Federal Times

October 27, 2008

In his Oct. 6 commentary, “Improving SBA data,” Calvin Jenkins, the acting associate administrator for the Small Business Administration’s Office of Government Contracting and Business Development, contends that SBA has made strides toward improving the accuracy, transparency and accountability of the federal government’s small-business contracting program. As president of the American Small Business League (ASBL), I disagree.

SBA says it is doing a great job, but small businesses across the country point to SBA’s inadequate responses to the problem of federal small-business contracts being diverted to large corporations.

Since the first federal investigation into the diversion of federal small-business contracts to large corporations in May 2003, 15 federal investigations have found that large corporations are the actual recipients of federal small-business contracts. A February 2005 report from the SBA Office of Inspector General stated, “One of the most important challenges facing the Small Business Administration and the entire federal government today is that large businesses are receiving small-business procurement awards and agencies are receiving [small-business contracting] credit for these awards.”

While SBA appears to have made an effort to remove large firms from federal small-business contracting data, rule changes made by SBA after 2006 have allowed the diversion of federal small-business contracts to large corporations to continue. On June 30, 2007, SBA enacted a rule change that will allow large corporations already in possession of federal small-business contracts to maintain those contracts through 2012.

This year, ASBL filed suit against SBA in the U.S. District Court for Northern California because the agency refused to release the names of firms that had received federal small-business contracts during fiscal 2005 and 2006. The court ruled in the ASBL’s favor, ordering the SBA to release the information. A review of the data by ASBL and two third-party experts uncovered discrepancies indicating that Bush administration officials manipulated the data to disguise the true volume of government small-business contracts that wound up in the hands of Fortune 500 corporations and other large businesses.

In his commentary, Mr. Jenkins stated that SBA itself awarded 69 percent of its contracts to small businesses during 2007. However, earlier reports show a different story. In a February 2005 report, the SBA inspector general found that of six high-dollar contracts examined, SBA awarded four contracts to large businesses. Among the companies SBA considered a small business is one of the largest corporations in Europe, Dutch conglomerate Buhrmann NV, which at the time maintained 26,000 employees, in 28 countries.

According to Mr. Jenkins, “miscodings and errors will not be eliminated from the federal contracting database. A number of factors contribute to coding errors, such as a contracting officer checking the wrong box or a small business failing to recertify itself after it is purchased by a large firm.”

I believe it is unacceptable that for the last five consecutive years, SBA has used miscoding or simple human errors as an excuse for the diversion of up to $100 billion a year in federal small-business contract dollars to large corporations. Additionally, it is unreasonable that nearly every mistake made by contracting officers in the last five years has resulted in the reporting of small-business contract awards to Fortune 500 corporations and their subsidiaries. There are no investigations or reports that show the contrary, small businesses being miscoded as large businesses.

In a March 2005 report, the SBA inspector general stated that large businesses were receiving small-business contracts through false and improper certifications. In July of this year, the Interior Department IG found that Interior had misstated achievement of its small-business goals by including Fortune 500 companies. Additionally, the report found that despite specific training, Interior contracting officers erroneously recorded contracts to large businesses as small-business contracts. During 2006 and 2007, Interior reported millions of dollars in contracts to Fortune 500 corporations such as Dell, GTSI, Home Depot, John Deere, McGraw-Hill, Ricoh, Sherwin Williams, Starwood Hotels, Waste Management Inc., Weyerhaeuser, World Wide Technology and Xerox Corp. as small-business contracts.

SBA can no longer be trusted to provide the American people with an accurate account of the actual recipients of federal small-business contracts.

Lloyd Chapman is the president of the American Small Business League.

Source:  http://www.federaltimes.com/index.php?S=3787475

Washington - Independent presidential candidate Ralph Nader said Friday that liberal Americans have settled for the Democratic presidential candidate Barack Obama in the presidential race.

In the "two-party prison," Nader said liberals and progressives rally behind Obama's campaign without asking him to change his stance on issues to help workers rather than corporations.

"Domestically, Obama has never been associated to a comprehensive program for the bottom Americans," Nader said. "All he talks about is the middle class."

Nader said that, rather than take a look at his campaign, some organizations endorsed Obama because they considered him the more viable candidate.

Critics say Nader was a spoiler in 2000 and 2004 elections when he has previously run, particularly by pulling votes away from Democratic candidate Al Gore in 2000.

