Small Business Federal Contract Diversion


Small Business Federal Contract Diversion

By Minara El-Rahman
December 30, 2009

While Congress is trying to ensure that Main Street gets some relief from the recession with some stimulus bills in the works, there are plenty of small business interest groups who complain that all of the bills fail to address one major issue: diversion of small business federal contracts to big business. They claim that government federal contracts that belong to small businesses have been awarded to big businesses that should not be receiving the contracts to begin with. 

The American Small Business League's press release calls the proposed legislation to help small businesses a "sham." The press release goes on to state that the $100 billion dollars a year in small business federal contracts have somehow been diverted to large corporations. It uses strong language to describe how the proposed legislation does little to stop the "widespread fraud, abuse and loopholes in small business contracting programs, which continue at the cost of countless jobs every year."

There was proposed legislation called the Fairness and Transparency in Contracting Act of 2009. That bill would have stopped the flow of $100 billion dollars a year in government federal contracts to big businesses. It would also double the volume of federal small business contracts to every state in the country since a majority of small business government contracts are awarded to firms in the Washington, DC area at the moment.

According to the Open Congress website, the bill would amend the Small Business Act to exclude as a small business, for purposes of meeting federal agency contracting goals with small businesses, any small business (or subsidiary thereof) that is publicly traded, or any business (or subsidiary thereof) with more than 50% non-U.S. citizen ownership.

It would require the Administrator of the Small Business Administration (SBA) to notify the head of each federal department or agency regarding this Act and its amendments, and the department or agency head to then notify its contractors. It also requires that the SBA Administrator publish a report of who is awarded government federal contracts and to establish penalties for companies that misrepresent that they are a small business in order to get a small business federal contract.

Currently the Fairness and Transparency in Contracting Act of 2009 has been referred to the Subcommittee on Contracting and Technology since May 21, 2009. Stay tuned to see if and when the proposed bill will be passed. In the meantime, please visit our Related Resources links in order to see how your small business can score small business federal contracts.


Helping hand for small businesses


Helping hand for small businesses

By Jeremy Hay
The Press Democrat
December 25, 2009

In January, with the economy in near freefall, customer calls to Luxury Products dropped from 200 a month to just one.

“Business stopped, literally stopped,” said Chris Welch, CEO of the Santa Rosa-based designer of custom appliances.

The company turned to its cash reserves and credit lines but bankers then froze all its credit lines, Welch said, and some asked to be repaid right away.

Welch did what he had to.

“When cash flow stops, the first thing you do is lay off employees,” he said.

Turned down for more credit at local banks, he looked to the U.S. Small Business Administration, which under the American Recovery and Reinvestment Act received $375 million and altered conditions of its key loan programs in a bid to restart small-business lending.

Luxury Products was approved for a $139,000 SBA loan. The money allowed the company to move forward until business revived — and Welch rehired the two employees he'd laid off, a marketing and Web site manager and an operations manager.

“It wasn't a massive loan, but it really was,” he said. “It allowed us not to live on just our own internal cash, and it allowed us to expand ... to invest in the marketplace to add market share.”

Since the federal stimulus act passed in February, the SBA has guaranteed 59 loans amounting to $25 million in Sonoma County, agency records show. Those loans have ranged in size from $7,500 to $1.6 million, and have gone to borrowers ranging from jewelers to wine bottlers.

California companies have received 3,892 SBA recovery loans valued at a total of $2.75 billion through the agency's two main loan programs, according to Mike Stamler, an SBA spokesman.

“The SBA is the best thing going right now,” said Gene Crozat, owner of G&C AutoBody, which used a $1.6 million recovery loan to help finance a new Sonoma County shop.

The total value of the local recovery loans is small relative to the county's $21 billion economy — and some critics say it is far from enough.

“Those are good steps but from our perspective it's not doing a ton to assist small businesses who are still unable to obtain loans,” said Chris Gunn, spokesman for the American Small Business League, an advocacy group in Petaluma.

But for the broad stripe of small businesses that have been able to get them, the loans have meant the difference between growing or shrinking, opening or, perhaps, closing.

