It all looked so good in the beginning. There has been a change, but not what we expected. Unemployment is higher than ever for African-Americans. While there are many reasons, there is one direct correlation.

The amount of contracting by Black-owned firms at the federal government level has drastically been reduced to less than one percent – an all-time low. And instead of exhausting all avenues to improve the amount of Black contracting, the Obama administration is now taking formal action to end all  minority goals from the agencies.

Serious decrease

There was a time a few years ago that the federal Department of Housing and Urban Development was enjoying a 40 percent level for minority contracting and most of that was with Black firms. Even the Congressional Black Caucus awarded HUD Secretary Alphonso Jackson for that accomplishment.

Today, that level is below four percent and it fell with lightning speed. The following is an open letter that I received from American Small Business League (ASBL) President Lloyd Chapman last week:

“On Friday, September 9, the Obama administration proposed a policy to end one of the most successful federal programs to create jobs and stimulate growth among minority-owned small businesses.

Will end program

“The policy, announced in the Federal Register, aims to end a program that established a five percent minority-owned small business federal contracting goal for the Department of Defense, NASA and the U.S. Coast Guard. I estimate that this change will have a significant, negative economic impact on a substantial number of minority-owned small businesses, costing millions of jobs.

“It is difficult to understand why, in the middle of one of the worst economic downturns in U.S. history, and when unemployment has hit minority communities especially hard, the Obama administration would end one of the most successful programs to create jobs for minorities.

“According to the U.S. Department of Labor, the jobless figure for African-Americans is 16 percent and 11.3 percent among Hispanics. Close to 35 percent of the U.S. population is made up of ethnic minorities and 5.8 million businesses are minority-owned. According to U.S. Census Bureau data, small businesses create 90 percent of all net new jobs in America. I estimate that this change will divert billions of dollars in federal contracts away from minority-owned small businesses, thwarting the power of those businesses to expand and hire.

“I have been a small business advocate for two decades and have rarely seen policies as detrimental as this latest proposal from the Obama administration. I have launched a national campaign to block its implementation. Minority-owned small businesses have until November 8, 2011 to comment on the proposed change in the Federal Register.

Impact not ‘minimal’

“The administration will tell you that the impact of this policy will be minimal and that you have been misinformed. Nothing could be further from the truth. I need you to help tell President Obama, Congress, the U.S. Justice Department and the media that there is indeed discrimination in federal contracting, and this program needs to be saved.”

We certainly agree with the ASBL. We are calling out to all groups, associations and individuals to actively protest the above. We all should write letters to our senators, congresspersons and the Congressional Black Caucus. This is a call for action to all of us who want to see our businesses grow and increase the amount of jobs they produce.

The end of the comment period for the Federal Register’s Request for Comment is November 9. Please comment in the name of the African Diaspora. If you need details on how to formally comment, go to the NBCC website, http://www.nationalbcc.org, and look under “Latest News.” There is no time to wait.

Newly proposed legislation would increase oversight of federal small-business contracts, which in recent years have gone to several large companies.

“Large companies need to stop masquerading as small businesses to get government contracts,” said the bill's author, U.S. Rep. Hank Johnson, D-Ga. “Especially given how many small businesses are struggling in this economy, my bill will go a long way in helping stop this abuse.”

All told, 61 of the top 100 recipients of federal small-business contracts for fiscal year 2010 were large firms, according to an analysis by the American Small Business League, an advocacy group based in Petaluma. The group defines small businesses as those with fewer than 100 employees.

A few California Fortune 500 companies made the list of small-business contracts in 2010, including Northrop Grumman and Hewlett-Packard.

The Fairness and Transparency in Contracting Act targets provisions that have allowed large, publicly traded and foreign-owned companies to qualify as small businesses.

The federal government is supposed to award 23 percent of its contracts to small businesses. In fiscal year 2010, that amounted to approximately $100 billion.

But some have criticized the contract process. In 2005, the Small Business Administration's Office of the Inspector General called the diversion of federal small-business contracts to large corporations "one of the most important challenges facing the Small Business Administration and the entire Federal government today."

The inspector general found that government contracting staff have not always thoroughly verified companies' self-certification as a small business, allowing larger companies to illegally access small-business contracts.

In addition to widely recognized companies such as Hewlett-Packard and Northrop Grumman, the American Small Business League said other firms too big to qualify as small businesses got contracts. In California, the group singled out Ocean Systems Engineering in Oceanside; Innovative Technical Solutions Inc. in Walnut Creek; and Cobham Analytic Solutions, formerly known as SPARTA Inc., headquartered in Lake Forest. California companies won more than $180 million in small-business contracts during fiscal year 2010, according to data provided by the American Small Business League.

