As it celebrates National Small Business Week, the Small BusinessAdministration is facing renewed accusations that its efforts to reserve workfor small contractors have been distorted by accounting tricks andmisapplication of the law that permits large companies to win the awards.

Public Citizen, the nonprofit that pushes an anti-corporate view of trade,the environment, campaign finance and product regulation issues, releaseda report on Wednesday saying SBA "may be floutingthe law," perhaps for political reasons.

The study of controversies over the SBA-coordinated program to help federalagencies meet the goal of 23 percent of purchases from small businesses drawson the work of the Petaluma, Calif.,-based American Small Business League,which has long battled SBA and the Defense Department over the definition of a smallbusiness. But the league, Government Executive has learned,does not think Public Citizen's conclusions go far enough.

The SBA's claims "that the government has met or nearly met a requirement tomake 23 percent of its purchases from small businesses are misleading and relyon methodologies that conflict with federal law and regulations," argued thereport by Taylor Lincoln, research director for Public Citizen's Congress Watchdivision.

In 2013, seven of the 10 largest federal contractors received at least onecontract that SBA counted toward fulfillment of small business goals, thereport said. Of the 100 contractors receiving the most federal dollars countedtoward small business goals in 2012, 71 did not meet the government's standardsto qualify as small businesses, the report said, citing the American SmallBusiness League.

An "exception to the law's requirements on subcontracting plans exists forparticularly large defense contractors," Public Citizen said in the report. Arecently renewed 25-year-old Pentagon research project called the Comprehensive Subcontracting Plan Test Program authorizes participatingcompanies to engage in the "negotiation, administration, and reporting ofsubcontracting plans on a plant, division or company-wide basis asappropriate," the report noted.

Public Citizen then described 2014 congressional testimony from SBA AdministratorMaria Contreras-Sweet in which she said contracts held by very large businessescould count toward small business goals because of a rule allowing smallbusinesses that are acquired by large businesses to have their small businessstatus "grandfathered in" for up to five years, as the report put it.

Public Citizen argued that statement is "inaccurate," noting that SBA'sinspector general for a nearly a decade has reported procurement flaws that"allow large firms to obtain small business awards" in an annual list of agencychallenges. "A federal regulation that took effect in 2007 requires contractorsthat are acquired to recertify their size almost immediately," Public Citizensaid. "Subsequent orders relating to contracts held by acquired businesses thatno longer qualify as `small' may not be counted toward the government'sfulfillment of its small business goals.

Lawmakers have also been on the case. The House Small Business Committee inMarch approved a proposal from Rep. Janice Hahn, D-Calif., for a GovernmentAccountability Office study on the issue.

Asked by Government Executive about the Public Citizenreport and whether the administrator misspoke, an SBA spokeswoman said in anemailed statement: "The rules of contracting are complex. The administrator wasasked a general question, to which she provided a general explanation. To givea more complete answer, SBA would need to see the specific award that was beingasked about and then, SBA could provide the best answer. In general, whena firm grows organically, the agency can continue receiving small businesscredit for up to five years. … [But] in the case of a merger or acquisition,the agency should be notified within 30 days and the small business creditshould be discontinued."

Public Citizen concluded that "U.S. programs intended to level the field forsmall businesses and other historically disadvantaged businesses are riddledwith errors, anomalies and exceptions. These generally seem harmful to smallbusinesses' ability to realize the contracting goals laid out in laws andregulations."

Though it is tricky to explain the problem through a single politicalfactor, the report continued, "it seems reasonable to assume that they wouldnot exist to such a large degree if small businesses, for instance, furnishedthe majority of post-retirement jobs for military officials, performed thelion's share of contractor lobbying or gave the majority of campaigncontributions from contractors."

Lloyd Chapman, the founder of the business league that fed material toPublic Citizen researchers, told Government Executive the report"reads like it was written by the SBA press office." He said he thinks someonefrom the agency should be brought before Congress the same way Internal RevenueService official Lois Lerner was called to testify after the surfacing of the2013 controversy over political targeting by the tax agency.

 "No one in the SBA is held accountable," Chapman said. "It's typicalWashington softpedaling of hundreds of millions of dollars in felony federalcontracting fraud." 

To view full Government Executive article, click here: http://www.govexec.com/contracting/2015/05/advocacy-group-accuses-sba-misapplying-law-small-business-set-asides/112240/

The Small Business Administration was planning to announceFriday that the federal government had met its goal of awarding 23 percent ofits contracting dollars to small businesses.

That's my assumption, at least, since SBA Administrator MariaContreras-Sweet was scheduled to release the agency's annual procurementscorecard at a White House briefing on Friday afternoon as part of NationalSmall Business Week. She wouldn't have planned such a high-profile event if thenews were bad — that, like in most years, the federal government didn't meetits small business contracting goal.

Then, late Thursday afternoon, the SBA canceled this briefing,citing "unforeseen scheduling conflicts."

