Earlier this year, the Small Business Administration announced that thefederal government had reached its goal of awarding at least 23 percent of itstotal contracts to small businesses—the highest percentage in nearly eightyears.

This was a big deal for the federalgovernment—as Washington is always happy to tout its support for small firms.

Related: Small Business Contracts Flow toMega Corporations

But a scathing new reportfrom the SBA's inspector general casts doubts on the government's commitment tosmall businesses—and claims that the agency's numbers were significantlyinflated—by as much as $2 billion.

The IG reviewed federal contractsintended for companies eligible for the HubZone program, which benefitscompanies in low-income communities, as well as the 8(a) program, whichbenefits minority-owned firms.

Auditors concluded that inaccuratereporting practices and lax oversight resulted in some $428 million intendedfor disenfranchised groups going to ineligible firms. They added that another$1.5 billion went to business that used to be eligible for the programs—but areno longer qualified.

"In addition to overstating the smallbusiness "goal" dollars, this may have also prevented other eligible firms frombeing awarded these contract actions," the report says.

Related: The 10 Hottest Spots to Start aSmall Business

The auditors said information for theHubZone and 8(a) programs wasn't consistently transmitted to the System forAward Management, "As a result the affected small businesses—especially HubZonefirms—are not getting the visibility" in the system, which "may impact federalagencies in meeting their procurement goals."

The auditors only reviewed contractsworth more than $3 million, so it's likely that even more money was awarded toineligible companies.

The IG recommended that SBA create astreamlined process to more accurately award contracts. Agency officials agreedwith the recommendations.

This isn't the first time federalgrants for small businesses have gotten in the wrong hands. Earlier this year, an investigation bythe American Small Business League revealed that only 16 of 100 companiesreceiving small business grants were actually small firms. The rest of themoney was going to behemoth corporations like Apple, Bank of America andGeneral Electric.

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Federal agencies handed out more than $83billion in contracts to small businesses in 2013, allowing Washington tosurpass its goal of awarding 23 percent of government jobs to small businessfor the first time since 2005. How did the government manage to reach thatrarely met goal? Fudging the numbers may have helped, according to a reportissued last week.

Agencies overstated the amounts awarded by almost $2 billion,the Small Business Administration's Office of the Inspector General said in a Sept.24 report (PDF) that focused on set-aside programs for minority-ownedbusinesses, as well as businesses located in poor neighborhoods. That includes$428 million that went to companies that shouldn't have gotten set-asides, andan additional $1.5 billion to companies that qualified for the programs whenthey won the awards but no longer qualified last year, when agencies werecutting checks. "In addition to overstating the small business goaling dollars,this may have also prevented other eligible firms from being awarded thesecontract actions," the report says.

The SBA "generally concurred" with the findings, the reportsays.

To view full article, click here: http://www.businessweek.com/articles/2014-09-29/the-fuzzy-math-of-a-federal-program-for-minority-owned-businesses

During its approval of the defense budget back

in 1989, Congress added a new test program intended to simplify the

subcontracting process for large defense contractors. In theory, proponents

said, the tweak would lead large prime contractors to pass more work along to

small businesses.

A quarter century later, some of the world's

largest defense contractors are still taking advantage of the program — which,

oddly enough, remains in "test" mode. Odder still, the test has yet to be

evaluated.

Called the Comprehensive Subcontracting Plan

Test Program, the initiative allows large defense contractors to establish

company-wide or division-wide subcontracting plans that outline how the company

or each of its units generally intends to partner on any work awarded by the

federal government. Any time one of the participating companies competes for

work, it can present the general subcontracting strategy.

Normally, prime contractors are required as part of the bidding process to

submit a specific subcontracting plan for each individual project, which

details how much of the work they plan to outsource and to what type of

companies.

Originally approved for a two-year test, the

test program has since been extended by Congress several times, with its latest

authorization set to expire at the end of the year. Its current test

participants include a dozen of the nation's largest defense contractors,

including Lockheed Martin, Boeing, Northrop Grumman and General Dynamics.

Now 25 years after its inception, the Defense

Department's Web site still refers to the program as a "test," stating that its

purpose is "to determine whether comprehensive subcontracting plans will result

in increased subcontracting opportunities for small business while reducing the

administrative burden on contractors."

The idea is that, by alleviating some of the hassle of partnering with small

businesses and by allowing those subcontractors to perhaps become part of a

larger firm's overarching, routinely-used subcontracting network (rather than

competing for one-off projects), more work — and more contracting dollars — would trickle down to small

firms.

However, there's no telling whether that has

panned out.

In 2004, the Government Accountability Office

released the government's first report on the initiative, stating that, "although

the test program was started more than 12 years ago, DOD has yet to establish

metrics to evaluate the program's results and effectiveness."

