SAN FRANCISCO - A federal judge in San Francisco has awarded attorneys fees against the federal government in a case alleging that an agency meant to encourage small businesses instead gave billions of dollars to some the world's biggest businesses.

U.S. District Judge Susan Illston ordered the Small Business Administration to pay $54,000 to a small business advocacy organization for the expenses it incurred while trying to retrieve the documents under the Freedom of Information Act. That law allows plaintiffs who win public records cases against the government to collect attorneys fees and costs.

For months, American Small Business League, a Sonoma County-based association of hundreds of U.S. companies, has been trying to get a report commissioned by Eagle Eye Publishing. The league said that report uncovered fraud and abuse in government contracting at the Small Business Administration.

A federal law directs at least 23 percent of its government contracting dollars or about $80 billion a year to small businesses.

"I'm trying to prove that most federal small business contracts go to Fortune 1000 companies and their subsidiaries," said Lloyd Chapman, president of the American Small Business League.

Chapman cited the Carlyle Group, Raytheon, General Dynamics, Oracle and Hewlett-Packard as examples of companies receiving small business contracts.

Chapman intends to file a similar suit next week against the SBA for records of protests filed by small companies bypassed for contracts. Chapman wants to prove that the SBA dismisses most of those protests.

For more than a dozen years, according to Chapman, the large companies have defrauded the SBA falsely proclaiming themselves as small businesses.

"Cheating small business is a bipartisan issue," he said.

The SBA initially denied the report existed, Chapman said. Then it refused to release the report because it claimed it was a trade secret owned by Eagle Eye Publishing. It later said the report was a privileged communication between the government and the publishing house.

The U.S. attorney's office in San Francisco, which represented the Small Business Administration, did not respond to requests for comment.

Illston said the Small Business Administration asked the judge to either deny the fees or reduce them.

"The only way to encourage people to vindicate public access rights is to award fees," said Karl Olson, an attorney with Levy, Ram & Olson in San Francisco who represents newspapers and broadcasters. "Otherwise it can be prohibitively expensive to obtain public records."

Olson said Chapman's case against the SBA sounded "pretty righteous."

George Bush stood before the nation tonight and in an attempt to repair his tarnished image, unveiled the most massive reconstruction program since - maybe the reconstruction. At the same time, the US Army Corps of Engineers in conjunction with FEMA announced 4 contracts worth $500 million each, with the option of an additional $500 million. While Bush touted local jobs and local small business incentives, the debris removal contracts have been awarded to 2 corporations in Florida, 1 in Minnesota and 1 in California. Not a very promising start.
Certain provisions in the contracts do have the appearance of meeting Bush's purported agenda of local economic invigoration with targeted goals of 73.5 percent for Small business, 3 percent for Service-disabled veterans, 3.2 percent for Small HUB-Zone concerns, 10.6 percent for Small Disadvantaged business, and 11 percent for Small Women-owned business. But Americans have had 5 years to weigh Bush's proposals against his actions and the reality of these contracts cannot be spun away.

The first astonishing blunder is the glaring absence of a target percentage for Minority Owned Businesses. I suppose it isn't surprising considering this Administration's abysmal treatment of Minority Owned Businesses through the constant reduction of programs designed to help them gain federal contracts and access to new markets. Many of these small business programs are the same or similar to the programs Bush has been cutting or threatening to cut since he took office, from $900 million in 2001 to around $500 million this year. In fact, earlier this year, Senators Kerry and Snowe fought to restore funding as some of these programs were in danger of running out of money altogether.

This also follows the recent pattern, according to the NSBA, where small businesses are forced into the role of sub-contractor which inhibits their ability to establish a performance record, meet with contracting officers, or negotiate terms. In other words, it enables the government to say there is nobody but Halliburton with the contracting history to do the job. Despite Bush's claim to be a friend to small business, 15 of 22 federal agencies have reduced the number of federal contracts award to small business. Senator Kerry introduced the Contractor Safeguard Act and the Regulatory Assistance Pilot Program to begin to address these concerns.

Then there is the issue of fraudulent and deceptive practices within the SBA. Senators Kerry and Snowe announced the congressional investigation into abuses of the administration of the 9/11 small business loans. Accusations have been made that the SBA encouraged banks to give the loans with the loosest interpretation of the rules possible. Some businesses have received STAR loans without knowing that these loans were targeted at businesses hurt by the terrorist attacks, reports include a Dunkin' Donuts and a motorcycle shop from as far away as Colorado. There is also the recent revelation that a large number of federal contracts that claimed to go to small business actually went to such corporations as Titan Corp., Raytheon Co., General Dynamics Corp., Booz Allen Hamilton Inc., Archer Daniels-Midland, and Hewlett-Packard Co. To add insult to injury, many large corporations receive Small Business Loans as well. Lloyd Chapman, president of the California-based American Small Business League, believes that "80 to 90 percent of the contracts they say are going to small businesses are actually going to large businesses."

