A bigger Voice for Small Business

Senator McCaskill Slams Small Business Administration for Cheating Small Businesses

by | Jul 28, 2011 | Press Release

Press Release

Senator McCaskill Slams Small Business Administration for Cheating Small Businesses

July 28, 2011

Petaluma, Calif. – The following is a statement by the American Small Business League:

At a hearing Tuesday of the Senate Homeland Security and Governmental Affairs Subcommittee on Contracting Oversight, Chairwoman Senator Claire McCaskill (D-Mo.) challenged the Small Business Administration’s (SBA) reasons for including billions of contract dollars to large businesses in their fiscal year (FY) 2010 small business procurement scorecard. http://www.senate.gov/fplayers/I2009/urlPlayer.cfm?fn=govtaff072611&st=930&dur=6675

In June, the SBA reported that agencies awarded 22.7 percent of all contract dollars to small businesses. According to the Federal Procurement Data System-Next Generation (FPDS-NG), that number is inaccurate because billions of the those dollars actually went to companies like Lockheed Martin, General Electric, VSE Corporation and Italian defense giant Finmeccanica. The purpose of the hearing was to find out why. https://www.asbl.com/documents/asbl_2010_dataanalysis.pdf

Based on FPDS-NG, the American Small Business League (ASBL) estimates more than $200 billion per year is diverted from small businesses to some of the largest corporations in the U.S., Europe and Asia.
Referencing the looming debt ceiling, Senator McCaskill stated it is time, “for all of us to take a hard look at the way the government does business.”

SBA spokesman Joseph Jordan tried to justify the inclusion of billions of dollars to large businesses around the world in the SBA's scorecard by suggesting that not doing so would penalize the contract officer and agency. Senator McCaskill said that “makes the number really misleading.”

More than a dozen federal investigations dating back to 2003 have uncovered hundreds of billions of dollars in fraud, abuse, loopholes and lack of oversight of small business contracting programs. https://www.asbl.com/documentlibrary.html

In 2005, the SBA office of Inspector General (SBA IG) released report 5-15, which stated, “One of the most important challenges facing the SBA and the entire federal government today is that large businesses are receiving small business procurement awards and agencies are taking credit for these awards.” For six consecutive years, the SBA IG has named the diversion of small business contracts to corporate giants as the number one challenge facing the SBA. https://www.asbl.com/documentlibrary.html#5-15

“Joseph Jordan’s lame excuse that agencies would be penalized if not allowed to report contracts to Fortune 500 firms as small business contracts is ludicrous,” said ASBL President Lloyd Chapman. “It is a tragedy we have people as dishonest as Joseph Jordan working for an agency as important to our country as the SBA.”

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Senate Probes Small Business Administration on Billions in Fraud and Abuse

by | Jul 27, 2011 | Press Release

Press Release

Senate Probes Small Business Administration on Billions in Fraud and Abuse

By Brian Reeder
July 27, 2011

Petaluma, Calif. – The following is a statement by the American Small Business League:

At a hearing Tuesday of the Senate Homeland Security and Governmental Affairs Subcommittee on Contracting Oversight, senators challenged the Small Business Administration’s (SBA) claim that 22.7 percent of federal contract dollars went to small businesses in 2010.

Chairwoman Senator Claire McCaskill (D-Mo.) called the SBA’s claim “an empty achievement.” Billions of contract dollars the agency reported as going to small businesses actually went to large businesses. The federal government is required by law to award at least 23 percent of all prime contract dollars to legitimate small businesses.
http://www.senate.gov/fplayers/I2009/urlPlayer.cfm?fn=govtaff072611&st=930&dur=6675

The federal government’s data indicates that during fiscal year (FY) 2010, billions of dollars went to some of the largest corporations in the United States, Europe and Asia. These include Italian defense giant Finmeccanica, Lockheed Martin, Rolls-Royce, British Aerospace (BAE), Raytheon, General Electric and Ssangyong, a multinational corporation based in South Korea.

Senator McCaskill pressed SBA spokesman Joseph Jordan on why large companies receive small business contracts. She said that counting contract dollars awarded to a business that is no longer small as small business contract dollars is “misleading.” Jordan argued that it was unfair to “punish” a government agency because a business it contracts with becomes successful. 
 
