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.

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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

Federal procurement databases are still rife with examples of large businesses listed as small ones, despite repeated, well-publicized efforts to scrub the data, the Interior Department inspector general has found.

In a July 1 report, the IG said three divisions of Xerox Corp. were currently listed in the Central Contractor Registration as small businesses. Two of the divisions also showed up in CCR’s Dynamic Small Business Search.

John Deere Construction & Forestry, a division of John Deere Co., was identified as a small business in CCR, the Dynamic Small Business Search and the Online Registrations and Certifications (ORCA) database. The IG said the company claimed it qualified because it has fewer than 500 employees and less than $2 million in annual revenue, but its parent has $22 billion in annual revenue.

The IG found Dell Federal Systems GP LLC, a subsidiary of Dell Inc., was identified as a small business in its CCR registration. Its parent has more than $57 billion in annual revenue.

Contracting officers in all agencies rely on those databases to determine whether a company qualifies as small.

If companies misrepresent their eligibility for small business preferences, “that’s felony federal contracting fraud,” said Lloyd Chapman, president of the American Small Business League in Petaluma, CA. He has long contended that large companies are masquerading as small ones to take advantage of the preferences.

SBA and the Office of Federal Procurement Policy last year announced a major effort to improve the accuracy of contracting data. Agencies are now required to verify their reports to the Federal Procurement Data System-Next Generation. Then-SBA Administrator Steven Preston asked chief executives of up to 800 of the largest federal contractors to voluntarily correct records on any contracts that identify their corporations or subsidiaries as small firms.

SBA said a scrub of 2005 data found $4.6 billion in contracts credited to small business that actually went to large corporations. However, a study of the same data by the Democratic staff of the House Small Business Committee identified $12 billion going to companies erroneously counted as small. That is about 15% of all small business awards. (SAA, 8/31/07; 8/11/06)

The Interior IG examined the department’s 2006 and 2007 contracts, awarded after the data-scrubbing push began. In addition to the preceding examples, it found contracting officers had identified Home Depot, Waste Management Inc., McGraw-Hill, Sherwin Williams and Starwood Hotels as small in their official reports to FPDS. The auditors said about $5.7 million in contracts awarded to large businesses were counted toward the department’s small business goals in 2006 and 2007.

The IG’s findings indicate that some Interior Department contracting officers have ignored several directives since 2004, cautioning them to be more careful about the reporting of small business contracts. One contracting officer said, “If contracting officers did their job, [FPDS-NG errors] wouldn’t happen.” Another told the auditors, “Contracting officers often click through mindlessly when entering contracts in FPDS-NG.”

FPDS-NG, introduced in 2003, has many features that fill in forms automatically, to avoid data-entry errors. For example, when a GSA Schedule delivery order is entered into the system, it automatically determines whether GSA considers the contractor large or small. The IG said some contracting officers defeated that feature by entering GSA delivery orders as “purchase orders,” and filled in the small business block manually.

In other cases, the auditors found, GSA’s classification of a small business was wrong, but the contracting officer could not change it in FPDS-NG.

Both the Interior IG and SBA have blamed most of the misidentified contracts on data-entry errors.

Chapman, of the American Small Business League, charges the Bush administration is cooking the books to play down the problem. “What are the chances that it’s not just [happening] at Interior?” he asked in an interview. “This is just the tip of the iceberg.”

In May U.S. District Judge Marilyn Patel ordered SBA to turn over more than 10,000 pages of data listing the names of all firms that received federal small business contracts for fiscal years 2005 and 2006.

The Small Business League said its preliminary review indicates “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.”