The House voted Tuesday to extend the Small Business Administration's programs until Feb. 2, 2007, giving Congress more time to complete a review and reauthorization of the agency.

SBA's authority and programs were to expire Sept. 30. H.R. 6159, authored by House Small Business Committee chairman Rep. Don Manzullo (R-Ill.), extended the expiration date until February.

Over the past 18 months, SBA has come under fire from members of Congress for what some believe was a slow response in distributing disaster loans to victims of Hurricane Katrina, cutting offices that support veteran-owned businesses and a host of contracting issues.

Among the most pressing issues are the matter of large companies winning small-business deals, lack of oversight in the registry where companies certify themselves as small, and questions regarding whether the agency's data accurately reflects the federal small-business contracting scene.

Manzullo said his committee is still working on a reauthorization package that would improve SBA's response to catastrophic disasters and expand its finance and entrepreneurship programs.

"We will also eliminate unnecessary programs at SBA and combat waste, fraud and abuse by increasing fines for misuse of programs," Manzullo said in a statement.

The extension was necessary because several SBA programs are not supported by direct appropriations, and a continuing resolution would not provide legal authority for SBA to continue them, according to a House statement announcing the move.

Programs not supported by direct appropriations include the 7(a) loan, Certified Development Company and Small-Business Investment Company programs.

H.R. 6159 also extends SBA's authority to operate small programs, including grants to Small-Business Development Centers to participate in the Drug-Free Workplace program. The extension also allows sustainability funding for Women Business Centers, the pre-disaster mitigation pilot program, New Markets Venture Capital program and BusinessLinc.

Small businesses aren't getting their fair share of government contracts, according to a study released Friday by the Small Business Administration's Office of Advocacy.

While 99.7 percent of all U.S. companies are small -- meaning they have fewer than 500 employees -- they receive just 23 precent of all direct federal contracting dollars and 40 percent of all subcontracting dollars.

That is 'not quite commensurate with [small businesses'] relative importance to the U.S. economy," the study found.

Small ventures account for 65 percent of all new jobs, according to the U.S. Census Bureau. In addition, small businesses generate 13 to 14 times more patents per employee than their larger counterparts.

But Friday's study found outdated regulations are stymieing small-business contracting.

The federal government is required to channel at least 23 percent of all federal contracts to small firms. In addition, large companies that win contracts worth more than $500,000 are required to farm out at least 5 percent of that work to small ventures. But those rules are suspended when the contracts are being performed abroad, and that includes billions going toward government contracts in the Iraq and Afghanistan.

"Such policies are a disincentive to small-business owners who are ready, willing and able to compete in the international marketplace," the report said. ``Moreover, these policies may place American small businesses on an unlevel playing field with their foreign competitors."

Carole Hart is the assistant director of the Small Business Development Center at Florida Atlantic University, an organization offering free workshops to small businesses that want to compete for contracts. She said many of her small-business clients find the regulations and paperwork daunting.

"A lot of people we work with are one or two person operations," she said. "And they may spend half their day just trying to find the right person" to handle their bid.

The report also found that the database of government contracts, called the Federal Procurement Data System -- Next Generation, is not providing the quality of information needed.

The FPDS-NG has been under fire since its control and maintenance was handed over from the General Services Administration to a private contractor in 2003.

Last year the Government Accountability Office said it had "concerns" regarding the "timeliness, accuracy, accessibility and ease of use of the system" that is the sole source of information on millions of contracts worth more than $300 billion.

"In 2002 [FPDS-NG] was an open book; you could see everything," said Lloyd Chapman, the president of the American Small Business League, an advocacy group that mined the database to uncover government contracting fraud. ``Now they have a new way of compiling contracting data that is not readily accessible to the public."

The latest report comes as the government has been under fire for failing to ensure that contracts intended for small businesses are actually going to small firms.

SMALL-BUSINESS owners who have been thwarted in getting their lawful share of federal contracts are hoping to find some relief from new proposals being floated by the Bush administration.

At stake is billions of federal contracting dollars, of which 23 percent, or roughly $85 billion, is legally set aside for small businesses. Government studies of federal contracting have revealed that a considerable chunk designated for small businesses ends up in the coffers of some of the nation's largest corporations.

In June, the Small Business Administration revived debate over the issue when it announced that small businesses had received a record $79.6 billion in federal prime contracts for the 2005 fiscal year. The amount, said Hector V. Barreto, the former agency head, was $10 billion more than the year before, or 25.4 percent of the contracting dollars awarded in fiscal year 2005.

The agency's figures have been hotly disputed, and a recent study by the Democrats on the House Small Business Committee found that nearly $12 billion in fiscal 2005 contracts that were credited to small firms had been directed to large businesses.

