SBA Data Show Large Firms Are Nabbing Contracts Reserved for Small Businesses


SBA Data Show Large Firms Are Nabbing Contracts Reserved for Small Businesses

By Charles S. Clark
Government Executive
October 2, 2014

Federal procurement data show that large companies, including leadingdefense contractors, last year received millions of dollars in contractsintended for small and disadvantaged businesses. The data was obtained lastweek by the American Small Business League, which fought a multi-year court battle toobtain the information from the Small Business Administration.   

The group, based in Petaluma, Calif., and run by software entrepreneur LloydChapman, has been a thorn in the side of SBA for years. It accuses the agencyof catering to large companies that misrepresent themselves as small businessesto win government contracts.

Last week the league obtained from SBA an Excel file containingnearly 107,000 entries of vendors that received $83 billion in small businesscontracts in fiscal 2013. While SBA annually releases analytical informationabout small business contracting, it took a lawsuit from the league to forcethe agency to release its list of vendors who receive small businesscontracts.

The agency sought to protect its list from disclosure on the grounds that itis compiled from data it culls from a General Services Administration database.U.S. District Judge Marilyn Hall Patel found that reasoning flawed and in a 2008 ruling ordered theinformation released. This is the first year SBA has provided theinformation without a court battle, Chapman said.  

Prepared by SBA's Office of Government Contracting and Business Development,thelist is drawn from the fiscal 2013 Federal Procurement Data System. Thelist does not include any information about the contracts themselves, only thenames of vendors who received small business contracts and the amounts theywere awarded. It includes entries for such contractors as Chevron U.S.A. Inc.($8.5 million); Lockheed Martin Management Systems Designers, Inc. ($47million); Northrop Grumman Systems Corp. ($455,636); Raytheon BBN TechnologyCorp. ($5 million); Raytheon Company ($418,766); and General Dynamics C4 Systems($947,203).

"This list of companies is the biggest piece of evidence the American SmallBusiness League has ever received from the SBA through a FOIA request," saidChapman. In the past, attorneys for the SBA claimed the agency had noknowledge or information on the actual recipients of federal small businesscontracts, he said.

Chapman believes the administration is trying to dismantle the SBA"through policies that dramatically increase the federal definition of asmall business, and we can't let him do that," he said.

The SBA inspector general last month substantiated the notion that theagency mischaracterizes companies in a damningreport that found many agencies—while striving to reach the governmentwidegoal of awarding 23 percent of contract collars to small businesses—were"overstating" the eligible firms. The watchdog identified more than $400million in contract dollars that went to firms too large to qualify for theSection 8(a) set-asides for small businesses and those in poor communities.

The IG recommended that the SBA's associate administrator for governmentcontracting and business development strengthen controls between SBA databaseson certification data of 8(a) and HUBZone firms to improve the accuracy ofinformation reported to the Federal Procurement Data System. The SBA largelyagreed.

A previous league study concluded that 75percent of such awards were given to large firms.  

On Wednesday, the small business league said the administration "has adopteda new strategy to close the agency with a series of policies that appear to bedesigned to dilute and dismantle federal small business programs," a referenceto a seriesof proposed rules SBA began releasing in that the league says "dramaticallyincreased the federal definition of a small business in hundreds ofcategories."

One proposedrule out in August would remove the Information Technology Value AddedResellers exception under North American Industry Classification System 541519.It also "proposes to increase employee-based small business size standards for30 industries and three sub-industries."

The league says that would mean that a small information technology firm"with annual sales in excess of $27.5 million will be considered a largebusiness while contractsto firms like Lockheed Martin, Northrop Grumman and Raytheon will continue to be counted assmall business contracts."

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Obama Administration Moves To Quietly Close The SBA With Policies

Press Release

Obama Administration Moves To Quietly Close The SBA With Policies

American Small Business League Fights To Save Federal Small Business Programs

By Lloyd Chapman
American Small Busienss League
October 1, 2014

PETALUMA,Calif., Oct. 1, 2014 /PRNewswire-USNewswire/ -- Earlier thisyear the Obama Administration abandoned plans to close the Small Business Administration under the guise of streamlining the government.  After a series ofarticles appeared that agreed with American Small Business League (ASBL)President, Lloyd Chapman, Obama's plan to shutter the agency came to an end.

Havingfailed to close the Small Business Administration under the guise ofstreamlining government and combining agencies, the Obama Administration hasadopted a new strategy to close the agency with a series of policies thatappear to be designed to dilute and dismantle federal small business programs.

Startingin May of this year the SBA announced a sweeping series of policies that dramatically increased the federal definitionof a small business in hundreds of categories. According to the latest datafrom the U.S. Census Bureau 89% of all U.S. firms have less than 20 employees.Under the new small business size standards firms with up to 1500 employeesqualify as small businesses.

AWashington Post story described the new small business size standards as, "How 8,500 large companies will become small businessesovernight."

Thenet result is that programs to help legitimate small businesses will bedismantled, as small businesses must now compete head to head with some of thelargest firms in their respective industries for federal small businesscontracts.

Inaddition to the skyrocketing new definition of a small business, the ObamaAdministration has continued their policy of diverting billions of dollars infederal small business contracts to Fortune 500 firms.

Anothernew policy that received no media coverage is the "safe harbor from fraud penalties" policy. Undercurrent federal law, misrepresenting a firm's status as a small business toillegally land federal small business contracts is punishable by up to 10 years in prison, a $500,000 fine, or both.

Underthe "safe harbor from fraud penalties" policy, a large business canavoid any penalties for committing felony federal contracting fraud by simplyclaiming they "acted in good faith". The "safe harbor from fraudpenalties" policy will obviously promote more fraud in federal smallbusiness contracting programs and push legitimate small businesses out of thefederal marketplace, as more large businesses will be encouraged to illegallygo after federal small business contracts and subcontracts.

Nowthe Obama Administration is proposing another new policy that could force thousands of legitimatesmall businesses in the IT industry out of the federal market place. Under thenew proposed rule, SBA proposes to remove the Information Technology ValueAdded Resellers exception under NAICS 541519, making firms that provide a widerange of computer products to the federal government lose their small businessstatus if their annual sales exceed $27.5 million.

Ifthe new rule is adopted a small IT business with annual sales in excess of $27.5 million will beconsidered a large business while contracts to firms like Lockheed Martin, Northrop Grumman andRaytheon will continue to be counted as small business contracts.

FormerPentagon PR executive Terry Sutherland was likely assigned to head the SBA PressOffice and block any media coverage on the covert effort to close the SBA.

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