Monday - 2/27/2012, 6:20pm  ET

In the last fiscal year, 72 of the federal government’s top 100 small business contractors were some of the world’s largest companies. Research by both the American Small Business League and the SBA’s Inspector General found that Apple, Chevron, Shell, General Motors, General Electric, Coca Cola, Bank of America and 65 other giant companies got these contracts despite President Obama’s pledge to end this practice.

This practice has gone unchecked for years despite many government reports documenting the problem. In its most recent report, the SBA’s Inspector General said the agency’s top challenge is getting rid of  flaws that let large firms obtain small business awards and agencies to count contracts performed by large firms towards their small business goals. Under federal guidelines 23 percent of all government contracts are supposed to go to small businesses.

Large businesses have been able to get around this thanks to a combination of deceptive practices and government incompetence.

Studies have shown widespread misreporting by procuring agencies since many contract awards that were reported as going to small firms have actually been performed by larger companies. While some contractors may misrepresent or erroneously calculate their size, most of the incorrect reporting results from errors made by government contracting personnel, including misapplication of small business contracting rules.

One of the problems is a loophole in how the government awards contracts that contain multiple industrial codes. As it now stands, a company can identify itself as small on individual task orders for a contract even though it doesn’t meet the correct size criteria. That's because small businesses bought by large companies can qualify as “small” for contracting purposes for years after being purchased.

According to the Inspector General’s report, the SBA has made only “limited progress” toward

• Making sure contracting officers get “adequate” basic training on small business contracting procedures
• Coming up with regulations requiring firms to meet the size standard for each specific order they receive and showing that these regulations are being followed.

The IG has also called on the agency to overhaul its surveillance review process to make sure these are done “in a thorough and consistent manner.”

Constantine von Hoffman is a writer and sometime standup comedian. His work has appeared in Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, and Boston Magazine. @CurseYouKhan

Some of the world's biggest companies are benefiting from a program meant to help America's small businesses, according to a new study.

Lockheed Martin, IBM and AT&T all have snatched up federal government contracts meant for small businesses, according to a study from the American Small Business League.

Indeed, almost three-fourths of the top 100 federal "small" business contractors in fiscal year 2011, were actually large companies, says the report highlighted by the Project on Government Oversight.

Some of the biggest beneficiaries include Aegis, a 1,900-employee defense contractor, and Sierra Nevada, an 1,800-employee aircraft parts maker. Among the top recipients were Metro Machine Corp. in Norfolk, Va., which received almost $240 million in contracts even though it is a subsidiary of General Dynamics, a conglomerate with $2 billion in annual revenue.

The ASBL, which has repeatedly complained about instances in which large companies misrepresent their status to the government in order to qualify for such contracts, said such diversion of contracts deprives legitimate small businesses of more than $60 billion in contracts each year.

"Misrepresenting your firm as a small business is a felony, but the SBA has NEVER prosecuted a single offender," it says on the league's website. The Small Business Administration did not return a call for comment.

The industry group found that the government failed to reach its statutory goal of providing 23 percent of all federal contracts to small businesses in fiscal year 2010 and that there was an increase in the number of large businesses winning such contracts, as reported by the Project on Government Oversight.

The discrepancy could get worse. The SBA recently issued a rule that broadens the definition of companies that qualify as small businesses, as noted by POGO.

Spokesmen for Lockheed Martin, IBM and AT&T did not return emails seeking comment.

Chamber, Business Groups Aim To Weaken Anti-Bribery Law

A law that bans American companies from paying bribes to often-corrupt foreign leaders seems pretty obvious.

But the Chamber of Commerce is spearheading an under-the-radar battle to weaken the decades-old Foreign Corrupt Practices Act, which was passed in 1977 in the wake of scandals like Bananagate, in which Chiquita admitted to bribing the president of Honduras.

In that year alone, more than 400 U.S. companies admitted to making questionable payments of more than $300 million to foreign government officials and politicians. Recent violators include Siemens AG, which was forced to pay a $450 million fine for distributing more than $800 million to governments around the world, and former representative William "Dollar Bill" Jefferson (D-La.), who was busted for bribing African governments to win contracts for business colleagues.

American companies have often chafed at the rule, complaining that it hurts their ability to compete for business against non-U.S. firms that are not subject to such anti-bribery laws. The Chamber, which corralled a number of other prominent trade associations to send a letter this week to the Justice Department seeking clarity on the law, has long lobbied against it.

The Chamber's Institute for Legal Reform hired former Bush administration attorney general Michael Mukasey last year and has spent millions to lobby on the FCPA and other bills.

This week is a particularly vulnerable time for DOJ with the collapse of one of its biggest bribery cases against more than a dozen defendants in a case involving military equipment contracts. Still in officials' sights are Avon, over whether it paid bribes in China to win a license there, and Wynn Resorts, which gave a $135 million donation to the University of Macau while seeking gaming licenses there, as reported by Reuters.

Pentagon Lets Down Whistleblowers, Says GAO

Members of the military who fear retaliation for blowing the whistle on fraud and other concerns may not get help from the Pentagon, according to a new Government Accountability Office report. Military brass take too long to investigate whistleblower complaints and have sometimes put the careers of whistleblowers in jeopardy, according to the audit. But the process also can transform the career of a grunt -- in one example cited by the GAO, a servicemember eventually was given a Bronze Star that had been denied to him due to reprisal.