There are still reasons to doubt whether thegovernment is meeting its contracting goals for small businesses, despite theSmall Business Administration's report that 25 percent of federalprocurement dollars went to small companies in fiscal 2014.

"Large firms continue to receive contracts thatare counted toward small business goals," the SBA's inspector general concludedin its annual report on theagency's most serious management challenges.

The Small Business Administration'sinspector general says the agency needs to take… more

Under a goal set by Congress, small businessesare supposed to receive 23 percent of the federal government's contractingdollars.

Some big businesses may be misrepresentingtheir size to the government, but other cases of inaccurate reporting of smallbusiness contracting data may be due to mistakes by procurement officials, theinspector general concluded. In either case, small businesses are harmedbecause they lose out on contracts that should have gone to them, and the SBA'scredibility is damaged.

The inspector general's report identifiedseveral specific areas that should be addressed in order to make small businesscontracting data more accurate:

• Procurement officers should no longer beallowed to count contracts awarded to businesses that have left the 8(a)program or the Hubzone program toward those programs' contracting goals.They're able to do so under current SBA regulations, the inspector generalsaid. That inflates the numbers for the 8(a) program, which helpsminority-owned businesses, and the Hubzone program, which helps businesseslocated in low-income areas.

• The SBA needs to make more progress inaddressing weaknesses in the 8(a) mentor-protege program that allow agencies tocount contracts where large businesses do most of the work as small businesscontracts.

• The SBA should require that women-ownedbusinesses be certified by the federal government, states or an SBA-approvednational certifying entity in order to receive contracts set aside for women-ownedbusinesses. That was supposed to happen under a law passed by Congress lastDecember, which also gave contracting officials the power to award sole-sourcecontracts to women-owned businesses.

To view full article, click here: http://www.bizjournals.com/bizjournals/washingtonbureau/2015/10/big-businesses-still-getting-contracts-meant-for.html

The Obama Administration recently announcedit had reached 24.99% in small business procurement, exceeding the government's23% goal for the second year in a row. But instead of cheers, they got jeers.

      The SmallBusiness Administration's celebratory news was met with a stunningly negativeresponse in some quarters.

      "The SBA isrobbing small businesses," Rep. Steve Chabot, R-OH, who chairs the House SmallBusiness Committee, said in his official statement in response to theannouncement. "The reason Congress asks for these numbers is so we can usethem, not so that the Administration can pat itself on the back once a year."

      Chabot, whoobjects to the SBA's accounting methods, was not the only critic this year.While conservative gadfly Lloyd Chapman has been accusing the SBA of "fraud" inits small business goal achievement for several years, this year a consumerwatchdog group, Public Citizen, also jumped into the fray, citing several ofChapman's allegations almost verbatim.

      "Accountingtricks create false impression that small businesses are getting their share offederal procurement money," Public Citizen claimed in its May 6 report (http://goo.gl/FVjjcM).

      Perhaps itshould have been expected that once the small business goals were met in fiscal2013 and in fiscal 2014, after years of effort, the tables turned. Suddenly,the rules surrounding the goals are being harshly questioned.

      But arethese valid criticisms, sour grapes, or just sourness? And even if alleged"accounting tricks" are a factor, are the problems significant enough to affectthe goal achievement? Set-Aside Alert is looking for answers.

Watchdog allegations

      To start, weexamined the main allegations contained in Public Citizen's recent report.Their claim is that the SBA is wrongly counting some large businesses as small.The government's success in small business contracting "relies on methodologiesthat present a false impression," the Public Citizen report claimed. "Forexample, the list of contracts the government counted toward meeting its smallbusiness contracting goals in 2013 included some held by the largest companieswith which the government does business."

      Seven of the10 largest contractors received at least one contract that the SBA countedtoward small business goals that year, the report said. It named LockheedMartin Corp., Raytheon Co., General Dynamics Corp., Northrop Grumman Corp. andseveral others as large contractors with small business awards counted towardthe government's goals. The report did not show the value of those awards.

Set-Aside Alert's research

      Set-AsideAlert decided to compile our own list--not just of the 10 largest--but ofthe 100 largest federal contractors in fiscal 2014 and their small businessawards, if any.

