Earlier this month the Yahoo! Small Business Advisor Profit Minded Blog reported here

on an apparently momentous achievement the Small Business Administration had

announced: "For the first time in eight years, the federal government has

achieved its goal to award at least 23 percent of all federal contracts to

small businesses ... Just over 23 percent of contracts, accounting for $83.1

billion, were awarded to small businesses in 2013. Of 24 federal agencies, only

4 failed to meet their agency-specific goal."

But some have since challenged the SBA's claims.

Washington Post digital editor J.D. Harrison reported on the milestone, but asked, "Did the

government actually hit the target? Only time will tell. But there's ample room

for skepticism."

Harrison points out that General Services

Administration fine print notes that "SBA's annual reports are generated

by taking a snapshot of data from the Federal Procurement Data System on a

certain date." But the database is "dynamic" with changes and

updates continually being made by the federal agencies. And Harrison says those

snapshots reported to the public do not "stand the test of time" when

reviewed later. For instance, Harrison reports:

"In 2012 SBA reported that small businesses

claimed 22.25 percent of work, based on the snapshot of the moment. Now, two

years later, the database shows they claimed 22.17 percent."

A 0.08 percent difference seems trivial, until you

put it into dollars: even such a slight reduction in the $83.1 billion that SBA

claims was awarded in 2013 would translate to a loss of more than $66 million

for small business.

Lloyd Chapman,

the outspoken founder of the American Small Business League in Petaluma,

Calif., thinks the discrepancy is even greater. He has long accused the

government of fraudulently awarding contracts meant for small businesses to

large corporations and says the 2013 record is no different. "The ASBL

believes that small businesses got only one-tenth of what the SBA says they did

and will be moving forward with inquiries on that subject," Chapman announced on the ASBL

website. "The most recent information from the Federal Procurement

Data System indicates that 175 Fortune 500 firms and their subsidiaries

received small business contracts in FY 2013," he says.

Chapman also

points to a 2013 statement by Charles

Teifer, a University of Baltimore Law School Professor of Government

Contracts, who says that "large contractors wrongfully hold small business

contracts," and that "vast sums of Federal payments to businesses

should be, but are not, counted when figuring the 23 percent goal for small business."

Teifer says that the Small Business Administration does not deny that large

contractors hold the contracts, but excuses the practice by explaining that it

is a result of large companies acquiring the contracted small business, or of

contractors expanding beyond the small business category during the contract

term.

In the trade publication Government Executive last week, reporter Charles S. Clark

asked an SBA official to respond to the ASBL's argument. Associate

administrator for government contracting and business development John Shoraka

told Clark:

"This occurs for a variety of reasons, including

the growth of a business, mergers and acquisitions, or human data entry error.

 ... The fact that a contract awarded to a large business is coded in a

database as an award to a small business does not mean that the contract was

taken away from a small business or that small businesses suffered. Unless a

contract was set aside for a small business, the designation as a small

business does not benefit that business in receiving the award. The designation

could be a result of a mistake on the part of the contracting officer, who

actually enters the designation in the database, or the firm when filing its

representation for that contract."

Like Harrison reported at the Washington Post,

"only time will tell" if the 2013 contracting record was actually

something to celebrate.

To view full article, click here: https://smallbusiness.yahoo.com/advisor/blogs/profit-minded/federal-agencies-small-business-contracting-milestone-questioned-175650464.html

Earlier this month the Yahoo! Small Business Advisor Profit Minded Blog reported hereon an apparently momentous achievement the Small Business Administration hadannounced: "For the first time in eight years, the federal government hasachieved its goal to award at least 23 percent of all federal contracts tosmall businesses ... Just over 23 percent of contracts, accounting for $83.1billion, were awarded to small businesses in 2013. Of 24 federal agencies, only4 failed to meet their agency-specific goal."

But some have since challenged the SBA's claims.

Washington Post digital editor J.D. Harrison reported on the milestone, but asked, "Did thegovernment actually hit the target? Only time will tell. But there's ample roomfor skepticism."

Harrison points out that General ServicesAdministration fine print notes that "SBA's annual reports are generatedby taking a snapshot of data from the Federal Procurement Data System on acertain date." But the database is "dynamic" with changes andupdates continually being made by the federal agencies. And Harrison says thosesnapshots reported to the public do not "stand the test of time" whenreviewed later. For instance, Harrison reports:

"In 2012 SBA reported that small businessesclaimed 22.25 percent of work, based on the snapshot of the moment. Now, twoyears later, the database shows they claimed 22.17 percent."

