I wouldn't necessarily expect to put my thumb on the pulse of the region's economy at a flea market, but I got pretty close recently because I am an inveterate eavesdropper.

An old boy who looked like he'd just stepped off the lettuce truck was talking to one of his colleagues at his stand out at Happy's Flea Market in Roanoke, where I was busily snapping pictures for a portfolio. "Dang gas prices is going to run me out of bid-ness," the farmer said as he chomped on his cigar. "I'm gettin' behind on payments at the farm and they ain't no catchin' up when everything I make goes to keep the equipment runnin.'"

A few days earlier, I'd accompanied our reporter Don Simmons as he interviewed some big truck dealers and we listened slack-jawed as they explained that it takes nearly $1,000 to fill up the tank of a long-haul tractor-the kind my daughter used to drive on those coast-to-coast runs she made. Daddy's Little Girl.

Then I start reading how the Bush Administration-oil men and tycoons-is allowing big companies to buy up contracts meant for small businesses ("bundling," it's called) and that the Small Business Administration is not reviewing most bundled procurements. A U.S. Senate report says that $384 million worth of contracts (87 of them) weren't reviewed in this particular period last year. The Inspector General's office, according to the report, concluded that because there were so few people to monitor the process (due to a lack of financing), only 11.6 percent of the centers are examined.

From there, I hit upon a BusinessWeek headline that asked, "Is the SBA Hurting Small Business?" and in the long interview with Lloyd Chapman, the fiery founder of the American Small Business League, we find the answer to be, "Oh, yes!"

Chapman doesn't much like the SBA, an agency the Bushies have downgraded from cabinet status and whose budget they've cut substantially (all the while claiming "efficiencies"). Chapman says in the article that he senses "anti-small-business policy . . . I'd say I'm a bipartisan person, but I think the Bush Administration has done more damage to small business than any [other] president in my lifetime." Now, wait a minute, Lloyd, you're talking about a guy who loves to surround himself with small bid-ness people for photo ops and a man who says he just adores these "folks" who've pulled themselves up by their bootstraps-something he's heard about.

Here's some of the fodder for Chapman's ire, according to the BusinessWeek story:

• The administration refused to implement a law that requires a five percent goal for women-owned business to receive government contracts.
• The Bushies have allowed "some of the largest companies in the world to be classified as small business," including Oracle, H-P, and Northrop Grumman. "One of the biggest problems facing the SBA . . . is that large companies are allowed to receive small business contracts."
• Our boy Lloyd thinks the Bush Admin will try to close the SBA in the coming months.
• 9/11 response: "Only 10 percent of the [relief] loans" went to those small businesses with losses. "The problem is that the SBA has a real mission that's totally inconsistent with its [activities]. Its mission is supposed [to be] to help small business, but it appears focused on helping federal agencies."
• The Bushies want a small business exemption for venture capital companies. "Chase Manhattan Bank will be considered a small business," under this directive, Lloyd says.
• Bush appointed Steven Preston, an executive at ServiceMaster (which operates Merry Maids, Terminix and TruGreen) as head of the SBA recently. BusinessWeek says Preston has "no experience as an entrepreneur and comes from a company with a reputation as a bully among some small business owners."

Meanwhile, Bush's arch-foe John Kerry, the ranking Democrat on the Senate's Small Business and Entrepreneurship committee, is beside himself. He says Bush's tax cuts will clobber small business people, who are rarely in the wealthy elite (average income $1.5 million) who will benefit from the cuts. Kerry points out that 8 percent of small business households earn more than $200,000 a year, but the group making more than that will get 51 percent of the benefits of the tax reduction that goes to small business owners. Sixty-two percent of those households based on small business income below $75,000 will get 16 percent of the cuts.

