Size matters to the federal government, but defining size is no small matter.

At stake are billions of dollars in government contracts and loan guarantees, along with the survival of the businesses that depend on them.

The U.S. Small Business Administration held a public hearing Tuesday in Denver, one of 11 cities it is touring, on revamping its size standards.

The SBA defines "small" across more than a thousand industry classifications, juggles 37 size levels and measures size in terms of employees and revenues, said Gary Jackson, assistant administrator of the SBA's Office of Size Standards.

It could be another two years before a new, more simplified set of standards comes into place, he said.

"Everything is on the table," Jackson said.

The federal government must direct 23 percent of its procurement dollars to small businesses, which also have access to government guaranteed loans.

But SBA critic Lloyd Chapman, president of the American Small Business League, argues corporate giants siphon off billions of contract dollars each year set aside for small businesses.

A study last September from the Center for Public Integrity found that 30 percent of defense contract dollars reportedly going to small and minority businesses actually ended up in the hands of top defense contractors, he said.

"They are able to gobble up the opportunities that should be going to small business," testified Lloyd Lovell, head of LFL International, a small Denver construction firm.

That most often occurs when big companies acquire small businesses and keep their contracts, which can stretch for 20 years or more.

For small businesses, tens of billions of dollars in government contracts are at stake each year.

Now who gets a shot at competing for the money?

Owners of small businesses in the Denver area, including Alma Araiza Rode of Chaos Control Systems, argue that too often the dollars flow to bigger rivals that don't deserve it. They also worry a wider group of companies could get a crack at the federal contracts, undermining a plan designed to help the little guy.

The government program was meant "to level the playing field," Araiza Rode said in a prepared speech, noting that her diminutive peers lack the political clout to get a piece of the pie. "But in reality, I cannot even get over the fence that surrounds the playing field, much less get on the field to compete."

Denver business owners debated the issue on Tuesday at a hearing set up by the Small Business Administration, which is seeking feedback in an effort to come up with a fair definition for a "small" business.

The prospect of a lucrative government contract has many companies seeking the status.

Carol McCallister, owner of Champion Business Services in Aurora, said only companies with fewer than 100 workers should be eligible.

But much mightier firms with far more employees such as Sabre Systems and Unisys have received contracts that she had sought.

"If large corporations are allowed to bid on small-business contracts, they are going to beat out my small business every single time," said McCallister, who employs only seven people.

As it stands, there are varying thresholds to qualify for the bidding process depending on the industry. For instance, a small manufacturing company is one with 500 or fewer employees, the SBA said.

Retail companies, meanwhile, are measured by their revenue. Gary Jackson, the SBA's assistant administrator for the office of size standards, said that a company in that sector with $6 million or less in annual revenue is eligible to bid.

The SBA is reviewing comments from business owners across the U.S. to work out a plan to simplify the rules and make them fair.

"Nothing is set in stone," Jackson said.

Small businesses are supposed to receive 23 percent of all federal contracts. That is a lot of money. In the latest fiscal year, U.S. government contracts awarded to all companies, big and small, came to roughly $325 billion, SBA officials said.

It also is an issue that resonates with many people. Small businesses, as one speaker on Tuesday said, are the "backbone of the economy."

About 98 percent of Colorado employers are small firms, with fewer than 500 workers, the most recent SBA figures showed.

Now critics who charge that the government mission to help small businesses is not being carried out effectively have new ammunition.

A December report by the Office of Advocacy of the SBA found that $2 billion in federal contracts that supposedly were awarded to small businesses in fiscal year 2002 actually went to large businesses.

The study said that 44 of the top 1,000 small-business contractors in that year should not have had that distinction.

Among the giants getting money earmarked for small businesses: Raytheon and Hewlett-Packard.

Dutch company Buhrmann NV, whose Corporate Express division is located in Broomfield, is another large player that has benefited.

"They have known about this for years," said Lloyd Chapman, head of the American Small Business League and an SBA critic.

The problem in some cases is that firms are able to keep the "small" label after being gobbled up by another company or growing rapidly.

The SBA, whose job is to strengthen the economy by promoting the interests of small businesses, must digest a number of differing opinions.

Some said the SBA should be more inclusive, not less.

Richard Duke, founder of privately held biopharmaceutical company GlobeImmune in Aurora, said companies like his cannot get the government money because they are controlled by venture capitalists.

Duke called it an "unnecessary exclusion," saying his company was "hamstrung by its own success" in attracting funding.

He may get his way. One of the changes under consideration is allowing small businesses whose major owners are venture capitalists to bid for the contracts.

Small businesses are getting short shrift from federal agencies, receiving only 20% of their contracting dollars last year, far below the government's goal. And the problem goes beyond one lackluster year:

When Congress set up the U.S. Small Business Administration in 1953, it declared that small businesses would be awarded at least 23% of all federal government prime contracts.

It hasn't been easy going.

A preliminary analysis of fiscal 2004 contract data by Eagle Eye Publishers, a Fairfax, Virginia-based firm that monitors federal procurement, puts last year's percentage at a mere 20%. While the SBA has yet to release the official data, Eagle Eye President Paul Murphy doesn't think that further number-crunching will get them to 23%. "The numbers just look way down from last year," he says.

