Less than thirty days after his departure, the truth about Hector Barreto's tenure as head of the Small Business Administration has come to light. Stories on ABC, CBS, in the New York Times, the L.A. Times, and dozens of other publications have exposed the true picture of the SBA under Barreto.

What Barreto claimed was a "victory for America" and "record-levels" of contracts awarded to small businesses has turned out to be a sham. The real recipients of Federal small business contracts have been identified as a who's who of corporate giants. Contracts to firms such as Boeing, Bechtel, Lockheed, Northrop Grumman, AT&T, Office Depot, Walmart, Rolls Royce, and even Microsoft were reported as small business awards during Barreto's tenure.

American Small Business League president Lloyd Chapman estimates that as opposed to the $79.6 billion in prime contracts Barreto claimed went to small businesses in 2005, the actual number was less than $20 billion. While Barreto was in office, Chapman's organization won a series of federal lawsuits against the SBA that forced the release of damaging information proving Barreto knew about the wholesale diversion of small business contracts to large corporations.

Barreto has now joined a Statewide Leadership Team in California to back Governor Arnold Schwarzenegger in his current re-election campaign. According to the Governor's website, this organization will "take his message of protecting the California dream to every Californian." It's well-known that the Governor would like to increase his support among the Latino community.

In a decision issued last year but only publicized recently, the Small Business Administration ruled that Federal Prison Industries cannot win service contracts set aside for small businesses.

The decision, reached in February 2005, came from the Office of Government Contracting of an SBA area office covering several states in the mid-Atlantic. It resolved protests by two companies alleging that a contract for electronics recycling and disposal was improperly awarded to FPI, also known as UNICOR.

FPI is a congressionally established corporation that employs prison inmates and receives certain preferences in federal procurements.

The protests lodged by Global Investment Recovery Inc. and Creative Recycling Solutions Inc. alleged FPI was ineligible to win the work because it was neither a for-profit business nor classified as small under the rules of the Federal Acquisition Regulation.

In the decision, SBA officials rejected FPI's argument that the 2004 Consolidated Appropriations Act and the FAR included special provisions allowing FPI to compete for small business set-aside contracts, concluding the prison group was not eligible when the set-aside is a service contract.

"The way that the decision was written was fairly broad," said Amy Laderberg O'Sullivan, a lawyer with the government contracts practice group at Crowell & Moring, and lead counsel on the case for Global Investment Recovery. "It is not limited to this procurement, and it has significant implications for FPI's ability to participate in small business set-asides in general," she said.

The decision received little attention when it was made, in part because protests at SBA's area office level are not publicly announced or made widely available. SBA spokesman Michael Stamler confirmed Monday that area office decisions are not publicly posted or made the subject of press releases, and are routinely distributed only to the companies and contracting officers involved in the case. Appeals of those decisions can be made through SBA's Office of Hearings and Appeals and those rulings are posted in an online database, he said.

A spokesman for FPI said the company did not appeal the decision, and it recently surfaced as the result of a query to a procurement community listserve.

Chris Jahn, president of the Contract Services Association, an industry group, said he was aware of the decision when it came out but was unsure of the effect it had on small businesses competing with FPI for work.

He said the prison group had Defense Department contracts last year worth more than $460 million, noting, "To consider them somehow a small business just doesn't pass the straight face test."

Jahn said his group supports measures presented in both the House and Senate that would require agencies to conduct market research before awarding product or service contracts to FPI, and allow agencies to bypass the prison group if they did not offer a comparable product or service. Under current provisions, FPI performs the comparability assessment.

The nation's leading small business gadfly group is always quick to point out the shortcomings of government bureaucrats, but it also believes in giving credit where credit is due.

The American Small Business League (ASBL) praised Virginia Gov. Tim Kaine for his aggressive effort to direct state government contracts to small businesses, calling him an "an inspiration to every small business in America."

Among his initiatives, Kaine has ordered the state to make sure at least 40 percent of its contracts are awarded to small businesses, including those owned by women and minorities. The governor also signed another bill in June that allows small firms to collectively purchase health insurance.

On the same day, July 26, that Steven Preston was being sworn in as new administrator of the Small Business Administration, Democratic congressional investigators lobbed their latest attack on the SBA's record for meeting federal contract goals to small business.

At least $12 billion in contracts the government claimed it gave to small companies last year actually went to giants including Microsoft, Rolls-Royce, Wal-Mart and Exxon Mobil. Critics point to longtime problems with miscoding of companies, firms that have been acquired by big business still on the small business rolls, and election-year data-spinning.

Last month the federal government reported the amount small businesses received in federal contracts for fiscal year 2005. The government reported that 25.4 percent of federal contracts went to small businesses, or $79.6 billion. At least 23 percent of federal contract dollars are designated for small businesses each year.

But House Democrats said the government missed its small business target for the sixth straight year. Democrats said they found 2,500 large and ineligible companies on the government's list of small-business contract winners.

The percentage for small-business contracts for fiscal 2005 was only 21.37 percent. That cost small business $4.5 billion in lost contracting opportunity in the last year alone, said U.S. Rep. Nydia Velázquez, D-N.Y., ranking Democrat on the House Small Business Committee.

In a separate report, research firm Eagle Eye Publishing said only $65 billion, or 17 percent, of the $377 billion the federal government spent on goods and services in fiscal 2005 went to small businesses.

So many numbers. Whose are correct? The SBA says it's a matter of scoring while critics say the problem is much larger in scope.

Congressional investigators say federal agencies miscode thousands of contracts to big companies as small business awards. And companies that started small, but grew large, or were purchased by corporate giants continue to get small business contracts.

Now the question for small business owners and those who represent them is this: Will Preston finally take action to close the loopholes in big business getting federal contracts that should be going to small business?

"Yes," said SBA spokesman Mike Stamler. But he added, "There's a lot of misinformation about what is going on. Large companies are purchasing small companies that have multiyear contracts, and there's no reasonable provision for simply taking them away.

"What we're talking about is simply a scoring problem -- how agencies score contracts."

The SBA has taken steps to have a more robust reporting system, including requiring small businesses purchased by another firm to recertify as a small business to obtain a contract. The SBA also is developing a rule to require periodic recertification, Stamler says.

Lloyd Chapman, head of the American Small Business League, isn't holding his breath. Chapman has been following this controversial issue for more than a decade and thinks billions of small-business contract dollars are going to big business. "It's not miscoding. If this were the case, why is it that it's always large businesses being coded as small and not the reverse?" he says.

J. Raul Espinosa, CEO of FitNet Purchasing Alliance in St. Augustine, is involved in a coalition that supports an independent arbitrating body to settle government contract disputes. He calls the current system "worthless."

"It's like trying to fix a flat tire on a car whose other tires are ready to pop. You can't address one element without addressing the others."

Republican leaders in the House abruptly withdrew a bill reauthorizing the Small Business Administration's budget last month after Democrats blitzed it with last-minute amendments.

Now the bill is about to resurface before the House Small Business Committee, but critics say it still falls short on one of the biggest challenges facing the SBA – contracting fraud. The current bill would increase fines and penalties for small business fraud, but the SBA has never prosecuted any large business for misrepresenting its size to win small business contracts.