He went on to say that the 2010 contracting data was “the cleanest data ever” despite the fact that, according to the Federal Procurement Data System-Next Generation, 61 of the top 100 small business contractors were actually large businesses. https://www.asbl.com/documents/asbl_2010_dataanalysis.pdf

Since 2003, a series of federal investigations have uncovered billions of dollars in fraud and abuse in small business contracting programs. In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the problem as, “One of the most important challenges facing the SBA and the entire federal government today.” For six consecutive years, the SBA IG has named the issue as the number one challenge facing the SBA. https://www.asbl.com/documentlibrary.html#5-15

In 2008, President Obama recognized the magnitude of the issue stating, “It is time to end the diversion of small business contracts to corporate giants.” https://www.asbl.com/documents/20081007_Obama_Promise_Website.pdf 

“Joe Jordan is lying through his teeth,” ASBL President Lloyd Chapman said. “To claim that we are punishing agencies by preventing them from reporting contracts to Fortune 500 firms as small business contracts is ludicrous. He should be forced to resign immediately for making such statements.”

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Senate Grills SBA Over Federal Contracts

by | Jul 27, 2011 | ASBL News

News

Senate Grills SBA Over Federal Contracts

By Jason Fell
Entrepreneur.com
July 27, 2011

Billions of dollars in federal contracts that are intended for U.S. small business might actually be awarded to large companies -- and the Senate isn't happy about it.

At a hearing Tuesday, senators questioned the SBA over its claim that 22.7 percent of federal contract dollars went to small businesses in 2010. In an effort to make sure entrepreneurs can get in on government contract work, federal agencies aim to award at least 23 percent of those contracts to small businesses each year.

Sen. Claire McCaskill (D-Mo.), chairman of the Senate Subcommittee on Contracting Oversight, said the SBA's system for tracking and qualifying companies for small business contracts "doesn’t seem to make sense." "We don’t need to be spending taxpayer dollars to prop up a system that allows the government to take credit and large businesses to profit at the expense of the small businesses that the system is meant to help," she said.

McCaskill argued that a complicated framework of regulations makes it "virtually impossible" to track the number of federal contracts being awarded to small businesses. The Senate investigation claims several large companies abuse special exemptions to the SBA’s size standards while others hold small-business contracts although they no longer qualify as small businesses.

According to small business advocacy group the American Small Business League, 61 of the top 100 firms on the SBA's Small Business Procurement Scorecards for Fiscal Year 2010 -- ranked by the total dollar amount of their federal contracts -- are in fact large companies. Some of the larger companies named in the report include Lockheed Martin, Northrop Grumman and Motorola.

In his testimony, Joseph Jordan, an associate administrator of the SBA's Office of Government Contracting and Business Development, defended the SBA's "rigorous analysis" and monitoring of the contracting data, saying his group's top priority is to "ensure that the benefits of our programs flow to the intended recipients."





Senate Holds Hearing on Fortune 500 Firms Hijacking Small Business Contracts

by | Jul 26, 2011 | Press Release

Press Release

Senate Holds Hearing on Fortune 500 Firms Hijacking Small Business Contracts

July 26, 2011

Petaluma, Calif. – Today the Subcommittee on Contracting Oversight of the U.S. Senate Committee on Homeland Security and Governmental Affairs will hold a hearing titled “Small Business Contracts: How Oversight Failures and Regulatory Loopholes Allow Large Businesses to Get and Keep Small Business Contracts.”

The purpose of the hearing is to examine ways in which, for more than a decade, large businesses have obtained hundreds of billions of dollars in small business contracts.

