A small-business trade group sued the Small Business Administration on Wednesday, seeking disclosure of a report on the government's awarding of small-business contracts to big businesses.

"The SBA has had a report on small-business contracting since January but refuses to release it,'' said Lloyd Chapman, president of the American Small Business League, a Petaluma organization that advocates for companies with fewer than 100 employees.

"We believe its report confirms widespread fraud in federal contracts and that the SBA is covering up the problem.''

An association lawyer said, however, that the report is still being prepared and would be released when it was ready, probably in a couple of months. He also said it has nothing to do with fraud.

"This is not some secret conspiracy, just a study that we have initiated to make sure agencies have reported the number of contracts going to small business,'' said Eric Benderson, the association's associate general counsel. He said the lawsuit "sounds like a publicity thing.''

The suit, filed in U.S. District Court in San Francisco, accuses the association of illegally withholding a contractor's study on how often and why small-business contracts, legally limited to companies with 500 or fewer employees, are awarded to larger companies. Federal agencies are required by law to set goals of awarding 23 percent of their contracts to small businesses.

Chapman said the contractor told him the report was submitted in January. The suit said the trade group filed a Freedom of Information Act request for the draft document in July that was denied by the association.

Congress' General Accounting Office reported in May 2003 that large companies were receiving billions of dollars in federal contracts designated for small businesses. The primary reason, the office said, was that federal regulations allow a company to be considered a small business over the life of a contract, as long as 20 years, even if it has grown into or has been bought by a large business.

Last week, the nonprofit Center for Public Integrity reported that some of the Pentagon's largest contractors were classified as small businesses in at least half of their contracts.

The congressional study did not accuse contractors of fraud, but some members of Congress called for further investigation. Chapman said Wednesday the report his group is seeking would include information on the extent to which large companies misrepresented their size to win contracts.

A small-business trade group plans to sue the Bush administration in federal court on Wednesday, asking for release of a secret study on small-business contract fraud.

The American Small Business League says the Small Business Administration, a federal agency, has been sitting for months on a study that shows frequent abuse of federal contracting regulations. The group wants the study's data in the public domain.

"The report shows that there's fraud and abuse," Lloyd Chapman, president of the trade group, told Dow Jones Newswires Tuesday. "Someone needs to be held accountable for that."

The trade group said the SBA hired an Eagle Eye Publishers, an outside
research firm, to investigate whether and why large businesses were listed as small companies in federal records. Chapman says the study found a number of reasons behind coding errors, including deliberate fraud.

On Tuesday, the SBA acknowledged the study and said it isn't finished yet.
Spokesman Evan Keefer said he expected that it would eventually be released. "I was told that it was not ready," he said.

Trade group officials say they already have exhausted other avenues under the Freedom of Information Act. Lawyer Robert Belshaw said the SBA has offered legal reasons for withholding the study that he does not think will stand up in court.

"They have failed to disclose some documents which we feel we're entitled to. If not everything, then at least in part," said Belshaw, referring to the
statistics at the heart of the trade group's request.

The lawsuit will be filed in U.S. District Court for the Northern District of
California. The trade group is based in Sonoma County outside San Francisco.

Before adopting its current name, the group was known as the Microcomputer Industry Suppliers Organization.

Lack Of Enforcement History For Firms In Wrong Category

The SBA does not have much history of punishing big firms that are listed as small ones for the purpose of winning federal contracts. The American Small Business League says the agency has never pressed charges against a firm that was posing as a small business.

The SBA says it hasn't prosecuted any firms because it hasn't needed to. When companies are disqualified from winning small-business set-asides, they typically drop out of the running and there is no need to punish them further, Keefer said.

"We spend a lot of time verifying that these folks are indeed small
businesses," he said.

The trade group says the SBA doesn't go far enough to root out offenders. It says firms should be punished if they represent themselves as small businesses for any reason, not just for set-aside contracts. Otherwise, the government can't tell if it's meeting Congress-imposed quotas.

Chapman says the Small Business Administration has faced these kinds of
problems for many years. But he blames the Bush administration for not acting to fix them after the General Accounting Office, now the Government Accountability Office, found flaws in a recent review.

"They did not try to stop it," Chapman said.

Large businesses can legally receive small-business contracts in some cases.

For example, once a small business wins a contract, it often can retain its
status for the life of the contract, even if the business grows or is bought by
a big company.

"The government has created so many benefits for small businesses that
companies have an incentive to try to claim that status as a way of getting
business or returns that otherwise would be beyond their reach," said defense expert Loren Thompson of the Lexington Institute, a Washington think tank.

Analysts said changes in contracting practices may have exacerbated firms' tendency to hang onto their status as long as possible.

The federal government, which has turned over significant military functions to private contractors in recent years, has hired a computer firm to manage information about all government contracts with private companies -- including billions of dollars in military contracts.

The General Services Administration, which maintains government databases on federal contracts, will turn over control of all contractor data to a Virginia-based company today. The agency says the new arrangement will provide information about contracts to Congress, the news media and the public more efficiently, cheaply and accurately.

Some members of Congress and independent experts have criticized the change, saying it could increase costs and eliminate direct public access to information about billions of dollars in federal contracts. They say putting government data in the hands of a for-profit company will make the federal contracting process less transparent.

Calling the new arrangement "ominous," Sen. Tom Harkin (D-Iowa) told a Senate hearing last month that the move raised "all kinds of issues about whether we can get the information freely."

Aron Pilhofer, database editor at the Center for Public Integrity, a watchdog group, said the change essentially "commoditizes" public records by turning them into commercial products.

The General Services Administration database is a valuable source for journalists, watchdog groups and academics who track government spending on private contracts. It is also used by companies to keep up with competitors, and by members of Congress and government agencies to monitor federal spending.

