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Government Loophole Will Slow Economic Recovery for Middle Class America

by | Aug 26, 2009 | Press Release

Press Release

Government Loophole Will Slow Economic Recovery for Middle Class America

August 26, 2009

Petaluma, Calif. - A loophole created by the federal government is having a significant negative impact on the economic recovery of middle class America. The latest U.S. Census Bureau data shows that 98 percent of all U.S. firms have less than 100 employees. These firms employ over 50.2 percent of the private sector work force, create over 97 percent of all net new jobs and generate over 50 percent of the Gross Domestic Product (GDP).

Federal law stipulates that 23 percent of the total value of all federal contracts awarded each year shall go to small businesses.

With the annual federal acquisition budget hovering around $700 billion, the nation's 27 million small businesses should be able to count on approximately $161 billion a year in federal contracts being channeled into the middle class economy. 

Unfortunately, the federal government has created colossal loopholes that have diverted the vast majority of federal small business contracts away from middle class America and into the hands of many of the largest firms in the world.

The federal government adopted a policy, which allowed large businesses to acquire a small business and retain that firm's small business status for 20 years. A reporter from CBS forced this out of an SBA official in a 2004 interview. In July of 2007, the Small Business Administration (SBA) implemented a rule change requiring 5-year recertification of small business status.  This rule change "grandfathered" large businesses currently receiving federal small business contracts into the government's contracting data.  As a result, the overwhelming majority of federal contracts intended for American small businesses will be diverted to Fortune 500 firms and thousands of large businesses around the world until the year 2012.

Last week, the Obama Administration released the latest data on federal contracts awarded to small businesses. The top recipient of federal small business contracts was Textron. Textron is a Fortune 500 firm with 43,000 employees and over $14 billion in annual sales. Their AAI division received $775,773,505 in small business contracts during fiscal year (FY) 2008. (https://www.asbl.com/documents/20090821Top100SBContracting%20Numbers2008.pdf)  

Other firms receiving federal small business contracts included, British Aerospace (BAE), Lockheed Martin, Boeing, Raytheon, GTSI, L-3 Communications, Northrop Grumman, Booz Allen Hamilton, General Dynamics, 3M Company, Hewlett-Packard, AT&T, Dell Computer, Staples, Office Depot, Xerox, General Electric, Rolls-Royce and French firm Thales Communications. Finmeccanica SpA in Italy with more than 73,000 employees received $273,872,995 in small business contracts; Ssangyong Corporation in Seoul, South Korea received $254,149,950 in federal small business contracts. (https://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)  

The American Small Business League (ASBL) estimates that over $100 billion a year in federal contracts that by law should go to middle class firms are diverted to worldwide corporate giants. (www.asbl.com)

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Please click here to watch our response to the Obama Administration's small business contracting statistics: http://www.youtube.com/watch?v=oV0jeTrYPsM

 

 

US Small Businesses Slam Clean Tech Funding "PR ploy"

by | Aug 25, 2009 | ASBL News

News

US Small Businesses Slam Clean Tech Funding "PR ploy"

New $37 million grant scheme for clean tech-focused small businesses dismissed as a drop in the ocean

By Danny Bradbury
Businessgreen.com
August 25, 2009

US small businesses have been left largely unimpressed by a new Department of Energy initiative that has seen millions of dollars in stimulus package funding for earmarked for small businesses prepared to tackle environmental problems.

Energy Secretary Stephen Chu this week announced $37 million in grant money, to be made available under the Department's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) initiatives.

The funds will be made available to small businesses researching solutions in clean technologies, such as power plant cooling, advanced solar technologies, and smart controllers for smart grid applications.

Over $8 million in funds will be made available in the first phase of the initiative, the submission deadline for which is September 4. Each successful applicant could receive grants of up to $150,000 to help demonstrate the commercial viability of their technology.

However, small business groups highly critical of the initiative, arguing that even for smaller firms the sums on offer were unlikely to make a significant difference.

