The Obama administration reports it has nearly met Congress’s goal of giving 23 percent of federal contracts to small businesses, but a new analysis shows that claim is significantly overstated.

A report by the American Small Business League found the administration came close to the 23 percent goal counting contracts with large companies, including Fortune 500 companies as small-business contracts.

The federal government counted businesses with hundreds or thousands of employees and hundreds of millions of dollars in revenues as small businesses, the report found.

The group reported that the top five recipients of federal small business contracts were actually large businesses, such as Sensor Technologies, a company with 8,500 employees, and Seta Corporation, a firm with 1,500 employees and $699 million in annual revenue. The full report will become public on Tuesday.

One of the top 100 recipients of small-business contracts in 2010 was the defense giant Lockheed Martin, the group said.

The analysis undermines the Small Business Administration’s claim that the federal government gave 22.66 percent of federal contracts to small businesses in 2010, a hair short of its 23 percent goal.

“The biggest companies in the world are getting small-business contracts,” said Lloyd Chapman, president of the American Small Business League. “If you’re trying to create jobs and know small businesses create 90 percent of jobs, wouldn’t be a no-brainer to stop giving small contracts to Fortune 500 companies.”

Chapman is a major Democratic donor. He gave $27,800 to Democratic candidates, including $1,000 to President Obama in 2008, according to data compiled by the Center for Responsive Politics. But Chapman is frustrated that Obama’s administration is misleading the public over how many federal contracts are going to small business.

He argues the Small Business Administration has inflated the reported percentage of contracts going to small businesses by underreporting the federal acquisition budget.

He claims the budget for federal contracts is closer to $1 trillion than the $430 billion the administration claims. The SBA counts a budget of $430 billion because it doesn’t count classified spending or contracts not eligible for small businesses, according to the American Small Business Leaguge.

“Small business are getting one-tenth of what they’re supposed to,” Chapman said.

Mike Stamler, spokesman for the Small Business Administration, defended the claim that 22.7 percent of federal contracts have gone to small businesses. He said it was based on data provided by federal agencies.

“We use data that federal contracting officers across the government put into the federal contracting database,” he said.

However, he acknowledged that agencies sometimes make errors. He also noted that the federal government often awards contracts to businesses that are considered small at the time of signing but are then later acquired by larger businesses.

“Every federal agency certified that the data is correct, which is not always true. There are lots of errors. There are 6 million contract actions a year on average,” Stamler said.

Stamler said the SBA is trying to reduce errors by working with federal procurement officials “to give them the tools to improve the data.”

“We conduct training so the data put into database will be more accurate,” Stamler said. “We’re focused on increasing contracting opportunities for small businesses.”

Christopher Gunn, spokesman for the American Small Business League, said the group came up with its findings by reviewing contracts classified as small-business contracts in the federal procurement data system.

The other top-five recipients of small business contracts were Atlantic Diving Supply, Inc., a company with 300 employees and $350 million in annual revenue; and Aegis Mission Personnel, a company with 1,900 employees and $350 million in annual revenue, according to the small-business league.

Gunn said his organization estimates that less than 5 percent of federal contracts went to small businesses, far below the 22.7 percent claimed by the SBA.

The American Small Business League released a statement on June 21st criticizing the Obama Administration about their failure to implement economic policies to help small businesses succeed.  In fact, the US Census Bureau indicates that over 90% of all new jobs in America come from small businesses.

The Kauffman Foundation compiled a study that proved that, since 1980, small businesses that were less than 5 years old have created more jobs than any other type of business.  The ASBL found that, in 2009, small businesses only received about 3% of the Obama Administration’s economic stimulus for businesses.

Lloyd Chapman, President of ASBL, said that it isn’t a surprise that unemployment has skyrocketed from 7.6% to 9.1% since Obama was elected.  Chapman charged that the Administration is diverting small business funding to the larger corporations throughout the world.

A series of federal investigations, going all the way back to 2003, found that billions in federal small business contract dollars have been diverted to corporate giants.  The Inspector General of the Small Business Administration, in Report 5-15, referred to the problem as a major challenge that the entire federal government is facing today.

The Obama Administration’s most recent data concerning their “small business” list includes numerous large corporations such as AT&T, GE, Northrop Grumman, 3M Company, Raytheon, Dell, Xerox, Hewlett-Packard, Lockheed Martin and Boeing.  These and numerous foreign corporations have received billions of dollars in small business contracts related to the federal government.  Some of these foreign corporations include Ssangyong Co., Rolls-Royce and British Aerospace Engineering.

Source: http://ewireinformer.com/economic-policies-of-obama-administration-ignoring-small-businesses-342471.html

Sen. Mary Landrieu (D-La.), chairwoman of the Senate Committee on Small Business & Entrepreneurship, chaired a hearing earlier today called "An Examination of SBA Programs: Eliminating Inefficiencies, Duplications, Fraud and Abuse" (archived video available).

