The federal government failed to meet its goal of awarding 23 percent of its procurement dollars to small businesses, according to preliminary 2007 data.

The official numbers won't be released until August, but it appears small businesses received 22.1 percent of federal contracting dollars in 2007, said Calvin Jenkins, the Small Business Administration's deputy associate administrator for government contracting and business development.

That percentage was down from 2006, when small businesses' share was 22.8 percent, also short of the goal.

More money flowed to small businesses last year, however, because overall federal contracting increased to more than $436 billion.

Hitting the 23 percent goal was harder for agencies last year because they could no longer count contracts awarded to small businesses that were acquired by large businesses.

Until last year, agencies could count these awards as small business contracts for the life of the contract.

In addition, the SBA worked with federal agencies to improve the quality of contracting data.

In the past, billions of dollars were credited to small businesses for contracts that actually went to large businesses.

The SBA and the Office of Federal Procurement Policy removed $4.6 billion of miscoded contracts from the 2005 small business database, and the data scrubbing continued for the 2006 and 2007 goaling reports.

Agencies also were ordered to establish procedures for verifying contracting data and were graded on their efforts. This year, for the first time, they were required to certify the accuracy of their contracting data.

The SBA also asked large businesses to make sure none of their contracts was being counted as a small business contract.

These efforts to get the numbers right are having a "major effect" on agencies' ability to hit their small business goal, Jenkins said. Audit: Miscoding continues

A recent investigation of small business contracts at the Interior Department, found $5.7 million in contracts that were awarded to large businesses but were counted as small business contracts.

Recipients of these contracts included such well-known corporations as The Home Depot, Dell and Weyerhaeuser.

Counting these awards as small business contracts helped the agency achieve its small business goal in 2007.

The inspector general's report blames the errors on data entry mistakes, reliance on incorrect data and the failure to verify a company's size listing in the Central Contractor Registration, an online database of government contractors.

The CCR, for example, still listed subsidiaries of John Deere and Xerox as small businesses on July 14, two weeks after the inspector general's report was released.

"We are working to correct these issues," said Lynn Scarlett, deputy secretary of the Interior. Critic: Mistakes intentional

One Interior Department procurement official told investigators that "contracting officers often click through mindlessly when entering contracts" in the government's procurement data system.

Lloyd Chapman, president of the American Small Business League, doesn't think these mistakes are mindless, however.

"My opinion is they did that intentionally," Chapman said, in order to meet their small business goals.

As evidence, he points to the inspector general's finding that in a few cases contracting officers bypassed a procedure that would have automatically filled a contract's fields with the correct information.

Instead, they made their own determination about a company's size. Why would they do this extra work, Chapman asks, unless they wanted to inflate their small business contracting numbers?

Chapman contends this practice "is obviously not limited" to the Interior Department.

"The intentional diversion of federal small business contract dollars to Fortune 500 firms is a government-wide problem," he said.

The situation is much better, however, than it was five years ago, said Molly Brogan, vice president of the National Small Business Association.

The SBA deserves some credit for reducing the number of miscoded contracts and holding contracting officers more accountable, she said.

"Transparency has certainly increased," Brogan said. "At least they're being more open, honest and candid about what their problems are and where they are, and what their plans are to fix them." Quick info

Fortune 500 goes small

The Interior Department miscoded contracts to these Fortune 500 companies as small business contracts:

The Home Depot Inc. Dell Inc. Deere & Co. Weyerhaeuser Co. Xerox Corp. Waste Management Inc. Sherwin-Williams Co. McGraw-Hill Cos. Starwood Hotels & Resorts

Source:  www.msnbc.msn.com

BELCHERTOWN, Mass. - Small firms that want to do business with the federal government must keep three cardinal rules in mind: Location, location, location.

"Geography matters," says Sandy Levine, head of an Olney, Md.-based public relations firm.

Like many Beltway companies, Levine's 25-year-old business has prospered as the annual amount of federal contract work has soared to nearly a half-trillion dollars. Like many Beltway company owners, Levine said she can't imagine trying to land government jobs from outside Washington.

