A small business association called the American Small Business League (ASBL) did something unexpected this week.  ASBL President, Lloyd Chapman, decided to take the Obama Administration to court and expose the growing divergence between the Administration’s stated goals to meet the federal statutes for small business participation versus the Obama Administration’s total failure on federal, small business contracting.

By any measure, Obama’s record on federal, small business contracting has been abysmal.  The recent, National Federation of Independent Businesses (NFIB) Small Business Economic Trends Report confirms that “for small business owners, 2009 ended with a thud.”

Many factors have contributed to the disaster in small business contracting.   A rush to push the $787 billion Stimulus funding quickly gave federal contracting officers no real options other than to dump the additional federal money onto existing federal contracts that are held by the largest companies.  There just was not enough time to conduct procurements to encourage the participation of small businesses.  So, small businesses received very little of any of the new federal business or the loans anticipated from the $787 billion Stimulus spending, even though President Obama and Democrats in Congress stated that awards to small businesses were the primary goal.

Worse yet, Obama decided to delay the long-overdue need to increase the number of federal contracting officers that are in critical short supply.  Ten years ago, each federal contracting officer was responsible for an average of  $300 thousand dollars of federal contracts.   Today, each federal contracting officer is responsible for $50 million dollars in federal contracts.   Put bluntly, contracting officers have been stretched thinly and no longer have the time needed to open procurements to small businesses.

Many contend that it is simpler and faster to add funding to an existing federal contract  or to bundle many disparate governmental needs into huge omnibus contracts that often top $1 billion in size.   This may be a bad policy and a poor return for taxpayer dollars, but it is the most expedient process for a federal procurement officer that is required by Congress to get the billions of dollars of new federal money committed quickly.

The Obama Administration has further rigged the deck, for construction contracts,  by forcing small businesses to seek Union participation prior to bidding on federal construction and infrastructure jobs.  This move, might be great for the Unions, but it destroys innovation and further burdens small businesses with foolhardy regulatory burdens.

The American Small Business League’s decision to bring suit against the government represents one of the few times that a trade organization has mustered the courage to tell the truth about what’s really happening in federal procurements.   The fact is, the government has been doing a poor job in contracting for years, but under the Obama Administration, small businesses have been hit especially hard.

Moreover, the Obama Administration knew the Stimulus funding would exacerbate the problems in government contracting  (lack of federal contracting officers, excessive regulatory processes, arbitrary and unpredictable oversight from a multitude of sources).  Yet, until the announcement of the ASBL, most industry and trade groups have done lots of complaining, but few have followed through with action.

I experienced this strange phenomenon, firsthand, while serving as the Administrator of General Services Administration (GSA), the government agency responsible for most issuing many of the federal contracts in the government.   High profile trade organizations would bring impassioned real-world evidence of the debilitating impact of excessive regulatory regimes imposed upon its member companies trying to compete for government contracts.  Yet curiously, when, as the head of GSA, I acted and swiftly attempted to create a more rational and predictable oversight and regulatory regime to govern federal contracts, these very same industry groups and corporations became very quiet.

I learned that the leaders of the vast majority of the different trade organizations dealing with federal government contracting have difficulty taking their claims public, and it seems they become too frightened to say in public what they scream in private.

The dirty, little, DC secret is that many of the leaders of the different Washington-based trade organizations are anxious to court favorable opinion and gain access to government leaders (who themselves seem to demand, above all else, praise and fawning).

Nor are you likely to hear the honest and unfiltered truth from a Congressional hearing.  Trade reps understand that lawmakers, like other government bureaucrats, can quickly turn on anyone that might have the gumption to declare that the emperor has no clothes and use facts and figures to prove that the system is not working.   Alas, with the Obama Administration, fear and intimidation seem to have reached new heights and seems to have grown excessively thuggish.

So, the recent announcement by the American Small Business League is important.  Finally, a trade group has stepped forward with the unfiltered truth that most folks connected to government contracting already know: that the Obama Administration, despite all the lofty rhetoric has failed completely with small businesses.

Many federal government contractors have their eyes are on the American Small Business League, the  little engine that might bring real change.  Long-suffering, small businesses have a champion, willing to tell the truth and let the chips fall, willing to confront the Obama Administration and demand action.