So far, his campaign with vice presidential candidate Mike Gonzalez has raised $4 million, as much as the Obama campaign raises in a day, Nader said.

•  A new economic stimulus plan not needed -- if

•  ‘Enforce existing laws and end fraud and abuse’

A small business advocacy group says fixing fraud and closing loopholes in the federal government’s small business contracting programs would immediately boost the nation’s middle class economy.

The American Small Business League points to “over a dozen” federal investigations since 2003 have found billions of dollars in federal contracts earmarked for middle class firms instead diverted to Fortune 500 companies.

A new economic stimulus plan might not be needed if the loopholes were closed and the federal money actually went to small businesses, the ASBL contends.

“The fastest and simplest way to stimulate the middle class economy is to enforce existing laws and end fraud and abuse in the existing federal programs to assist small businesses,” the Petaluma-based organization says.

In his Oct. 6 commentary, “Improving SBA data,” Calvin Jenkins, the acting associate administrator for the Small Business Administration’s Office of Government Contracting and Business Development, contends that SBA has made strides toward improving the accuracy, transparency and accountability of the federal government’s small-business contracting program. As president of the American Small Business League (ASBL), I disagree.

SBA says it is doing a great job, but small businesses across the country point to SBA’s inadequate responses to the problem of federal small-business contracts being diverted to large corporations.

Since the first federal investigation into the diversion of federal small-business contracts to large corporations in May 2003, 15 federal investigations have found that large corporations are the actual recipients of federal small-business contracts. A February 2005 report from the SBA Office of Inspector General stated, “One of the most important challenges facing the Small Business Administration and the entire federal government today is that large businesses are receiving small-business procurement awards and agencies are receiving [small-business contracting] credit for these awards.”

While SBA appears to have made an effort to remove large firms from federal small-business contracting data, rule changes made by SBA after 2006 have allowed the diversion of federal small-business contracts to large corporations to continue. On June 30, 2007, SBA enacted a rule change that will allow large corporations already in possession of federal small-business contracts to maintain those contracts through 2012.

This year, ASBL filed suit against SBA in the U.S. District Court for Northern California because the agency refused to release the names of firms that had received federal small-business contracts during fiscal 2005 and 2006. The court ruled in the ASBL’s favor, ordering the SBA to release the information. A review of the data by ASBL and two third-party experts uncovered discrepancies indicating that Bush administration officials manipulated the data to disguise the true volume of government small-business contracts that wound up in the hands of Fortune 500 corporations and other large businesses.

In his commentary, Mr. Jenkins stated that SBA itself awarded 69 percent of its contracts to small businesses during 2007. However, earlier reports show a different story. In a February 2005 report, the SBA inspector general found that of six high-dollar contracts examined, SBA awarded four contracts to large businesses. Among the companies SBA considered a small business is one of the largest corporations in Europe, Dutch conglomerate Buhrmann NV, which at the time maintained 26,000 employees, in 28 countries.

According to Mr. Jenkins, “miscodings and errors will not be eliminated from the federal contracting database. A number of factors contribute to coding errors, such as a contracting officer checking the wrong box or a small business failing to recertify itself after it is purchased by a large firm.”

I believe it is unacceptable that for the last five consecutive years, SBA has used miscoding or simple human errors as an excuse for the diversion of up to $100 billion a year in federal small-business contract dollars to large corporations. Additionally, it is unreasonable that nearly every mistake made by contracting officers in the last five years has resulted in the reporting of small-business contract awards to Fortune 500 corporations and their subsidiaries. There are no investigations or reports that show the contrary, small businesses being miscoded as large businesses.

In a March 2005 report, the SBA inspector general stated that large businesses were receiving small-business contracts through false and improper certifications. In July of this year, the Interior Department IG found that Interior had misstated achievement of its small-business goals by including Fortune 500 companies. Additionally, the report found that despite specific training, Interior contracting officers erroneously recorded contracts to large businesses as small-business contracts. During 2006 and 2007, Interior reported millions of dollars in contracts to Fortune 500 corporations such as Dell, GTSI, Home Depot, John Deere, McGraw-Hill, Ricoh, Sherwin Williams, Starwood Hotels, Waste Management Inc., Weyerhaeuser, World Wide Technology and Xerox Corp. as small-business contracts.

SBA can no longer be trusted to provide the American people with an accurate account of the actual recipients of federal small-business contracts.

