People across the country were horrified when ABC and CBS recently ran stories reporting that millions of dollars in contracts to firms such as AT&T, Microsoft, Wal-Mart, Rolls Royce, Exxon and Northrop Grumman were reported as federal small-business awards. As shocking as these stories were, the reality is that the problem actually is much worse.

Thousands of large companies have received small-business contracts in amounts up to a half a billion dollars - and this has been going on for years. To make matters worse, Congress currently is proposing legislation that will dramatically worsen the problem.

Research has found that the list of firms receiving hundreds of millions in small-business contracts contains a who's who of giant defense contractors, including Boeing, Bechtel and Lockheed Martin.

In the past 36 months, there have been more than a dozen federal investigations that have found that billions of dollars in federal small-business awards have been diverted to some of the largest companies in the world. The problem has become so severe that the Small Business Administration's own inspector general called it one of the government's biggest challenges.

Government officials have been struggling to do damage control, denying vehemently that this problem is ongoing in spite of much evidence to the contrary. Frequently, they claim that this is a result of clerical error, or "miscoding." This rationale is difficult to accept because only large businesses are coded as small businesses, never the reverse.

Now Congress has proposed three new policies that will increase the opportunities for large businesses to obtain federal small-business contracts:

All three of these proposals were included among policies the SBA put forward last summer for public comment. The policies received the highest overall response in SBA history and more than 90 percent of the comments were against them. Why will Congress not pay heed to the will of the people?

Even without these new loopholes, it's estimated that the diversion of small-business contracts to large companies could top $100 billion a year. The SBA Office of Advocacy reported that $119 billion in prime and subcontracts were awarded to small businesses in one year. But by factoring in the magnitude of the abuse by Fortune 1000 corporations, it's projected that small businesses with 100 employees or fewer may be receiving less than $20 billion a year.

It now appears that the federal system that was set up to help small businesses has, without question, led to the destruction of hundreds of thousands of businesses within the past few years. These small firms never knew they were competing head-to-head with some of the world's biggest companies for what they thought were contracts set aside for small business.

It's time for our nation to stop tolerating this charade. Small-business owners need to step up and demand that Congress put an end to the policies that have killed the American dream for so many. Contact your senators and congressional representatives with calls, e-mails or letters. Speak out and let them know that a system that favors corporate giants is not the American way.

What happened to the SBA? Over the past several years, the SBA's budget, staff and employee morale have been cut in half. Investigations by the SBA's Office of Advocacy and the Office of Government Accountability found that billions in federal contracts awarded to some of the largest corporations in the world were reported as small-business awards. A report by the Office of Advocacy found that the SBA had completely failed to ensure that bundled contracts were broken up to give legitimate small businesses their fair share.

How did an agency established to assist small businesses come to this? Somewhere along the way, the true mission of the SBA was hijacked by bureaucrats and politicians. Now the future of the SBA is in jeopardy, as more information comes out that major defense contractors like Northrop-Grumman and General Dynamics are the actual recipients of billions in federal small-business contracts.

How can the SBA recover? Restore the budget and staff. Eliminate policies and regulations that have allowed Fortune 1000 firms to be considered small businesses. And prosecute fraudulent firms.

In the first development since Steven Preston was sworn in as administrator of the Small Business Administration less than a month ago, the Senate Small Business Committee has approved a major overhaul of the SBA's programs.

Approval was unanimous for the three-year reauthorization of programs that will focus on improving the agency's disaster loan efforts and other programs such as minority small business development.

These changes come in the wake of severe criticism the department received following Hurricane Katrina. Long delays in processing federal emergency disaster loans for small business owners generated heated complaints from local business owners, senators and members of congress.

During his nomination hearing in June, Preston highlighted his commitment to fostering strong partnerships with private-sector groups to speed up the Katrina recovery process, and promised the reparation of the agency's disaster loan program.

Senator Olympia J. Snowe, R- Maine, one of the main proponents for change within the SBA, said that the new reauthorization takes steps to apply lessons learned from previous disasters.

"Authorizing the government to guarantee loans, rather than establish what is, in essence, a new temporary bank after each major disaster, saves the federal government money and enables the SBA to more quickly respond to the needs of disaster victims," Snowe said.

Under the new legislation, the SBA would be ordered to create a new bridge loan program providing states federal guarantees on loans provided to assist with disaster relief. Help would also be implemented for businesses outside the geographically affected area that were impacted economically. Businesses potentially affected by significant increases in energy costs would be provided up to $1.5 million in loans.

The SBA also plans to back loans by private lenders to disaster victims at lower rates. Concerns of fraud within the SBA's loan programs would be addressed with a strengthening of federal authority to prosecute large corporations attempting to illegally gain small business loans.

The reauthorization also calls for the implementation of a minority small business development office. An estimated $5 million annual budget will be provided for the proposed minority office. Nonprofit organizations also stand to benefit from the legislation, as the SBA would be allowed to loan nonprofit institutions anywhere from $1.5 to $5 million. Currently only renters and for-profit businesses are eligible for loans.

