A bigger Voice for Small Business

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."





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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Obama Economic Policies Defy Logic and Reason

by | Jul 20, 2011 | Press Release

Press Release

Obama Economic Policies Defy Logic and Reason

July 20, 2011

Petaluma, Calif. – According to the U.S. Census Bureau, small businesses create 90 percent of all net new jobs in America. Yet President Obama’s economic policies continue to ignore this clear avenue toward a better economy.

The Administration’s failed policies come at the expense of the middle class. During the first half of 2011, Americans have faced massive unemployment and endured dismal job growth. The number of Americans without a job has shot above 14 million, an increase of more than 500,000 since March. (http://www.bls.gov/news.release/empsit.nr0.htm)

Data indicates that the President and Congress are ignoring small businesses while promoting policies aimed at helping the nation’s chief job exporters, large corporations. The American Small Business League (ASBL) reports that legitimate small businesses have been left out of the federal government’s most practical economic stimulus plan, the Small Business Act, which requires that 23 percent of all prime contract dollars go to small businesses.

Since 2003, a series of federal investigations have discovered billions of dollars in small business contracts going to some of the largest corporations in the United States and Europe. For example, in fiscal year (FY) 2010, the government reported $768 million in small business contracts went to ManTech Sensor Technologies Inc. (STI), which is a subsidiary of ManTech International Corporation and has 8,000 employees and $1.8 billion in annual revenue.

In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the issue as, “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, the President said, “98 percent of all American companies have fewer than 100 employees. Over half of all Americans work for a small business. Small businesses are the backbone of our nation’s economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.” (https://www.asbl.com/documents/20081007_Obama_Promise_Website.pdf) 

Data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau support the President’s statement, yet the latest data from his administration illustrates that 61of the top 100 small business contractors during FY 2010 were actually large firms. (www.asbl.com/documents/asbl_2010_dataanalysis.pdf)

“President Obama’s economic policies defy all logic and reason,” said ASBL President Lloyd Chapman. “If the President would stop diverting small business contract dollars to Fortune 500 firms, it would direct more than $100 billion a year in existing federal infrastructure spending to the middle class and the nation’s chief job creators. It requires no new taxes, no new spending, and it is deficit neutral.”

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How to help the drivers of job growth

by | Jul 16, 2011 | ASBL News

News

How to help the drivers of job growth

By Loren Steffy
Houston Chronicle
July 16, 2011

If the entire economy could have fit into the room at Houston's Lakeside Country Club, it would be fixed.

The 30 or so people who gathered there recently exuded a determination and self-reliance that remains undaunted by the Great Recession and the Not-So-Great Recovery. The annual Entrepreneurs Workshop, sponsored by Services Cooperative Association, brought together small-business owners, entrepreneurs and the businesses and services to help them grow.

Executive Director C. Dean Kring is a ponytailed evangelist for small businesses solving their own problems and not waiting for the government to provide solutions.

He talked of how small-business owners are infused with "entrepreneurons" that are like energy particles for economic development.

"Entrepreneurons tend to thrive, propagate and increase in a free enterprise system, excepting those environments in which bureaucracies are found to predominate," he said. "Entrepreneurons comprise the greatest economic energy resource in the United States."

By the time I left, I started to believe I could feel them bouncing around the room.

Outside, though, the reality beat down like the unrelenting July sun. A recent U.S. Bancorp survey of more than 1,000 small businesses nationwide found that almost three-fourths have no plans to expand in the next year.

Meanwhile, the National Federation of Independent Businesses optimism index fell again in May, its third straight month of decline. Across the country, small businesses are struggling to get by as costs rise, customers remain skittish about spending and, most of all, credit remains hard to find.

They didn't cause it

While entrepreneurs may extol the virtues of not relying on the government, they shouldn't have to in an economy like this.

Small-business owners didn't cause the financial crisis, but they play a key role in rebuilding from it, and it is among small businesses that government should be focusing its support.

Too much of the federal stimulus efforts have merely strengthened the bond between big business and big government, either by awarding contracts to large companies or by literally handing them money. I'm looking at you, General Motors.

Sure, bailouts for GM and Chrysler saved a lot of jobs, but how many jobs will they create over the long term? Big manufacturers have been boosting productivity for years — a never-ending quest to make more stuff with fewer people.

