It may be sunny in Washington today, but a hard raining is falling for some around the beltway just the same.

After years of accusations and hand-wringing, the Federal government is finally doing something about the problem with small business set-asides going to big companies. On Monday, the U.S. Department of Justice (DOJ) reached a settlement with Insight Enterprises Inc.'s (Nasdaq: NSIT) Public Sector unit regarding an investigation into a company that Insight bought four years ago. The settlement calls for Insight to pay the government a $1 million fine for something that a unit of the company bought by Insight in 2002, Comark Government & Education Services Inc. (CGES), said 10 years ago. The above is a bit complicated, but worth your while if your company sells products to the government through partners.

Some background: For years various branches of the government at both the state and Federal level have created contracting vehicles specifically to help small, minority-owned or disadvantaged businesses. These contract vehicles have come to be known as "set asides" and have been around for years. In many instances, they truly help small companies; in some cases these small companies benefit so much that they ultimately become big companies. Former GTSI CEO Dendy Young told me once that he built his company into a billion-dollar powerhouse thanks, in part, to set-aside contracts.

But as with many things in Washington, what started out as a good idea eventually turned into a bad thing, at least according to some. Now, many small companies complain about small-business awards. The biggest gripe isn't the slow, grinding way in which these awards are handed out, but rather the quick and easy manner in which they seem to go to those who are anything but "small."

That brings us back to CGES. In 1996, it represented itself to the government as a small business. The government took its word and gave the company a Multiple Award Schedule (MAS). When the government took a second look, however, it suspected that it made a mistake and began to investigate the true size of CGES. Ultimately, the government contended that CGES was not what it represented itself to be. To be fair to Insight, this trouble not only pre-dates its acquisition of CGES' parent company, Comark, but also does not reflect that the renamed CGES business, Insight Public Sector, stopped representing itself as a small business in 2004.

Nonetheless, the contract remains in place to this day, which is particularly galling to those who argue that far too many large companies win small-business set-asides, either by exploiting loopholes in the systems, or, worse, by fraudulently representing themselves as something they are not. In this case, Insight admits to no wrong doing and thus does not appear to be barred from selling additional goods to the government. That's just not right, according to Lloyd Chapman, President of the American Small Business League and one of the nation's most out-spoken critics of the government's handling of small-business, set-aside contracts.

"A $1 million fine to a $1 billion company is a drop in the bucket," he says. He wishes the government would crack down harder simply because far too many companies are beating the system. According to his Web site, the government's Small Business Administration (SBA) has removed 600 large companies from its database of small businesses. But it has penalized zero. Well, make that one: Insight, a company that was never found to misrepresent itself in the first place. Go figure.

It's not hard spotting firms that don't deserve set asides, Chapman says, "It's like finding shells on the beach."

He would know. He's combed through literally thousands of documents to identify what he believes are the most significant abusers of set-aside awards. And he believes some of IT's most vaunted firms are at the heart of the problem. That includes the aforementioned GTSI, which went nuts when I wrote about its involvement with set-asides for VARBusiness Magazine. That billion-dollar plus company secured some set-aside business for itself a few years ago, though not by breaking any rules, company officials insist. GTSI secured set-aside business from the government when it was small and was able to renew some of those deals over a period of time. Nothing wrong with that, Young himself told me once in a somewhat heated exchange at a New York investment conference. He likened taking advantage of contracting loopholes to securing the maximum number of legal tax breaks available from the IRS at tax time.

The comparison doesn't sit well with some. And that's why Chapman and others are working hard to get the government to changes its ways.

Why this matters to you is this. Despite his sometimes abrasive demeanor, you cannot deny that Chapman is now a force to be reckoned with. His unrelenting style has humbled civil servants and commanded the attention of lawmakers and the media both.

"I have a message for vendors," he says. In essence, he wants them to be aware that some of the firms that they rely on to sell to the government may ultimately run into trouble if his campaign to clean up the awarding of small business contracts succeeds. That could ultimately upend your business, at least temporarily.

An April 6 hearing called by U.S. Sen. Tom Coburn, R-Okla., is one of the precursors to eliminating the Small Business Administration, says a California small business advocate.

The hearing will be biased toward elimination of the SBA because of the witnesses on its agenda, says Lloyd Chapman, president of the Petaluma-based American Small Business League.

A key witness scheduled to testify is Veronique de Rugy of the American Enterprise Institute, Mr. Chapman says.

Ms. de Rugy has advocated abolishing the SBA, contending that common beliefs about small business are wrong. She says when it comes to jobs, the greatest job creation comes when small companies become big companies.

And in a December 2005 interview with BusinessWeek Online, she reaffirmed her call to kill the SBA, saying it "does a lot of damage."

But Mr. Chapman says the real reason to kill the SBA is for big business, especially defense contractors, to get the estimated $119 billion in government contracts now earmarked for small business.

In the BusinessWeek interview Ms. de Rugy also noted she has called for an end to subsidies to big business as well.

For his part, Mr. Coburn says the April 6 hearing will simply examine the effectiveness of the SBA.

He says his office "has received indications that officials from the SBA itself may be engaging in lobbying activities against this hearing," in a press release Thursday afternoon.

The League charges SBA is withholding information that would identify large companies posing as small ones to receive federal contracts. In response to a Freedom of Information Act request, SBA said it does not have the names of firms it reported as small businesses in 2004.

"I am confident the information we obtain will prove the SBA and the GSA have diverted billions in small business contracts to Fortune 1000 companies," said ASBL President Lloyd Chapman. "It's unacceptable that we have to go to court over and over just to get the most basic information from the SBA. Clearly they are trying to hide damaging information."

During the past twelve months, the ASBL has won two Freedom of Information cases against SBA. The League says a federal court ordered the government to pay its legal fees totaling more than $54,000.