Agencies are slipping further and further from meeting governmentwide small-business contracting goals.

Congress requires agencies to spend 23 percent of their combined contracting money through small businesses every year, but agencies fell well short of that goal in fiscal 2008, according to a new Small Business Administration report released today.

The report shows that $93 billion — or 21.5 percent — of the $434 billion in contracts spending in 2008 was through small businesses. That's down from 22.0 percent in 2007 and down from 22.8 percent in 2006, according to SBA reports.

In recent years, SBA officials attributed the drop in small-business contracting to cleaner data, following the revelation that large companies, like Lockheed Martin and Dell, were counted as small businesses. Since 2003, SBA has worked to eliminate such anomalies by requiring agencies to certify their data is accurate. With large companies out of their calculations, agencies are reporting more accurately but, as a result, fall behind on their goals, Sandy Baruah, then-acting SBA administrator, said last year.

The same holds true this year, said Joseph Jordan, SBA's associate administrator for government contracting and business development.

Cleaning up miscodings in the government's databases, such as the Central Contractor Registry, the Dynamic Small Business Search and the Federal Procurement Data System, "has had a big impact," he said. Since 2003, more than 90,000 firms have been removed from small-business listings. In addition, since 2007 SBA has mandated that small businesses report when they grow large or are purchased by large businesses; then they no longer show up as small in the databases.

The data is more accurate than ever, but that is not the only explanation for agencies' failure to meet the contracting goals, Jordan said.

Wartime and homeland security-related contracting is a major reason for the drop in small-business spending, he said.

The Defense Department "is procuring weapons systems, Humvees and tanks," prime business contracting that small business can't play a role in, Jordan said.

Other agencies also have complex, big-ticket buys, such as advanced research and development contracts for an H1N1 flu vaccine, that also affect what can be spent through small businesses, he said.

Each year SBA negotiates agency-specific goals, which can be more or less than 23 percent, with the 25 agencies that fall under the Chief Financial Officers Act. In 2008, only 10 agencies met their goals, according to the SBA report.

Only one of the 25 agencies — the General Services Administration — met its overall small-business contracting goal in addition to four separate goals for contracting with disadvantaged businesses. Agencies are required to spend 5 percent of their contracting dollars through small disadvantaged businesses; 5 percent through women-owned businesses; 3 percent through HUBZone-certified businesses, those in historically underutilized business zones; and 3 percent through service-disabled veteran owned businesses.

Two agencies — the Agency for International Development and Office of Personnel Management — missed all five goals, according to SBA.

Figures showing the federal government is meeting its goals in funneling contracts to small businesses are faked, says the president of the American Small Business League of Petaluma.

He says the Obama Administration is dragging its feet in releasing contracting data so the numbers can be invented.

“They need all that time … to juggle the books,” Mr. Chapman says. “They’re going to hide the fact that most of these contracts go to large businesses. What it means to California is maybe $10-$12 billion a year in lost federal contracts and probably 400,000 jobs.”

Mr. Chapman says some government officials are fraudulently changing data to make the government look good in its contracting goals.

“They’ll take a small business that got maybe $1 million and add zeros to the end,” he says. “So they’ll go from $1 million to $10 million or a $100 million or even a billion,” he says. “And if anyone exposes that, they’ll say it’s a computer glitch.”

(Lloyd Chapman expands on his argument in a CVBT Audio Interview via Skype. Please left-click on the link below to listen now or right-click to download the MP3 audio file for later listening.)

Mr. Chapman says the fraudulent figures are still being reported despite widespread publicity – but no action or even interest by Congress.

“It is fraud,” he says flatly. “You’ve got fraud on the part of the federal contracting officials and on the part of large businesses.”

Mr. Chapman says the only way the federal government achieves its small business contracting goals is through manipulating the numbers.

He wrote a bill now sitting in a committee of the House of Representatives that would force clarity in contracting. It has picked up 12 co-sponsors, but also the opposition of the chairwoman of the House Committee on Small Business, Nydia Velasquez, D-N.Y., Mr. Chapman says.

He says it’s all about the money with members of Congress getting so much money from big business and big labor. Ms. Velasquez, for example, saw three dollars out of four for her re-election campaign last year coming from political action committees, according to opensecrets.org, which compiles figures about campaign financing.

“This issue defines politics in America today,” says Mr. Chapman. “It shows more about our government than any other issue I can think of.”

Source:  http://centralvalleybusinesstimes.com/stories/001/?ID=12741