June 18, 2008
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June 12, 2008
Petaluma, Calif. – On May 19, 2008, United States District Court Judge Marilyn H. Patel ruled in favor of the American Small Business League (ASBL) and ordered the Small Business Administration (SBA) to provide the ASBL with more than 10,000 pages of data that listed the names of all firms that received federal small business contracts for fiscal years 2005 and 2006.
A preliminary review of the data by the ASBL and two third party experts has uncovered hundreds of dramatic and glaring discrepancies in the data, which indicate that Bush Administration officials manipulated the data to disguise the true volume of government small business contracts that actually wound up in the hands of Fortune 500 corporations and other large businesses.
Since 2002, Bush Administration officials have consistently denied that Fortune 500 firms and other large businesses are receiving federal small business contracts. The data released by the SBA proves that some of the largest firms in the world were the actual recipients of billions of dollars in federal small business contracts each year.
- In May of 2007, the SBA went so far as to issue a press release titled, “Myth vs. Fact: SBA and Government Contracting,” which stated that it is a myth that large companies, including large, multinational corporations are taking away federal contracts specifically intended for small businesses. After reviewing the data, the ASBL and both third party experts all found that the Bush Administration had in fact included billions of dollars in awards to Fortune 500 corporations and other large businesses in the United States and Europe in its small business contracting statistics. The Bush Administration falsified their compliance with the congressionally mandated 23 percent small business contracting goal by including such corporate giants as Dyncorp, Battelle Memorial Institute, Hewlett Packard, Government Technology Services Inc (GTSI), Bechtel, Lockheed Martin, General Dynamics, General Electric, Northstar Aerospace, Booz Allen Hamilton Inc. and Raytheon. (http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_07-30.pdf)
- The ASBL also discovered that the Bush Administration even included hundreds of millions of dollars in contracts to large corporations in Europe such as British Aerospace Engineering Systems (BAE, British), Buhrmann NV (Dutch) and Thales (French). BAE is recognized as one of the five largest defense contractors in the world, and has more than 79,000 employees world wide. Buhrmann NV, headquartered in Amsterdam, has more than 19,000 employees and French defense contractor Thales has 52,000 employees, according to Hoovers.com.
- The ASBL also found that contracting numbers to large corporations were manipulated to make it appear as if some firms had received significantly less small business contracting awards than they had. For example, the ASBL found that according to the SBA, BAE Systems Analytical Solutions Inc. received $8.5 million in 2005 and $4 million in 2006. However, Fedmine.us indicates that BAE Systems Analytical Solutions Inc. received small business contracts in excess of $137.6 million in 2005 and $134.5 million in 2006. Fedmine.us is one of several companies with access to the XML data feed from the Federal Procurement Data System (FPDS-NG). In another example, the SBA reported that Battelle Memorial Institute received $12,801 in 2005, but data from both third party experts indicated that Battelle had actually received more than $900 million during 2005. The ASBL found a pattern where contracts to large firms were altered in the same way they were with BAE and Battelle.
- The ASBL also discovered that the Bush Administration was forced to make a systematic counter balancing increase in the volume of contracts awarded to legitimate small businesses to prevent the total amount of contracts awarded for 2005 and 2006 from being diminished. Consequently, awards to legitimate small businesses were systematically inflated to equalize the reduction of small business contract dollars awarded to Fortune 500 corporations. The ASBL found that according to SBA numbers, Circle B Enterprises Inc. received $887.5 million during 2005. However, Fedmine.us indicates that Circle B Enterprises Inc. received $287.5 million during 2005, which represents a discrepancy of $600 million. The ASBL found several other instances of significant inflation of small business contracting numbers in legitimate small businesses.
During his time as SBA Administrator, Steven Preston continually denied the fact that large businesses were the recipients of federal small business contracts. However, in June of 2007, Preston adopted the SBA’s 5-year grandfathering/re-certification policy allowing some of the largest corporations in the United States and Europe to continue receiving billions of dollars in U.S. government small business contracts through the year 2012.
