Pentagon 25-Year-Old "Sham" Test Program Facing Mounting Opposition

Press Release

Pentagon 25-Year-Old "Sham" Test Program Facing Mounting Opposition


By Lloyd Chapman
American Small Business League
October 8, 2014

PETALUMA,Calif., Oct. 8, 2014 /PRNewswire-USNewswire/ -- Recent mediaattention on the Pentagon's 25-year-old Comprehensive Subcontracting Plan Test Program (CSPTP) andthe significant negative impact it has had on small businesses has caused thePentagon and Congress to reconsider the future of the program.

TheCSPTP was adopted in 1990 under the guise of increasing subcontractingopportunities for small businesses. In reality, the CSPTP created a colossalloophole in federal law that has allowed the Pentagon's largest primecontractors to completely ignore federal law establishing small businesssubcontracting goals. Once the CSPTP eliminated all transparency and penaltiesfor non-compliance with small business goals, subcontracting opportunities forsmall businesses evaporated.

ThePentagon has never released any documentation that the CSPTP ever helped smallbusinesses. Even the language in the 2015 National Defense Authorization billrenewing the CSPTP into its 28th year of testing was critical of the program. It stated, "However,after nearly 24 years since the original authorization of the program, the testprogram has yet to provide evidence that it meets the original stated goal ofthe program."

A2004 Government Accountability Office investigation also found no evidence the CSPTP had everincreased subcontracting opportunities for small businesses.   

Themedia attention on the CSPTP prompted a hearing in the Senate Armed ServicesCommittee. Long time small business advocate and former head of the SBA OfficeOf Advocacy, Jere Glover testified at the hearing andsubmitted a letter to the committee opposing the renewal of the CSPTP.Before the media buzz on the program, both houses of Congress voted to renew theCSPTP into its 28thyear of testing.

ProfessorCharles Tiefer, one of the nation's leadingexperts on federal contracting law, issued a legal opinion opposing the renewal of the CSPTP. ProfessorTiefer's legal opinion referred to the CSPTP as a "sham" and stated,"There is no doubt in my mind the CSPTP has significantly reducedsubcontracting opportunities for small businesses. It should not have gottenits 25 years of extension as a never-tested 'Test Program.' Let itExpire."

ProfessorTiefer discussed his legal opinion opposing the renewal of the CSPTP in anappearance on Federal News Radio on September 22,2014.

TheAmerican Small Business League launched a nationalcampaign to expose the fact that the CSPTP has cheated small businesses outof over a trillion dollars in subcontracts since its inception in 1990, andhalt the renewal of the test program.

TheHill ran a blog critical of the test program titled, "Pull The Plug On Pentagon's 25-Year-Old TestProgram." Another article by The Blaze White House correspondent, Fred Lucas, focused even more attention on the CSPTP.

GovExec journalist Charles Clark released an article critical ofthe CSPTP. In his article Pentagon spokeswoman MaureenSchumann acknowledged, "The Department of Defense position is to not haveCongress extend the CSP."


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New Federal Policy Could Devastate Thousands Of Small IT Firms

Press Release

New Federal Policy Could Devastate Thousands Of Small IT Firms

American Small Business League Fights To Save Small Business IT Firms

By Lloyd Chapman
American Small Business League
October 7, 2014

PETALUMA,Calif., Oct. 7, 2014 /PRNewswire-USNewswire/ -- A new government policy that was posted in the Federal Registeron September 10 could be devastating to thousandsof small businesses that supply IT products to the federal government andgovernment prime contractors.

Underthe new proposed rule, all small business that fall under theexemption under NAICS code 541519 titled, Information Technology Value AddedResellers, with annual sales in excess of $27.5 millionwill become large businesses by the end of the year.

Ifthe new rule is adopted, thousands of legitimate small businesses in the ITindustry will be forced to close their doors when they are required to competehead to head with corporate giants like IBM, Dell, Hewlett-Packard, OfficeDepot and Staples for even the smallest government orders for IT products.

Atthe same time the government decided to make small businesses in the IT industrylarge, other new federal policies have allowed thousands of large businesses tosuddenly qualify as small. The Washington Post released a story on the issuetitled, "How 8,500 large companies will become small businessesovernight."

Asthe government plans to adopt policies that will cost thousands of small ITfirms their federal small business status, contracts to many Fortune 500 firmswill continue to be counted as small business contracts.