      Our goal wasto independently estimate the value of the small business awards going to the100 largest contractors, to see if it is large enough to affect goalachievement. Our secondary goal was to further examine whether Public Citizen'sallegations were valid.

      Of those top100 contractors, 57 had small business contract actions in fiscal 2014(presumed to have been reported for small business goal achievement). Thosesmall business awards totaled $289 million. That included $293 million in 45awards minus $4 million in 12 negative awards (values below zero).

      At the sametime, those top 100 contractors received $236 billion in contract awards infiscal 2014. Their small business awards totaled about 1/10 of 1%.

      In thecontext of small business contracting, the $289 million was less than a thirdof 1% of all small business contract value and 7/100ths of 1% of total eligiblecontract value available to small firms.

      Based on Set-AsideAlert's review, there was no indication that the top 100 contractors infiscal 2014 were receiving small business awards at a level that would havematerially affected small business goal achievement.

Public Citizen's response

      When weshared those findings with Public Citizen, Taylor Lincoln, author of the study,said while it's clear some awards to large businesses are being included inSBA's small business goal achievement,total dollars involved might be low.

      "It warrantsfurther research," Lincoln told Set-Aside Alert. "It is possible thatthe totals (of large businesses receiving small business awards) do notmaterially affect the goals," he said.

      PublicCitizen also cited the SBA inspector general's 2014 finding of $400 million in"ineligible" 8(a) and HUBZone set-aside contracts. However, the IG previouslytold Set-Aside Alert that while the firms were ineligible under thoseset-aside programs they still may have been eligible for credit as smallbusinesses.

More research details

      Set-AsideAlert's list of the top 100 contractors with small business actions hadthese top 10:

• Lockheed: $2 million (15 actions)
• Boeing: $-41,000 net (33 actions)
• General Dynamics: $2.6 million (43 actions)
• Raytheon: $2.6 million (56 actions)
• Northrop: $48,000 (6 actions)
• McKesson: $554,000 (32 actions)
• United Tech: $442,000 (42 actions)
• L-3: $8.2 million (39 actions)
• BAE Systems: $17,000 (9 actions)
• Huntington Ingalls: $23 million (56 actions)

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The government's successin meeting mandatory small business contracting goals two years running is duelargely to White House focus and new requirements that program managers in theSenior Executive Service pay greater attention to the acquisition process, theObama administration's small-business development chief said on Tuesday.

Many call set-asides for small business "not a handout but a hand-up, but Isay it's a matter of survival for the federal government as a whole," said JohnShoraka, associate administrator of government contracting and businessdevelopment at the Small Business Administration. He spoke to contractorsgathered for American Express OPEN's all-day summit with agency acquisitionofficials working with small businesses that are women- or minority owned oreconomically disadvantaged.

Outlining the government's efforts to institutionalize the success ofmeeting the goal of steering 23 percent of contract dollars to small business,Shoraka said, "I've told my staff I could write a book saying that America'ssecret weapon is small business procurement -- when small business is engaged,the industrial base is preserved. It's win-win, because companies hireemployees, which has impact on the economy."

The industry veteran and political appointee said, "The government as awhole is interested in casting a broader net to make sure small businesses canplay" in winning $80 billion or more of the $400 billion-plus annual purchaseof goods and services, the world's largest.

The SBA itself, Shoraka said, contributes through its "three C's and one D,"meaning contracting, capital (through loan guarantees) and counseling (inpartnership with academe and women's centers), followed by direct loans incases of disaster.

But he credited the White House for impressing upon program offices -- whichweren't putting special emphasis on small business goals -- that achieving thegoals should be part of annual performance reviews and for requiring eachagency's Office of Small and Disadvantaged Business Utilization to reportdirectly to deputy secretaries. "A real-time dashboard" of progress incontracting set-asides for qualified small businesses "is generating a lot ofinterest and elevating the OSDBU," he said.

Shoraka said he also feels pressure from Capitol Hill to exceed goals and,for example, to clarify how small businesses owned by disabled veterans canwork with the Veterans Affairs Department, which requires eligibilitycertification, and the rest of the agencies, which do not.

