Giant firms get 'small business' benefits


Giant firms get 'small business' benefits

Complex government rules send millions of dollars intended for small businesses to giant corporations that have Florida subsidiaries.

By Jim Wyss
Miami Herald
December 30, 2005

Safety Equipment Co. is part of a massive conglomerate boasting 17,500 employees, annual revenue of $4.7 billion and offices in the Netherlands, Australia and Malaysia. But when it comes to federal contracting, Safety Equipment is a small business based in Tampa.

It's also a prime example of how complex rules allow the government to brag about millions in small-business spending that is actually lining the pockets of corporate giants, critics say.

Earlier this year the government announced that it had pumped $69 billion into small-business contracts nationwide in fiscal 2004 -- the most current annual data available. Small Business Administrator Hector Barreto trumpeted the results, saying the government "broke records by awarding more contracting dollars to America's small businesses than ever before.''

Florida's take of that was a healthy $3.2 billion -- reason for cheer in a state where small ventures dominate and 90 percent of all companies have fewer than 20 employees.

But a Miami Herald review of more than 28,000 federal procurement documents provided by the General Services Administration for fiscal 2004 casts a different light on those figures.

  • Of the top 20 small-business contractors in the state, more than half exceeded the SBA's basic definition of a small business: one with 500 or fewer employees. Four of the companies had more than 1,000 workers. All had revenue in the millions -- including three with more than $1 billion in annual sales.
  • Some of the Florida small ventures are neither small nor from Florida. One example: Chugach Alaska Corp., based in Anchorage, with 5,000 employees and revenue of more than $700 million.
  • Data-entry errors may have resulted in millions of contract dollars being mistakenly credited to small businesses -- including to the state's top ''small'' contractor Point Blank Body Armor, of Pompano Beach.


There's nothing illegal going on. Federal contracting rules allow small companies that grow large -- or firms absorbed by larger corporations before December 2004 -- to keep their small-business status for the life of a contract, which can often last decades. In the case of Chugach, its special designation as an Alaska Native Corp. allows it to be counted as small regardless of size.

But just because it's legal doesn't make it right, said Lloyd Chapman, president of the American Small Business League -- a California-based organization lobbying for reform. ''There are laws in place that divert money -- that Congress intended to go to small businesses -- to Fortune 500 companies,'' he said. Not only does it skim resources from entrepreneurs but "[puts] them in a competition they have no hope of winning.''


The government has a mandate to channel 23 percent of all federal contracts to small business -- a target it hit in 2004 but has missed in the past. But a spate of new reports has questioned the reliability of that yardstick.

A recent SBA study found 44 large companies, including defense giants Raytheon and Titan, were counted among the small businesses that won contracts in 2002. Combined, the large firms soaked up at least $2 billion in contracts. The Office of Inspector General found similar problems with 2001 data.

Then there are concerns about the way the SBA defines small business. There are 37 different industry standards -- some based on the number of employees and some based on revenue -- but critics say they are far too inclusive. When the SBA held a nationwide hearing earlier this year about the issue it received more than 6,000 responses -- many from entrepreneurs worried that the small-business definition is pitting them against behemoths.

It all adds up to one thing, said Sen. John Kerry, D-Mass., the ranking member of the Senate Small Business Committee: "Small businesses are not receiving their fair share.''

The Safety Equipment case illustrates how the rules work: In 1999, when the Tampa-based firm was small it won a contract to make firefighting equipment for the Defense Logistics Agency. Then, in 2001, it was purchased by Fisher Scientific, a Fortune 500 company.

If size were measured annually -- as some are suggesting -- Safety Equipment would have lost its small-business status (but not the contract) that year. Instead, Fisher -- which operates in 45 nations and is traded on the New York Stock Exchange -- has been counted as a Florida small business for the past four years.

In 2004 alone, $121 million in ''small business'' awards credited to the state actually went to Safety's parent, New Hampshire-based Fisher.

The SBA acknowledges the system isn't perfect but defended the companies on the list.

''What we are seeing is small businesses that follow the rules, do what they are supposed to do and grow,'' said SBA Administrator Barreto. "After a period of time they exceed the small-business definition. That's what we want to happen.''

One of the obstacles to making sense of small-business figures is the government database that houses the contracting information. The Government Accountability Office recently wrote it had ''concerns'' regarding the ''timeliness, accuracy, accessibility, and ease of use of the system'' that is the sole agency-wide source of information on millions of contracts and more than $300 billion in annual spending.

Of the 28,000 small-business contracting documents The Miami Herald reviewed, more than 14,500 had no information about company revenue or employees -- data that would be key for auditors to determine the true size of businesses on the list.

Missing data and wrong information have been persistent problems, said Paul Murphy, CEO of Eagle Eye Publishing, a company that uses the database to study government procurement.

''It may not be malicious at all,'' he said. "[But it's] contributing to this growing lack of transparency.''

The data irregularities represent honest errors, not attempts to cheat the system, the SBA said. As Barreto put it: "What we do not see is big businesses masquerading as little businesses.''