Both Congressional committees that oversee small business have been studying ways to strengthen the government's oversight and enforcement to ensure that contracts designated for small businesses actually land in the right place.

The Senate Committee on Small Business and Entrepreneurship adopted proposals to strengthen the S.B.A.'s authority to, among other things, take action against companies that obtain contracts by misrepresenting themselves as small entities, and to require businesses to recertify their size yearly.

The House committee has bickered over what proposals it would include in its bill. The Democrats have proposed criminal penalties for contractors who knowingly certify themselves as small when they are not, and for allowing small businesses that have lost contracts because they were not properly coded as small business to seek damages for lost contracting dollars. The different approaches will be hammered out when the Senate and the House meet this fall to adopt the S.B.A.'s reauthorization bill.

Prodded by complaints from small-business owners and threats of Congressional action, the Bush administration set out some changes last month, noting that "aggressive steps can and must be taken to increase small business access to the federal marketplace."

In an Aug. 3 letter from the Office of Management and Budget to Olympia J. Snowe, Republican of Maine and chairwoman of the Senate small-business committee, the administration said it would seek ways to "unbundle" contracts – meaning that huge contracts could be broken into smaller pieces for small businesses to bid on. It said it would add more oversight and try to change rules on the size of small businesses.

Clay Johnson, a deputy director at the Office of Management and Budget, who wrote the letter, said the proposed rule changes were meant "to guard against misrepresentation, miscoding or manipulation of the system by large businesses."

That is one central issue hurting small businesses in their pursuit of federal contracting dollars.

The government generally defines a small business as having fewer than 500 employees, but that can vary. The S.B.A. is reviewing the parameters, said Karen C. Hontz, the associate administrator for contracting, especially in industries that have gone through major changes, like information technology.

Without consultation or notification, the Bush Administration has closed its office at the Small Business Administration (SBA) solely dedicated to helping veteran-owned small businesses gain access to federal contracts. The Administration has also informed the Veterans Advisory Committee, another group dedicated to helping veteran small business owners, that their charter will not be extended and instead will expire this September. These unprecedented moves hurt America's veteran entrepreneurs and raise serious questions about the Administration's commitment to comply with federal law.

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.

In closing the contracting assistance office, the Small Business Administration (SBA) has eliminated the one office solely dedicated to implementing a law that requires three percent of all federal contracting dollars to be awarded to service-disabled veteran owned firms. The government has failed to meet this goal and has also failed to develop and support the Veteran's Advisory Committee, as required by law passed in 1999. Last year, the federal government awarded just .38 percent of contract dollars to companies owned by service-disabled veterans, costing them nearly $9 billion in lost contracts.

"It is shameful that in a time of war, the Administration saw fit to abandon our commitment to those who have honorably served our country - and the brave men and women serving today who will be the proud veterans of tomorrow. Now, it should be our turn to serve them, by protecting their personal information and by providing them with opportunities to start a business, or rekindle businesses that are struggling from recent deployments in Iraq and Afghanistan," said Kerry.

Joe Wynn, President of the VETs Group and executive member of the Task Force for Veterans Entrepreneurship, said, "Despite the best efforts of the Task Force and other veteran's groups to work with the SBA to help make the Veterans Procurement Program under PL 108-183 become a success for the government and for the service disabled veteran business owners that it was designed to serve, the SBA continues to demonstrate a seemingly disregard for carrying out the President's Executive Order, 13-360, which instructed the SBA to provide information, federal procurement training, and assistance to increase participation in federal contracting for service disabled veteran business owners."

Bob Hesser, also a member of the Task Force for Veterans Entrepreneurship, and President of Vetrepreneur, LLC a Service- Disabled Veteran-Owned small business said, "During the short time the SBA's Veteran's office existed there were meaningful actions that gave us a belief that someone cared. I am just not sure of that today!"

The SBA has also failed to respond to a letter sent on February 27,
2006 from Senator Kerry and Senator Daniel Akaka (D- Hawaii), Ranking Member of the Veterans' Affairs Committee, regarding their role in implementing the Veteran's Benefits Act of 2003.

For follow-up contact: Kathryn Seck of the Senate Committee on Small Business and Entrepreneurship, 202-224-9431

Small Business Contracts Plunge to Record Low
The latest statistics on Federal small business contracting show the lowest participation by small businesses in recent history. According to current government figures, small businesses received a meager 17% of the total value of Federal contracts during fiscal year 2005. This number represents the lowest level of Federal contracts that have been awarded to small businesses in the past 20 years.

The Small Business Act of 1953 requires that 23% of Federal contracts go to small businesses. Last year, the SBA reported that 23.09% of contracts were awarded to small firms during FY 2004.