The database -- the Federal Procurement Data System -- has become especially significant during the war in Iraq, as critics have raised questions about lucrative contracts awarded to military contractors. Halliburton Co., in particular, has come under scrutiny for no-bid, multi-billion-dollar Pentagon contracts.

David A. Drabkin, the federal agency's deputy chief acquisition officer, said the new system would replace an antiquated one from the 1980s that was criticized for long delays and data errors. He said the agency would still own and control all data, but would improve access to it through a sophisticated computer system run by Global Computer Enterprises of Reston, Va.

Drabkin said Global would not be permitted to resell the data without the agency's approval.

David Lucas, Global's director of change management, said the company made its money by developing information systems, not by selling data. He said the firm would provide federal contract information faster and cheaper than the federal agency while ensuring " unparalleled transparency for how the government spends tax dollars."

Global won a $24-million, seven-year contract after competing with 10 companies, Drabkin said. For the last 12 months, the company has been phasing in the new system, receiving contract data from some federal agencies. The system is expected to be fully in place today, Drabkin said.

Rather than submitting contract information to the General Services Administration, more than 70 federal agencies will send it directly to Global. That troubles critics, who say the move cuts off public access as part of a Bush administration strategy to turn important government functions over to private industry.

Steven L. Schooner, a former federal procurement official who teaches procurement law at George Washington University, said the government had cut so many federal acquisition positions that it had been forced to hire a private firm to do the work of government employees.

" The government has no choice at this point but to enter into larger and more complicated contracts because they don't have enough people to manage the contracts," Schooner told a Senate hearing last month." So they're being penny wise and pound foolish by not staffing up their acquisition workforce."

Schooner said that the federal system had "been a model of transparency because anyone could sit down at a computer and log in the name of a firm and find out all the contracts they've been awarded." Whether such direct access will be maintained -- and at what cost -- are "legitimate concerns," Schooner said.

Drabkin said anyone would be able to access the agency's reports online at no charge. For direct access to raw data, there will be a one-time $2,500 fee (except for members of Congress) to cover the cost of connecting a user to Global's network. Watchdog groups say the fee would have been far higher if not for pressure applied by them on the General Services Administration.

The Project On Government Oversight, which monitors government waste and fraud, said the first report under the new system was eight pages long; it was 192 pages the previous year. The group says the report is an indication the new system will provide less information.

Drabkin said the report, compiled during the transition year, was truncated because the number of federal employees maintaining data had been reduced from 15 to three as Global began to take over. He said a more detailed report would be completed next month, and next year's report would contain more information than the annual reports compiled by the General Services Administration.

Drabkin said reports on contractor information would be provided free to Congress, the news media and the public. In addition to online access, Global has set up a computer help desk, staffed 24 hours a day, seven days a week, to handle requests for information.

In most cases, Drabkin said, electronic reports would be provided within eight to 24 hours. Drabkin said most information would be available in "real time," compared with information under the previous system that was not available until months after it entered the federal database.

Under the previous system, Pilhofer said, his watchdog group paid the General Services Administration about $500 a year for a computer disc containing a "data dump" of the previous year's contracts. The data was months old and riddled with errors, he said.

The new system should provide information more quickly and accurately, Pilhofer said. But he added that putting public records in private hands raised "very serious questions" about potential restrictions placed on use of the data.

Drabkin said Global was prohibited from denying access to information, except for restrictions imposed by agencies such as the Pentagon or the Department of Homeland Security for "operational security reasons." Such restrictions may be imposed for up to 90 days, he said.

Because the General Services Administration owns the data, Drabkin said, anyone denied access to information may file a Freedom of Information Act request.

The U.S. government came under fire this week for its treatment of small contractors and the way it keeps track of them.

Critics say the federal government isn't complying with mandatory quotas for awards to small business, and is too lax with firms that outgrow their small business status or get bought by bigger companies.

The Center for Public Integrity, a Washington think tank, singled out The Titan Corp. and GTSI Corp. for their use of contracting loopholes, in a report released Wednesday.

The study also found that 189 of the Pentagon's top 737 contractors - the top 1 percent - are classified as small businesses on at least half of their contracts.

Titan, a San Diego-based computer services company, had $1.8 billion in 2003 revenue. The study said it received $550 million in small business contracts from 1998 through 2003 thanks to a string of acquisitions. The firm had nearly $2.4 billion in total defense contracts over the same period, ranking it 34th among all Pentagon contractors, the study said.

Titan representatives couldn't immediately be reached for comment.
GTSI Corp. won the most small business contracts of any nonminority firm: nearly $1.2 billion over the six-year period, the report said.

The firm, a Washington, D.C.,-area technology services provider, "retained its small business status despite long since having grown out of it," the study said.

Total GTSI sales in 2003 were $954 million.

GTSI spokeswoman Fern Krauss had no comment on the contracting rules, or the Center for Public Integrity's assessment. But recent public filings show that the firm is worried about its status and is taking steps to safeguard it.

" To mitigate any potential adverse impact (of losing small-business status), GTSI has developed strategic relationships with small, minority-owned businesses that benefit from the small business benefits described above," GTSI said in its most recent filing with the Securities and Exchange Commission.

The Bush administration said small businesses have benefited from its efforts over the past four years.

Small Business Administration spokesman Evan Keefer said the government is meeting its contracting targets and helping match contractors with opportunities.

" We stand by our numbers. We're confident that small businesses are being able to take advantage of federal procurement better than ever before," Keefer said in a Thursday interview.

But the government's numbers have been questioned for some time.
In a 2003 review, the Government Accountability Office, the investigative arm of Congress, found "gross errors" in federal procurement data.

The agency blasted current practices in May 2003, then followed up with a December letter to the Office of Management and Budget urging speedy modernization of contract tracking systems.