Pentagon "Sham" Test Program Backed by Government Accountability Office Executive

Press Release

Pentagon "Sham" Test Program Backed by Government Accountability Office Executive

ASBL Challenges GAO Report Backing "Sham" Pentagon Test Program

By Lloyd Chapman
American Small Business League
November 23, 2015

PETALUMA, Calif., Nov. 23, 2015/PRNewswire-USNewswire/ -- Government Accountability Office (GAO)Director, William Woods, has recommendeda 25-year-old Pentagon Test Program that legal experts have described as a"sham" become permanent. The Pentagon has refused to release anyinformation on the controversial ComprehensiveSubcontracting Plan Test Program (CSPTP) for over twenty-five years.

The Pentagon adopted the CSPTP in 1989 after subcontractingreports on many of the Pentagon's largest prime contractors revealed thePentagon hadfabricated data to intentionally misrepresent the true percentage offederal contracts that had been awarded to small businesses.

The CSPTP was adopted under the guise of increasingsubcontracting opportunities for small businesses. In reality the programeliminated all transparency on Pentagon prime contractor's subcontractingprograms and eliminated any penalties for prime contractors that did notcomply with federally mandated small business subcontracting plans.

In 2004, the GAO-04-381 investigation found that the "DOD has yetto establish metrics to evaluate the program's results and effectiveness. As a result, there is no systematic way of determining whether the program ismeeting its intended objectives."

In September, Pentagon spokeswoman MaureenSchumann told The Washington Post, "Although the test program was started more than 12 years ago,DOD has yet to establish metrics to evaluate the program's results andeffectiveness."

In a subsequent interview for The Blaze, Schumann stated, "Although well-intended, the program has not producedquantifiable results. The Department of Defense position is to not havecongress extend the CSP."

After Woods recommended that Congress should consider making theCSPTP permanent, the Pentagon released a graphthat indicated since the test program began, subcontracts to small businesseshad actually dropped by 50 percent.

Professor Charles Tiefer,one of the nation's leading experts on federal contracting law, issued a legalopinion on the CSPTP. He stated, "The program is a sham and its extension will be seriouslyharmful to vital opportunities for small business to get government contractingwork... Let it expire."

Longtime small business advocate and Executive Director of the Small Business Technology Council, Jere Glover,stated, "I agree with the DOD. This program has resulted in reducing smallbusiness subcontracting by close to 50 percent and almost $50billion. This program should be terminated."

ASBL President, Lloyd Chapman,has been the most outspoken critic of the CSPTP. "Mr. Woods' motives andmethods in recommending the Comprehensive Subcontracting Plan Test Program bemade permanent appear very suspect. It would have been impossible for him toevaluate the effectiveness of the test program since the Pentagon has refusedto release any data that could be used to evaluate the program. The informationthat is available clearly indicates the Test Program is as Professor Tieferstated a "sham" that has cheated American small businesses out ofhundreds of billions in subcontracts over the last 25 years. I plan to ask theGAO Office of Inspector General to investigate Mr. Woods and his report."

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Obscure Pentagon Small Business Program Gets a Boost from GAO


Obscure Pentagon Small Business Program Gets a Boost from GAO

By Charles S. Clark
Government Executive
November 18, 2015

A mysterious Defense Department research project designed to test ways toencourage large contractors to hire small businesses earned a recommendationfor permanent reauthorization from the Government Accountability Office onMonday, a move that surprised some inside the Pentagon and the small businesscommunity.

The 25-year-old TestProgram for Negotiation of Comprehensive Small Business Subcontracting Plans,results for which the Pentagon has never reported to Congress or the public, in2013 helped 12 participating companies avoid "about $18.5 million in coststhrough the use of single comprehensive subcontracting plans rather thanmultiple individual subcontracting plans," the GAO said in a report mandated by thefiscal 2015 National Defense Reauthorization Act.

GAO found after reviewing contracting activities of a dozen firms, includingdefense giants Lockheed Martin Corp. and Northrop Grumman Corp., the companieshad made "acceptable progress" toward enhancing small business opportunities 87percent of the time, GAO found. "Participants also achieved a 72 percentsuccess rate in increasing small business subcontracts in areas such asintegrated circuits and information technology, thus addressing a concern amongsome small businesses that high-end technical work was not being subcontractedunder the program."

Interviews with company managers and DoD officials also showed that theprogram "resulted in non-financial benefits, including greater companywideawareness of small business subcontracting opportunities."

If the program were terminated—as some Defense officials have recommended—aone-time administrative cost of about $22 million could result, GAO said,adding that it had confirmed earlier Pentagon studies estimating that theprogram avoided $45 million in administrative costs in fiscal 2005. The numberof years in which the program has remained in "test" status "createsuncertainty and inhibits further expansion," the report added.