Lloyd Chapman, founder of the American Small Business League, argued that the new funds were little more than a drop in the ocean, pointing out that small businesses have so far received roughly 0.5 per cent of the $7.8 trillion made available by the American Recovery and Reinvestment Act in February.

"Half a percent seems staggeringly low to me, and this Department of Energy money is what I would call statistically insignificant," he said. "It's a public relations ploy."

Chapman added that there was a strong case for smaller businesses to receive a larger chunk of the DoE's stimulus funding, pointing out that small businesses are responsible for 97 per cent of new jobs and 50 per cent of gross domestic product in the US.

Source: Businessgreen.com

Obama Administration Juggles the Books to Shortchange Small Businesses Out of Billions

by | Aug 25, 2009 | Press Release

Press Release

Obama Administration Juggles the Books to Shortchange Small Businesses Out of Billions

August 25, 2009

Petaluma, Calif. - The Obama Administration released its latest small business contracting statistics on August 21, claiming that the federal government awarded 21.5 percent of federal contracts to small businesses. (https://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)  

The American Small Business League (ASBL) has uncovered information within the Federal Procurement Data System - Next Generation (FPDS-NG), which indicates that the government actually did closer to 7 percent with small businesses.

Since 2003, over a dozen federal investigations have found that federal officials consistently inflated the government's actual small business contracting data, and allowed billions of dollars in federal contracts intended for small businesses to be diverted to corporate giants.

One technique used by the government to misrepresent compliance with the congressionally mandated 23 percent small business contracting goal was to create the term, "small business eligible." Using this technique, government officials subtract larger federal prime contracts from the overall federal acquisition budget. Reducing the actual federal acquisition budget significantly inflates the percentage of all federal contracts awarded to small businesses.

The ASBL points out that excluding large contracts as not being "small business eligible" is not supported by any statute of the law, and is contrary to the actual language of the Small Business Act which states, "The Government-wide goal for participation by small business concerns shall be established at not less than 23 percent of the total value of all prime contract awards for each fiscal year." (http://www.sba.gov/regulations/sbaact/sbaact.html) The ASBL estimates that the actual federal acquisition budget for 2008 was approximately $700 billion. The SBA used a figure of $434 billion to arrive at the 21.5 percent number. (http://www.sba.gov/idc/groups/public/documents/sba_homepage/fy2008official_goaling_report.html)  

Another technique, uncovered in federal investigations and used by government officials to misrepresent the actual percentage of federal contracts awarded to small businesses, is to include billions of dollars in contracts to Fortune 500 firms and hundreds of other large businesses as small business awards.

Some of the firms Obama officials used to reach the government's 21.5 percent figure included Lockheed Martin, Textron, Boeing, Raytheon, L-3 Communications, Northrop Grumman, Dell Computer, General Dynamics, Office Depot, Xerox, 3M, Staples, GTSI, General Electric, AT&T, Hewlett-Packard, British Aerospace (BAE), Rolls-Royce, French giant Thales, Ssangyong Corporation headquartered in Seoul, South Korea and Finmeccanica SpA which is located in Italy with 73,000 employees.

In response to the SBA's release of its 2008 small business goaling report, the ASBL conducted a detailed analysis of small business contracting data obtained from FPDS-NG.  By excluding the large recipients of federal small business contracts and using the actual federal budget from fiscal year 2000 forward, the ASBL has estimated that legitimate American small businesses have lost an average of approximately $100 billion a year in government small business contracts.

A new bill titled the "Fairness and Transparency in Contracting Act," or H.R. 2568 has been introduced into the House of Representatives would redirect billions of dollars in federal small business contracts back to legitimate American owned small businesses.