And the troubles go way deeper than a disappointing 2004. Federal agencies have been caught miscategorizing large companies as "small businesses" casting doubt on past data. For instance, many question whether the agencies did in fact award 23.6% of their contracting dollars to small businesses in 2003--the first year that the government reached its goal since 1999.

In the past few years, billions of dollars in federal contracts that purportedly went to small businesses actually lined the pockets of giants such as Titan Corp., Raytheon Co., General Dynamics Corp., Booz Allen Hamilton Inc., Archer Daniels-Midland, and Hewlett-Packard Co.

Even the SBA admits that it has inadvertently given small business contracts to big companies, though SBA officials contend that only a small portion of the government's small business contracts are affected and that database errors are to blame.

Small business advocates beg to differ.

"I believe that 80 to 90% of the contracts they say are going to small business are actually going to large businesses," Lloyd Chapman, president of the California-based American Small Business League, tells the New Mexico Business Weekly. "Everywhere you look you find blatant fraud and abuses by agencies like the Small Business Administration. They say these are honest mistakes and computer glitches, but these glitches inflate their numbers 100% of the time and divert funds away from small businesses."

Chapman advises the SBA to start by reworking its definition of small businesses, which the agency says can include some companies with as many as 500 employees. Meanwhile, Chapman notes, 98% of all U.S. firms have 100 workers or fewer.

In the high-stakes battle for government contracts, Jorge Quadreny rarely bothers to get into the ring.

It's not that the president of Custom Copy & Printing fears a fight, but he knows when he's punching above his weight. Under government rules, any quick-printing shop with 500 or fewer employees qualifies for small-business contracts. That puts him and the six-person staff at his Doral company at a real disadvantage against larger ''small'' firms.

''Five hundred employees is not a small business,'' he said. ``Small is me.''

Exactly how the government defines small business is the focus of public hearings that the Small Business Administration is holding across the nation this month.

That definition is particularly important in Florida, where about 90 percent of all firms have fewer than 20 employees and a full 99 percent have fewer than 500 -- making them small under the SBA's broadest guidelines.

More is at stake than just semantics. Federal policy requires that 23 percent of all prime government contracts be earmarked for small businesses. In fiscal year 2003, the small-business share amounted to about $65 billion.

That's why an increasingly vocal group of advocates says the government needs to rein in its size standards and clamp down on fraud to make sure such contracts are really going to the small businesses for which they are intended.

FORTUNE 500

According to the SBA's Office of Advocacy, large businesses erroneously won $2 billion worth of contracts set aside for small companies in fiscal year 2002. Its report also said that of the country's top 1,000 small-business contractors, 44 were large firms, including such heavy-hitters as San Diego's Titan Corp., a military contractor, and aerospace giant Raytheon.

''These are Fortune 500 companies and the SBA tries to tell people that [the contract awards] were the result of them outgrowing their size standards or data entry errors,'' said Lloyd Chapman, the president of the American Small Business League and one of the SBA's most outspoken critics. ``Right now, most federal small-business contracts are still going to some very, very large companies and the SBA isn't doing anything about it.''

Part of the solution is to simplify size standards and eliminate loopholes, he says.

The American Small Business League will have a representative at the SBA's public hearing in Atlanta today, the fourth stop on the SBA's national tour and the closest the debate will come to Florida. The organization wants the government to set 100 employees as the absolute ceiling for a company to be defined as a small business in a nonmanufacturing industry. If the cap were adopted, 97 percent of Florida firms would still be eligible for small-business loans and special contracts.

But the business community doesn't fit neatly into a one-size-fits-all world, says Gary Jackson, SBA assistant administrator for size standards in Washington, D.C.

''SBA programs are trying to help a wide range of businesses -- everything from startups that may have a handful of employees to companies that are growing and building infrastructure but still haven't reached a point that they're competitive with the largest of companies,'' he said.

The SBA has 37 different definitions for ''small'' depending on the industry. In general, for a manufacturing company to be considered small it may employ no more than 500 to 1,000 employees -- depending on the industry. Jobs at nonmanufacturing companies are capped at 100 employees for most SBA programs, but set at 500 when it comes time to compete for small-business contracts.

But Jackson admits the system isn't perfect. In the case of Quadreny's Custom Copy & Printing, for example, only 15 of the nation's 7,949 quick-printing shops are considered large. That means considerable competition in the small-business category.

''There are some industries where their coverage is very broad, and in those situations it makes it tough to find the right balance,'' Jackson said. ``But we're trying to address those unique situations.''

LOOKING FOR FRAUD

The government has also taken steps to crack down on fraud. In 2003, the SBA purged about 90,000 companies from its Dynamic Small Business Search website, www.ccr.gov, where contractors go shopping for vendors, because they were not updated. And it continues to scour the site for offenders.

The SBA hearings wind up at the end of the month. If the SBA does decide to adopt new size standards, the rules probably won't go into effect until 2006, Jackson said. And even then, they are likely to include a grandfather clause that could give companies whose small-business status is revoked a five-year window to keep competing for contracts.