Ina newly published reportoutlining the failure of the Small Business Administration (SBA) to properlymonitor or penalize Fortune 500 companies, like Verizon Communications Inc. (NYSE:VZ) and Raytheon Company(NYSE:RTN),who pilfer contracts otherwise promised to small businesses in America, CharlesTiefer, a Maryland Professor of law and a governmental contract specialist,says the system is broken and in need of overhaul.

Readprofessor Charles Tiefer's report at: asbl.com

Problems for SmallBusiness Administration

Thereport cites three major problems that plague the system, including:

·    The current practice of large contractors such as VerizonCommunications Inc. (NYSE:VZ), Citigroup Inc (NYSE:C) etc, acquiringsmall businesses to retain contracts.

·    Small businesses as they grow larger are not "early graduated" outof the small business category, thus retaining small business contracts.

·    Vast sums of Federal payments to businesses should be, but arenot, counted when figuring the 23% goal for small business.

Tieferbelieves that while the law calls for a 23% goal, in fact, the number actuallyrealized may be in the single digits. "By any objective standard ormeasurement," says Tiefer, "the real number may be well less of 10%. Worse, theSBA knows this and continues to obfuscate the real data. A simple question thatgoes unanswered is how can it be that more than 200 Fortune 500 companiescontinue to receive billions in SBA contracts?"

"Thisabuse of the contracting system has been going on for some time and the SBAseems unwilling to take corrective measures," says Professor Tiefer. "The factsare that federal law requires small businesses in the United States to receive23% of all contracts awarded by the federal government. In fact, because abuseis rampant, and unchecked by the SBA, barely a fraction of contracts actuallyend up with small business. We believe this [is] fraud, and there is no otherway to define it. Small businesses in America have been cheated out ofbillions, if not a trillion dollars. This abuse must stop."

To underscore the pernicious nature of federal contracts being awardedimproperly to Fortune 500 companies such as Verizon Communications Inc. (NYSE:VZ) in America, SBAInspector General, Peggy Gustafson testified, "The bottom line is that there isa real societal cost when ineligible companies improperly profit frompreferential contracting through fraud and illegal conduct…This fraud thwartscongressional intent behind these programs and deprives legitimate smallbusinesses of contracting opportunities."

Tiefer'sreport includes facts from a 2004 SBA Office of Advocacy study finding manycases of small business contracts going to large companies, including veryfamiliar names such as Verizon Communications Inc. (NYSE:VZ), Citigroup Inc (NYSE:C), The BoeingCompany (NYSE:BA)etc, on the federal procurement roster. "Billions of dollars are at stake forsmall businesses in America," says Tiefer. "They are, frankly, being cheatedout of their opportunity to provide goods and services to the American peoplebecause large companies such as Verizon, Citigroup, Boeing etc, have figuredout how to manipulate the system. Worse, when people such as Lloyd Chapman, thehead of the American Small Business League and a true champion in this fieldtry to expose these unsavory practices, they are held up to scorn andridicule."

Verizon tops2013′s small business revenue

Amonetary figure of $1.1 trillion dollars has been cited as the 23% goal forsmall business contracts from the federal government, yet, the actual number ofdollars going to small businesses in America is well short of that number andpercentage, says the report. "At the end of the day, there should be federaland public concern, and perhaps outrage, that a system can remain so brokenthrough numerous congressional hearings, many in-depth media reports and bothinternal and external investigations of the SBA." Tiefer concludes, "it is timeto take action."

CharlesTiefer is a nationally recognized expert in government contract law andco-author of, Government Contract Law in the Twenty-First Century, hehas also served as a Commissioner on the Commission on Wartime Contracting inIraq and Afghanistan.

To view full article, click here: http://www.valuewalk.com/2014/04/verizon-citigroup-sba/

Members of the House Small Business Committee on Tuesday votedunanimously in favor of several revisions to the Small BusinessAdministration's new budget proposal, with several lawmakers criticizing theagency for committing too much money to new, unproven programs and too little to fulfilling itsunderlying responsibilities to small employers.

"By necessity, budgets requirehard choices," Committee Chairman Sam Graves (R-Mo.) said during a brief markupof the budget on Tuesday. "To the extent that the SBA... budget request makeshard choices, they ultimately make them in the wrong place."