The small business set-aside program in the past few years has implementedseveral policy changes, including an end to caps on the size of contractswomen-owned businesses can bid on; allowing small businesses to count smallbusiness subcontractors in their work percentage requirement; new third-partycertification requirements for businesses billing themselves as woman-owned;and a new requirement that agencies such as the State Department be measured onthe percentage of their overseas work that goes to small business.

Shoraka has sought to streamline the "bureaucratic" application process forsome set-asides, reducing 57 elements on one form to 27.

He lauded the new mentor-protégé program in SBA's 8A business developmentprogram. "A small firm may need a larger partner or management expertise, sothey team up in a joint venture to go after larger projects," Shoraka said ofthe program scheduled to take effect at the end of 2015.

Asked whether such a program might be abused by large companies seeking topoach some of the set-asides, he said, "SBA will do an annual review of thisprogram, with lots of oversight, to make sure dollars are flowing to theintended recipients. If it's a joint venture, we make sure they're gettingtheir fair share and is not a front," he said. Congress is pressuring him forfast implementation, he said, but "we're doing it methodically."

Critics, such as the AmericanSmall Business League, regularly accuse large companies, particularlydefense contractors, of horning in on small business turf.  But Shorakatold Government Executive he "challenges that methodology. Data can bemassaged a lot of different ways. If in a full and open contracting process,say, Raytheon gets the award but is coded as a small business or a set-asidefor women or 8A," that could be a clerical error, he said. Such mistakes "dohappen," he said. But that doesn't happen with actual set-asides because "thesecond-ranked bidder would file a protest.

To view full article, click here: http://www.govexec.com/contracting/2015/08/white-house-focus-ses-visibility-help-agencies-meet-small-business-goals/119043/

The Small Business Administration (SBA) recently boasted that the federal government exceeded itssmall business contracting target in fiscal year 2014. The government is requiredby law to annually award 23 percent of all prime contract dollars tosmall businesses. According to the SBA's FY 2014 scorecard, agencies awarded a record-high 25percent of contract dollars—$91.7 billion—to companies that meet the size eligibility standards: generally, fewer than 500employees and less than $7.5 million in average annual receipts.

Good news, right? After all, small businesses are "thebackbone of our economy and the cornerstones of our communities," in the words of President Obama. Unfortunately, pastexperience shows that the SBA's numbers must be taken with a handful of salt.

The SBA admits that its scorecard methodology has flaws. An SBA official explainedto Government Executive that the baseline for determiningcontract award percentages excludes certain kinds of contracts, including contractsfor overseas contingency operations. Removing these billions of dollars fromthe calculation obviously makes it easier for the government to attain the 23percent goal. (Studies conducted in 2013 found that these exclusionsinflated the small business contracting amount by roughly 3 percent.)

But there is a more important reason to be skeptical of thesescorecards: the government simply fudges the numbers. Investigations by the GovernmentAccountability Office and SBA's Inspector General, as well as by private groups suchas Public Citizen and the American Small Business League (ASBL), have found thatsmall business contracts are often awarded to non-small businesses and getcounted toward the annual small business contracting goal. Every year, the ASBLcombs through federal contracting data and finds a disturbinglylarge number of Fortune 500 companies that have won federal small businessawards.

This problem, which is more the result of errors by governmentcontracting officials than fraud by the contractors, has persisted for years.During his 2008 campaign, then-Senator Obama proclaimed that "it is time to end thediversion of federal small-business contracts to corporate giants." Nonetheless,large companies obtaining small business contracts and the agencies countingthese contracts toward their small business goals are still among the SBA's Most Serious Management and Performance Challenges.

In the meantime, the SBA is facing heat from a skepticalCongress about its latest scorecard. Senate Small Business CommitteeChairman David Vitter (R-LA) wrote a letter to the SBA requesting a list of allcompanies that were counted toward the FY 2014 goal.

To view full article, click here: http://www.pogo.org/blog/2015/07/20150707-federal-small-business-contracting-fact-or-fiction.html