In June 2006, the Small Business Administration announced that, in 2005, small businesses received a "record-breaking $79.9 billion in federal prime contracts," epresenting an increase of $10 billion over 2004. Though the list of small-business contract recipients is not publicly available, private research suggests that not all small-business contracts go to actual small businesses. A list of top smallbusiness contract recipients for 2005 compiled by Eagle Eye Publishers Inc. of Fairfax, Va. includes large corporations such as General Dynamics, Lockheed Martin, Science Applications International Corp., Boeing and L-3 Communications.

Though SBA size standards mandate that a firm must have fewer than 500 workers to qualify as a small business (see 13 CFR § 121 et seq.), the top three companies on Eagle Eye's list are Apptis Inc., an information technology firm with 1,600 employees; SAIC, which claims to have 43,000 employees worldwide; and GTSI, an IT firm with 850 workers. In fact, the SBA inspector general lists the problem of large fi rms receiving small-business set-asides as the agency's top challenge for Fiscal Year
2006. "As the advocate for small business, the Small Business Administration should strive to ensure that only small firms obtain small business awards and agencies only receive small business credit for awards to small firms," the IG said.

In with the new … but what happened to out with the old?

That's the question on the mind of one small business group, which was hoping that incoming Small Business Administration head Steven Preston would break with his predecessor and identify which companies have received government contracts.

The issue is important because it goes to the heart of allegations that large corporations are masquerading as small businesses to cash in on billions of dollars in government contracts earmarked for small firms.

Lloyd Chapman, president and founder of the Small Business League, has been pressuring to get the names released, but said late yesterday that Preston had rebuffed his request.

WASHINGTON -- A post-Sept. 11 loan program was a disaster in the making because the government could not verify that most loans actually went to businesses affected by the attacks, a federal official told Congress on Thursday.

One lawmaker noted that money even made its way to a custard shop in Texas.

"This was really a program that had potential for disaster," said Eric Thorson, the inspector general for the Small Business Administration. The agency administered the program.

Thorson said his office could not determine in 85 percent of the loan cases it examined whether the businesses qualified for some of the billions of dollars handed out after the terrorist attacks on New York and Washington.

In stories last year, The Associated Press showed how the SBA program spread money far and wide across the country.

Lawmakers conducting a review of $21 billion in aid for New York ridiculed the notion that many of the far-flung recipients of the loans had suffered any negative impact from the attacks.

Rep. Michael McCaul, R-Texas, noted that in his district, a custard shop was one of 122 businesses in the Austin area that received such loans, which totaled $47 million.

"I for one could hardly argue that any of these loans are in any way, shape or form related to the Sept. 11 attacks," McCaul said at a hearing of a House Homeland Security subcommittee.

Reached by telephone by the AP, the owner of Shakes Frozen Custard shop outside Austin, Texas, said he was never told his $635,000 loan through a private lender was intended for businesses affected by Sept. 11.

"No one was more surprised than me, and I don't want to get something I'm not entitled to," said Mark Blankenship. "As a matter of fact, I would love to get rid of that loan because it's eating me up with the variable interest rate."

At the hearing, Thorson said the program was not intended to be limited to businesses in the New York or Washington area. But he said he was offended when he heard about some of the places the money was going.

Early in the loan program, lawmakers complained the SBA was not getting enough financial aid to businesses in need. The agency then loosened the rules and said businesses from across the country could apply.

Thorson said the SBA sent a signal to lenders that "virtually every small business had suffered some direct or indirect adverse impact and could likely qualify for a STAR loan," and that the agency told lenders they "would not second-guess their eligibility justifications."

An audit of the program found that 50 of 59 borrowers' samples were unable to show whether the borrowers were adversely affected by the attacks and the economic downturn that followed.

Of 42 borrowers that were interviewed, only two said they were aware they had received a loan intended for businesses hurt by Sept. 11.

The AP reported many loans went to local outlets of some of America's most famous and lucrative companies, including Dunkin' Donuts, Quiznos, Subway and Dairy Queen. Other recipients included dentists and chiropractors.

The inspector general recommended that any future special loan programs should:

_require applicants to justify how their business was harmed.

_require lenders to submit documentation.

_have effective internal controls and oversight in place.

____

July 13, 2003 WASHINGTON They are among America's larger companies: Verizon Communications, AT&T Wireless, Barnes & Noble booksellers and Dole Food. But in the government's contractor database, they are listed as small businesses.

The mistaken designations, contained in records obtained by the Associated Press, mean the government has overstated the contract dollars that are going to small business at a time when the Bush administration has been pressing to give smaller firms as much federal work as possible.

"The numbers are inflated," said David Drabkin, senior procurement officer for the General Services Administration. "We just don't know the extent."

Drabkin, whose agency maintains the records entered by contracting officials across the government, said that the GSA was working to ensure accurate entries in the future, but that past errors are "not something we can clean up overnight."

Once a company's status is mischaracterized, it stays that way through the life of a contract - which can be 20 years. That means smaller firms that the administration intended to help may be frozen out of fresh business by the bigger companies with the incorrect designations.

"This transition has led to the apparent diversion of contract dollars intended for small business," said Sue Hensley, a spokeswoman for the U.S. Small Business Administration.

One small businessman who is pushing to have the listings corrected says workers are paying in lost jobs.

"Most Americans work for small businesses, and most of all the new jobs are created by small businesses. This certainly has a dramatic impact on job creation," said Lloyd Chapman, who formed the California-based Microcomputer Industry Suppliers Association.

The government defines a small business as one that is independently owned and operated and is not dominant in its field. Size standards change from one industry to another, based on either the number of employees or revenue.

Among the contractors designated as small businesses in the records obtained by the AP were:

Verizon Communications Inc., the largest local phone company in the nation, and Verizon Wireless, the company's joint venture that is the largest U.S. wireless provider.

Barnes & Noble Inc., the top U.S. bookseller, with superstores in 49 states and the District of Columbia, plus mall stores under different names.

AT&T Wireless, the cellular phone spin-off from AT&T.

Starwood Hotels & Resorts Worldwide, which includes Sheraton, St. Regis and Westin hotels.

Dole Food Co. Inc., the world's largest producer of fresh fruits and vegetables.

KBR, a Halliburton subsidiary formerly known as Kellogg, Brown & Root. KBR is one of the world's largest providers of oil field services and part of the company Vice President Cheney ran before taking office in 2001.

The Bush administration has set a goal of providing small business with 23 percent of all federal contracts, but it has fallen about 3 percentage points short after awarding $53 billion to small companies.

Officials now acknowledge that the percentage was inflated by the erroneous database entries and that the true amount of federal business that went to small firms was smaller.

Investigators from Congress' General Accounting Office found no evidence that large companies had tried to manipulate the designations found in the database. Rather, they blamed the mistakes on federal contracting officials who either entered wrong codes for business size or reentered outdated information.

Large companies said they never intended to be listed as small businesses.

AT&T Wireless spokeswoman Rochelle Cohen said the company was unaware that it was mischaracterized in the database.

The SBA said it had referred companies to the agency's inspector general whenever it suspected deliberate misrepresentation.

One company the SBA said it referred is GTSI Corp., of Chantilly, Va., a computer-equipment company.

Charles DeLeon, acting general counsel for the company, said the firm "has always provided the government with accurate and truthful information."

The company lost its designation as a small business in 1998, but DeLeon said it continued to provide information-technology products to the government under a contract that began when it was a small business.

Caption:
JENNIFER S. ALTMAN / Bloomberg News