Democratsand Republicans on the panel agreed on revisions that would trim $50 millionfrom the agency's $710 million budget proposal that was published earlier thismonth as part of the president's broader spending blueprint. The committee's recommendationsnow move to the House Budget Committee for review.

SBA officials maintain that theproposal would ensure that employers have the resources they need to start andgrow their businesses, and it would give the department the resources it needsto expand important exporting, capital access and other educational programs.On the agency's blog earlier this month, Marianne Markowitz, the agency'sacting administrator, said the plan "builds on SBA's proven track record ofassisting America's small businesses."

Quite the contrary, lawmakers onthe small business committee said. During the hearing, they identified severalareas in which they feel the agency's budget outline falls short of the department'scharter to assist small companies.

Namely, they worry that thebudget does not include enough resources to combat persistent fraud and abusein the agency's small-business contracting programs.

Several government oversight reports have shown that contractsintended for small firms are often awarded to large corporations, yet thosecontracts are sometimes still recorded as having gone to small businesses. Inan attempt to remedy that, Congress has in the past two years passedlegislation that requires the SBA to improve its contracting database and issuebetter guidelines to help other departments seek out legitimately smallbusinesses.

However, the agency, which hasbeen without a permanent leader for the past seven months, hasnot completed several of the tasks in those laws, some of which committee saysare now more than a year overdue.

"The Committee believes that theSBA undervalues the importance of its mission to ensure that small businesseshave a fair shot at winning government contracts," the panel wrote in a memoconcerning the budget request. Lawmakers also urge officials to hire more staffto oversee its procurement programs and combat contracting fraud.

So where would that additionalfunding come from? In large part, the panel thinks the department shouldshutter some pilot programs that it says are both unproven and unauthorized byCongress.

"While the SBA is ignoringmandates from Congress, it has the gall to request $39 million to continueentrepreneurial outreach initiatives of its own creation," Graves said, latercalling the agency's funding decisions "misguided."

Republicans weren't the only onesvoicing concerns. Rep. Nydia Velázquez of New York, the committee's top rankingDemocrat, called the agency's overall funding proposal "reasonable" but saidshe too takes issue with the way the money would be allocated.

"Similar to previous years, theSBA continues to support initiatives that lack a specific statutoryauthorization," Velázquez said.

Specifically, the panel advisedthe administration to take an axe to the agency's Boots to Business program,which targets military veterans-turned-entrepreneurs, Growth Accelerators program,which targets high-growth, early-stage companies, and its broadEntrepreneurship Education initiative. All the programs, lawmakers argued inthe memo, "have amorphous goals" and replicate existing programs within thefederal government.

"Simply put, this practice iswasteful and should not be allowed to continue," Velázquez said. She laterwarned that the agency is "squandering its limited resources."

Contracting for the federal government is aspecialized but lucrative field. Small businesses that managed to navigate thearcane rules for bidding for government jobs landed more than $83billion in federal contracts last year, aided by policies that encourageagencies to award a fixed percentage of work to smallcompanies. The process is complex and often contentious: It's not uncommonfor losing bidders to file protests, arguing, among other things, that thewinner shouldn't have qualified for set-asides.

Saiz Construction, a Salt Lake City-basedcompany that qualifies for federal jobs reserved for small businesses owned bymembers of disadvantagedgroups, just won another kind of legal battle. Back in 2011, the NativeAmerican-owned company filed a whistle-blower complaint alleging that a largercompany had used its relationship with Saiz to win contracts set aside forsmall businesses. On March 21, the Department of Justice announcedthat the larger company, Salt Lake City-based Okland Construction, had agreedto a $928,000 settlement—and that Saiz Construction and its owner, Abel Saiz,were entitled to $148,480 plus $86,000 in legal fees.

"Large businesses must not be allowed tofraudulently obtain access to contracts set aside for small businesses," SmallBusiness Administration Inspector General Peggy E. Gustafson said in a press release.

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Okland says it did no wrong, and that thecompany settled to avoid a costly legal battle. "We dispute all of theallegations completely," says John McEntire, chief financial officer of Okland,which has 600 employees. "[Saiz] made a lot of money with us, and we'redisappointed in him and in the federal government."