“Based upon a number of federal investigations that have been done on this subject, such as 5-14, 5-15, and 5-16 from the SBA Office of Inspector General and our analysis of this information, it looks like the pattern that we are seeing in 2005 and 2006 will be repeated every year during the Bush Administration. If that holds true, the Bush Administration will have diverted somewhere between $500 and $800 billion from our nation’s middle class economy,” President of the ASBL, Lloyd Chapman said. “It’s time for Congress to call for a GAO investigation to get to the bottom of this issue. The Bush Administration has consistently tried to paint me as a conspiracy theorist. Based on the release of this data and the fact that I have won five federal lawsuits against the Bush Administration, I expect that will be a more difficult job for them in the future. I would like to see the media report this story accurately and responsibly and start listening to sources outside the SBA’s press office. The facts don’t lie.”
The ASBL intends to continue to review the data and will release a more detailed report on their findings within 30 days. The information is now available on the ASBL’s website, www.asbl.com.
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By Elizabeth Olson
New York Times
June 12, 2008
WASHINGTON — Steven C. Preston’s signature accomplishment as head of the Small Business Administration was overhauling the agency’s disaster loan assistance program, a program that was foundering under the crush of Hurricane Katrina claims when he took over nearly two years ago.
Mr. Preston has now moved on. He started this week as secretary of Housing and Urban Development. While he streamlined the way the S.B.A. worked, he left behind various problems that critics and small-business groups say are particularly troublesome in a weakened economy. They cite the need for greater availability of loans in particular.
And because his departure comes in the waning months of the Bush administration, it is unlikely that a permanent leader for the S.B.A., with a mandate to make major changes, will arrive before next year.
“While they focused on disaster assistance, there has been criticism that the agency has ignored small-business concerns,” said Karen A. Kerrigan, president and chief executive of the Small Business and Entrepreneurship Council, which represents 70,000 small businesses.
The agency’s difficulties in getting hurricane assistance to small businesses and homeowners showed how years of cuts by the Bush administration had taken a toll. The S.B.A.’s budget this year, $482 million, was less than half its budget in 2001.
Critics say the S.B.A. needs to broaden access to federally guaranteed loans, which carry lower interest rates and lower fees than their commercial counterparts, so that they are more attainable for entrepreneurs and small-enterprise owners.
Minority business owners also complain the agency is not doing enough to help them find financing and contracts. Female entrepreneurs are angry that the S.B.A. has not done more to help deliver a higher percentage of contracts, even though the agency was ordered to do so by Congress eight years ago.
While Mr. Preston faced no opposition at his confirmation hearing for the job at HUD, Representative Nydia M. Velázquez, Democrat of New York and head of the House Small Business Committee, gave his stewardship of the S.B.A. an incomplete. “Unfortunately, he was not at the agency long enough to have a lasting effect,” she said.
Jovita Carranza, now the acting administrator and a former executive of United Parcel Service, is likely to run the agency until a new administration arrives.
Even with Mr. Preston’s efforts to speed up disaster assistance, Congress recently pushed ahead with provisions, part of the farm bill, that amounted to its own overhaul of the S.B.A. disaster loan program.
The legislation’s provisions, said Senator John F. Kerry, Democrat of Massachusetts and chairman of the Senate Committee on Small Business and Entrepreneurship, would “cut through red tape, increase resources, bring private lenders into the response and help bridge that gap while disaster victims begin the process of building their lives.”
And last week, the Senate voted to add $101 million to the agency’s budget. The move was also supported by Senator Kerry’s Republican counterpart on the committee, Olympia J. Snowe of Maine. Both senators argue that the agency needs to step up its efforts since less capital is available elsewhere in the current sluggish economy.
“There is a contraction in the lending program, which I think is antithetical to what the S.B.A. is supposed to be doing,” Mr. Kerry said. “This is a moment where the credit crunch requires the S.B.A. to fill the gap.”
The number and amount of federal loans under the main loan guarantee program, called 7 (a), has fallen to 50,546 through the end of May this year, from 63,945 loan approvals through the end of May 2007. The loan amounts dropped as a well, to $8.24 billion from almost $9 billion.
“Our overall lending volume is down 8 percent,” Mr. Preston said in an interview last week. “And the dollar volume from the riskiest lenders is down 34 percent because they have pulled back the most.”
The agency, he said, has adopted procedures for greater automation, which should streamline lending and make it more attractive for banks to handle S.B.A. loans.
But small-business owners like Frances Richards, who heads Arlean & Company, a construction program management firm in Las Vegas, say they do not see any relief. Her efforts to tap into the area’s commercial expansion have been thwarted by difficulties in getting a $25,000 loan to hire the employees necessary to qualify for a subcontract.
