When is a small business not so small? When it comes to U.S. Small Business Administration rules and practices that allow Fortune 500 firms to compete for federal contracts as a small business. Such SBA policies run counter to its mission to promote the interests of the small firms that employ half the civilian workforce and produce half of the private-sector's goods and services.

The SBA needs to narrow its definition of ''small business'' and end practices that allow companies to win contracts after they have outgrown the designation. SBA also should eliminate or reduce mistakes and fraud that permit big firms to win federal awards set aside for small businesses.

The stakes are high in Florida, where 90 percent of all firms employ fewer than 20 people. Such firms are critical to our state and national economies. By aiding larger companies, the SBA makes it tougher for the small outfits to compete. It also is misleading for the SBA to count awards to giant firms toward the requirement that 23 percent of federal contracts go to small businesses.

A Miami Herald review of more than 28,000 federal contracting documents for 2004 (Small is big, by business writer Jim Wyss, Dec. 30) uncovered practices that give ample reason for concern. While the SBA was celebrating record-breaking contract awards to small businesses, the study found:

• More than half of Florida's top 20 small-business contractors had more than 500 employees, the SBA's basic definition of a small business. Four of the firms had more than 1,000 employees; three exceeded $1 billion in annual revenue -- although some may have been small firms when they won the contract.
• Millions of contracting dollars may have been credited by mistake to small businesses because of data-entry errors. That includes Florida's top contractor, Point Blank Body Armor in Pompano Beach, a subsidiary of a publicly held firm that had 950 employees at the time and was still winning new small-business contracts.

The SBA's own Inspector General's Office has noted problems. SBA rules allow firms to keep their ''small'' designation for the life of a contract, which can extend for years, even if they are bought by a corporate titan or grow beyond SBA size limits. Without current company-size information, firms can continue to get small-business contracts well beyond the point that they've grown into giants. The SBA doesn't verify the size-information provided by the companies, either.

Despite coming under fire recently because of loan mismanagement after the 9/11 terrorist attacks, the Small Business Administration says it is keeping the same procedures in place as it continues to approve a record amount of emergency loans for Gulf Coast hurricane victims.

As of Dec. 30, loan approvals for small businesses and homeowners impacted by Hurricanes Katrina, Rita, and Wilma had reached $2 billion -- second only to the $4 billion in loans approved after the 1994 Northbridge, Calif., earthquake.

Loan approvals in December 2005 alone hit $1 billion, averaging out to a record-pace of some $36 million a day, according to SBA figures. By comparison, emergency loans issued after the entire 2004 hurricane season totaled just $1.86 billion.

The SBA has faced negative publicity as of late, due to what critics called a slow initial response to the Gulf Coast hurricanes, as well as an internal report that showed a some 85% of businesses sampled did not demonstrate that they actually qualified for the post-9/11 loans they received.

Carol Chastang, an SBA spokeswoman, credited the ramped-up pace with a series of measures enacted in October to streamline the lagging application process. These included waiving the need for owners to file tax and business records covering the past three years, among other requirements. The SBA has also moved to expedite loans under $100,000 for businesses meeting specific requirements, such as satisfactory credit, a gross income over $25,000 and an SBA loan history.

Chastang said the application process was hampered early on by the scale of devastation in the region, with many communities simply inaccessible to loan inspectors. Under normal circumstances, loan applications take from seven to 21 days to process, she said, but were "considerably longer" given the destruction wrought by Hurricane Katrina.

To date, the agency has completed more than 146,000 site inspections across the Gulf Coast region, SBA Administrator Hector Barreto said in a statement Tuesday -- the equivalent of a full year's workload in just three months, he said. To meet the high demand, the agency has increased its Office of Disaster Assistance staff five-fold since early September, from about 880 full-time employees before the storms to more than 3,900.

Yet despite the accelerated rate of approvals, no new measures have been put in place "beyond the usual procedures" to ensure the loans are getting into the right hands, Chastang said.

Barreto said the renewed pace was achieved "while maintaining our responsibility to taxpayers not to approve loans that cannot be repaid."

