A new Small Business Administration proposal to curtail government contracting fraud is having trouble getting off the ground at the U.S. Air Force.

The Government Accountability Office and the SBA's Office of the Inspector General have recommended that government agencies annually recertify the status of small business contractors to prevent billions of dollars in work from going to larger firms.

But the Air Force is pushing back. It only wants to recertify companies every five years for reasons of "national security." But that creates a problem when a small business is acquired by a large firm or outgrows its small business status.

Does the White House have another "Brownie" problem brewing? That's how some critics view President Bush's choice of ServiceMaster executive Steven Preston as the next director of the Small Business Administration. Recall that after Hurricane Katrina, Bush got slammed when the public learned that the director of the Federal Emergency Management Agency, Michael Brown, had a resume seemingly mismatched for the job--including a stint as rules enforcer for the International Arabian Horse Association. Preston's nomination last month also spurred misgivings. "We don't need another unqualified SBA administrator," Lloyd Chapman, president of the American Small Business League and frequent Bush critic, said then.

Now at first take, Preston may appear an unconventional choice. He comes from a big home-services company (ServiceMaster owns Merry Maids, Terminix, and TruGreen ChemLawn) with $3 billion in sales and 39,000 employees. And he has never started a small business himself. Yet he could be running an agency devoted to entrepreneurs. "He doesn't come from small business, and he's never owned a small business," says Harry Alford, president of the National Black Chamber of Commerce.

Sen. John Kerry, the Massachusetts Democrat who is the ranking minority member of the Small Business and Entrepreneurship Committee, cited concerns about Preston's apparent lack of small-business background, plus complaints that ServiceMaster plays rough with the many small businesses it deals with. "I don't have answers to these questions yet," Kerry says. "He needs to be vetted."

The White House responds that it has already done that and, says spokesperson Erin Healy, found a "results-oriented executive who has improved customer service, employee satisfaction, and operation efficiency at his company." Preston, 45, was ServiceMaster's former chief financial officer and also worked as an investment banker at Lehman Brothers.

With a resume like that, Preston certainly seems a creature of big business or Wall Street. Yet ServiceMaster is no corporate monolith. The company has a network of more than 4,000 small-business franchisees, making Preston a great fit for the SBA job, says former CEO Bill Pollard. "Those franchisees are all small business, so Steve understands what they need, especially in the way of financing." The National Federation of Independent Business calls Preston "a great choice."

In the late 1980s, Preston was an early investor in and adviser to Boston's Harpoon Brewery, now one of the nation's largest craft breweries. Cofounder Dan Kenery calls him "a really intense and smart guy and a good businessman who knows how to focus on the right things." Kenery jokes that he and Preston spent a lot of time doing "market research" together--drinking beer, that is.

By all accounts, Preston did a solid job at ServiceMaster. "Preston is a no-nonsense, by-the-book sort," says Alex Paris, an analyst at Barrington Research.

Politicians drumming up support love to say that small business is the economic engine of America.

A new study shows that's not all talk: The smallest businesses create the biggest number of jobs, according to an analysis of census data by the U.S. Small Business Administration.

Between 2002 and 2003 (the most recent years for which figures are available), companies with fewer than 20 employees added a combined 1.6 million jobs to the nation's work force, according to the report by the SBA's Office of Advocacy.

That's four times as many jobs as were added by slightly bigger companies: Businesses with 20-to-499 employees added a combined 400,000 jobs.

Meanwhile, the country's biggest corporations were a drain on job creation: Companies employing 500 or more had a net loss of 1 million jobs.

In Florida, small businesses added 184,405 jobs during the period studied.

The SBA report also confirmed another business adage -- that failure is a big part of the small-business equation.

The report found that, while 612,296 companies were created during the period, 540,648 went out of business -- a failure rate of 88 percent.

Asian-owned businesses

Census-data crunching has found another growth machine: Asian-American entrepreneurs.

The number of Asian-American start-ups is growing at twice the national pace for all businesses, and Florida is one of the top states for the boom, according to a recent U.S. Census Bureau report.

Asian-owned businesses grew 24 percent from 1997 to 2002, totaling 1.1 million businesses. Those companies generated more than $326 billion in revenue, up 8 percent from 1997.

"The robust revenues of Asian-owned firms and the growth in the number of businesses provide yet another indicator that minority entrepreneurs are at the forefront as engines for growth in our economy," Census Bureau Director Louis Kincannon said in a statement.

Nearly half of all Asian firms were Chinese- or Indian-owned. Korean firms were the next largest segment, followed by Vietnamese, Filipino and Japanese companies.

Almost a third of Asian-American companies had paid employees, providing jobs for more than 2.2 million people.

Other highlights from the report:

California had the most Asian-owned firms, followed by New York and Texas. Florida came in seventh.

Wholesale and retail trade accounted for 47 percent of all Asian-owned business revenue.

One of the most persistent critics of the federal Small Business Administration has sent a farewell message to outgoing SBA director Hector V. Barreto and it isn't pretty.

The American Small Business League said in a statement that the agency is a "gutted shell" after five years under Barreto's administration.

"The SBA's dismal performance has been chronicled in 10 federal investigations and two private studies that uncovered fraud, abuse, and lack of proper oversight in virtually every major SBA program," the organization said.

Among the litany of allegations, the group noted that the SBA had inflated statistics by reporting billions of dollars in contracts to small businesses, when, in fact, they were large companies; failed to properly monitor major federal "bundled" contracts; failed to implement the women's procurement program; and made a mess of relief efforts after hurricane disasters in the Gulf Coast region.