Meanwhile, on the direct-to-you level, Kerry tells us Bushies want to eliminate the Advanced Technology Program, which encourages high-risk research; has proposed to "cut or eliminate micro-loans and counseling to micro-entrepreneurs (disproportionately hurting women and minorities)"; are doing little or nothing to expand small business' access to health care and rising healthm care costs; and continues to allow large businesses to "take advantage of loopholes and poor oversight to receive contract dollars intended for small firms."

'Course Bush's guys deny all of the above, mostly claiming it's some kind of illusion. But next time you go over to the Texaco filling station and start pumping gas and the numbers mount, you might do well to remember that Bush is an oil man. Chaney is an oil man. Rice is an oil ma . . . uh, woman. And that the administration is heavily populated with marketing professionals and big business executives. As the price of oil climbs and small businesses struggle, there's little wonder why.

Misc.

The Queen of Schmooze departs. There are influences in the evolution of any business that you can point back to with pride, with horror or with some other meaningful response because they were important. I look at Deborah Nason coming by my office five years ago, seeking an opportunity to do something she just knew she could do well, as one of those.

Deborah has been our lead freelancer since that time, a position she so clearly earned that she is the only "contributing editor" we've ever had. Deborah came with little experience, but a lot of enthusiasm and an ability to schmooze the likes of which I was not aware existed.

A little while back, she handed in her 100th story-most of them cover stories-and I think that over that period she made far more friends among our readers than a journalist has a right to expect. Deborah didn't make the friends by pandering. She did it the old-fashioned way by writing stories that were true (not just factual) and by telling readers how business was done right. That means a lot because there has to be a reason to pick up a publication; you have to get some value for your time. Deborah has always presented that. Now she and her husband, Richard, a good guy and an optometric researcher who was caught up in the Johnson & Johnson misfortune recently, will return to The North-New Jersey or Connecticut or New Hampshire or one of those states that all look alike to me. I, among many, many others, wish them both well. But, boy, I'm going to miss Deborah's contributions. She made my job easier and your read better. Deborah asked if she could use this space to say au revoir, les enfants. I said yes.

Here 'tis:

"I want to thank all of you in the Blue Ridge Region business community for being so wonderful to work with over the past five years. It has been a privilege to get to know so many interesting people and diverse businesses throughout this far-flung region. In the spirit of true regionalism, I recommend that you make the effort to visit communities in the area that you have never seen before, and to get acquainted with their business communities. I am sure you will be surprised by what you will learn-I always was. I will miss you."

President Bush's nominee to take over the top spot at the Small Business Administration is doing his best to stay out of the spotlight.

But the spotlight seems to have found him anyway.

Steven Preston is Mr. Bush's pick to succeed Hector Barreto as head of the SBA.

Mr. Preston has turned down all interview requests since the nomination last month and is still waiting for his Senate confirmation hearing, but a lot of people have already made up their minds on his qualifications.

Mr. Preston was previously executive vice president at ServiceMaster Co., a home and lawn care services company that reported $3.2 billion in revenue last year.

Lloyd Chapman, president of the American Small Business League and one of the harshest critics of the SBA's performance in the last several years, said it doesn't make sense to appoint an executive of a multibillion-dollar company to head the SBA.

"Historically, the kind of people running the SBA were people who had a passion for small business and had a track record with that sort of thing," Mr. Chapman said. "Erskine Bowles was a great guy. Not Barreto and guys like this Preston guy."

Rep. Nydia Velázquez of New York, the senior Democrat on the House Small Business Committee, didn't go much easier on Mr. Preston.

"Small businesses need an independent voice at SBA that will fight for their needs, speak out forcefully on their behalf and act as a true champion for this nation's entrepreneurs," she said in a news release.

"Mr. Preston would be coming to the agency from a Fortune 500 company whose issues are nothing like those faced by the average small-business owner."

But Mr. Preston does have some allies.

Matthew Shay, president of the International Franchise Association, has thrown his support behind Mr. Preston, noting that ServiceMaster is a franchisor.