“It was a stimulus,” said Mara Shepard, a jeweler whose $389,700 SBA loan enabled her to open a jewelry store at Coddingtown Mall. “It worked in my case.”

Shepard was trying to buy her former employer, the Earthworks jewelry shop — which had shut its doors — when the economic crisis closed off lending streams.

“It was not looking good,” Shepard said of her prospects of getting the financing she needed.

Her banker suggested she pursue a recovery loan. She was approved, the SBA waived about $9,000 in application fees and, in September, just in time for the holiday season, Shepard opened her doors.

“I was able to bring four people besides myself back from unemployment and bring some part-time people back too,” she said.

In Petaluma, Wally Stevensen turned to the SBA for a $349,300 Recovery Act loan to refinance his downtown Petaluma Collective building, which houses a military antiques store and museum and a collective of 20 antiques dealers.

He said he'd struggled to get the financing — despite having perfect credit — and in the end went to a Sacramento bank for help obtaining the SBA loan.

“Everyone at the time was tightened up,” he said. “If we didn't have the loan I don't know what we would have done — I guess they would have foreclosed on us.”

This week, President Obama signed a defense appropriations bill that included an additional $125 million for the SBA to continue its “enhanced” lending programs. The agency estimates that will generate $4.5 billion in small business lending.

The SBA doesn't lend money directly; it guarantees portions of private bank loans. Under the Recovery Act, the SBA waived or lowered fees on those loans and increased the amount of a loan it would guarantee to 90 percent from 75 percent.

That reduces the risks to banks, making it easier for them to lend to businesses that, due to declining revenues, for example, may be less attractive borrowers in a recession.

“By allowing us to get back in there and do deals that we haven't been able to do, this SBA program allows us to say, ‘Okay, let's go,'” said Tony Ghisla, senior loan officer at Exchange Bank.

The Santa Rosa bank in October opened a new department devoted to making SBA 7a loans — the agency's largest loan program.

“The opportunity for us to work with our businesses is certainly enhanced through the SBA operation,” said Bill Schrader, the bank's president. “It allows us to put together some practical solutions and start moving our economy forward.”

Economists say it's one of the more effective aspects of the targeted stimulus spending.

“It's a good way of using federal stimulus money because it's put to work immediately,” said Robert Eyler, director of the Center for Regional Economic Analysis at Sonoma State University.

From tourism to high-tech, “small business plays a really important role in Sonoma County just because of the structure of the economy,” said Steven Cochrane, managing director at Moody's

But those businesses are often first to feel the vise of tightening credit markets, he said.

“A larger public company can go to the credit market or the equity market,” he said. “A small company just doesn't have any alternatives. They have to go to the bank downtown, and when they clamp down there often is really no other alternative.”

At the height of the credit crunch, “banks had just tightened up credit unbelievably,” said Crozat, of G&C AutoBody, which has three shops and 53 employees. Seeing in the recession an opportunity to expand at a lower cost, Crozat wanted financing to open a new body and fender repair shop — but he was having trouble securing it all.

He turned to the SBA and was approved for a 20-year $1.6 million loan, with $24,000 in fees waived under the Recovery Act. He said he expects to save about $5,000 a month in payments under the loan terms.

“It's a hell of a deal. It made such a significant difference, it's a godsend, a blessing,” Crozat said. The new G&C shop — developed at a total cost of about $7 million — should open in May in Windsor, and will employ about 25 people, he said.

At Top It Off Bottling, a mobile wine bottling company with about $1.5 million in annual revenues, a $932,000 SBA loan was used to reorganize capital, lower debt payments and buy equipment, said Randy Ramos, a company partner and vice president.

Those changes helped the privately-held Sonoma-based company to hire a new full time bottler — at a salary of between $60,000 and $80,000 a year — and keep two bottlers employed, Ramos said.

At about the time Ramos' company was getting its loan, a retired Texas businessman was applying for an SBA loan to help buy the historic Applewood Inn, a Guerneville bed and breakfast and restaurant.