“I’m in a Catch-22 because I’m not going to get a contract unless I have the capacity to handle it,” Ms. Richards said. “But that requires more money than I can get from my credit cards.”
The S.B.A. loan program is also contentious because of accusations of inadequate oversight of lending institutions. The agency’s inspector general found recently that flawed oversight had resulted in a $329 million loss in recent years. Mr. Kerry and Ms. Snowe this month asked the Government Accountability Office to investigate the S.B.A.’s system for monitoring lender portfolios and identifying risky lenders.
“The whole process of overseeing lenders is under review,” Mr. Preston said. “We’ll be putting clear rules in place to determine what we should do for lenders,” although he said he would not be around to see it through.
The most vociferous criticism has been about the S.B.A.’s handling of government contracts, about $400 billion yearly — 23 percent of that is supposed to be for small businesses. The American Small Business League, which sued and won release of S.B.A. data, maintains that large corporations are receiving contracts meant for small business.
Last year, the agency changed its rule to require businesses to certify their size every five years to prevent large corporations from winning contracts.
Female business owners are pursuing legal action to force agency compliance with Congress’s directive, passed in 2000, that they receive 5 percent of federal contracts. This year, the agency issued a regulation that included only four industries, infuriating female business groups.
If anything, minority small businesses are even more irate at the S.B.A., though the agency this year started an initiative aimed at helping inner-city enterprises. For minority businesses, “the S.B.A. isn’t even in the picture,” complained Harry C. Alford, president and chief executive of the National Black Chamber of Commerce. “We are not looking for giveaways, but in contracts and loans we are looking for them to loosen rules and make them more accessible.
“So right now, we’re not counting on the S.B.A.”
Source: http://www.nytimes.com
By Elizabeth Olson
New York Times
June 12, 2008
WASHINGTON — Steven C. Preston’s signature accomplishment as head of the Small Business Administration was overhauling the agency’s disaster loan assistance program, a program that was foundering under the crush of Hurricane Katrina claims when he took over nearly two years ago.
Mr. Preston has now moved on. He started this week as secretary of Housing and Urban Development. While he streamlined the way the S.B.A. worked, he left behind various problems that critics and small-business groups say are particularly troublesome in a weakened economy. They cite the need for greater availability of loans in particular.
And because his departure comes in the waning months of the Bush administration, it is unlikely that a permanent leader for the S.B.A., with a mandate to make major changes, will arrive before next year.
“While they focused on disaster assistance, there has been criticism that the agency has ignored small-business concerns,” said Karen A. Kerrigan, president and chief executive of the Small Business and Entrepreneurship Council, which represents 70,000 small businesses.
The agency’s difficulties in getting hurricane assistance to small businesses and homeowners showed how years of cuts by the Bush administration had taken a toll. The S.B.A.’s budget this year, $482 million, was less than half its budget in 2001.
Critics say the S.B.A. needs to broaden access to federally guaranteed loans, which carry lower interest rates and lower fees than their commercial counterparts, so that they are more attainable for entrepreneurs and small-enterprise owners.
Minority business owners also complain the agency is not doing enough to help them find financing and contracts. Female entrepreneurs are angry that the S.B.A. has not done more to help deliver a higher percentage of contracts, even though the agency was ordered to do so by Congress eight years ago.
While Mr. Preston faced no opposition at his confirmation hearing for the job at HUD, Representative Nydia M. Velázquez, Democrat of New York and head of the House Small Business Committee, gave his stewardship of the S.B.A. an incomplete. “Unfortunately, he was not at the agency long enough to have a lasting effect,” she said.
Jovita Carranza, now the acting administrator and a former executive of United Parcel Service, is likely to run the agency until a new administration arrives.
Even with Mr. Preston’s efforts to speed up disaster assistance, Congress recently pushed ahead with provisions, part of the farm bill, that amounted to its own overhaul of the S.B.A. disaster loan program.
The legislation’s provisions, said Senator John F. Kerry, Democrat of Massachusetts and chairman of the Senate Committee on Small Business and Entrepreneurship, would “cut through red tape, increase resources, bring private lenders into the response and help bridge that gap while disaster victims begin the process of building their lives.”
And last week, the Senate voted to add $101 million to the agency’s budget. The move was also supported by Senator Kerry’s Republican counterpart on the committee, Olympia J. Snowe of Maine. Both senators argue that the agency needs to step up its efforts since less capital is available elsewhere in the current sluggish economy.
