Business Intelligence


Business Intelligence

A High-Stakes Battle for American Small Businesses

By Keith Girard
February 22, 2007

Some people say Lloyd Chapman is tilting at windmills, but he's no Don Quixote. Sure, he's almost single-handedly taken on the massive federal bureaucracy through his organization, the American Small Business League (ASBL). But the stakes are high and he believes his fight says a lot about the state of small business in America.

At issue is the $314 billion that the government spends each year to purchase goods and services from outside contractors. By law, 23 percent of that amount is supposed to be set aside for small businesses. But major corporations are grabbing a big piece of the action through bureaucratic indolence or outright fraud, he charges.

For the past five years, Chapman has waged a legal, political, and public relations battle, trying to force the Bush administration to address the problem. So far, he's won almost every battle, but his war is far from over.

"The people that the government is giving these contracts to are the biggest in the world, and they hire the finest lobbyists that money can buy," he says. "And as you know, that buys a lot of clout in Washington. I don't think this could have ever happened if small businesses had a voice in this country."

In the end, that's what he thinks his fight is all about. While the politicians in Washington pay lip service to small business, they have yet to deliver on the issues that really count, such as health care, tax, and government contracting reform. Chapman made contracting his cause célèbre in large part because he wants small businesses to get the respect they deserve. And like the old Watergate adage, he began his quest by following the money.

"Back in 2002, I was sitting in my office, when a young woman came in crying. She spent two months working on a small business set-aside and lost it to a Dutch company with 26,000 employees in 26 countries," he recalls.

Chapman says he called the Chamber of Commerce, the National Federation of Independent Business (NFIB), the FBI, the White House Liaison Office, and finally the Government Accountability Office, the investigative arm of Congress. Only the GAO called him back.

That marked the beginning of 14 separate investigations by the GAO, the Small Business Administration's Office of Inspector General, and congressional committees. "They all found the same thing," he says. Billions of dollars earmarked for small businesses were going to major corporations.

The most recent investigation by congressional Democrats found that at least $12 billion in contracts that the government claimed to have given to small companies in 2005 actually went to corporate giants — companies such as Microsoft, Rolls-Royce, Exxon-Mobil Corp., and even Wal-Mart.

The investigation said federal agencies miscoded thousands of contracts to big companies as small business awards. In other instances, companies that grew large or were purchased by corporate giants continued to get small business contracts. And in some cases there appeared to be possible fraud.

In his own campaign, Chapman says he's been the subject of almost 500 news stories, from the Wall Street Journal to CNN, CBS, and The New York Times. Yet, he says it's absolutely astonishing that you can't find the results of these investigations mentioned on any small business organization Web site.

"How come they are not demanding legislation to stop it?" he asks. Chapman has his own theory, of course. He cites an Inc. magazine article on Washington lobbying that noted the Chamber, the NFIB, and other small business groups are solidly Republican. They are not about to rock the boat, he says.

Because his campaign has largely focused on the Bush Administration, Chapman says many people assume he is a Democrat. But he is quick to point out that he's a Texas Republican just like the president. "My father actually worked with the first Bush in the Harris County Republican Party in the 1950s," he says.

Even so, he's the first to acknowledge that the Bush administration's record on small business is dismal. It has failed to meet the 23 percent small business set-aside goal for six years in a row and has all but starved the SBA to death through budget cuts. And Republican lawmakers didn't do much better while they controlled Congress. He's now counting on Democrats to finally address the issue.

In the meantime, he's pressing on with his fight. He says he intends to file suit, hopefully this year, to ask a federal judge to rule that the SBA is failing to act according to statute. And he is trying to put together a group of attorneys across the country to file civil suits against large corporations for falsifying their small business status.

"Hopefully, I'll be able to embarrass Congress into filing some legislation to stop this," he says.

That's a hope we can all share.