The first investigation into the diversion of federal small business contracts to large businesses was released in 2003. That investigation was conducted by the General Accounting Office (GAO) and was based on information provided by American Small Business League (ASBL) President Lloyd Chapman. In that investigation the GAO found more than 5,000 large businesses receiving small business contracts. http://www.gao.gov/new.items/d03704t.pdf  

Since 2003, the Small Business Administration (SBA) has attempted to justify the diversion of billions in small business contracts to Fortune 500 firms as “miscoding.” This includes small business contracts to Italian defense giant Finmeccanica, Lockheed Martin, Rolls-Royce, British Aerospace (BAE), Raytheon, General Electric and Ssangyong from South Korea. In 2006, SBA issued a press release claiming that the diversion of federal small business contracts was a myth. www.asbl.com/documents/sbamythvfact.pdf

In 2005, the SBA Office of Inspector General (SBA IG) released Report 5-15 that found the diversion of small business contracts to large businesses was, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” The SBA IG has named the issue as the agency’s top management challenge for the last six consecutive years. https://www.asbl.com/documentlibrary.html#5-15

In 2008, President Obama recognized the magnitude of the issue stating, “It is time to end the diversion of small business contracts to corporate giants.” https://www.asbl.com/documents/20081007_Obama_Promise_Website.pdf  
 
The ASBL has led the drive to end the diversion of federal small business contracts to large businesses. The organization currently has more than a dozen lawsuits against the Obama Administration pending under the Freedom of Information Act.

Representatives from the General Services Administration, SBA and the U.S. Agency for International Development will testify. However, SBA IG Peg Gustafson does not appear on the list of those who will testify.

“Ending the diversion of small business contracts to Fortune 500 firms would do more for the economy than anything the Obama Administration has done to date,” said ASBL President Lloyd Chapman.

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Senate inquiry finds big companies taking small business contracts

by | Jul 26, 2011 | ASBL News

News

Senate inquiry finds big companies taking small business contracts

By David Goldstein
Miami Herald
July 26, 2011

WASHINGTON -- Federal contracts intended for small business are being awarded to large corporations, according to a Senate inquiry.

They are being counted toward the congressionally mandated goal of ensuring that 23 percent of all federal contracts go to small businesses, the inquiry found.

"A system that should be helping small business is in fact doing little more than helping the government play a numbers game," said Sen. Claire McCaskill, D-Mo., chairman of the Homeland Security and Governmental Affairs contracting oversight subcommittee, which looked into the issue.

At a hearing Tuesday, McCaskill took note of the looming possibility that Washington could default next week on its bills and said, "This is a time for all of us to take a hard look at the way the government does business."

The subcommittee's investigation found that some contracts meant for small businesses go to large corporations because of a complex system of rules, loopholes and lax oversight.
The inquiry also suggested that possibly willful ignorance of regulations occurred, including those that require subsidiaries of large corporations to be counted as part of the parent operation and not as separate businesses.

Among the top 100 small business federal contractors last fiscal year, 61 were large firms - including major defense contractors such as Lockheed, Raytheon and General Electric - according to an analysis by the American Small Business League, a marketing group for small businesses around the United States. The analysis is based on information from the Federal Procurement Data System.

The league has been critical of the government's efforts to attract small business contractors.

The subcommittee cited a situation involving the VSE Corp., a Virginia-based engineering company and defense contractor that had been a small business but has since grown into a $364 million operation with four subsidiaries, nearly 3,000 employees and $165 million in federal small business contracts last year.
The subcommittee's findings reflect a similar conclusion by the Office of Inspector General of the Small Business Administration. It has raised concerns about large businesses receiving contracts meant for smaller operations since 2006.

The SBA oversees efforts to spread federal contracts to the entire business sector. The program is similar to outreach attempts to businesses operated by women, veterans and other disadvantaged groups.

SBA regulations generally define a "small business" as one with no more than 500 employees and average annual earnings of $7 million for most non-manufacturing industries. But there are exceptions that have to do with certain industry categories and wholesale vs. retail operations.

Sen. Rob Portman, R-Ohio, the panel's ranking member, said the system had more than 1,000 different industrial codes, making it "incredibly complex to be certified as a small business."

Joseph Jordan, an SBA assistant administrator and contracting official, said businesses that were awarded contracts when they met the rules for being "small" can keep the jobs for the life of the contract, but are then no longer eligible.

"There are many legitimate reasons for a small business contract to look like it was awarded to a business that is other than small," Jordan said.

He defended SBA's oversight of the system and noted that the government was just shy of reaching the goal of 23 percent small business participation last year.

"Unless you're trying to pigeonhole these folks to boost your own numbers, I think it's as plain as the nose on your face that it doesn't make sense," McCaskill said. "This winds up actually harming small businesses, and people are getting fat and happy thinking their goals are being met."