“There is a contraction in the lending program, which I think is antithetical to what the S.B.A. is supposed to be doing,” Mr. Kerry said. “This is a moment where the credit crunch requires the S.B.A. to fill the gap.”
The number and amount of federal loans under the main loan guarantee program, called 7 (a), has fallen to 50,546 through the end of May this year, from 63,945 loan approvals through the end of May 2007. The loan amounts dropped as a well, to $8.24 billion from almost $9 billion.
“Our overall lending volume is down 8 percent,” Mr. Preston said in an interview last week. “And the dollar volume from the riskiest lenders is down 34 percent because they have pulled back the most.”
The agency, he said, has adopted procedures for greater automation, which should streamline lending and make it more attractive for banks to handle S.B.A. loans.
But small-business owners like Frances Richards, who heads Arlean & Company, a construction program management firm in Las Vegas, say they do not see any relief. Her efforts to tap into the area’s commercial expansion have been thwarted by difficulties in getting a $25,000 loan to hire the employees necessary to qualify for a subcontract.
“I’m in a Catch-22 because I’m not going to get a contract unless I have the capacity to handle it,” Ms. Richards said. “But that requires more money than I can get from my credit cards.”
The S.B.A. loan program is also contentious because of accusations of inadequate oversight of lending institutions. The agency’s inspector general found recently that flawed oversight had resulted in a $329 million loss in recent years. Mr. Kerry and Ms. Snowe this month asked the Government Accountability Office to investigate the S.B.A.’s system for monitoring lender portfolios and identifying risky lenders.
“The whole process of overseeing lenders is under review,” Mr. Preston said. “We’ll be putting clear rules in place to determine what we should do for lenders,” although he said he would not be around to see it through.
The most vociferous criticism has been about the S.B.A.’s handling of government contracts, about $400 billion yearly — 23 percent of that is supposed to be for small businesses. The American Small Business League, which sued and won release of S.B.A. data, maintains that large corporations are receiving contracts meant for small business.
Last year, the agency changed its rule to require businesses to certify their size every five years to prevent large corporations from winning contracts.
Female business owners are pursuing legal action to force agency compliance with Congress’s directive, passed in 2000, that they receive 5 percent of federal contracts. This year, the agency issued a regulation that included only four industries, infuriating female business groups.
If anything, minority small businesses are even more irate at the S.B.A., though the agency this year started an initiative aimed at helping inner-city enterprises. For minority businesses, “the S.B.A. isn’t even in the picture,” complained Harry C. Alford, president and chief executive of the National Black Chamber of Commerce. “We are not looking for giveaways, but in contracts and loans we are looking for them to loosen rules and make them more accessible.
“So right now, we’re not counting on the S.B.A.”
Source: http://www.nytimes.com
By Adam Piore
Portfolio.com
June 5, 2008
Some contractors argue with their clients over design specifications or the size of the bill. But Anthony Rawls has an entirely different sticking point with his best customer—the route he takes to work.
With the price of gasoline at $4 a gallon, Rawls, the president San-Marin Construction in South San Francisco, is trying to save money. His work can take him as far as Ukiah, more than 100 miles north of San Francisco. For this job, he carefully maps out the routes needed to visit 26 bank branches in the most fuel-efficient manner.
But his client, a major bank he declined to identify, often has a different schedule in mind.
"It's really difficult because they're not even thinking about gas prices," he says. "But it comes out of my overhead, and the price has almost doubled."
For managers of businesses both big and small across the nation, the rising cost of fuel and energy is very much on their minds. It's not just airlines and trucking companies that are struggling with the recent sharp increases in energy prices. Businesses that use cars, vans, or trucks for distribution or services are feeling the pinch, as are manufacturers that use oil-based products from detergent to plastics. Gasoline prices are up nearly 28 percent from a year ago, and crude oil futures are up 85 percent from a year ago.
When oil prices began climbing several years ago, companies were able to absorb the hit, for the most part, as the costs of other goods fell thanks to global competition. Now, however, the prices of other commodities are also rising, adding to the pressure.
The quandary is whether to pass along at least some of the higher costs in the form of price increases. That's easier done when the economy is booming. In a slowing economy, raising prices could drive away customers. Still, there comes a breaking point for a business to stay profitable. The recent surge in fuel prices may be it.