It's a sentiment Jonathan Spiegel ruefully acknowledges. Spiegel, head of ITO Consulting in Belchertown, Mass., is a long way from the nation's capital. Although his leadership development firm has been able to win a government contract here and there, Spiegel says it's never easy — and being so far from Washington makes it more difficult.

"For a small firm," he sighs, "it can be really challenging."

Federal contracting work has exploded in recent years. In 2000, the government paid companies about $200 billion to do its work. Within five years, that amount had roughly doubled, according to a June 2006 report by the House Government Oversight committee.

The AP analyzed 9 million domestic transactions worth nearly $1 trillion handed out from the 2004 through the 2007 budget years. About $212 billion of that went to small businesses, as classified by the General Services Administration — the agency that maintains most of the government's contract records.

Nearly $70 billion of the contract money awarded to small businesses stayed within 50 miles of the White House — even though those companies account for fewer than 2 of every 100 small firms in the United States, and the area encompasses about 0.2 percent of the nation's land area.

The Small Business Act requires the federal government to give at least 23 percent of contract dollars to small companies, but there's no requirement that contract dollars be awarded in any geographic pattern. The AP found wildly varying results among federal agencies:

_Nearly 40 percent of the EPA's contract dollars go to small businesses and of those, nearly 75 percent is spent outside the Washington area. Both figures are among the highest rates in the federal government.

Dale Kemery, a spokesman for the agency, said most EPA contracts are awarded to companies cleaning up Superfund sites, which are scattered around the country. In addition, he said, the EPA has purchasing centers not just in Washington, but in Cincinnati and Research Triangle Park, N.C.

_At the other end of the scale, the National Science Foundation kept more than 8 of every 10 small business dollars within 50 miles of the White House. Barely 14 percent of its roughly $1.1 billion in contracts awarded between 2004 and 2007 went to small businesses.

The NSF declined to comment.

Spiegel, the Belchertown consultant, said one of the biggest obstacles for his consulting group is figuring out what federal agencies need. The contract process generally begins when agencies issue a "request for proposal," or RFP. The request tells potential contractors what the government is shopping for.

Those requests, however, aren't always clear. For example, a Dec. 21, 2007, request by the Transportation Security Administration addressed the agency's need for a baggage screening and test facility at Ronald Reagan Washington National Airport in Arlington, Va. It wanted to hire a small business for the job.

Simple enough. But the government's 82-page outline of requirements contained a nearly impenetrable forest of jargon, at one point describing the need for the agency "to develop and evaluate concepts of operation, Measures of Performance (MOPs), and Measures of Effectiveness (MOEs) of individual systems, as well as fully integrated system-of-systems configurations."

The contract ultimately was awarded to the Vic Thompson Company, a Fort Worth engineering business with a field office in Washington.

The case illustrates another point about the Washington-centric nature of the process. The agency said questions about the proposal would be answered at a Washington meeting barely two weeks after a synopsis of the work was posted on a federal web site. Such meetings are helpful, but it's not always possible for small firms to drop everything and make it to them on short notice, Spiegel said.

"If you can get to the meetings," he said, "you're lucky."

In some cases, small businesses outside the capital are excluded from the bidding process entirely. One contract proposal for printing services released in late December 2007 by the U.S. Agency for International Development limited bidders to those within 50 miles of Washington.

A spokesman for the agency had no explanation. But USAID, which is best known for its overseas development work, has a middling record when it comes to small business contracting in its home country. About 40 percent of its $2.1 billion in contracts is spent on small firms, but 90 percent of that stays within the Washington area.

Indeed, navigating the twists and turns of the contracting process has become so frustrating to some small businesses that a cottage industry of consultants has sprung up to serve them. Patrick Malyszek, owner of an Endicott, N.Y.-based consulting firm that assists small firms, said companies that don't have Washington offices start at a disadvantage.

"It's a battle we fight quite often," he said.

___

On the Net:

American Small Business League,http://www.asbl.org

Federal Business Opportunities, http://www.fedbizopps.gov/

Small Business Administration, http://www.sba.gov

Source:  http://news.yahoo.com/s/ap/20080717/ap_on_go_ot/beltway_bandits