When administration officials this year sought data to learn more about the booming practice of interagency contracting, there was one place they couldn't go for the information: the government's own contracts database.

"We realized that the data may not be complete and accurate," said Robert Burton, acting administrator of federal procurement policy at the Office of Management and Budget.

Created in 1979, the Federal Procurement Data System (FPDS) was intended to provide the federal acquisition community with details on the government's $300 billion-a-year contracting operation. Policy makers could analyze the data and find out how a particular agency was spending its money or where it could be more efficient. Market researchers could develop insights into where the growth spots are for vendors interested in developing their federal business. And public interest groups could spot areas requiring greater oversight.

But shortcomings in FPDS are hindering policy makers and other users in their attempts to make procurement spending more efficient and responsible.

Policy makers and procurement experts grumble that the government's contracts database is unreliable when it comes to finding out almost anything about the government's procurement practices, such as how many contracts go to small and disadvantaged businesses, how much agencies use so-called performance-based contracts, or which Hurricane Katrina-related contracts were awarded without a competition and why.

The causes for the database's problems are many. People often enter contract data incorrectly because they don't understand the system. Much of the government's contract information gets logged into the database months after the contracting activity occurred. And much of the information that is logged in is erroneous or incomplete.

The government – and the contractor that manages the database – is trying to address these problems by automating contract data entry across government. In other cases, the government hasn't yet set up the system to capture data such as interagency contracting or the effectiveness of performance-based contracts.

In their search for data on interagency contracting, procurement leaders ultimately sent out lengthy questionnaires to each agency to get that information, delaying by months the formulation of new policies that would make the practice more accountable. Interagency contracts account for more than $32 billion worth of government business a year, but their use has been flagged by government auditors as a risky practice because agencies often misuse them.

Questionable data
There are other stories of how the database has not served its masters well. A 13-member acquisition expert panel – created by Congress to draft recommendations for how to improve the government's $300 billion-plus procurement operation – has tried using the database to research federal contracting.

In one case, the Acquisition Advisory Panel, as it's called, used the database to assess the government's use of performance-based contracts. Under performance-based contracts, agencies pay companies to meet specific service performance goals – such as answering customer calls satisfactorily within five minutes – rather than to perform specific functions, such as setting up a call center staffed by 30 customer-service representatives.

But the panel, after examining a sample of contracts labeled as performance-based in the database, found that 19 out of 48 contracts reviewed were not performance-based at all – agencies had wrongly categorized them in the database. And the database wasn't set up to answer key questions about performance-based contracting, a practice many contracting officials are struggling with.

"I don't know which [contracts] were failures and which ones were successful. I don't know which [contracts] met their cost standards or exceeded them," said panel member Carl DeMaio, president of the Performance Institute, a nonpartisan think tank, and chairman of the panel's subcommittee on performance-based contracting.

"FPDS is not a reliable database. It does not provide reliable data on federal acquisition and procurement. We've known this for many years," he said.

Frequent users of the database describe strange quirks in the data. Ray Bjorklund, senior vice president and chief knowledge officer at the market research firm Federal Sources Inc. in McLean, Va., said that he recently found the dollar value of NASA contracts declined by hundreds of millions of dollars from one year to the next. Several weeks later, after checking updated FPDS data, he found the amount had increased.

"If you don't constantly stay alert to the possibility that there may be big gaps in the data, then you may end up with the wrong answer," he said.

He said he didn't know what caused that swing in the data.

Another problem: A list of contracts for the Gulf Coast's hurricane recovery has scores of blank entries where it should say whether a contract was subject to competition, or the reason why it wasn't.

Many contracts are missing from the database because contracting officers are working without their automated systems, or have not had time to make entries, according to Global Computer Enterprises (GCE), the Reston, Va., company that has managed the database since 2003 under a contract from the General Services Administration.

How system works – or doesn't
Concerns about FPDS date back decades. The system began in 1978, when Congress set out to build a one-stop shop for data on government contracts. It was supposed to help the government set procurement policies by giving a timely, accurate view of spending.

GCE took over the system in late 2003 under the GSA contract and updated it to collect contract information as it is completed, rather than making agencies wait for the next periodic update.

Agencies use FPDS to see who they're doing business with, how much they're spending on various types of commodities or services, the level of competition in contracts, and whether they're meeting their goals for contracting with small companies. The system is meant to capture details on all executive branch transactions above $25,000, except for spending by classified programs and by a few exempt agencies such as the U.S. Postal Service.

The system has several dozen entries for each contract – the name of the contractor, the contract value, whether it was awarded competitively, whether it went to a small business, and other details.

At some agencies, contracting officials have to punch in the data; others have computer systems that automatically dump the data into FPDS as the contract is written.

Most civilian agencies now have automated systems, although they may not be used throughout the agency yet, OMB officials said. But the biggest spender of all – the Defense Department – has lagged for years in hooking up its contract systems into FPDS, the Government Accountability Office said in a September report.

That makes it hard to take overall snapshots of federal contracting. Bjorklund said it's tough to use the system to tell how much the government spends on information technology or other products, for instance.