If oil is yesterday's fuel, then auto plants are yesterday's economic development.

Last month, the U.S. Small Business Administration issued a report saying that almost $98 billion in federal contracts, or almost 23 percent of contract dollars spent by the government, went to small businesses.

That's roughly the amount that's required under federal contracting laws.

Critical of data

The American Small Business League, which focuses on federal contracting issues that affect small businesses, has long criticized the SBA's data. The group, based in Petaluma, Calif., says many of the contracts actually go to large companies like AT&T, Lockheed Martin and Hewlett-Packard that use subsidiaries that are mistaken for or disguised as small businesses.

The percentage of federal contract dollars awarded to actual small businesses is closer to 5 percent, said Brian Reeder, an ASBL public affairs analyst.

"What we're finding in our data is that a lot of these contracts that the SBA is saying are going to small business are actually going to large businesses," Reeder said.

The SBA maintains that its data is as accurate as it can be.

Government contracts are an important opportunity for small businesses, and it's the kind of stimulus that provides real benefit for taxpayers, the economy and, of course, the business owners.

"They need someone to sell goods and services to, and the government is the biggest buyer of goods and services," Reeder said. "It seems like a no-brainer. It seems like you'd want to shift more demand to those chief job creators."

In other words, it seems like you'd want to tap into those entrepreneurons in rooms like that one at the Lakeside Country Club and help channel it toward creating jobs and rebuilding the economy.





SBA Spokesman Continues to Mislead the Media

by | Jul 7, 2011 | Press Release

Press Release

SBA Spokesman Continues to Mislead the Media

July 7, 2011

Petaluma, Calif. – For the past decade, Small Business Administration (SBA) spokesman Mike Stamler has led a coordinated campaign to mislead the public and media about the diversion of federal small business contracts to corporate giants.

On June 24, the SBA released its fiscal year (FY) 2010 small business scorecard and goaling report, claiming that small businesses received just under $98 billion in federal contracts, or 22.7 percent of total spending. An analysis of the FY 2010 contracting data by the American Small Business League (ASBL) found that 61 of the top 100 small business contract recipients were actually large companies that received more than $8.8 billion in contracts counted towards the congressionally mandated 23 percent goal. (https://www.asbl.com/documents/asbl_2010_dataanalysis.pdf)

In response to the analysis by the ASBL, Mr. Stamler defended the SBA’s numbers claiming that, “Every federal agency certified that the data is correct.” (https://www.asbl.com/showmedia.php?id=1857)

For years, the SBA and Mr. Stamler have used the excuse of “miscoding” to explain why some of the largest firms in the U.S. and Europe receive billions of dollars a month in contracts intended for small businesses. Last year, Mr. Stamler claimed that large companies receive small business contracts, “because of simple human error,” and “miscoding.” In a May 2007 press release, the SBA even claimed the rampant abuses were simply a “myth.” (https://www.asbl.com/documents/sbamythvfact.pdf)

In 2008, after quoting ASBL President Lloyd Chapman in a story, the Long Island Business Journal (LIBJ) received a series of aggressive correspondence from Stamler, which was so profane in nature that editors of the paper responded by publishing a blog entitled, “Expletives the SBA's Forte.” (http://libizblog.wordpress.com/2008/02/22/expletives-the-sbas-forte/)

Mr. Stamler’s remarks stand in stark contrast to a series of federal investigations from the Government Accountability Office (GAO), the SBA Office of Advocacy, and the SBA’s Inspector General (SBA IG) that have found widespread fraud and abuse in virtually every program managed by the SBA. (https://www.asbl.com/documentlibrary.html)

In Report 5-15, the SBA IG referred to the diversion of federal small business contracts to corporate giants as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” For the last six consecutive years, the SBA IG has reported these rampant abuses as the top management challenge facing the SBA. (https://www.asbl.com/documents/05-15.pdf)

An SBA IG investigation from March 2010 found that the SBA itself awarded federal small business contracts to large businesses during fiscal years 2008 and 2009. (http://www.sba.gov/idc/groups/public/documents/sba_homepage/oig_report_10-08.pdf)

“There is no way Stamler and the SBA can explain over a trillion dollars in small business contracts going to large firms over the past decade as an accident or simply a miscoding error,” Lloyd Chapman said. “That is statistically impossible.”

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