the state.

State Department of Transportation officials say they prefer to continue administering the Disadvantaged Business Enterprise program -- which pushes contractors to give a percentage of their contracts to women and minority subcontractors -- but a federal court decision could kill the decades-old quota system.

A ruling by the 9th U.S. Circuit Court of Appeals in May would force Caltrans to prove to the U.S. Department of Transportation that discrimination exists among the big contractors that share a $4 billion pot of federal transportation construction funding.

And that may be difficult.

Caltrans officials recently hosted 12 public forums for small business owners and other interested parties around California, and only 70 people testified that they had encountered discrimination. Two people spoke in opposition of the program, which has been around for 27 years.

The agency has since scheduled a new round of meetings, including one March 1 in San Jose.

Though coincidental, the timing of the court decision could be especially painful because Gov. Arnold Schwarzenegger and legislators want the state to embark on an ambitious highway construction plan.

Now, the owners and employees of many small firms may be shut out and some predict they may be forced to shut down.

"If they discontinue the Disadvantaged Business Enterprise," said Tu Nguyen, whose San Jose company works on irrigation projects at freeway interchanges, "it's going to hurt a lot."

Just how much? The small firm he works for, T&L Landscaping, relies on the minority contracts for half its revenue.

The program works like this: Say California is awarded federal funding for a project, like for the $40.1 million going to repair the pavement and bridge at a Branham Lane overcrossing in San Jose. The state uses a formula and tells the main contractor that its bid should include a certain percentage of business with women or minority firms, in this case 11 percent of the project value. As a result, 10 "disadvantaged" businesses are working there on contracts worth $4.4 million.

Caltrans officials say the quota program has been highly successful in providing "a level playing field" for women and minorities since its roots in 1979.

Olivia Fonseca, the agency's deputy director for the office of civil rights, said Caltrans Director Will Kempton is "passionate about the program and wants it to remain as we have now."

But a court challenge against Washington state has prompted transportation officials in California -- and other states -- to re-evaluate the program.

The suit, filed by Western States Paving Co. of Vancouver, alleged that its white owner was turned down for subcontracting work by the city of Vancouver and Clark County because the prime contractor chose minority-owned firms instead. In one instance, the bid by Western States Paving was $100,000 less than a minority bid.

In the end, the appeals court ruled that Washington "has not proffered any evidence of discrimination within its own contracting market" and therefore "failed to meet its burden of demonstrating that its DBE program is narrowly tailored to further Congress's compelling remedial interest."

Because California's program deals with federal transportation money, it has been unaffected by Proposition 209, the 1996 voter initiative that bans the state from using racial preferences to award public contracts.

Argentine-born George Quinonez, of PCS Construction in Pleasant Hill, gets at least 75 percent of his business through the program, which has helped him purchase hundreds of thousands of dollars in equipment needed to pour a special concrete on freeways that dries in two hours.

His biggest fear: Being undercut by prime contractors if Caltrans won't be looking over their shoulders. Small and medium sizes contractors, he said, "are going to be at the mercy pretty much of what a big prime is willing to pay." him or her for his or her services."

Trucking company owner Pat McDonald of Santa Cruz, whose 20 trailers haul rocks, gravel and sand to and from highway construction sites, stands to lose more than 20 percent of her income if Caltrans pulls the plug.

"It is a viable program because it opens up the doors of opportunities for emerging businesses," McDonald said. "The issue is, simply without a program like this they won't look at those emerging businesses; they would have no reason to."

There are at least 5,000 firms listed on the Disadvantaged Business Enterprise database. And even more across the country -- from firms that work on and around freeways, to the owners of airport concession shops.

"I know the whole nation is watching to find out what's going to happen with this," said Todd Christner, director of operations for DBE Goodfaith Inc., a web-based firm that helps connect contractors with sub-contractors.

"I think a lot of companies will go out of business if this happens, without the legal requirement for large companies to hire smaller, minority owned companies," Christner said, convinced that contractors will either do the work themselves, or hire white-owned sub-contracting firms they've known for years.

"It will be millions and millions of dollars of funds diverted away from small businesses and women- and minority-owned firms in California," said Lloyd Chapman, president of the American Small Business League, a Petaluma-based organization. "It's a step in the wrong direction."

An investigation by Democrats in the House of Representatives that called into question Small Business Administration statistics on meeting its small business quotas for federal contracts should madden hard-working small businesses.

The investigation shows some of the nation's largest businesses received small business contracts. Some $12 billion in contracts the government said it gave to small businesses went instead to companies such as Microsoft, Rolls Royce and even The New York Times.

The report was confirmed by documents obtained from the General Accountability Office and the Small Business Administration's Office of Inspector General, according to the Office of Sen. Olympia Snowe, R-Maine.

The Small Business Association last month reported the federal government awarded 25.3 percent of its $314 billion in contracts to small businesses, defined as those with fewer than 500 employees.

But Democratic investigators say when the contracts to the large companies are taken out of the statistics, the government missed for the sixth year in a row its goal to award 23 percent of contracts to small businesses.

The report says many businesses were simply misclassified by the agencies that awarded the contracts. Others grew into big businesses and were acquired by big businesses.

Many of the companies, including The New York Times, blamed the government.

"Since we do not categorize The New York Times as a small business, clearly this was an error," Times spokeswoman Abbe Serphos told the Associated Press, a cooperative with 3,700 employees and also a recipient of some small business contracts.

Most of the contracts to the big businesses were in the $10,000 to $20,000 range, but taken together added up to a lot of business that could have gone to legitimate small businesses.

Most small businesses applying to be considered for small business contracts work hard to file all the necessary paperwork, negotiate the red tape and get the deals done.

Unfortunately, the people in charge of making the correct determinations are not working as hard.

Snowe passed legislation shortly after the report came out last week to improve the system of awarding small business contracts.

The chair of the Senate Committee on Small Business and Entrepreneurship pushed a bill through her committee by an 18-0 margin that will increase federal government power to prosecute and suspend large corporations posing as small ones for purposes of obtaining the government contracts.

The legislation may be a good start, but federal agencies should step up their oversight of these issues. It shouldn't be difficult to tell if a company has 500 or fewer employees.