"Steve Preston knows the crucial role that franchised small businesses play in the global economy," Mr. Shay said in a news release.

"To have someone with this close-up view of free enterprise and entrepreneurship leading the Small Business Administration will be extremely beneficial to the growth and development of small firms."

The verbal jousting over Mr. Preston's appointment is part of a larger discussion.

Democrats and other critics have been complaining about budget cuts and slow response times at the organization almost since Mr. Bush took office.

Mr. Chapman has charged that for years Mr. Barreto and the SBA have turned a blind eye as large firms have commandeered federal contracts intended for small firms.

He also contends that Mr. Bush's ultimate goal is to shut down the SBA entirely, and remove the regulations that require a certain portion of federal contracts to go to small businesses.

Creating jobs

From 2002 to 2003, when the economy was just emerging from a recession, small companies were responsible for the vast majority of jobs created.

The Small Business Administration's Office of Advocacy recently released data showing that during that time, firms with fewer than 20 employees added a net of 1.6 million jobs.

Budget cuts and Barreto's resignation leave SBA toothless
One small-business advocate is sounding the alarm as best he can that companies should prepare for the possible closure of the Small Business Administration. It's just a matter of time, said Lloyd Chapman, president of the American Small Business League. President Bush and the Republican-controlled Congress want to shut SBA's doors for good, he said.

"People need to panic right now and start doing something," he said. "A lot of them are going to be going out of business."

Action or reaction?
Deep budget cuts in recent years have created a keen sense of foreboding among small businesses worried that the agency may not have the tools to carry out its mission as their advocate. Add to this the resignation last month of SBA Administrator Hector Barreto, and it's evident that the agency is struggling for direction, perhaps even its survival.

But Chapman's call to push the panic button may be premature, according to research analysts and industry observers. Even if the agency is closed or overhauled, a reduction in programs would not eliminate the small-business contracting market, said Stan Soloway, president of the Professional Services Council and a Washington Technology columnist.

The evidence the council has collected does not support the contention that the government is out to diminish the role of small business in federal procurement, Soloway said. But the role of SBA is a different story altogether, he added.

Rodney Thomas, president and CEO of Thomas and Herbert Consulting LLC, Silver Spring, Md., said he has yet to hear of concern among other small IT companies that SBA is in real jeopardy. Thomas' company is in the SBA's 8(a) and HUBZone programs.

But Thomas said he and other small-business owners are worried about the proposed budget cuts.

"There's a lot of anxiety among small businesses," he said. "Nobody has a concrete picture of what those negative outcomes will be, although they believe the outcomes will be negative and that they will impact the small companies out there."

SBA oversees large loan programs, is an advocate for small companies in government contracting and is charged with oversight of governmentwide, small-business contracting programs and goals.

SBA's budget has been cut from more than $1.2 billion in fiscal 2001 to $499 million in 2006. The request for 2007 is $429 million, not counting disaster loans.

In March, a report from the House Small Business Committee detailed more than $6 billion in proposed cuts to small-business support programs across the federal government in President Bush's 2007 budget proposal. More than $3 billion in proposed cuts are aimed directly at programs supporting small technology companies, according to the report.

Supporters and detractors of small-business programs agree that an important debate about SBA is just beginning, and the results will greatly affect the future of the agency and small IT contractors.

The reality of small-business contracting, according to both Soloway and Thomas, is that small businesses are landing their share of federal contracts, and that SBA has done a good job as an advocate for small companies to win work.

Agency procurement officers are getting increasingly larger contracts for small companies, Thomas said.

Chapman brushed aside such assertions, however, and charged that many of those contracts actually go to large businesses, not small companies. SBA has been investigating such claims, and even reached a $1 million settlement with a company it said posed as a small business to win set-aside contracts.

Not all agencies can meet their small-business contracting goals, and those that do may be misrepresenting how many contracts went to small companies.

