WASHINGTON (AP) -- Lawmakers will investigate loan delays to hurricane-ravaged small companies along the Gulf Coast, the head of a Senate committee that oversees the Small Business Administration said Tuesday.

The situation is ''indefensible and inexcusable,'' said Sen. Olympia Snowe, R-Maine.

''Unfortunately, there appears to be no sense of urgency in providing the assistance hurricane victims so desperately need,'' she said. ''I intend to find out why.''

The SBA, which did not cut its first check to Hurricane Katrina until more than a month after the storm made landfall, also has yet to distribute any money for economic victims of Hurricane Rita within a month of its blow to the Louisiana-Texas border, according to documents obtained by The Associated Press.

The agency's figures show it has received more than 9,500 Katrina-related applications for home and business loans in Texas and Louisiana. Six loans have been approved.

The federal response has been ''simply unacceptable,'' said Rep. Nydia Velazquez of New York, top Democrat on the House Small Business Committee.

''It has been a month with no approvals or loans made for those firms impacted by Hurricane Rita -- now what will it be for the small businesses that were hit by Wilma?'' she said.

Agency officials say Rita has posed almost as many logistical problems for them as Katrina, which barreled ashore near New Orleans on Aug. 29 as a Category 4 storm.

Rita, a Category 3 hurricane as it came ashore on Sept. 24, was briefly measured as the most intense storm ever to pass through the Gulf of Mexico. Estimates put the total insured losses between $2.5 billion and $7 billion.

The agency promised a swift response. But the hurricane flooded roads, downed power lines, and shattered buildings, making it difficult for federal officials to assess damage and begin the process of making loans, an SBA official said.

''A lot depends on the situation on the ground,'' spokesman Michael Stamler said.

Agency officials came under criticism at a congressional hearing this month when lawmakers pressed for an investigation into the SBA's slow response in making loans after Katrina and the agency's high rejection rates for applicants. Within a month of the hurricane's landfall, more than 95 percent of all applicants had been rejected.

The rejection rate is described by officials as the result of a new computer system that takes all applications into account, not just loans that are seriously considered for approval. SBA officials acknowledged that the rejection rate for Rita-related loans probably would top 70 percent -- much higher than the traditional 50 percent to 55 percent for most disaster recovery efforts.

''We're dealing with areas where there's a lot of low-income people,'' said Herb Mitchell, head of the SBA's disaster assistance office.

Mitchell also said early figures tend to exaggerate the rejection rate. Typically, he said, people have to be rejected for government loans before they can apply for grants, which don't have to be paid back.

Last week, SBA officials announced they would relax some filing requirements to expedite loans by not requiring a three-year monthly sales analysis, three years of tax returns, and title or record searches for loans under $50,000. The agency also has given a one-year deferral of principal payments to existing borrowers in the disaster area.

The agency said it has more than doubled the size of its staff since the hurricane season began and dramatically increased the size of its disaster assistance office by adding temporary employees to help process loans.

Snowe, who heads the Senate Small Business and Entrepreneurship Committee, was not impressed.

Depending on whom you talk to, Texas-born small-business advocate Lloyd Chapman is either a modern-day Cesar Chavez or a conspiracy theorist with a grudge. Either way, as the SBA has learned, he's become hard to ignore.

In late 2004, Chapman and his organization, the American Small Business League, spearheaded an investigation into a series of flaws in the SBA's contract procurement process, culminating in a lawsuit. Since the end of 2004, at least five reports from three different government agencies--the Government Accountability Office, the SBA Office of Advocacy and the SBA Office of the Inspector General--have noted irregularities in the SBA's system of awarding small-business contracts, prompted in part by Chapman's incessant lobbying. The agencies' findings allege complacency at best, borderline fraud at worst.

The ASBL complaint focused on the SBA's refusal to offer up a draft of a 2003 report that highlights serious discrepancies in the awarding of federal contracts. Chapman sued for the data, claiming the agency was hiding blatant contracting fraud by releasing only an edited version of the original document. The SBA initially appealed a judge's order to release the paper, but eventually acquiesced in June. The draft report, conducted by research firm Eagle Eye Inc., shows that in 2002, "$2 billion in contracts coded as small-business awards went to 39 firms designated as large businesses," and lists possible vendor fraud as one of the causes.

The SBA Office of Advocacy's John McDowell is quick to defend his department's actions. "There is nothing sensational about the draft as compared to the final product," McDowell says. "All our edits were designed to eliminate speculation and produce a quality report grounded in sound data."

Chapman points out, however, that none of the companies has ever been prosecuted for falsifying their claims, despite a provision in the Small Business Act that lists intentional misrepresentation as an offense punishable by up to 10 years in prison.

According to the SBA, no action has been taken against these companies because the mistakes were simple company coding errors, not unusual for a database containing thousands of names. The complexity of the SBA's Central Contractor Registration database system--which, until April of this year, relied on self-reporting--only serves to exacerbate the problem.

Furthermore, enforcement of size standards occurs only when a company's size classification is protested by a contracting officer, another bidder or the SBA itself. In 2002, the SBA processed 383 of these protests, of which 29 percent were dismissed on procedural grounds. Of the remaining cases, 85 firms were found to be misclassified.

Earlier this year, the Department of Energy was singled out after a GAO report showed it had vastly overestimated the number of contracts it was awarding to small businesses. Prompted by the findings, Sen. Olympia Snowe (R-Maine), chair of the Senate Committee on Small Business and Entrepreneurship, urged the DOE to work on fixing the problem. In response to pressure from the committee, the DOE agreed to better police itself.

For its part, the SBA is eager to assuage critics and spent the summer struggling to repair its image in the U.S. small-business community. It held a series of hearings to gauge sentiment on issues, the most important of which was its proposed size-standard changes. The SBA wants to switch to a standard based strictly on number of employees, abandoning the current mix of size- and revenue-based indicators.

But changing the standards may not be the answer. Paul Murphy, author of the original Eagle Eye report, says of the proposal, "Our analysis concludes that on average, the proposed revisions will harm the truly small and emerging businesses by reclassifying a group of larger contractors that exceed revenue standards but not the proposed new labor standards."

After holding a hearing in her home state of Maine, Snowe, too, urged caution: "Any reform of this system must be fair to businesses of every size, help them grow to become competitive in national and global markets, and give due regard to the unique circumstances of the industries in which they compete," Snowe said in a statement.

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