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.

The American Small Business League (ASBL) has more distressing news about federal small business contracting. ASBL reviewed the federal government's fiscal year 2011 contracting data and found that the number of large businesses winning small business contracts has increased, and that many of these awardees are some of the largest companies in the world.

The federal government has a statutory goal of awarding 23 percent of all federal contract dollars to small businesses. According to the latest Small Business Goaling Report, the government fell slightly under that goal in FY 2010 (22.7 percent). However, as ASBL has repeatedly documented, government agencies fudge the numbers by reporting contracts awarded to large businesses as small business contracts.

Sure enough, ASBL found that 72 of the top 100 federal “small” business contractors in FY 2011 were actually large companies, a 20 percent increase over the previous fiscal year. These 72 large businesses received $16.4 billion, or 77.6 percent, of the total awarded to the top 100, which includes several companies in POGO’s Federal Contractor Misconduct Database:

#4 – Atlantic Diving Supply, Inc. ($1.1 billion)
    • 425 employees, $968 million annual revenue

#5 – Mission Essential Personnel, LLC ($689.2 million)
    • 1,900 employees, $350 million annual revenue

#6 – Sierra Nevada Corporation ($396.8 million)
    • 1,800 employees, $938 million annual revenue

As well as subsidiaries of FCMD companies:

#14 – Metro Machine Corporation ($237.5 million), a subsidiary of General Dynamics

    • Metro Machine: 4,000 employees, $125 million annual revenue
    • General Dynamics: 81,000 employees, $2 billion annual revenue

#16 – Precious A-Mark Metals, Inc. ($231.9 million), a subsidiary of Spectrum Group International, Inc.  
    • Precious A-Mark Metals: 22 employees, $2 billion annual revenue
    • Spectrum Group International: $6 billion annual revenue

#19 – Petro Star, Inc. ($218 million), a subsidiary of Arctic Slope Regional Corporation
    • Petro Star: 319 employees, $777 million annual revenue
    • Arctic Slope: 6,600 employees, $974 million annual revenue

Among the small business contractors below the top 100 (meaning they received less than $86 million that year), ASBL found a “who’s who” of large federal contractors, including Lockheed Martin, BAE Systems,  L-3 Communications, Finmeccanica, IBM, and SAIC.

The Small Business Administration Office of Inspector General (SBA OIG) recently warned that the SBA’s most serious management and performance challenges are procurement flaws that allow large companies to obtain small business awards and agencies counting contracts performed by large companies towards their small business goals:

OIG audits and other governmental 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.

POGO has been pointing out the problems in federal small business contracting for a long time and will continue to do so. With a new SBA rule increasing some small business size standards, we expect these problems to get worse.

Small business is frequently touted as the “backbone” of the economy. What happens to that backbone if billions of dollars in small business contracts end up in the hands of Fortune 500 companies?

Neil Gordon is a POGO investigator.