The Saiz case evolved from a mentor-protégéprogram that the SBA created in the 1990s. The idea was to encourage largecompanies to share expertise with small businesses vying for contracts, givinglarge companies incentive by letting them share the work—and profit—on jobs setaside for small business.

Saiz and Okland entered into such arelationship in 2002, according to the complaint, which was filed in U.S.District Court in Utah and unsealed last week. That helped Saiz win federalcontracts—mostly building jobs on Air Force bases—worth more than $18 million,based on data from Bloomberg Government.

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Those jobs should have been performed by ajoint venture formed by Saiz and Okland; instead, the complaint says thatOkland hijacked the partnership, using the smaller company "as a pass-throughor front" to obtain government contracts. When Saiz protested, Oklandthreatened to "bury [him] in court," the complaint says. McEntire declined todiscuss specific allegations.

The complex process of steering contracts tosmall and disadvantaged businesses has a longhistory of problems—mainlythat some of the awards allocated for small companies always seem to go tolarger ones. Whistle-blower suits that callout fraud give small businesses some leverage.

The federal government maintainsinformation about federal contractor performance in a system of databases thatis supposed to keep contract officers up to date on how well contractors areexecuting on their work, and whether they have been sanctioned or subject tocriminal penalties.

But Sen. Claire McCaskill says thesystem "feels shockingly old and clunky," with relevant information"scanty, and scattered across multiple databases."

The Missouri Democrat says she wantsmore reliable data standards to identify contracting companies, and a moreunified system, with a simpler interface, that includes data from states, whenavailable. Additionally, she is concerned that contract officers are reluctantto enter negative performance information about contractors.

Government-wide contractor performanceinformation is accessible via the Past Performance Information Retrieval(PPIRS) database, established in 2002 under the E-Government Act.

But there is a separate system, theContractor Performance Assessment Reporting System (CPARS) for enteringinformation into PPIRS, created in 2010 to combine individual agency systems.Information on suspended and debarred contractors is contained in yet anotherplace, the System for Award Management (SAM). And the Federal AwardeePerformance and Integrity Information System (FAPIIS) contains information oncontractors who have been subject to criminal convictions or certain civilpenalties.

Plans have been in place since 2001 tocreate a single system called the Integrated Acquisition Environment to unifyall contracting information from solicitations to awards to performance metricsin a single resource.

Delays, cost overruns and developmentproblems have pushed back the scheduled completion date to 2018, according toKevin Youel Page, a General Services Administration assistant commissioner whotestified at a March 6 hearing of the Senate Homeland Security and GovernmentalAffairs Subcommittee on Financial and Contracting Oversight, which McCaskillchairs.

"We've suffered our ownmissteps," Page said. "We're using new 21st century architecturalprinciples and the right kind of development approach to minimize risk."

The proposed consolidation is being phasedin gradually. The next step is the inclusion of three systems used to inputpast performance information on contacts into the Contractor PerformanceAssessment Reporting System (CPARS), set to take place in June.

McCaskill is also worried that a unifiedsystem might maintain some of the divergent data standards of legacy databases.

For example, company names frequentlyappear with a variety of different spellings, making it potentially difficultfor contract officers to get a read on a company's full contracting history.Companies can maintain dozens of identifiers in the Dun and Bradstreetnumbering system used by the government, and this makes it difficult to trackthe relationship between divisions, subsidiaries, joint ventures and othercorporate entities. Companies can change their names or be acquired by otherfirms and their performance histories can essentially disappear.

McCaskill noted that CGI Federal, thecompany most closely associated with the buggy HealthCare.gov website launch,was built out of the acquisition of American Management Systems by parentcompany CGI. American Management Systems had its own problems as a governmentcontractor, failing in a project to build an online portal for the federalretirement savings system and modernize its recordkeeping.

McCaskill wondered if this history wouldhave given any contract officers second thoughts about the HealthCare.govassignment. CGI Federal, she noted, was ranked "exceptional" in everycategory in a June 2013 assessment.

"We know it turned out not to betrue," McCaskill said.