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Please click here to watch our response to the Obama Administration's small business contracting statistics: http://www.youtube.com/watch?v=oV0jeTrYPsM

Contact:
Christopher Gunn
Communications Director
American Small Business League
cgunn@asbl.com
(707) 789-9575


The S.B.A. Puts the Best Face on Small-Business Contracting

by | Aug 24, 2009 | ASBL News

News

The S.B.A. Puts the Best Face on Small-Business Contracting

By Robb Mandelbaum
The New York Times
August 24, 2009

The Small Business Administration took a victory lap Friday in the press release (pdf) that accompanied its annual scorecard rating the government on awarding contracts to small firms. In fiscal year 2008, which ended last Sept. 30, “small businesses won a record $93.3 billion in federal prime contracts,” the agency said, “an increase of almost $10 billion from 2007.” Moreover, “small disadvantaged businesses, women-owned businesses and service-disabled veteran-owned businesses increased their share of federal contracting dollars by at least $1 billion to $3 billion.”

That’s the S.B.A. for you, always bringing the good news. The whole story is, of course, more complicated and less complimentary to the bureaucracy. Here’s your annotated fact-check:

Though small-business contracting grew, the federal government fell short of its goals. The law of the land sets a goal — not a requirement — that the federal bureaucracy as a whole award at least 23 percent of prime contract dollars to small firms. Within that figure, there are sub-goals for disadvantaged small businesses (5 percent), small firms owned by women (5 percent) and service-disabled veterans (3 percent), and firms located within distressed areas known as HUBZones (3 percent). The S.B.A. negotiates with each agency to establish its individual goals.

In 2008, nominal small-business contracts accounted for just 21.5 percent of all eligible contract dollars. Not only is that below the goal, it’s worse than in 2007, when small businesses received 22 percent of the dollars. The federal government as a whole hasn’t met this goal since 2005.

In three of the four sub-goals, government agencies mostly made progress but still fell well short of the target. Only among “small disadvantaged businesses” did the government meet its goal — and actually exceeded it. But even that comes with a caveat: a provision of the law allows agencies to count as small disadvantaged business contracts deals made with large corporations owned by Alaska Natives. (And those companies are typically managed by well-paid white men, often veterans of government procurement.)

The figures are inflated because much federal spending is excluded from the goal calculation. Among such expenditures are purchases paid out of user fees or other operating funds (think the post office), instead of from Congressional appropriations. Agencies that don’t follow the standard acquisition regulations, such as the Federal Aviation Administration and the Transportation Security Administration, are also excluded. Nor are international contracts counted, which makes the dismal small-business performances turned in by the State Department and the United States Agency for International Development look even worse.

“Small businesses play a very important role in some of these categories, including foreign military sales and contracts performed overseas,” says Paul Murphy, whose Eagle Eye Publishers, of Fairfax, Va., analyzes federal procurement data. Mr. Murphy has been able to add some of the exclusions back in and found that they totaled $80 billion — which drops the small-business share of the expanded contracting pie to just over 19 percent.

Contracts to giant conglomerates are often counted as small-business contracts. According to data from July compiled by Eagle Eye, the No. 2 “small business” contractor in 2008 was Textron, a Fortune 500 company with $14. 2 billion in sales and 37,000 employees. No. 8 is QinetiQ, a British company — that that doesn’t seem right, does it? — with $2.3 billion in global revenue. No. 9 is ManTech International, which, with $1.9 billion in sales and 8,000 employees, proudly acknowledges that it has been ranked among “400 Best Big Companies in the nation.” Five of the remaining top 10 are among the aforementioned Alaska Native Corporations.

Typically this sort of miscoding occurs when a QinetiQ buys a small firm with federal contracts. Or buys a firm that bought small contractors — it used to be that it could keep the small-business designation for the life of those contracts, including options to extend that could stretch years into the future. The S.B.A. tightened those rules a couple of years back, and Mr. Murphy has since noted small improvements. “I think fewer dollars are being miscoded these days,” he says. (General Dynamics and Lockheed Martin, which were the eighth- and 19th-biggest “small business contractors” in 2005 dropped to 41 and 42 in 2008.) “But we’re still a few years away before the error rate is insignificant.”