Loan Agent Problems

The first panel of the hearing focused on inappropriate loan agent actions in the 7(a) loan program, Small Business Administration (SBA) enforcement of the problem and other fraud issues.

SBA Inspector General Peggy Gustafson noted that inappropriate actions by loan agents was a large problem in the 7(a) loan program, suggesting that a central database of the large network of such figures would help alleviate the situation.

Administrator Karen Mills noted that the loan officer problem involves eliminating “bad actors.” She asserted that aggressive enforcement would be made against these bad actors.

Increasing Program Oversight

Mills also cited two other categories of improvements to SBA loan program performance: ensuring eligibility of applicants and general oversight.

While asserting that oversight of contractors in its programs is a responsibility of the SBA, Mills noted the importance of training agency procurement partners to help in the process. She pointed out more than once that the government has 30,000 contracting agents and handles 8 million contracts a year.

Gustafson agreed that the SBA must take on more enforcement actions. She revealed that the agency is in the process of overhauling its suspension and debarment procedures.

In response, committee ranking member Sen. Olympia Snowe (R-Maine) called on Gustafson and Mills to employ consistent standards and proper training in SBA enforcement activity. Snowe cited that less than one percent of small business contracts are reviewed by the SBA and asked if the agency had the proper manpower.

Mills noted the agency is under no obligation to review every contract, but did point out that 24 new employees were being brought in to combat fraud, waste and abuse.

Polar Opposite Set-Aside Views

Perhaps the most interesting aspect of the second panel to contractors was the dichotomy of the American Small Business League (ASBL) calling for improved oversight of set-aside programs while the Cato Institute stumped for abolition of the SBA and a level playing field for all contractors.

Though the second panel featured five witnesses, ASBL Director of Government Affairs Kevin Baron and Cato Institute budget analyst Tad DeHaven made what are likely the most relevant comments to the GovCon community.

Baron started off by saying that small business contracting is vital to the national economy, and could create over 1 million new jobs. He described the problem of large businesses claiming small business set-aside contracts, with the agency getting credit for helping a small business. He estimated that the problem costs small businesses billions of dollars.

Noting that some observers feel the federal goal of awarding 23 percent of procurement dollars to small businesses is impossible, Baron insisted it could be achieved through initiatives such as the Fairness and Transparency in Contracting Act and the establishment of small business set-asides on General Services Administration Schedule contracts and other government-wide acquisition contracts.

On the other side of the spectrum, DeHaven called for abolition of the SBA and a totally level playing field for contract competition in his opening statement. He said that the SBA has been known as the “Small Scandal Administration” and does not have the incentive to eliminate fraud and abuse like a business would.

DeHaven said that finding a government program without fraud would be like finding a McDonald’s Happy Meal without a toy. He must have been hungry, as he later said that seeing a letter thanking the SBA for its loan help in an Indiana pizza joint made him think of the unfairness of other pizza places in the area not receiving similar help.

Landrieu seemed to be speaking to DeHaven in her closing statement by noting that eliminating the SBA would save $900 million, much less of an effect than simple tweaks to the $649 billion DOD budget.

Pro-Set-Aside Argument

During the question-and-answer period, Landrieu asked Baron to give specific arguments as to why small business set-asides are a good thing. Baron said that small businesses are able to offer high quality at a cheap price and are perfectly suited for the approximately 20 percent of government contracts under $100,000.

Pointing to the Air Force tanker contract, Baron also explained that small businesses serve valuable roles as subcontractors on larger programs.

The number one problem small businesses cite, according to Baron, is a need for demand, which could be fueled through more government contracts. He claimed that small business work has a multiplier effect through local communities.

Campaign Donation Disclosure Issue

Sen. James Risch (R-Idaho) was especially interested in the seemingly hot-button contractor issue of President Obama’s proposed executive order to disclose political contributions. While admitting the ASBL does not have an official position, Baron said he does favor efforts to increase transparency. He feels that the superior product should win over a contractor’s connections.

DeHaven did not have an official position either, but did not think that the Obama administration is continuing a tradition of abuse of government power. The other panelists did not offer any type of opinion. The noncommittal responses of this small sample pool could indicate that contractors do not care as much about the issue as the media depicts.

In Closing

In closing, Landrieu said that while the SBA is a comparably lightly-funded agency, she is still committed to stamping out waste and fraud. She noted that programs that work well will be kept, while others will be discarded.

Anthony Critelli follows the latest GovCon developments as news editor for GovWin, a Deltek network that helps government contractors win new business every day. He can be reached at anthonycritelli@govwin.com.

Source: http://govwin.com/anthonycritelli_blog/sba-fraud-hearing-discusses-loan/137510