Under the Small Business Act, any company caught lying about its size to win federal contracts is subject to fines of up to $500,000 and its officers and other officials could face up to 10 years in prison. In the past 20 years only about ''a dozen'' companies have been penalized, according to the SBA's Administrator for Size Standards Gary Jackson.

''Part of the difficulty is that it is always difficult to prove fraud,'' he said. ``Did someone knowingly misrepresent themselves? A lot of what we're seeing are companies outgrowing the size standard on existing contracts, or companies that have been purchased.''


But for Chapman of the American Small Business League, talk of fraud and data errors are just sideshows to the main event -- small business' fair share of government contracts.

By the SBA's own account, 99.7 percent of all companies in the nation are small, yet the government is barely meeting its goal to channel 23 percent of all contracts to small business.

''If you were a federal judge what would you say is a fair percentage of contracts?'' Chapman asked. ``I think 23 percent is very low. And I think you would agree with me that a Fortune 500 company should be nowhere near small-business contracting.''

ASBL Seconds Motion from Velázquez for Resignation of SBA Administrator

Press Release

ASBL Seconds Motion from Velázquez for Resignation of SBA Administrator

Trade Group Backs Congresswoman's Evaluation of SBA's Poor Performance

December 16, 2005

SAN FRANCISCO, CA, Dec. 16, 2005 /PRNewswire/ -- Earlier this week, Congresswoman Nydia M. Velázquez issued a press release to call for the immediate resignation of Hector V. Barreto, Administrator of the U.S. Small Business Administration. Velázquez, ranking Democrat on the House Small Business Committee, pointed to numerous examples that illustrate the failure of the SBA to uphold its mission to ensure fair treatment and assistance to America's entrepreneurs.

Among the matters listed by Ms. Velásquez are the following:

  • SBA has declined 80% of all disaster loans to small businesses in the hurricane regions and has a backlog of over 200,000 pending applications.
  • Last year, SBA's flagship 7(a) loan program – responsible for 30% of all long term lending – was temporarily shut down, after the agency failed to notify Congress that the program needed additional funding.
  • Three months after announcing record small business contract awards last year, the SBA had to revise the numbers downward due to misrepresentation of contract awards.
  • Although the women's procurement program was enacted in 2000, Mr. Barreto has failed to act on it, thus costing women entrepreneurs over $33 billion in lost contracting opportunities and forcing them to file a lawsuit to compel him to implement it.

"The American Small Business League wholeheartedly agrees with the assessment of the SBA by the Democrats of the House Small Business Committee. The Bush Administration has a terrible track record of placing people in Federal posts for which they are not qualified. Hector Barreto should resign," stated Lloyd Chapman, President of the ASBL.

"As a native Texan, I was initially happy to see our nation elect a president from the state of Texas," Chapman added. "Unfortunately, I have been extremely disappointed with the small business policies of the Bush Administration. I would even say that George W. Bush has been the worst president for small business in my lifetime."

About the ASBL
The American Small Business League was formed to promote and advocate policies that provide the greatest opportunity for small businesses - the 98% of U.S. companies with less than 100 employees. The ASBL is 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 1951. Representing small businesses in all fields and industries throughout the United States, the ASBL monitors existing policies and proposed policy changes by the Small Business Administration and other federal agencies that affect its members.


For more information contact:
Lloyd Chapman

Slow Business Administration


Slow Business Administration

Washington Post
December 9, 2005

THERE ARE many competitors for the title. But after viewing the video (available at of a hearing held Nov. 8 by the Senate Committee on Small Business and Entrepreneurship, we'd like to nominate Hector V. Barreto, chief of the Small Business Administration, as "the next Michael Brown." The committee chairwoman, Sen. Olympia

J. Snowe (R-Maine) began the session by pointing out that the Small Business Administration had, at that time, processed only 10 percent of 28,540 applications for disaster loans from small businesses in the Gulf Coast area and had approved only 3 percent of them. Mr. Barreto responded with a long and self-pitying description of how difficult things remain in the Gulf, how emergencies are not really his responsibility and how much his agency's performance had improved lately.

Unfortunately, "improvement" isn't the first word that comes to mind when the SBA's loan records are examined a month after that hearing. As of Tuesday, the SBA had received 37,214 applications for disaster business loans. Of those, 2,127 have been approved. Meanwhile, Mr. Barreto and his agency are still resisting the committee's proposal to give the SBA funding to make short-term "bridge loans" similar to those set up to help businesses affected by the Sept. 11, 2001, attacks (loans that the affected states were making before they ran out of funding), arguing that the same needs are met through other SBA programs. This may well represent the first time a government agency has resisted a congressional attempt to give it more money. It may also help explain why economic recovery in Louisiana is going so slowly.

The agency has set up an expedited loan program that it calls GO Loans. But it didn't get going on this program until two months after Hurricane Katrina (and just before the aforementioned Senate hearing), and now not enough lenders in the region are qualified to make these loans. More to the point, the loans are being offered at relatively high interest rates, which doesn't necessarily make them any more attractive than what commercial banks offer anyway. Perhaps that's why the agency has so far approved only 10 of them.