It's in the role of watchdog that SBA is failing by not getting agencies to meet their goal of 23 percent of all contract dollars going to small companies, Thomas said.

Oversight of the government's small-business contracting goals should be given to either the Government Accountability Office or the Office of Management and Budget, he said.

"Because GAO and OMB are, in comparison to SBA, well-respected, and in some cases feared, it may have even more teeth," he said.

Agency budgets should be tied to their ability to meet contracting goals, Thomas said. "If you tie it to the money, and the agency's ability to get dollars, the goals will be met, I promise you," he said.

Getting OMB or GAO involved is a bad idea, said John Kost, managing vice president for market research firm Gartner Inc., Stamford, Conn. SBA and its programs are a way of inserting social policies into the contracting process, and GAO, the audit arm of the legislative branch of the government, has no role in the executive branch's procurement process, Kost said.

"For OMB, an oversight role in social policy would run contrary to its fiduciary responsibility to protect the best interests of the taxpayer," he said.

The rumor mill
The way SBA is perceived is another of its problems. In the wake of Barreto's resignation, word quickly spread throughout the small-business community that the Office of Federal Contract Assistance for Veteran Business Owners Office of Government Contracting had been closed.

SBA spokesman Raul Cisneros denied that the program had been shuttered, and said it had been "shifted to the Office of Veterans Business Development. With the resources in that office, we can better serve the veteran's business community."

Asked to explain why veteran business owners saw the move as a scale-back of support for veteran businesses, Cisneros answered, "Certainly not," and offered no further explanation.

The move of the office should not be assumed to be negative, Soloway said. SBA is known for its inefficiencies, he said, and any moves it makes to improve should be supported.

However, he added, "that does not mean that every time they do this they're doing it with the right intentions."

At press time, SBA had yet to announce the program move. With so little explanation from official sources, the small-business community is left on its own to try and determine what the consolidation means to companies and their futures.

Oversight, size standards and poor communications are some of the issues likely to figure large in any debate about small business and SBA's role.

"We're getting to the point where it's time to start having some of these discussions, but it's hard to have them," Soloway said.

Conventional wisdom has long held that small businesses are a crucial driver of the the nation's economy. Indeed, last week while on a visit to a Washington (D.C.)-area hardware store, President George W. Bush said: "Small businesses provide most of the job growth in our country. If the small-business sector is doing well, so is the American economy," according to the Associated Press. And Small Business Administration statistics show that the U.S. has 24.7 million businesses with fewer than 500 employees.

However, the SBA is an organization in transition. Lately, the words "embattled" and "beleaguered" have been used with frequency in describing both the SBA and its outgoing chief, Hector Barreto. Critics have charged President Bush with paying little more than lip service to the significant role that small businesses play, while weakening the SBA by significantly cutting its budget since he took office.

In April, Barreto announced his resignation from the SBA in order to head the Washington-based Hispanic business-advocacy group, the Latino Coalition. Appointed in 2001, Barreto, a California businessman, is the second longest-serving SBA administrator. But his tenure has been marked by much criticism, particularly regarding the agency's response to the hurricanes that devastated the Gulf Coast last year, as well as its handling of economic disaster-recovery loans to small businesses following the September 11 terrorist attacks (see BW Online, 2/2/06, "The SBA Chief Comes Out Swinging").

CAPITOL TARGET. Steven Preston, an executive vice-president for Illinois-based ServiceMaster (SVM), has been tapped by the White House to take over as the head of the SBA, pending Senate confirmation (see BW Online, 4/26/06, "A Storm Brewing at the SBA?"). He faces numerous challenges, including growing apprehension about the SBA's future.

In April, Senator Tom Coburn, (R-Okla.), who chairs a subcommittee on federal financial management, created a wave of anxiety when he scheduled a hearing in which two witnesses, including the American Enterprise Institute's Véronique de Rugy, publicly advocated abolishing the SBA. De Rugy has continually challenged the organization's existence (see BW Online, 12/19/05, "A Talk With a Small-Biz Heretic"). And on May 11, Democrats on the House Small Business Committee plan to introduce a bill that would overhaul the agency.

