Petaluma, Calif. - The Obama Administration plans to require all federal contractors and subcontractors to report employee pay and benefits. This comes despite President Obama’s recently publicized announcement to curb regulatory burdens, particularly on small businesses.

Existing federal regulations require federal contractors to report the five most highly compensated executives for sub-contracts under prime contracts exceeding $25,000. The pending requirement for reporting employee pay will add to already burdensome regulations on small business contractors. The American Small Business League (ASBL) believes this regulation will create friction between small business owners, their employees and customers.

Federal small business contracting programs have been plagued by rampant fraud and abuse for over a decade.

Federal law requires 23 percent of all federal contracts be awarded to small businesses. Yet the Obama Administration’s 2010 small business contracting data showed that most small business contracts actually go to large businesses. An ASBL analysis of the data found that 61 of the top 100 small business contractors were large businesses.

Since 2003, a series of federal investigations have found that companies like General Electric, Northrop Grumman, Lockheed Martin, British Aerospace (BAE) and Finmeccanica, a defense conglomerate based in Italy with over 70,000 employees, have all received federal small business contracts.

In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) described the abuse as, "One of the most important challenges facing the Small Business Administration and the entire Federal government today."

President Obama acknowledged the magnitude of the problem during his 2008 presidential campaign when he stated, “It is time to end the diversion of federal small business contracts to corporate giants.”

“When you quit listening to what President Obama says and watch what he does regarding small business, it appears he is trying to drive small businesses out of the federal marketplace,” said ASBL President Lloyd Chapman. “His refusal to stop the diversion of small business contracts to Fortune 500 companies and these new burdensome regulations show that he is not trying to make it easier for small businesses to compete in the federal marketplace, but to make it much more difficult.”

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Petaluma, Calif. - 

Dear Mr. Krueger,

Congratulations on your appointment to chair President Barack Obama’s Council of Economic Advisers. I am encouraged by your appointment, as I assume most Americans are. Your credentials and reputation as a leading economist are impeccable.

I would like to bring up an issue that needs immediate attention. Based on the latest U.S. Census Bureau data, small businesses create 90 percent of all net new jobs. The Small Business Administration Office of Advocacy indicates that small businesses are responsible for more than half the private sector workforce, half of GDP and 90 percent of exports. Ninety-eight percent of U.S. firms have less than 100 employees. And yet President Obama’s economic policies do not seem to reflect this. 

Based on economic data, this country needs aggressive programs focused on small businesses. Congress realized this in 1953 when they passed the Small Business Act, establishing the Small Business Administration (SBA) and a federal small business contracting goal (currently 23 percent). That law appears to be an extremely effective tool to create jobs. Moreover, research indicates that Fortune 500 companies have not created one net new job in more than thirty years.

Yet since 2003, a series of federal investigations have found that most federal small business contracts have gone to large corporations in the U.S., Europe and Asia. In 2005, the SBA Inspector General released Report 5-15, describing the abuse as, “One of the most important challenges facing the Small Business Administration and the entire federal government today.”

During his campaign, President Obama recognized this abuse and stated, “It is time to end the diversion of federal small business contracts to corporate giants.”

Federal law defines a small business as being independently owned. This would exclude any publicly traded company. I suggest that President Obama issue an executive order that states, “The federal government will no longer report contracts awarded to publicly traded companies as small business contracts.” This would direct more existing federal infrastructure spending to the middle class than any previous economic policy.

I think this is a very reasonable, deficit neutral approach to boosting the economy and creating jobs. I cannot imagine a downside to ending the illegal diversion of federal small business contracts to large corporations.

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Petaluma, Calif. - Friday Federal Reserve Chairman Ben Bernanke will speak on the economy in Jackson Hole, Wyoming. The latest economic trends suggest that Chairman Bernanke should turn to small businesses to stimulate the U.S. economy.

The U.S. Census Bureau indicates that small businesses create 90 percent of all net new jobs. Small businesses are responsible for half of the private sector workforce, half of GDP and more than 90 percent of U.S. exports. More than 90 percent of U.S. firms have less than 100 employees, and there are more than 28 million small businesses in America.

Since 2009, small businesses have received only a small fraction of the stimulus funds. Economic data indicates the government’s policy of focusing stimulus funds on banks and corporate giants has failed. The latest data from the Labor Department shows U-6 unemployment at 16.1 percent.  The small business sector is the last untapped resource to stimulate economic growth.