Although President Bush has repeatedly pledged his support to America's entrepreneurs, this statistic paints a different picture. The fact that the percent of small business contracts has dropped from 23% to 17% in only one year appears to indicate a lack of commitment by the Bush Administration to offer small business owners a fair opportunity to do business with the government.

Lloyd Chapman, President of the American Small Business League, points to eleven Federal investigations and two private studies that have found fraud, abuse, and lack of oversight in small business contracting. The SBA's own Inspector General uncovered outright fraud in small business contracting and in Report 5-15 called the diversion of Federal small business contracts, "One of the biggest problems facing the SBA and the entire Federal government today ..." In report 5-20, the Inspector General also found that the SBA has done nothing to stem the growing use of large, multiple-award contracts (or "bundling") that significantly reduce the opportunities for legitimate small businesses to participate in the Federal procurement process.

"This information should sound an alarm to small business groups around the country that President Bush is serious about shutting down the SBA. It's time for small business owners around the country to wake up and see what's happening and begin to fight," stated Chapman. "People need to stop listening to what Bush says and start paying attention to what he is doing. President Bush is trying to end all programs that help small, women-owned, minority-owned, and veteran-owned businesses in order to divert more Federal contract dollars to the defense and aerospace industries."

Apparently, the Environmental Protection Agency has concluded that small is not only beautiful, it is also darn near mandatory.

In a memo circulated last September, Barry Breen, deputy assistant administrator for the agency's solid-waste office -- which manages the Superfund program and other cleanup projects (including Hurricane Katrina) -- declared that the office will require written justification for any service contract over $1 million that is not reserved for small businesses.

The justification must be submitted a year in advance and must explain why open competition is preferable to a small-business set-aside. "I understand that there is appropriate rationale to pursue full and open competition for some of our contracting needs," Breen wrote. "Such cases should be well justified and documented."

Small-business set-asides are nothing new. The Small Business Administration sets targets for each department and agency, with a government-wide goal of hiring small businesses as prime contractors on 23 percent of the total value of government contracts.

The government also has detailed goals for contracting with female-owned businesses (5 percent) and "service-related disabled veteran-owned" businesses (3 percent). But in general, the feds prefer that contracts be open for competitive bidding, with any set-asides made on a case-by-case basis.

The waste office's memo "has taken the present process and stood it on its head," said Alan Chvotkin, senior vice president of the Professional Services Council, which represents 200 companies that sell professional and technical services to the government. "It's the first time I've seen an agency invert the priorities and say, 'We are going to give first preference to small business, and if we are not going to give it to them, we need to have a justification.' "

Christopher Yukins, co-director of the Government Procurement Program at George Washington University Law School, is blunt: "I've never seen such a clever and draconian bureaucratic maneuver."

The goal of all federal procurement is supposed to be achieving the best value for the taxpayer's dollar, Yukins says. The waste office policy would instead declare that "we care first about the size or disadvantaged status of the businesses," he contends, "and second about the best value for the taxpayers. And that just can't be right."

Some procurement experts say that this kind of policy reversal puts pressure on procurement officials to do business with companies that may not be qualified to perform the tasks required. Systems are already in place to benefit small businesses or disadvantaged businesses that have the capability to perform government contracts. Rewriting those policies to make size the primary criterion for bidders would work mostly to the benefit of small businesses that cannot win an open competition for services under the old rules.

The EPA memo also raises the question of what exactly qualifies as a small business. For example, the General Services Administration's electronic contracting database indicates that EPA has given 75 percent of its $194 million worth of Katrina-related contracts to small businesses. (GSA warns, however, that the database is probably incomplete and is constantly being updated.)

According to GSA, $136 million of that total went to one "small business," a Cincinnati-based waste-handling firm called Environmental Quality Management. Under standard SBA definitions, a "remediation services" company qualifies as a small business if it has less than $13 million in annual receipts. A company that does more than just clean up waste -- such as testing, site inspection, and waste storage -- may fall under the "environmental remediation services" category, for which the "small-business" cutoff is 500 employees, regardless of income.

The contract documents in the GSA database indicate that Environmental Quality Management has 150 employees and $51 million in annual revenue, but the company claims on its Web site to have provided "more than 700 skilled personnel" for EPA's cleanup mission on the Gulf Coast, and its revenues have evidently more than doubled in the past year.

Ironically, EQM won its contract in an open competition. The company did not return phone calls seeking comment.

Chvotkin says that EQM may be an example of the kind of "churn" that EPA's new rule may create -- that is, when small companies get big contracts, they are quickly disqualified for further consideration for small-business advantages. But EPA can still claim to be contracting with a small business because the firm was small when the contract was written.