Of course, some large companies willfully misrepresent themselves as small. Nobody knows the extent of such fraud, but as Lloyd Chapman, the head of the American Small Business League who has a made a federal case (literally!) out of protesting this malfeasance, pointed out to me a couple years ago for an article that ran in Inc. magazine, few firms are likely to be deterred by rigorous enforcement — as of a couple years ago, at least, not one firm had been prosecuted for falsely representing itself as small.

Senator Mary Landrieu, chairwoman of the Senate Small Business Committee, issued an anemic statement: “While I am encouraged by these numbers, I still see room for improvement,” etc., etc. — hardly the sentiment she would have expressed had it been the Bush administration releasing these numbers. Of course, the Obama administration should not be excoriated for reporting on the dismal performance of its predecessor, which confined its small-business agenda largely to cutting taxes and gutting regulation.

But history suggests that ignoring small business in the bureaucracy isn’t a partisan preference. If the numbers haven’t improved next year at this time, Democrats will not have an excuse to hold their fire.

Source: New York Times


Obama Administration Small Business Data Includes Billions to Corporate Giants

by | Aug 24, 2009 | Press Release

Press Release

Obama Administration Small Business Data Includes Billions to Corporate Giants

August 24, 2009

Petaluma, Calif. - On August 21st, the Obama Administration released its latest statistics on the volume of federal contracts awarded to small businesses. Federal law requires a minimum of 23 percent of the total value of all federal contracts to be awarded to small businesses. Federal statute defines a small business as being "independently owned," which excludes publicly traded firms.

The Obama Administration is claiming the government awarded $93.3 billion in contracts to small businesses or 21.5 percent during fiscal year (FY) 2008.

According to information from the Federal Procurement Data System - Next Generation (FPDS-NG), of the ten largest recipients of federal small business contracts, 85.4 percent of the contracts went to large businesses. Eight of the top ten recipients of small business contracts were large businesses.

The top recipient of government small business contracts was Textron, which received $775.7 million.  Textron is a Fortune 500 firm with 83,000 employees and over $25 billion in annual revenue.

Two other top ten recipients of federal small business contracts were Ssangyong Corporation, which is headquartered in Seoul, Korea and received over $254 million and Finmeccanica SpA, which is headquartered in Italy with 73,000 employees and received over $283 million in contracts.

The 14th largest recipient of federal small business contracts is listed as “Miscellaneous Foreign Contractors” with $210 million in government small business contracts.

Other firms included in the Obama Administration's small business data were Lockheed Martin, Boeing, Raytheon, Northrop Grumman, General Dynamics, AT&T, 3M Corporation, Xerox, Dell Computer, Booz Allen Hamilton, Hewlett-Packard, General Electric, Staples, Office Depot, British Aerospace (BAE), Rolls-Royce and French firm Thales.

Since 2003, over a dozen federal investigations have found that legitimate small businesses have lost billions of dollars in federal small business contracts, which have been diverted to many of the largest firms around the world. In 2005, the SBA Inspector General referred to the diversion of federal small business contracts to corporate giants as, "One of the most important challenges facing the Small Business Administration (SBA) and the entire federal government today."  (https://www.asbl.com/documents/05-15.pdf) 

In February of 2008, President Obama promised to halt the rampant abuses when he released the statement, "It is time to end the diversion of federal small business contracts to corporate giants." (http://www.barackobama.com/2008/02/26/the_american_small_business_le.php)   

To date, President Obama has taken no actions to honor his campaign promise, and corporate giants continue to dominate government small business contracting programs.

The American Small Business League (ASBL) estimates that during the first six months of the Obama Administration, legitimate small businesses have lost over $50 billion in federal small business contracts to corporate giants. (www.asbl.com)   

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Please click here to watch our response to the Obama Administration’s small business contracting statistics: http://www.youtube.com/watch?v=oV0jeTrYPsM