A 0.08 percent difference seems trivial, until youput it into dollars: even such a slight reduction in the $83.1 billion that SBAclaims was awarded in 2013 would translate to a loss of more than $66 millionfor small business.

Lloyd Chapman,the outspoken founder of the American Small Business League in Petaluma,Calif., thinks the discrepancy is even greater. He has long accused thegovernment of fraudulently awarding contracts meant for small businesses tolarge corporations and says the 2013 record is no different. "The ASBLbelieves that small businesses got only one-tenth of what the SBA says they didand will be moving forward with inquiries on that subject," Chapman announced on the ASBLwebsite. "The most recent information from the Federal ProcurementData System indicates that 175 Fortune 500 firms and their subsidiariesreceived small business contracts in FY 2013," he says.

Chapman alsopoints to a 2013 statement by CharlesTeifer, a University of Baltimore Law School Professor of GovernmentContracts, who says that "large contractors wrongfully hold small businesscontracts," and that "vast sums of Federal payments to businessesshould be, but are not, counted when figuring the 23 percent goal for small business."Teifer says that the Small Business Administration does not deny that largecontractors hold the contracts, but excuses the practice by explaining that itis a result of large companies acquiring the contracted small business, or ofcontractors expanding beyond the small business category during the contractterm.

In the trade publication Government Executive last week, reporter Charles S. Clarkasked an SBA official to respond to the ASBL's argument. Associateadministrator for government contracting and business development John Shorakatold Clark:

"This occurs for a variety of reasons, includingthe growth of a business, mergers and acquisitions, or human data entry error. ... The fact that a contract awarded to a large business is coded in adatabase as an award to a small business does not mean that the contract wastaken away from a small business or that small businesses suffered. Unless acontract was set aside for a small business, the designation as a smallbusiness does not benefit that business in receiving the award. The designationcould be a result of a mistake on the part of the contracting officer, whoactually enters the designation in the database, or the firm when filing itsrepresentation for that contract."

Like Harrison reported at the Washington Post,"only time will tell" if the 2013 contracting record was actuallysomething to celebrate.

To view full article, click here: https://smallbusiness.yahoo.com/advisor/blogs/profit-minded/federal-agencies-small-business-contracting-milestone-questioned-175650464.html

Law360, New York (August 18, 2014, 7:47 PM ET)-- The American Small Business League on Monday criticized a proposed safeharbor from fraud penalties for large businesses that inadvertentlymisrepresent themselves as small businesses, saying that the provision is aloophole that invites ineligible businesses to illegally bid on small businesscontracts.
The SmallBusiness Administration proposed a new regulation on June 25 that wouldcreate a "safe harbor" for ineligible companies that misrepresent themselves assmall business contractors due to clerical errors or a misunderstanding of newregulations. The agency has said that the proposal would improve enforcement oftougher small business contracting rules by preventing honest mistakes fromtriggering newly increased penalties, including criminal sentences of up to 10years in prison.

But the ASBL said that the SBA's  proposal makes it too easy for largebusinesses to claim that they acted in good faith when they're caught trying tobend the SBA's eligibility rules.

"Legitimate small businesses could lose billions of dollars a year in federalcontracts as the penalties for hijacking federal small business contracts areessentially removed," the ASBL said. "Every year for a decade the SBA Office ofInspector General has named the diversion of federal small business contractsto large businesses as the number one problem at the SBA. The SBA hasconsistently refused to adopt any policies to halt the rampant fraud."

The SBA is still seeking feedback on its proposal, and will accept publiccomments until Aug. 25.

The proposal aims to enact a January 2013 change to the Small Business Act thateliminates penalties for companies that act in good faith after seekingadvisory opinions on their small business status from Small BusinessDevelopment Centers or Procurement Technical Assistance Centers.

The agency said that it doesn't expect the safe harbor to impact manycompanies, and that the number of companies fraudulently claiming smallbusiness status remains small. In 2010, for example, the SBA found that 150ineligible firms had represented themselves as being small for purposes offederal procurement.