SBA Pulls Information To Stop CBS Investigative Story

Press Release

SBA Pulls Information To Stop CBS Investigative Story

SBA tries to stop third CBS investigative story into the diversion of federal small business contracts to Fortune 500 firms

February 14, 2007

Petaluma, Calif., Feb. 14, 2007- In the middle of research by the American Small Business League for a CBS investigative report, the Small Business Administration abruptly pulled public information from the Central Contractor Registry that allows the determination of small-business status of federal contractors.
The ASBL was working with CBS on what would have been the network’s third and most damaging investigative story into the SBA’s role in the diversion of billions of dollars in small-business contracts to some of the nation’s largest firms. The ASBL believes that the SBA suddenly pulled the information without warning to hinder the investigation. Without access to the size and revenue information of contractors, the ASBL could not complete the necessary research and CBS temporarily shelved the story.
A spokesperson for the SBA said the agency removed the information because a small number of businesses had complained about their size and revenue information being made public. When the ASBL contacted the SBA in preparation for a Freedom of Information Act request for copies of any complaints made, the spokesperson responded that the agency had not actually received any formal written complaints, but rather a few phone calls. The SBA was unable to recall the names of any specific firms that had complained.
“It simply is not believable that the SBA would pull this information because it received a handful of phone calls,” said Lloyd Chapman, president of the ASBL. “The SBA doesn’t have a good track record of being responsive to small business complaints, let alone doing something as dramatic as pulling information from a federal data base that the media, contracting officials and the public use to determine the size status of federal contractors. If the SBA has ignored thousands of letters from small businesses all across the country urging it to change federal policies allowing the diversion of billions of dollars in small business contracts, why would it respond to a handful of phone calls?”
Two previous CBS investigative reports exposed the fact that the SBA had adopted policies that have allowed Fortune 500 firms like Lockheed, Boeing, Rolls Royce, L-3 Communications and Hewlett-Packard to receive billions in small business contracts.
 “It is no coincidence that the decision to pull this information was made in the middle of another damaging CBS investigation,” Chapman said.
Before the SBA pulled this information from the central contractor data base, ASBL’s research for CBS found that over half of the contracts that the Bush administration reported as going to small businesses actually went to the top two percent of American firms. The research concluded that between $50 and $60 billion a year has been diverted to major corporations. The new SBA administrator, Steven Preston, has proposed a new policy that will allow the federal government to continue to report awards to Fortune 500 companies as small business contracts until the year 2012. ASBL projects that this would rob legitimate small businesses of over $300 billion.


CNN Drops Story On Multi-Billion Dollar Contracting Scandal

Press Release

CNN Drops Story On Multi-Billion Dollar Contracting Scandal

Lou Dobbs Pulls Story on Diversion of Billions from America's Middle Class

February 7, 2007

Petaluma, Calif.- Primetime news program Lou Dobbs Tonight dropped an investigative story exposing the diversion of billions of dollars in federal small-business set-aside contracts to some of the nation’s largest corporations and defense contractors just hours before the segment was to air on CNN.
As part of Dobb’s series, “The Attack on the Middle Class,” the show’s producers spent several weeks researching and filming the segment featuring Lloyd Chapman, contracting expert and president of the American Small Business League. During his interview with CNN, Chapman discussed a series of 13 federal investigations by the Government Accountability Office, Small Business Administration Office of Advocacy and the SBA Office of Inspector General that found billions of dollars in federal small business contracts were diverted to Fortune 500 corporations. The Bush administration reported these contracts--awarded to firms like L3-Communications, General Dynamics, Halliburton and major CNN advertisers Boeing and Lockheed--as “small business” awards.
CNN producers told Chapman that the segment had been pulled in the wake of more pressing news stories but assured him that it would air shortly. After three months of waiting, Chapman has concluded that the station abruptly pulled the story to avoid embarrassing its major advertisers and has no intention of ever airing the segment.
“CNN is never going to run that story,” said Chapman. “I think they pulled it because it was unflattering to its major advertisers, Lockheed Martin and Boeing. CNN’s reputation as the most trusted name in news obviously doesn’t apply when you’re talking about its advertisers.”
Chapman points to a story featured on the highly-rated blog The Daily Kos, Advertising as Payola: Who really owns CNN,”that also suggests firms like Lockheed and Boeing, who have no products to sell to the general public, advertise on major networks to gain influence over the media outlet.
The latest government figures report Boeing with 37 federal small business awards, totaling $495,319,668. Lockheed Martin received $223,210,917 in federal small business awards and Fortune 500 Defense contractor L-3 Communications was the top recipient of small business contracts with $650,143,831. The ASBL projects that up to $65 billion a year in federal small business contracts are diverted to the top two percent of firms in the US.
For more information about the American Small Business League, see