“We decided that it would be a good avenue to pursue, that the banker would be much more interested in the loan if they were partnering with the SBA and only sharing some risk,” said Carlos Pippa, who bought the inn in November.

He was approved for a $1.05 million loan that helped leverage the rest of his $3.5 million loan from the Sonoma County-based Redwood Credit Union.

“We do plan to grow the business,” Pippa said, “so this would stimulate jobs. And I think it would have been difficult under the present lending conditions to obtain the total package from the bank.”

Redwood Credit Union vice president of business services Michael Downey wouldn't speak specifically to Pippa's loan. But, he said, “It's obviously been a really challenging year for the credit markets in general, and lenders did in many cases pull back.”

“In an economy like this,” Downey said, “it's not unreasonable to find that lenders may find it more difficult to find creditworthy borrowers.”

But the Recovery Act provision to waive fees made loans more affordable, effectively making credit cheaper, he said. Together with the higher loan guarantees, “in some cases, it may have been the difference in being able to qualify” loan applicants, he said.

From November 2008 to this October, the credit union issued 16 SBA loans totaling $8.3 million; about 90 percent of those were Recovery Act loans, Downey said.

“In many cases these are loans that could not have been done without the SBA loan program and the further enhancements that were offered by the Recovery Act,” he said.


U.S. Chamber of Commerce Winner of National 'Scrooge of the Year' Award While Its CEO Tom Donohue Me


U.S. Chamber of Commerce Winner of National 'Scrooge of the Year' Award While Its CEO Tom Donohue Me

By Staff
December 25, 2009

Each year, the national organization Jobs with Justice gives an 'award' to the greediest, most cold-hearted company or person to be its "Scrooge of the Year." This year, the U.S. Chamber of Commerce found itself in the final five for the National Scrooge Award, and, after thousands of voters were counted, the Chamber won by a large margin.


As Jobs with Justice says, "This Scrooge likes you to think it is the voice of American business. But in reality, the U.S. Chamber of Commerce -- and its CEO Tom Donohue -- are pushing a narrow, radical agenda. It's becoming increasingly clear that the Chamber has become a front group for a few narrow interests, not a membership association that represents the voice of mainstream American businesses. And it is increasingly at odds with both small and green businesses. The U.S. Chamber of Commerce often says it speaks for 3 million members, businesses both large and small. What it doesn't promote as readily is that 19 supporters last year provided a third of the trade group's total revenue. The bottom line? The Chamber is the ultimate Scrooge. Not only will Tom Donohue fight hard to put a lump of coal in your stocking at taxpayer expense, but it will claim that the lump of coal represents the voice of American business and is good for you."

"There was plenty of competition for the award this year," said Jobs with Justice Executive Director Sarita Gupta, "but the similarities between Scrooge and the Chamber of Commerce were hard to beat. The ghost of years past would show that the policies they've promoted including deregulation and maximizing profits at the expense of workers are directly connected to the destruction of America's middle class."

Tom Donohue has been palling around with the president of China in order to promote the outsourcing of American jobs. As Mr. Donohue told the publication Venture Outsource, outsourcing is good for business and the Chamber is "fighting to preserve their right to [outsource]."

Stop The Chamber,, a campaign by, is working to expose the extremist agenda of the Chamber and its CEO. "Congress should investigate their claim that the Chamber represents the views of American business owners," said Stop The Chamber spokesperson Kevin Zeese. "The vast majority of small and large businesses do not support the Chamber's radical polices against health care for all, environmental protection, and financial regulation. In fact, Chamber polices are determined by a select few big business insiders without any board or membership approval. And we know that those insiders are controlled a mere handful for the worst polluters, robber barons, and failures in modern history. With millions of Americans out of work, it is outrageous that the Chamber is going to Communist China to outsource jobs and spending $100 million to oppose initiatives that will help every American citizen."

Stop The Chamber urges every concerned American to join our call for a federal criminal investigation into the actions of the Chamber and the Chamber CEO, Tom Donohue. People who sign on at will also ask member companies to quit the Chamber and Congress to hold hearings on the Chamber's misrepresentations, controlling donors, and unethical conduct.