Lloyd Chapman, at the American Small Business League, does not appear interested in playing the Washington game, nor does he seem too interested in courting government favor that might lead to an appointment in the Obama Administration.  Chapman seems like the real deal, an honest man, singularly focused on solving a difficult problem.

Unfortunately, Mr. Chapman should expect the usual M.O. from Democrats: immediate retaliation and attempts to discredit him and his organization for daring to expose the truth about how small businesses are being crushed by the Obama Administration.

Take out your sling and find yourself a hard, little pebble Mr. Chapman: Goliath approaches.

Source:  http://biggovernment.com/ldoan/2010/04/14/small-businesses-sue-government-goliath/

Another problem is that the public’s perception of small businesses is different from the government’s definition, which includes entities with up to 99 employees. Super-small businesses, those with less than five employees, make up 70% of all small businesses.

Source: http://www.allgov.com/Where_is_the_Money_Going/ViewNews/Government_Accused_of_Giving_Small_Business_Contracts_to_Fortune_500_Companies_100413

The American Small Business League in a lawsuit is accusing the General Services Administration of destroying information in a database that could help advocates trace the violations, and the league has asked a federal court in Northern California to force the government to restore the data, which spans 10 years, and to make the information public. A federal judge is set to decide on the request for a preliminary injunction by the end of April.

For years, the Petaluma, Calif.-based organization, which represents 100,000 businesses seeking federal contracts, has tried to hold the government accountable for federal regulations that require 23 percent of its contracts to be set aside for small businesses. The government has never met that goal, small business advocates say. Instead, many contracts have been awarded to companies such as Falls Church-based General Dynamics, Xerox and General Electric, advocates say, withholding billions of dollars annually from small businesses.

"I believe $10 billion a month in federal contracts that by law should be going to small businesses are actually going to Fortune 500 firms and to some of the biggest companies around the world," said Lloyd Chapman, president of the ASBL.

"It's devastating to small businesses," Chapman said, adding that he's talked with several that have closed because they couldn't get contracts.

A spokeswoman for the GSA said her agency could not comment on the lawsuit.

At issue is whether large businesses deliberately defrauded the government and should be punished, as the advocates argue. The Small Business Administration denied that the contracts went to large companies intentionally. A spokesman said the awards resulted from a number of problems: companies mistakenly applying for contracts because they were unaware of the complex guidelines of what constitutes a small business; data entry errors; and agencies failing to update records after large companies, including General Dynamics, bought small businesses that earlier had received contracts.

"In nearly all the cases, it's a data integrity issue, not awarding the contract falsely," said SBA spokesman Jonathan Swain. "The integrity of this data is a top priority" for SBA Administrator Karen Mills.

The dispute centers on the government's move last month to drop a field from its database that captured companies that identified themselves as small businesses. Advocates say they used that field to determine whether large companies had illegally misidentified themselves as small businesses to get the contracts. Companies that falsely represent themselves are subject to fines of up to $500,000 or a prison term of up to 10 years, though the government has rarely if ever imposed the penalties, advocates say.

A study issued by the SBA's inspector general in February said 11 of 36 contracts it sampled were awarded to businesses reported "as small, but the contract file reflected that they were other than small."

"We really don't know how much business we're looking at" that was lost, said Fred Valerino Sr., director and founder of Pevco, a 70-employee Baltimore company that sells pneumatic tubes, similar to the devices used in drive-through bank windows, that allow government hospitals to send items from one end of their building to another.

Valerino said government audits show that his competitor, a Swiss multinational corporation, received 147 sole-source contracts from the government that were destined for small businesses. "All we're looking for is a fair share of the industry," he added.

Last year, the SBA reported that the government had set a record in 2008 awarding federal contracts to small businesses. However, it said only 21.5 percent of the contracts went to these firms, still below the 23 percent requirement. Advocacy groups such as the National Association of Small Business Contractors said the shortfall represented $30 billion in lost revenue to the firms.

Swain of the SBA in part faulted an overwhelming crush of contracting transactions -- 8 million -- that government officials oversee each year. He said the government is training contracting officers to look for errors and increase quality control.

"We are periodically running anomaly reports to identify any contracts that are coded as having gone to a small business that might look questionable," Swain said. "We're sending those reports to the procurement officer in the agency that specifically awarded the contract to reconfirm the data."

Source:  http://www.washingtonpost.com/wp-dyn/content/article/2010/04/11/AR2010041103341.html