On Dec. 27, an internal report released by the SBA's inspector general said only nine of 59 emergency loan recipients in the months after 9/11 showed the attacks "adversely affected" them -- including loans to a perfume store in the Virgin Islands and more than 100 Dunkin' Donuts and Subway outlets.

The loans, issued under a newly minted Supplemental Terrorist Activity Relief program, were created to enhance the SBA's existing disaster loans for small business nationwide that were "adversely impacted" by the attacks. About 7,000 small businesses received loans under the program.

The report, which followed an internal investigation at the request of Congress, found that lenders complained of "unclear and poorly defined requirements," which resulted in confusion and mismanagement.

Barreto has since defended the agency, saying the program was implemented as Congress intended. Other SBA officials have said the inspector general's report took an overly narrow view of the eligibility criteria.

Critics claim mistakes were made after 9/11 and that the faster pace of hurricane loans opens the door for similar problems. "No matter what happens, they're going to claim nothing is wrong," said Lloyd Chapman, founder of the American Small Business League, a federal small-business policy watchdog group based in Petaluma, Calif.

The nation's small businesses appear to be shifting from recovery leaders to laggards, ending 2005 with flat growth and fewer new jobs, according to a new payroll data report.

"It was a yawner of a year for small-business growth," Michael Alter, president of Skokie, Ill.-based payroll research firm SurePayroll, said in the year-end report released Tuesday.

SurePayroll's small-business scorecard for December, which surveyed some 15,000 small businesses nationwide, showed hiring at small businesses grew by just 0.3% in 2005, compared to 4.4% in 2004. The SurePayroll survey is conducted monthly.

By the end of December, the size of small businesses -- gauged by the number of employees -- had declined in every region except the Northeast, where hiring was up 10.4% on 17 straight months of increases.

About half of the scorecard's 21 benchmark states reported declines, including significant decreases in Washington, Pennsylvania, and Texas.

The lower hiring rate means small businesses likely were not driving economic growth last year, which saw gross domestic product -- the sum total of all goods and services in the U.S. -- rise at an annual rate of 3.8%, Alter said.

Meanwhile, despite an up-tick last month, salaries at small businesses for the year were also down, by 0.5%, falling to an average of $29,126. The biggest drop came in Florida where average paychecks shrunk by 10.6% in 2005.

The only region that saw salaries rise in 2005 last year was the Midwest, where hiring dropped by 4% -- the steepest in the country. In 2004, average paychecks nationwide dropped by 4.8%.

As jobs and average salaries fell, small businesses were increasingly competing with larger companies for good workers, the report showed.

"Larger companies are doing well and are accordingly bidding up salaries in the hunt for talented workers," Alter said. So as the pace of hiring is down, Alter said, small-business owners are facing higher prices for top-tier employees.

That's just one of several ways the "deck is stacked" in favor of larger firms, Alter said. Bigger companies can afford higher prices for production-boosting technology, along with rising health-insurance costs, while riding out unexpected swings in the energy market. They can also retain high-priced lobbyists to pursue a more favorable regulatory environment in Washington, he added.

Small business owners find themselves caught in the cross hairs again as Congress considers billions of dollars in cuts to various Federal programs following one of the most destructive hurricane seasons on record.

At press time, the House was seeking a 2 percent across-the-board cut that would hurt the SBA--even though the SBA's budget has already been slashed in half over the past five years. There could also be additional cutbacks included in pending appropriation bills this year that would trim programs that provide small business loans and other support for entrepreneurs.

On Capitol Hill, "just about every kind of budget cut you can imagine" is being proposed in the name of paying for Katrina and keeping deficitis down, says Adam Hughes, budget policy analyst for OMB Watch, a nonprofit government wathchdog organization in Washington, D.C. SBA programs "are definitely going to be pinched. Maybe even more than pinched--maybe eliminated."

Some say the SBA will be DOA unless things change. For small business owners, "it's time to panic," says Lloyd Chapman, founder of the American Small Business League, a Petaluma, California organization working to change Federal contracting rules to help small businesses. He predicts a bleak future for the SBA, which has decreased staff and closed field offices over the past few years. The current SBA budget is "miniscule," Chapman says. "It's literally not enough to buy the latest jet fighter."