GAO acknowledged that little is known about the program's effectiveness. AndDoD officials balked at the auditor's recommendation that it draft legislationto make the program permanent, noting that it has provided GAO with a chart thedepartment said shows that small business opportunities under the program havedeclined.

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Federal Investigation Finds SBA Executives Violating "Laws and Regulations"

Press Release

Federal Investigation Finds SBA Executives Violating "Laws and Regulations"

ASBL Encourages Congress to Hold Hearing on SBA Executives

By Lloyd Chapman
American Small Business League
November 11, 2015

PETALUMA, Calif., Nov. 11, 2015/PRNewswire-USNewswire/ -- A damning investigationby the Government Accountability Office (GAO) has accused the Small BusinessAdministration (SBA) of violating federal law.

The GAO also found the SBA cannot demonstrate with certaintythat its workforce has the skills the agency requires.

The SBA has been widely criticized for years for their role indiverting billions of dollars in federal small business contracts to Fortune500 firms. ABC,CBS, NBC, CNN and RTTV haveall reported on the fraud in federal small business contracting programs.

As early as 2003 the GAO found the SBA had dramatically inflated the actual volume of federal contracts awarded tosmall businesses and falsified the government's compliance with the 23% smallbusiness contracting goal by includingcontracts to over 5,000 large businesses.

In 2005, the SBA Office of Inspector General released Report5-15 that described the diversion of federal small business contracts to largebusinesses as, "One of the most important challenges facing the SmallBusiness Administration (SBA) and the entire federal government today…"

Every SBA Inspector General since 2005 has reiterated thediversion of government small business contracts to corporate giants as thenumber one problem at the SBA in their annual report to Congress.

In 2009, the GAO essentially accused the SBA and federalagencies of encouraging fraud in Report 10-108 that stated, "By failing to hold firmsaccountable, SBA and contracting agencies have sent a message to thecontracting community that there is no punishment or consequences forcommitting fraud."

In 2014, the GAO issued yet another scathing reporton the SBA Office of Advocacy that found they often work with large corporateinterests to block regulations that they find inconvenient to their bottomline. The Center for Progressive Reform even analyzed the report and referredto the SBA Office of Advocacy as a "taxpayer-funded lobby shop" for large businesses.

In May, Public Citizen released an investigative report on theSBA and federal small business contracting programs title, "Slighted." That investigation found the SBA usingaccounting tricks to create the "false impression that small businessesare getting their share of federal procurement money."

The House Small Business Committee adopted an amendment calling for another GAO investigation of the SBA based on theresearch conducted by the American Small Business League (ASBL).

ASBL encourages Congress to hold a hearing on the SBA to findout which executives are responsible for the fraud that has been uncovered atthe agency.

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Taxpayer Subsidies Flowing Mostly To Big Business, Not Small Business: Report


Taxpayer Subsidies Flowing Mostly To Big Business, Not Small Business: Report

By David Sirota ?
International Business Times
October 20, 2015

Both major political parties in the U.S. often tout smallbusinesses as the backbone of the nation's economy. A new report, though, suggeststhat government spending on economic development doesn't necessarily reflectthat rhetoric.

The study released Tuesday from the taxpayer watchdog groupGood Jobs First finds that between 80 and 96 percent of state economicdevelopment awards in the last five years went to large corporations ratherthan small business, even though the awards were supposedly available to bothsmall and large companies. The group analyzed more than 4,200 economicdevelopment grants in 14 states and found "a profound bias against smallbusinesses" -- which it defined as locally owned enterprises with fewer than100 employees.

This isn't the first analysis that has tracked how taxpayerlargesse disproportionately flows to major corporations, and not to smallbusiness.

GovernmentExecutive reported that the American Small Business League found in 2013"that of the top 100 companies receiving the highest-valued small businessfederal contracts" from the Small Business Administration, "79 were largecompanies that exceeded the SBA's small-business size standards, five wereanomalous and 16 were legitimate small businesses." The watchdog group's analysisin 2014 found "over 160 Fortune 500 firms were the actual recipients offederal small business contracts" in 2014.

Corporategroups and officialsat the Export-Import Bank, which provides credit for foreign purchasers of U.S.goods, have touted the government-supported bank as a major supporter of smallbusinesses. But researchers at George Mason University's MercatusCenter have documented that "less than 20 percent of all Ex-Im Bank fundinggoes to small business" and that the bank's support "backs less than 0.3percent of all small business jobs and less than 0.04 percent of all smallbusiness establishments."

Reutersalso reported that the bank "has mischaracterized potentially hundreds of largecompanies and units of multinational conglomerates as small businesses." Thenews service discovered that "companies owned by billionaires like WarrenBuffett and Mexico's Carlos Slim, as well by Japanese and Europeanconglomerates, were listed as small businesses" by the bank.

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