A spokesman says the agency is planning to send a team to the Gulf Coast to find out what the problem is. But the biggest problem seems to be in Washington, where Mr. Barreto has shown no sense of urgency. Only under congressional pressure, and only a full two months after the storm, did the agency agree to simplify some of its heavy bureaucracy for victims of Katrina or to start recruiting more loan officers from the private sector. Asked by Senate committee staff members why they weren't willing to try different ways of doing things, SBA officials replied that they "didn't want to switch horses in midstream."

The SBA's failure even to understand why it needs to think differently while thousands of businesses are going bankrupt bodes ill. It's possible to imagine many other scenarios -- a terrorist attack, a West Coast earthquake -- that might once again require fast, targeted government help to ensure rapid economic recovery. Small-business loans -- as opposed to massive government aid -- are a smart way to help because they create employment and growth, leading to reduced overall government costs. But without a rethinking of this agency's mission, the loans won't be there when they're needed.

U.S. District Court: SBA Must Implement Women's Procurement Program

Press Release

U.S. District Court: SBA Must Implement Women's Procurement Program

December 8, 2005

[Washington, D.C.] The U.S. Women's Chamber of Commerce congratulates the court for upholding the rights of Americans to expect the executive branch to implement the laws established by Congress. In an important Nov. 30, 2005 ruling, U.S. District Court Judge Reggie B. Walton found the SBA and Administrator Hector Barreto's five-year delay has sabotaged the implementation of the Women's Federal Procurement Program and the delay has been "unreasonable" and "beyond the scope of the SBA and the Administrator's authority." The SBA must submit a proposed schedule for implementation of the program within 45 days, and take part in a status hearing.

"Women business owners are losing billions of dollars in opportunities every year as we wait for the SBA and Administrator Barreto to simply do their jobs," said U.S. Women's Chamber of Commerce CEO Margot Dorfman. "We're happy to know our court system will hold the executive branch accountable for implementing the laws established by Congress, and we continue to wait for the SBA to implement this important economic program in support of women business owners."

"Not only has the court held that the incredible five-year delay in implementing this law is unreasonable, Judge Walton found that our members have sustained concrete injury which has harmed -- and continues to harm them -- and they are entitled to some form of relief," added Dorfman. "Judge Walton makes it clear he will check the progress of the SBA and retain jurisdiction in this case to monitor the SBA's adherence to congressional mandates."

"Even now, the SBA is dragging its feet on the implementation of the Women's Procurement Program. The SBA indicates it will not have the procedures for implementation of the program complete until May 2006, and has established a nine-month time frame for the completion of the new study," Dorfman continues. "The SBA was established to assist small business owners. Instead, after five long years, they still require an additional six months to simply write the procedures necessary to implement this program."


On October 29, 2004, the U.S. Women's Chamber of Commerce filed a complaint against the U.S. Small Business Administration (SBA) and SBA Administrator Hector Barreto in U.S. District Court for the District of Columbia, under the Administrative Procedure Act to compel the SBA to implement the Women's Procurement Program, Public Law 106-554, codified at 15 U.S.C. § 637(m).

As part of the SBA reauthorization in 2000, Congress passed what was originally titled the "Equity in Contracting for Women of 2000" Act. The purpose of this Act is to "allow contracts, in industries historically underrepresented by women-owned small businesses, to be reserved for competition by women-owned small businesses."

Congress issued this mandate on Dec. 21, 2000. Five years have passed and the SBA has unreasonably delayed its response to this mandate. The SBA has set, orally and in writing, a series of deadlines for accomplishing the steps necessary to implement this program, and all of these deadlines have been missed. And, the Administrator of the SBA recently informed leaders of the U.S. Women's Chamber of Commerce that he has no intention of implementing the program.

On May 26, 2005 over seventy members of Congress signed on to an amicus brief in support of the USWCC complaint seeking to compel the SBA to implement the law they passed.

On December 8, 2005 Judge Reggie B. Walton refused to dismiss the complaint brought by the U.S. Women's Chamber of Commerce against the SBA for failure to implement the Women's Procurement Program, and made it clear through his memorandum that he will closely monitor SBA's progress toward implementation.

View Judge Walton's Memorandum Opinion here:

View the USWCC complaint here:

View additional information here:

About the U.S. Women's Chamber of Commerce

The U.S. Women's Chamber of Commerce™ ( is the pre-eminent national women's chamber of commerce network whose mission is to develop leaders, accelerate economic growth and provide a community voice for women. The USWCC, a not-for-profit 501(c)6 organization founded in 2001, is growing through councils and strategic alliances across the U.S. Creating and representing the next generation of leadership for women, the USWCC is women's connection to influence, education, opportunity and advancement. Its headquarters offices are located in Washington, D.C.

U.S. Women's Chamber of Commerce™ media contact:
Jill Van Dierendonck
(800) 738-0653

U.S. Women's Chamber of Commerce™ contact:
Margot Dorfman, CEO
(888) 41-USWCC / (888) 418-7922