"Most of these cases did not involve fraud, but instead were the result oferrors or misunderstandings of the size regulations," the SBA said in its June25 proposal. "To date, SBA is unaware of any firms being penalized … forfraudulently misrepresenting themselves as small business concerns. Therefore,SBA anticipates that the safe harbor provision of the proposed rule will impactvery few concern."

The 2010 Small Business Jobs Act sharplyincreased penalties for companies that try to defraudthe government by seeking to win contracts set aside for small businesses.Under the new regime, when a company wins a contract by willfullymisrepresenting its small business status, the government's presumed loss isthe value of the contract.

Although the law already provided for criminal and civil penalties, includingFalse Claims Act liability, the government had a hard time winning such becauseit was difficult for the government to establish damages when the contract wascompleted by an ineligible company. A 1994 case in the Court of Federal Claims,Ab-Tech Construction v. United States, limited the government's recoverabledamages because the contractor had provided the agreed on services, and othercases followed that precedent.

The new regulations, which took effect in August 2013, will allow prosecutorsand private relators to pursue fraud much more easily, under the assumptionthat contracts obtained through misrepresentation have no value to thegovernment. This puts the entire value of the contract at stake in litigation.

To view full article, click here: http://www.law360.com/articles/568462/small-biz-group-slams-proposed-contract-fraud-safe-harbor

In the sixth of its annual studies, a small business advocacy group hasagain blasted the government for allegedly awarding contracts to majorcorporations when policy intends for them to go to legitimate small businesses.The Small Business Administration offered other possible explanations for theapparent discrepancies.

The Petaluma, Calif.-based American Small Business League's new study offiscal 2013 procurement data concluded that of the top 100 companies receivingthe highest-valued small business federal contracts, "79 were large companiesthat exceeded the SBA's small business size standards, five were anomalous and16 were legitimate small businesses."

The group's annual studies also show that the number of top-100 contractingcompanies that are large firms has risen steadily, from 60 in fiscal 2009 to 84in fiscal 2013.

The large corporations that received the contracts in question in fiscal2013 included Lockheed Martin Corp., General Dynamics Corp., Boeing Co.,General Electric, Oracle Corp., Apple Inc., Verizon, Bank of America Corp.,Citigroup Inc., PepsiCo, Comcast Corp., Intel Corp., John Deere Co. and manymore, said the league, which published brief company-by-company profiles.

"Once again, large companies are the fraudulent recipients of a largeportion of federal small business contracts," League President Lloyd Chapmansaid in a statement. "This practice is disastrous to our economy and hurtingthe American people. The ASBL urges leaders to enforce renewed oversight andmonitoring of federal small business programs."

Asked for a response, an SBA official declined to comment on the league'smethodology but reiterated the agency's commitment to getting contracts tosmall businesses. "In some instances, a legitimate small business may appear tobe 'other than small' in the Federal Procurement Data System," said JohnShoraka, associate administrator for government contracting and businessdevelopment. "This occurs for a variety of reasons, including the growth of abusiness, mergers and acquisitions, or human data entryerror. SBA has no tolerance for fraud, waste and abuse, and takescorrective steps when actionable information comes to light."

Shoraka stressed that SBA over the past three years has initiated moregovernmentwide suspension and debarment actions against contractors than in theprevious 10 years. "The fact that a contract awarded to a large business iscoded in a database as an award to a small business does not mean that thecontract was taken away from a small business or that small businessessuffered," he said. "Unless a contract was set aside for a small business, thedesignation as a small business does not benefit that business in receiving theaward.  The designation could be a result of a mistake on the part of the contractingofficer, who actually enters the designation in the database, or the firm whenfiling its representation for that contract."

He added that SBA has a protest process for the size representation incontracts containing small business set-asides. "SBA cannot alter thefederal procurement data that has been [entered] into FPDS," he said. "However,we are continuously taking steps to improve data integrity. Each agency isresponsible for ensuring the quality of its own contracting data, but SBA conductsadditional analysis to help agencies identify any potential dataanomalies.  As part of its ongoing data quality efforts, SBA iscontinuing to work with federal agency procurement staff to provide tools toencourage data reviews, improvements to procurement systems and trainingsessions to improve accuracy."

To view full article, click here: http://www.govexec.com/contracting/2014/08/how-many-big-contractors-are-actually-posing-small-businesses/91694/