Commentary: SBA's data cannot be trusted
By Lloyd Chapman
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.