Thelatest data from the Federal Procurement Data System indicatesthat hundreds of large businesses are currently receiving federal small business contractsincluding a who's who of Fortune 500 defense giants like Boeing, Lockheed Martin,Northrop Grumman, General Dynamics and Raytheon.

NewSBA Administrator Maria Contreras-Sweet was chastised in a hearing by members of the House SmallBusiness Committee for diverting billions of dollars in federal small businesscontracts to corporate giants.

Thediversion of billions of dollars in federal small business contracts to Fortune500 firms has been uncovered in dozens of federal investigations andinvestigative reports by NBC, CBS, ABC, Fox News, CNN, RTTV, CNBC and MSNBC. On September 24, the SBA Office of Inspector General (OIG)uncovered up to two billion dollars in federalcontract actions that were awarded to ineligible firms. A similar investigationin 2008 reported the same widespread evidence of fraud.

TheSBA has recently faced a barrage of bad press after the SBA Inspector General's report wasreleased.

TheAmerican Small Business League (ASBL) is coordinating a national effort todefeat the proposed policy. ASBL President Lloyd Chapmanstated, "Think about the insanity of a new federal policy that willreclassify thousands of legitimate small IT firms as large businesses whilethousands of large businesses are inexplicably redefined as small businessesand federal contracts to some of the largest corporate giants in the U.S.continue to be reported as small business contracts."

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Small-Biz Gov't Contracts Going To Big Firms, Group Says


Small-Biz Gov't Contracts Going To Big Firms, Group Says

By Dietrich Knauth
Law 360
October 3, 2014

Law360, New York (October 03, 2014, 5:49 PMET) -- Procurement data obtained by the American Small Business League showsthat large companies received millions of dollars in contracts intended forsmall and disadvantaged businesses, which the league says casts doubt on the SmallBusiness Administration's recent assertion that agencies met theirsmall-business contract goals in 2013.

ASBL president Lloyd Chapman obtained a list of companies with small-businesscontracts worth $83 billion through a Freedom of Information Act request to theSBA. The list includes some big-name contractors — $46.6 million went to Lockheed MartinManagement Systems Designers Inc., $4.59 million went to Raytheon BBNTechnologies Corp. and  $419,000 went to Raytheon Co., according tothe ASBL's list.

Chapman said that the raw data obtained through the FOIA request is likely amore accurate representation of what's happening in the SBA contractingprograms than the official data, which is "cleaned up" over the course ofseveral months before being released.

"Every year when this information comes out, SBA says the large businessesrepresented are the result of anomalies, miscoding, simple human errors,computer glitches, small businesses outgrowing their size status, and largebusinesses acquiring smaller companies," Chapman said. "But there's a verystrong case that this is not simply [an accumulation of errors] ... anotherword that you could use is fraud."

Small-business contracts have been the subject of frequent government reports,and agencies including the GovernmentAccountability Office, the Department ofthe Interior inspector general and the Small Business Administrationinspector general have found overreporting of small-business contracts andevidence that agencies improperly award and take credit for small-businesscontracts that end up in the hands of large business.

The SBA's inspector general issued a report Sept. 24 that concluded thatagencies significantly overstated the value of contracts awarded to businessesin the SBA's Historically Underutilized Business Zone program and its 8(a)Business Development Program for small, disadvantaged businesses.

"We identified over $400 million in contract actions that were awarded toineligible firms, which may have contributed to the overstatement of smallbusiness goaling dollars for the Small Disadvantaged Business and theHUBZone Business preference programs in FY 2013," the inspector general'sreport said. "Besides reporting inaccurate information in [the FederalProcurement Data System], procuring agencies may have limited contractingopportunities for firms currently participating in the 8(a) or HUBZoneprograms."

The discrepancies raised by the SBA's data have also caught the attention oflawmakers like Rep. Nydia Velazquez, D-N.Y., who said during a Sept. 10 hearingthat the SBA allowed agencies to take credit for small-business contracts thatwere performed by large companies like NorthropGrumman Corp., Chevronand Raytheon.

"I don't know how, I don't know when they became small businesses, butwere you aware that agencies were taking credit towards their small-businesscontracting goals by including contracts that were given to largecompanies?" Velazquez asked SBA administrator Maria Contreras-Sweet.

Contreras-Sweet said that at least some of those discrepancies were explainedby SBA's "grandfathering" policy, which allows a company to keep itssmall-business status for up to five years after being acquired by a largecompany like Northrop Grumman.

Velazquez was unsatisfied by Contreras-Sweet's explanation and said she wouldpress the SBA to do more to make sure "numbers are not being cooked by theseagencies."

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