Lloyd Chapman is the president of the American Small Business League.

Talk to people inside the SBA and theyll say the agency is poised to emerge from several trying years of restructuring a stronger, business-friendlier organization.

The last two years have been a time of aggressive reform to make the SBA easier to work with, easier to get information from, says Sean Rushton, the agencys head of communications. Now we are actually beginning to see measurable results from those changes.

Then there are SBA critics like Sen. John Kerry (D-Mass.), who, as chairman of the Committee on Small Business and Entrepreneurship, contends the agency, under President George W. Bush, has lost its relevance as a small business ally.

Because of insufficient funding and little oversight, the SBA has failed small businesses time and time again, Kerry says. While the Bush administration touts itself as pro-business, theyve used their final year in office to put forth a [2009] budget that would cut the SBAs funding by nearly 30 percent from when they took control, raised the fee on its largest loan program, and are doing little to help underserved entrepreneurs in the midst of a nationwide economic crisis.

To say SBA programs are embattled is an understatement. No federal agency has endured deeper budget cuts under Bushs watch, Kerry says.

Acting administrator Sandy K. Baruah, who was appointed by Bush this summer, has not been confirmed by Congress and is likely keeping the chair warm for whomever the next president appoints to the post.

Meanwhile, the agency remains a scapegoat for what critics like Kerry and Lloyd Chapman, president of the Small Business League of America, claim is outright neglect of small business by the Bush administration.

Then there are the lawsuits, some of which stem from allegations that under the SBAs watch, a significant percentage of federal small business contracts have been wrongfully diverted to major corporations via their smaller subsidiaries.

The SBA has faltered time and time again in guaranteeing [small businesses] equal access to [government] contracts, Kerry says.

The agency has also had to deal with unfavorable attention for its sluggish performance during the Hurricane Katrina relief effort. Those issues apparently took an internal toll. A 2006 government audit placed the SBA last among 30 federal agencies for worker morale.

To Chapman, whose legal clashes with the SBA and the Bush administration are extensive and ongoing, these are signs of an agency that, after 55 years, is headed toward marginalization, if not outright dismantlement.

George Bush intends to starve the SBA to death, he says, and end all programs for the little guy.

Soon, however, the fate of the SBA will rest in the hands of Bushs successor in the White House. Whether thats Sen. John McCain or Sen. Barack Obama, Kerry says one of the top SBA-related issues on his agenda when Congress reconvenes in early 2009 is to strengthen programs aimed at groups he claims have been underserved by the agency: minorities, veterans, rural and urban firms, and women.

Procurement rules adopted recently by SBA, he says, have seriously harmed women-owned firms. Another of Kerrys priorities is to expand small business access to affordable credit by lowering the fees associated with SBAs 7(a) and 504 loan programs, the largest sources for long-term small business financing. Chapman, like Kerry, says it's also vital to halt the alleged diversion of small business contracts to Fortune 500 companies.

To accomplish all that, Chapman says the SBA needs a major funding infusion. Depending on the source, the agencys core budget has either remained stable (as Rushton claims) or been slashed by anywhere from 30 percent to 50 percent (as Kerry and Chapman contend) during Bushs two terms as president.

The Bush administrations core budget request for the SBA in 2009 is $382 million, according to Rushton. For the SBA to again be a force on behalf of small business, that figure needs to be closer to $5 billion, Chapman says.

Does an agency that is clearly in flux have the wherewithal to help the little guy with loans and other forms of support that many of them desperately need in todays turbulent economic environment? Rushton says so. Thanks to reforms at the agency, he says, SBA loan programs are now more efficient and accessible. Entrepreneurs can tap the basic 7(a) program for loans of up to $2 million and the 504 program for loans of up to $4 million (the latter is focused on fixed-asset loans for larger capital improvements). Meanwhile, he counts other, more targeted programs such as the Patriot Express loan initiative for veterans, as among the SBAs recent successes.

Also new at SBA are the Emerging 200 initiative to help inner city small businesses grow, and the Small/Rural Lender Advantage initiative, which is designed to make it easier for small and rural lending institutions to participate in SBA loan programs.

With change coming in Washington, and atop the SBA, time will tell whether those programs--and the SBA itself--will flourish in years to come.

Editor's note: This is the first in a series of stories on the SBA. Come back Nov. 26 for the next installment.