General Dynamics cashes in on $30m 'small business' contract


General Dynamics cashes in on $30m 'small business' contract

By Staff
Procurement Leaders
December 23, 2009

The US government has been accused of awarding a $28.5m business contract reserved for a "small business" to the Fortune 500 firm General Dynamics.

The American Small Business League (ASBL) claims that the most recent data from the Federal Procurement Data System - Next Generation (FPDS-NG) shows that General Dynamics is "just one of hundreds of corporate giants" that are currently receiving federal small business contracts from the Obama administration.

Since 2003, twenty-five federal investigations have uncovered the diversion of billions of dollars a month in federal small business contracts to corporate giants, ASBL argues.

The pressure group notes that, in Report 5-15, the Small Business Administration Office of Inspector General (SBA OIG) referred to the issue as: "One of the most important challenges facing the Small Business Administration and the entire federal government today."

According to ASBL, more than $100 billion in federal small business contracts are diverted annually away from legitimate small businesses and into the hands of some of the largest corporations in the world. The most recent data, it claims, shows that firms counted as small businesses included: Xerox, Bechtel, Lockheed Martin, Boeing, Raytheon, Northrop Grumman, British Aerospace (BAE) and Ssangyong Corporation.

"In May of 2009, Congressman Hank Johnson (D-4-GA) introduced H.R. 2568, the Fairness and Transparency in Contracting Act. If passed the bill would halt the flow of federal small business contracts to large businesses and redirect more than $100 billion a year in federal infrastructure spending to legitimate small businesses," according to ASBL.


House Jobs Bill Falls Short of Real Solutions

Press Release

House Jobs Bill Falls Short of Real Solutions

House Stimulus Bill Criticized for Being a Sham

December 21, 2009

Petaluma, Calif. - Leaders from the U.S. House of Representatives have narrowly passed a, "Jobs for Main Street Bill," and once again failed to heed strong recommendations from America's 27 million small businesses.  The bill has drawn strong criticism from both Republicans and Democrats:

"As the old axiom goes, the definition of insanity is doing the same thing twice and expecting different results.  With that in mind, it's astounding Speaker Pelosi would repeat the same mistakes with her second stimulus as she did with her first."
-  Congressman Aaron Schock (R-IL), December 16, 2009

"I believe Congress must continue taking strong action to create jobs, but any jobs package should have significant support for small businesses. I have been arguing for months that expanding small business lending is critical to getting our economy moving again, and this bill should have had far more small business support."
- Congressman Gary Peters (D-MI), December 16, 2009

Congress' jobs bill, H.R. 2847, allocates $75 billion in redirected TARP funds for "targeted investments."  However, the bill fails to address the diversion of more than $100 billion a year in government small business contracts away from legitimate small businesses and into the hands of corporate giants.  The American Small Business League (ASBL) maintains that the House's bill does little to address widespread fraud, abuse and loopholes in small business contracting programs, which continue at the cost of countless jobs every year. 

According to the U.S. Census Bureau, small businesses are responsible for more than 50 percent of America's Gross Domestic Product (GDP), 50.2 percent of the non-farm private sector work force and more than 97 percent of all net new jobs.  A recent study from the Kauffman Foundation found that firms less than five-years-old are responsible for nearly all net new jobs. 

"If Congress wanted to pass a jobs bill, it would pass H.R. 2568, the Fairness and Transparency in Contracting Act of 2009. That bill would redirect more than $100 billion a year in federal infrastructure dollars to small businesses directly," ASBL President Lloyd Chapman said. "Congress' latest blunder is a one time hit, and a repeat of an already failed attempt to stimulate the economy. The Fairness and Transparency in Contracting Act is the simplest and most effective stimulus proposed to date and would continue to help small businesses year-after-year."

The House's, "Jobs for Main Street Bill," allocates less than 2.5 percent of the total volume of stimulus dollars invested by the government to small businesses which create virtually 100 percent all net new jobs.