September 9, 2005

Small business market share fell in 2004; as usual, accuracy of the official figures is in dispute.

Small businesses won 23.1% of federal prime contract dollars in fiscal 2004, down slightly from the year before, and the market shares for small disadvantaged businesses, 8(a) firms and woman-owned businesses also slipped, according to the Federal Procurement Data Center.

The official figures show the government barely exceeded the 23% goal set by Congress for the second straight year, but many critics contend the report overstates small business awards. In 2003 the Data Center said 23.6% of dollars went to small firms.

"The report shows that the government not only matched its own statutory goal, but it broke records by awarding more contracting dollars to America's small businesses than ever before," said SBA Administrator Hector Barreto. "However, we can still do better. While the federal government reached its goal, I believe it still has room to improve in allowing small business to compete for additional contracting dollars."

Small firms were awarded $69 billion in prime contracts, the report said.

According to the report, SDBs received 6.2% of the dollars, down from 7% the year before, but still above the government's 5% goal. The share going to 8(a) firms was 2.8%, down from 3.6%. Woman-owned businesses claimed 3%, down from 3.2% in 2003, and below the 5% goal.

HUBZone firms increased their share to 1.6%, up from 1% the previous year, but below the goal of 3%. Firms owned by service-disabled veterans approximately doubled their market share to 0.4%, till far from the 3% goal.

Critics inside and outside the government have long dismissed the official totals as inaccurate. Lloyd Chapman, president of the American Small Business League, said the figures "included billions in awards to Fortune 1000 firms and other large businesses in their small business statistics."

"The overall number of small business contracts continues to be inflated due to agencies' practice of miscoding large businesses as small contractors," said Rep. Nydia Velazquez (D-NY), ranking Democrat on the House Small Business Committee. "... Given the current figures and practices, regardless of all the Bush administration's rosy rhetoric, the reality is that small businesses continue to struggle to receive fair treatment in the federal marketplace."

The official figures do not include large agencies such as the Federal Aviation Administration and the Transportation Security Administration, nor contracts awarded overseas or those awarded to Federal Prison Industries and the Javits-Wagner-O'Day Program for disabled workers. The count also excludes most purchases under $25,000.

GSA installed a new Federal Procurement Data System-Next Generation in 2005 in an effort to improve its data collection and analysis.

Highlights of the report:

* Among cabinet-level agencies, the Department of Housing and Urban Development was the friendliest to small businesses, awarding 72.5% of its dollars to those firms. HUD also led in awards to 8(a), SDB and woman-owned companies. (See table, below.)

* The Energy Department again ranked last, awarding 4.2% of its dollars to small firms. More than 80% of Energy's procurement budget goes to the large prime contractors that run its installations; the department has sought legislation to count their subcontracts toward its small business goals.

* The Defense Department, which accounts for around 70% of federal procurement, awarded 22.3% of its dollars to small businesses.

Small Business Contracting

Percentage of dollars in 2004 prime contracts worth more than $25,000

                            All
                    Small   SDB    8(a)    HUBZ    Women    SDV

                    23.1%   18.6%  18.6%   18.6%   18.6%   <0.1%

All Agencies        23.1%    6.2%   2.8%    1.6%    3.0%    0.4%
Agriculture         49.0     8.9    4.0     8.1     6.2     0.5
Commerce            53.3    18.6    4.8     3.4    13.9     0.6
Defense             22.3     5.7    2.7     1.5     2.7     0.3
Education            6.7     2.0    0.4     0.3     1.2     0.3
Energy               4.2     1.4    1.0     0.1     0.6    <0.1
EPA                 29.5    13.6    5.5     0.7     3.3    <0.1
GSA                 42.3     6.4    3.3     2.2     3.6     0.6
HHS                 29.6     9.1    3.0     1.6     5.6     0.5
Homeland Security   38.5     9.5    5.1     2.3     7.0     0.5
HUD                 72.5    39.7   16.8     4.8    30.2     1.2
Interior            55.4    18.2    7.9     7.8     9.4     0.7
Justice             32.8     6.6    1.7     1.8     3.7     0.4
Labor               35.0    12.1    1.9     1.9     6.9     0.9
NASA                14.5     5.9    2.3     0.8     2.3     0.4
OPM                 16.7     2.0    0.1     0.1     8.9     0.5
SBA                 59.1    38.6   13.8     2.2    10.9     0.0
Social Security     43.5    12.7   11.7     3.0     5.5     0.3
State               50.6    20.1    2.9     3.9     6.4     3.3
Transportation      43.1    15.6    8.1     3.3     3.8     0.9
Treasury            29.1     8.3    1.7     0.8     4.9     0.1
VA                  26.7     8.6    5.1     3.1     3.6     1.4