"It either cuts into their profit, or they pass that on to consumers," says Mark Pingle, a professor of economics at the University of Nevada in Reno. "The trouble is when prices go up, people will tend to buy less of their product."
Rob Adler and his colleagues at Birchwood Best, which produces hardwood and plywood in Birchwood, Wisconsin, for builders and cabinetmakers, have been postponing a decision on prices for months.
"We're looking at raising prices," says Adler, Birchwood's general manager. "We've always been proud of the fact that we've been able to control raw-material costs and manufacturer costs just by continuous improvement. But we may have no choice."
Birchwood has the responsibility of fueling the eight to 10 trucks that leave the main factory every day. The company also has to wrestle with more expensive oil-based resins that are used to make particleboard. The cost of resins has increased by 25 to 40 percent over the last six months, Adler says.
To cut their own costs, the company began designating regular "milk runs" between plants where raw materials are stored, ensuring each run carries the maximum load.
More efficient use of the trucks—making sure nothing leaves half or three-quarters full—has saved thousands of dollars, Adler says. The company has considered more reliance on freight, but it's not practical because they need the "agility" of their own fleet to meet immediate needs of customers.
The only option left is for the company to initiate a "fuel surcharge" for customers taking delivery. "We plan to break it out separately to make sure people know it's a fuel surcharge and can understand it's not just Birchwood," Adler says.
Dennis Beatty, owner of Tiger Paws Carpet Cleaning in Memphis, says competition is too fierce to raise prices on his customers-even though the cost to run his nine-employee, three-van business has risen about $200 to $250 a week, equivalent to one and a half jobs.
To deal with the situation, Beatty has instituted a strict routing schedule for the 50 carpets his vans drop off and pick up weekly.
"Mostly we go by the zip code," he says. "I might be in one area in Tuesday and a different area on Wednesday. We send them to the furthest stop, and then they work their way back to the office. It takes more time, but it saves money."
Some of Beatty's fellow small-business owners in Memphis have elected to close shop on certain days of the week, Beatty says, grouping stops together and operating only on Mondays, Wednesdays, and Fridays or Tuesdays and Thursdays.
Despite these dire measures, Beatty considers himself lucky. A few weeks ago, when TV and radio stations first started talking about a recession, his business plummeted 50 percent until the panic subsided.
"I was calling around, and the same thing happened to other carpet cleaners," he says. "Our business was really steady, and it was just like somebody had turned off a faucet, then after two and a half weeks, it was just like it came around. Gas is a chunk of my expenses, but if revenue stops, we're really in trouble."
Indeed, the squeeze is felt especially hard by owners of small businesses because many operate with smaller profit margins and tougher competition, forcing difficult choices, says Lloyd Chapman, president of the American Small Business League.
"It's having a noticeable negative impact-and on small business in the transportation industry, it's a devastating impact," says Chapman, whose organization serves Chambers of Commerce nationwide. "Truckers in Southern California are going into Mexico to buy diesel fuel. It's putting a big strain on employers: They're having problems with employees getting to work on time because they have to ride public transportation. And if U.P.S. starts charging more, that will hurt everyone."
Pingle of the University of Nevada agrees that small business is particularly vulnerable. "Smaller businesses tend to have less ability to fall back on capital retained from previous earnings or the ability to borrow their way through, so small businesses don't have as many options," he says.
In Woodstock, New York, Susan Roth and Jane Fine, co-owners of Petwatch Plus, are contemplating their third price increase in a little over a year. They have no choice-with 35 stops a day to care for animals ranging from horses to dogs to birds, the price of gas is the cost of doing business. Roth fears many customers will simply cut back on the service. "My fear right now is that people are not going to be able to afford to do this, and not only will it affect me and my co-workers, but I feel bad for the animals," she says. "We have to raise prices to operate."
In California, meanwhile, Rawls has no such option. His costs were built into his bids, and even were he able to submit a new one, he's doubtful he would raise it. Competition is too fierce, and most of his competitors are simply eating the extra gas costs.
"At this point, short of haggling with OPEC and the oil companies, there's nothing to do but pay it," Rawls says.
When he bids on jobs, he usually banks on transportation costs making up 1 percent of the contract. But with gas prices as high as they are, they now account for 1.5 percent, he says.
"That might not sound like a lot," he says. "But if you have a $3 million project, one-and-a-half percent is bad. That's $45,000. That can pay for my daughter's education at Santa Clara for a year."
Source: http://www.portfolio.com