Six years later, still without any metrics in

place, several lawmakers sent a letter to the GAO formally requesting a

follow-up investigation, noting that the program still had "never been

evaluated." A second GAO report was never filed. DOD, meanwhile, still has

never put forth a report on the results of the program.

Not surprisingly, that hasn't sat well with

small business organizations. The National Small Business Association, Small

Business and Entrepreneurship Council, U.S. Hispanic Chambers of Commerce and a

half dozen other advocacy groups in April sent a letter to the House Small Business Committee and House Armed Service

Committee urging them not to keep extending an initiative that has no data

demonstrating its value and effectiveness.

To view full article, click here: http://www.washingtonpost.com/business/on-small-business/a-quarter-century-later-pentagons-test-program-for-small-businesses-still-untesed/2014/09/26/4beec2a2-4422-11e4-b437-1a7368204804_story.html

During its approval of the defense budget backin 1989, Congress added a new test program intended to simplify thesubcontracting process for large defense contractors. In theory, proponentssaid, the tweak would lead large prime contractors to pass more work along tosmall businesses.

A quarter century later, some of the world'slargest defense contractors are still taking advantage of the program — which,oddly enough, remains in "test" mode. Odder still, the test has yet to beevaluated.

Called the Comprehensive Subcontracting PlanTest Program, the initiative allows large defense contractors to establishcompany-wide or division-wide subcontracting plans that outline how the companyor each of its units generally intends to partner on any work awarded by thefederal government. Any time one of the participating companies competes forwork, it can present the general subcontracting strategy.

Normally, prime contractors are required as part of the bidding process tosubmit a specific subcontracting plan for each individual project, whichdetails how much of the work they plan to outsource and to what type ofcompanies.

Originally approved for a two-year test, thetest program has since been extended by Congress several times, with its latestauthorization set to expire at the end of the year. Its current testparticipants include a dozen of the nation's largest defense contractors,including Lockheed Martin, Boeing, Northrop Grumman and General Dynamics.

Now 25 years after its inception, the DefenseDepartment's Web site still refers to the program as a "test," stating that itspurpose is "to determine whether comprehensive subcontracting plans will resultin increased subcontracting opportunities for small business while reducing theadministrative burden on contractors."

The idea is that, by alleviating some of the hassle of partnering with smallbusinesses and by allowing those subcontractors to perhaps become part of alarger firm's overarching, routinely-used subcontracting network (rather thancompeting for one-off projects), more work — and more contracting dollars — would trickle down to smallfirms.

However, there's no telling whether that haspanned out.

In 2004, the Government Accountability Officereleased the government's first report on the initiative, stating that, "althoughthe test program was started more than 12 years ago, DOD has yet to establishmetrics to evaluate the program's results and effectiveness."

Six years later, still without any metrics inplace, several lawmakers sent a letter to the GAO formally requesting afollow-up investigation, noting that the program still had "never beenevaluated." A second GAO report was never filed. DOD, meanwhile, still hasnever put forth a report on the results of the program.

Not surprisingly, that hasn't sat well withsmall business organizations. The National Small Business Association, SmallBusiness and Entrepreneurship Council, U.S. Hispanic Chambers of Commerce and ahalf dozen other advocacy groups in April sent a letter to the House Small Business Committee and House Armed ServiceCommittee urging them not to keep extending an initiative that has no datademonstrating its value and effectiveness.

To view full article, click here: http://www.washingtonpost.com/business/on-small-business/a-quarter-century-later-pentagons-test-program-for-small-businesses-still-untesed/2014/09/26/4beec2a2-4422-11e4-b437-1a7368204804_story.html

Think the federal government's small business contractingnumbers are inflated? The Small Business Administration's inspector generaljust confirmed your suspicions.

The agency's internal watchdog identified $428 million incontracts that federal agencies awardedto ineligible firms in two programs for small businesses: the 8(a) program,which benefits minority-owned businesses; and the Hubzone program, whichbenefits firms located in low-income areas. Even more contracts could have beenawarded to ineligible businesses; the inspector general only looked atcontracts worth more than $3 million.

These improperly awarded contracts not only inflated thenumbers reported by the SBA for these programs, they also took opportunitiesaway from legitimate participants in these two programs.

The inspector general also identified more than $1.5 billionin 8(a) and Hubzone contracts that were performed by businesses that no longerwere in these programs. That's legal under SBA regulations, but including themmakes it look as though 8(a) firms and Hubzone businesses got more work thanthey actually did.

The SBA reported two months ago that the federal government hitits goal of awarding 23 percent of its contracting dollars to smallbusinesses in 2013 — the first time that' s happened since 2005.

The inspector general's report, which looked at only a smallslice of government contracts, gives ammunition to critics who contend thisachievement was hollow because the data doesn't reflect reality.

To view full article, click here: http://www.bizjournals.com/bizjournals/washingtonbureau/2014/09/sba-watchdog-just-blew-a-hole-in-small-business.html?page=all