Sophie O’Donnell, vice president of contracts at Cobham Analytic Solutions, which has more than 1,200 employees, declined to comment.

Although the bill takes important steps to prevent abuse, it is not as rigorous as the program California has in place for state contracts, said Marty Keller, former director of the state Office of Small Business Advocate and founder of the political group Small Business Revolution.

“In California, in the four years I was a small-business advocate, I’m unaware of any cases where a big business got around the system illegally," he said. "So that tells me it’s pretty effective.”

In contrast to the federal system, where businesses self-certify their size, California has a certification process to weed out big companies up front.

“You’d have a hard time getting through the sieve,” Keller said.

Praise of small businesses as the engine of the American economy is as much a part of political campaigns as bus tours, small-town diners and recycled stump speeches.

So, do small businesses deserve their job-generating reputation? In short, yes.

Armed with new tools for tracking job creation, the Small Business Administration estimates such firms create about 65% of the nation's net new jobs—jobs created minus jobs eliminated. And economists generally agree the figure is sound given the SBA's criteria. There are big caveats, though, ranging from how small business is defined to how much the jobs pay and how long they last.

The first question: How small is small? The SBA's Office of Advocacy, which produces the statistics, counts small businesses as those with fewer than 500 employees, which covers far more than garage tech start-ups and mom-and-pop stores. By that definition, 99.6% of the nation's 4.8 million private employers that have been monitored for job creation by the Bureau of Labor Statistics for nearly a decade are small businesses.

"What they call a small business is not what anyone else calls a small business," says David Neumark, director of the Center for Economics and Public Policy at the University of California, Irvine.

Joseph M. Johnson, chief economist of the SBA's Office of Advocacy, disagrees. "SBA began using 500 employees as an overall definition for small business because it was the most common size standard," he says.

One company that straddles the line between small and large is PROS Holdings Inc. in Houston. It is included in the SBA small-business stats with about 480 employees, and was founded by a husband-and-wife team in 1985. But the pricing-software maker looks like a large business today, as it has been traded on the New York Stock Exchange since 2007 and has a market capitalization of more than $400 million.

Those factors "make you scratch your head and say, 'Does that sound like a mom-and-pop shop?' " says Tim Girgenti, chief marketing officer of PROS. However, he says the company exhibits some characteristics of a small business, such as a board that still includes its founders.

The European Union defines small- and medium-size enterprises as those with fewer than 250 employees. Small businesses, a subcategory, have fewer than 50 employees, according to European Commission spokesman Andrea Maresi. Define small businesses that way, and they created 32% of net new U.S. jobs since September 1992, when collection of such data began.

Beneath the 65% figure cited by the SBA is a lot more job creation and destruction than is immediately evident. Businesses with fewer than 500 employees accounted for about three of four jobs created since 1992, according to a paper from the Federal Reserve Bank of St. Louis published in April.

But many don't last long. For instance, employers with fewer than four workers have accounted for roughly 5% of all private-sector workers since 1992, but 15% of all job creation and 15% of job destruction in the private sector in that period, according to BLS.

Such churning of jobs is hailed by economists as creative destruction, allocating resources to those sectors of the economy that can best use them. To workers, it is destructive to wealth accumulation and career advancement.

Small-business jobs also pay less. Last year, average weekly wages for employees at establishments with fewer than 100 employees ranged from $679 at shops with five to nine employees, to $815 at those with 50 to 99 employees, according to the Bureau of Labor Statistics. Average weekly wages topped $1,000 in all categories with at least 250 employees.

William Dunkelberg, chief economist of the National Federation of Independent Business, an industry association, said it doesn't make sense to compare the wage averages.

"Not all of the people who are working at nail salons and barber shops could work for Eli Lilly & Co., but we all want them to have a job," Dr. Dunkelberg says. "In fact, we all need them to have a job."

A recent study called into question whether size should matter at all when comparing businesses and their contribution to job creation.

The paper—co-authored by University of Maryland economist John Haltiwanger and two Census Bureau economists—confirmed that small businesses create more net new jobs, per employee, than do bigger businesses.

But the effect vanishes once each company's age is taken into account. It is young businesses that outperform old ones, according to the paper. Size isn't the important factor.

If you control for age, "you wipe out that effect" of small businesses creating a disproportionate share of net new jobs, says Prof. Haltiwanger. "There's no systematic relationship. If anything it goes the opposite way of conventional wisdom."