This cancellation was announced an hour or so after I hadasked the SBA for a list of the top 100 small business contractors in 2014, andtold an agency public affairs specialist that I planned to ask Contreras-Sweetabout what the agency had done to ensure that their small business contractingnumbers were accurate.

Bad data has bedeviled the SBA's procurement scorecard foryears. Every year, a close look at the data finds that government agencies havecounted some contracts to large businesses toward their small business goal.Through the years, independent analyses by everyone from the SBA's owninspector general to the House Small Business Committee have documented howsmall business contracting numbers have been inflated by the inclusion of largebusinesses.

PublicCitizen joined this chorus Thursday with its own report, which shot downSBA's announcement last year that — for the first time in eight years — thegovernment had met its small business contracting goal. Using data the AmericanSmall Business League had obtained through a Freedom of Information Actrequest, the report found that some contracts awarded to Lockheed Martin,Raytheon, General Dynamics, Northrup Grumman and other giant federalcontractors were counted toward the small business goal in 2013.

Counting large businesses as small businesses is only oneproblem with the SBA's procurement scorecard. The other problem is that around$100 billion a year in federal contracts aren't even considered when the agencycalculates small businesses' share of procurement dollars. For example,contracts performed overseas aren't included in the calculations. Without theseexclusions, the small business share of federal contracting would be evensmaller.

To view full article, click here: http://www.bizjournals.com/bizjournals/washingtonbureau/2015/05/its-time-for-sba-to-get-real-about-small-business.html?page=all

WASHINGTON,D.C. – Claims in recent years by the U.S. Small Business Administration (SBA)that the government has met or nearly met a requirement to make 23 percent ofits purchases from small businesses are misleading and rely on methodologiesthat conflict with federal law and regulations, according to a new Public Citizen report.

For example, in 2013, seven of the 10 largest federal contractors received atleast one contract that the SBA counted toward fulfillment of small businessgoals, according to the report "Sleighted:Accounting Tricks Create False Impression That Small Businesses Are GettingTheir Share of Federal Procurement Money, and the Political Factors That MightBe at Play." The release of the report coincides with NationalSmall Business Week, which President Barack Obama proclaimed is designed tocelebrate America's small businesses, which he called the backbone of theeconomy.

In the report, Public Citizennotes several political factors that could be motivating a bias toward largebusinesses in contracting and inhibiting outcry from members of Congress. Theseinclude the vast number of jobs that large defense contractors provide tomembers' constituents; defense contractors' lucrative employment opportunitiesto former military officials; contractors' significant political campaigncontributions and lobbying expenditures; and, potentially, influence garneredthrough undisclosed contributions contractors make to nonprofit groups thatengage in electioneering activities.

Public Citizen and others are encouraging Obama to issue an executive orderrequiring government contractors to disclose political spending made viathird-party groups. "This report shows that the deck is already stacked infavor of large contractors," said Lisa Gilbert, director of Public Citizen'sCongress Watch division. "At a minimum, we should know if contractors are usingsecret purse strings to line up even more advantages."

SBA Administrator Maria Contreras-Sweet said in congressional testimony in 2014that contracts held by very large businesses could count toward small businessgoals because of a rule allowing small businesses that are acquired by largebusinesses to have their small business status "grandfathered in" for up tofive years.

In response to questions from Public Citizen that cited applicable federalregulations, a spokeswoman for the SBA acknowledged last week that "in the caseof a merger or acquisition, the agency should be notified within 30 days andthe small business credit should be discontinued."

Aside from counting contracts with large businesses toward small businessgoals, the SBA's data create an inflated impression of the government'spercentage of purchases from small businesses by excluding whole categories ofprocurement from its calculations. This methodology conflicts with the SmallBusiness Act's stipulation that procurement from small businesses shall be "notless than 23 percent of the total value of all prime contracts" issued by thefederal government.

"This program is vital because small businesses are better job creators andmore engaged in their local economies," said David Levine, CEO of the AmericanSustainable Business Council. "More effective implementation and oversight willdeliver many times over the return on investment in job growth as well ascommunity revitalization."

Many observers have leveled allegations over the years that the government hasfailed to adequately police its small business contracting programs:

·        Everyyear since fiscal year 2006, the SBA's Office of Inspector General has listedprocurement flaws that "allow large firms to obtain small business awards" asthe first item in its annual enumeration of challenges facing the SBA.

·        Largebusinesses received $13.8 billion out of $50 billion (or nearly 28 percent) inprocurement that was categorized as going to small businesses in 2001, the U.S.General Accounting Office (now called the Government Accountability Office) reported.

·        Ofthe 100 contractors receiving the most federal dollars counted toward smallbusiness goals in 2012, 71 did not meet the government's standard to qualify assmall businesses, according to the American Small Business League (ASBL), aPetaluma, Calif.-based watchdog group. The ASBL report concluded that these 71businesses received 56 percent of procurement payments made to the top 100purported small business contractors.

To view full Public Citizen press release,click here: http://www.citizen.org/pressroom/pressroomredirect.cfm?ID=5503