Complaints about the SBA's management response to Hurricane Katrina stem from the chaos and backlog of loan applications following the Gulf Coast disaster. Months after the hurricane swept through the coast, there was a severe backlog of loan approvals, with many loans yet to be dispersed. And the agency had to employ several thousand additional employees to field and process loans. However, Barreto and the agency currently assert that it has subsequently approved nearly $9 billion in disaster-relief loans. Moreover, the agency came under fire after a number of reports that many businesses not directly impacted by the September 11 attacks received loans earmarked for victims.

BUDGET SQUABBLE. Lloyd Chapman, founder and president of the American Small Business League, a Petaluma (Calif.)-based federal small-business policy-watchdog group, is a vociferous, longtime critic of the SBA. Chapman has called the Bush Administration particularly hostile toward small businesses, and he has filed a number of lawsuits against the agency for creating policies and diverting contracts away from small businesses to large corporations (see BW Online, 1/27/06, "Is the SBA Hurting Small Business?").

Asked about the future of the agency, Chapman says: "I don't think that Bush nominated Preston to run the SBA but to potentially continue to dismantle the SBA. He's qualified to dismantle it, not to run it. I will stick to my guns and say that Bush wants to dismantle all federal programs for small business. There have been six consecutive years of budget cuts."

A slew of criticism erupted in February, following the President's fiscal-year 2007 budget request for the SBA. While the request of $624 million is an increase of $31 million over last year's initial request of $593 million, it amounted to about a 41% cut to the agency's budget since Bush took office. The proposed budget, which is still pending approval, includes increases for the cost of disaster loans for homeowners and businesses by eliminating the low interest-rate cap.

WALKING THE WALK? It also increases the cost of small-business loans by charging borrowers higher fees on loans of $1 million or more, while eliminating funding for the SBA's largest loan program -- the 7(a). Also, the budget effectively undercuts loan programs that proportionally serve the most minorities and women out of all the small-business assistance programs. The proposal also slashes a number of training and counseling programs.

When the budget proposal was released, Rep. Nydia Velázquez (D-NY), a top Democrat on the House panel that oversees the SBA, voiced some serious concerns to BusinessWeek Online. "When the President was campaigning five years ago, he was always talking about small business and the important role it plays in our economy," she says. "[But] he says one thing and does another. In the last four years, the President has cut the budget by almost 60%. While he has repeatedly touted his commitment to small business, this budget does not present to us a President dedicated to improving the environment to small business."

As Hector Barreto's days as chief of the SBA wind down, Barreto sees his time at the agency as a success. "I am leaving the SBA [knowing] that we have been doing more loans than ever in its 53 years," he says. "I am leaving the SBA having trained more small businesses than ever. The SBA has facilitated $70 billion in contracts for small businesses, 40% more than before ... When I am gone, the legacy I leave is an all-time record in every one of our programs."

Lloyd Chapman will assert that 80 to 90 percent of contracts that purportedly go to small businesses actually end up in the hands of large companies, that the entire small-business government program is smoke and mirrors, and that President Bush is determined to stomp out any provisions made for the disadvantaged. Bold statements. But Chapman, president of the American Small Business League (ASBL), will also tell you that he's just getting started. His detractors call him a conspiracy theorist, a blowhard, but regardless, he has unearthed some questionable practices and lighted a fire under the Small Business Administration, the Office of the Inspector General and other watchdog agencies.

His latest victory? After reporting Insight Public Sector to the Inspector General for misrepresentation as a small business, the subsidiary of Tempe, Ariz.-based Insight Enterprises settled allegations for $1 million. It was no admission of guilt, but Chapman expects it to have a domino effect, spurring companies to think twice before using subsidiaries to claim small-biz status.