Federal law stipulates that a minimum 23 percent of all federal contract dollars be awarded to small businesses. This model uses existing federal infrastructure spending to create demand among the nation’s chief job creators, which increases cash flow, allowing them to expand and hire.

However, the latest analysis of federal contracting data by the American Small Business League (ASBL) indicates that small businesses are receiving far fewer contract dollars than the congressionally mandated 23 percent. Of the top 100 small business contractors during 2010, 61 were actually large businesses or subsidiaries of large businesses.

Some of the companies that received small business contracts in 2010 were General Electric, AT&T, Dell, Raytheon and Lockheed Martin. Also among the 2010 U.S. small business contractors were Italian defense giant Finmeccanica, Rolls-Royce and British Aerospace (BAE).

In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) described the abuse as, "One of the most important challenges facing the Small Business Administration and the entire Federal government today."

The ASBL maintains that the only way to stimulate the economy is to stop diverting small business contracts to large corporations. 

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Petaluma, Calif. – Tuesday the Obama Administration announced plans to trim regulatory burdens, which it estimates will save businesses more than $10 billion over the next five years. According to the White House Blog, many of the reforms focus on small businesses, including a rule that will accelerate Department of Defense contract payments to as many as 60,000 small businesses.

“Although these seem like noble ideas,” said American Small Business League (ASBL) President Lloyd Chapman, “the Obama Administration continues to ignore the biggest challenge for small businesses: the diversion of federal small business contracts to large corporations.”

Federal law requires 23 percent of all contract dollars go to legitimate small businesses. U.S. Census Bureau data indicates that small businesses create 90 percent of net new jobs. Yet the Obama Administration’s 2010 federal contracting data indicates that most small business contracts actually went to large companies, including Lockheed Martin, General Electric, AT&T, Italian defense giant Finmeccanica and British Aerospace (BAE), among others.  An ASBL analysis of the top 100 small business contractors found that 61 were large businesses.

Since 2003, a series of federal investigations have uncovered hundreds of billions of dollars in fraud, abuse and loopholes in federal small business contracting programs.

In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) described the abuse as, "One of the most important challenges facing the Small Business Administration and the entire Federal government today."

In Report 5-16, the SBA IG found large businesses had illegally received federal small business contracts through "false certifications" and "improper certifications." The SBA Office of Advocacy found large businesses had received federal small business contracts fraudulently through "vendor deception.”

Based on information obtained through the Freedom of Information Act, the ASBL estimates that ending this abuse would redirect up to $1 trillion in federal infrastructure spending to the middle class over the next five years.

During his campaign, President Obamastated, “It is time to end the diversion of federal small business contracts to corporate giants.” Yet every day of his administration, hundreds of millions of dollars in existing federal infrastructure spending has been diverted from small businesses to large corporations.

“This latest move is just more smoke and mirrors,” said Chapman.

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Petaluma, Calif. – I had the pleasure of watching your recent interview on CNN. I agree that re-election is the primary motivation for politicians, and to starve them of funding is exactly what needs to be done. Your leadership on this issue is inspiring.

Congress needs to go back to work, focus on job creation and solve the crisis of uncertainty. That said, the most effective economic stimulus President Barack Obama and Congress could implement would be to direct more existing federal infrastructure spending to small businesses, our nation’s chief job creators. This is an issue my organization, the American Small Business League, advocates for on a daily basis.

The latest U.S. Census Bureau data indicates that small businesses create 90 percent of all net new jobs, employ more than half the private sector workforce, are responsible for more than half of GDP and more than 90 percent of U.S. exports. It is clear that economic recovery needs to be based on small businesses.

I think members of Congress realized this in 1953 when they passed the Small Business Act. Today that law requires that 23 percent of all federal contract dollars be awarded to small businesses. Yet since 2003, a series of federal investigations have found most of that money has gone to Fortune 500 companies and other large firms.

In Report 5-15, the Small Business Administration Office of Inspector General referred to the issue as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.”

During President Obama’s campaign he stated, “It is time to end the diversion of federal small business contracts to corporate giants.”

The Small Business Act defines a small business as generally less than 500 employees and independently owned, which, by definition, excludes publicly traded companies. Therefore, President Obama could stimulate the economy with an executive order stating, “The federal government will no longer report federal contracts awarded to publicly traded companies as small business contracts.” Our research indicates this would redirect up to $200 billion annually in federal infrastructure spending to small businesses.

It is a shame there are not leaders like you in Washington. Maybe with your help, we can communicate this message to Congress and rescue our nation’s economy. 

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