Another result is that it's tough to peg the government's total procurement spending in a given year. Paul Murphy, president of Eagle Eye Publishers in Fairfax, Va., said he's had to bypass FPDS and go directly to the Defense Department for its spending numbers. Using those, he computed a governmentwide total of $377 billion in fiscal 2005 – a far cry from the $314 billion in overall government contracting in an FPDS report that shows how much of the money went to small businesses.

Bjorklund noted that the FPDS figure has likely grown as more 2005 records are added to the system.

Murphy noted that the data are getting better, but said the picture is still incomplete.

"Clearly, the trend is going in the right direction as far as completeness of reporting, but with [Defense] missing, you're still missing 70 percent of all the dollars," he said.

The information is faulty in other, smaller ways, such as with miscoded entries or empty entries, Bjorklund said. Both industry and government organizations use FPDS for many routine tasks, such as researching contractors, and determining which are the busiest contracting offices or what type of contract an agency uses most often, Bjorklund said.

But the people entering the data don't always know the nuances that can have a big impact on the final numbers. For instance, Bjorklund said, the data entry task may fall to an inexperienced user who doesn't know a laptop computer goes under computer services rather than hardware. Then the agency has a hard time telling how much it spent on hardware.

"Some of them are inexperienced, junior people, and haven't necessarily been trained on all of the intricacies of the data," he said. "If you don't really understand government procurement and the way government procurement can be characterized digitally . . . then you're going to be on a very steep learning curve if you're coming in for the first time."

Users say the system can sometimes give strange results.

"We think there are improvements to be made in the accuracy of it," said Fritz Trakowski, program officer for small business procurement at the Labor Department's Office of Small Business Programs. For instance, he said, the share of the department's contracts going to small disadvantaged business dipped from 4.7 percent to 1.6 percent from 2003 to 2004, before rebounding to 3 percent last year.

"I don't think we dropped three percentage points in one year. That's a huge change," he said. "I'm just suspicious."

His office is working to correct these suspected inaccuracies, he said.

Solutions
The Defense Department has been hooking up its users to FPDS in recent months. About 2,600 are linked now, 14,000 will be connected by summer's end, and Defense will start on the remaining 15,000 in October, with the goal of finishing them in three months, said Lisa Romney, senior procurement analyst in the Defense procurement and acquisition policy office.

Delays of recent years came from difficulties in reconciling Defense contract writing systems with FPDS, she said. Also, GSA needed to improve the system to make it easier to use and ensure that Defense and civilian agencies could access their data once it was entered, she said.

FPDS still will delay releasing Defense data for three months to avoid revealing information on military strategy.

In some instances, the system simply isn't set up to capture a certain type of information. OMB is working on adding interagency contracting information to the database so it won't have to go through such an arduous questionnaire process again, said OMB's Burton.

The agency issued a new manual for the system about a month ago that should clear up some of the confusion about how to record contracts, and will soon issue a change to the Federal Acquisition Regulation that clarifies who's responsible for entering data into FPDS, OMB officials said.

Burton said 24 agencies have finished verifying the completeness of their contracts data in FPDS for 2004 and 2005, and are now certifying it for 2006.

"We are optimistic that by the end of this year we can really say the FPDS system is vastly improved," he said.

DeMaio said agencies should keep closer watch over the data entry.

"FPDS data needs to have greater oversight, and sanctions if we have repeat instances of inaccurate data coming from an agency," he said.

He said he supports a congressional proposal by four senators – Tom Coburn, R-Okla.; John McCain, R-Ariz.; Thomas Carper, D-Del.; and Barack Obama, D-Ill. – to set up a public Web site that offers data on all federal grants and contracts.

Coburn, chairman of the Homeland Security and Governmental Affairs subcommittee on federal financial management, found it hard to use FPDS to get timely data needed to oversee federal contracting, said his spokesman, Aaron Cooper.

"It was extremely difficult and unruly a task to try to track down some of this information on government contracts," he said.

The bill, S 2590, was approved by the Homeland Security and Governmental Affairs Committee on July 27.

An official with GCE said the online tools for researching procurements have been revamped to be more user-friendly, and allow the results to be saved in another spreadsheet program, a change sought by many users.

The system is easily adaptable to new information the government says it wants to collect, said David Lucas, GCE director of business development.

"At some level, the system is only as good as the data that gets put into it," he said.

Regarding glitches in the data, he said, "We're always looking at the data for anomalies and to make sure that there isn't any widespread data integrity issue."

Lucas said the move toward automated data entry from the various agencies into the database is improving transparency in contracting.

WASHINGTON -- Some of the nation's largest news media companies, including The Associated Press, were counted last year by the government as small businesses for contracting purposes, inflating the Bush administration's record of help to small companies.

Other media companies cited as small businesses included The New York Times Co., USA Today International Corp., Bloomberg L.P. and the Public Broadcasting Service, according to data the administration gave congressional investigators.

The media companies join other corporate giants like ExxonMobil and Microsoft Corp. that congressional investigators identified last week as companies listed as small businesses by the White House. The companies say the government erroneously gave them that designation and they did not portray themselves as small businesses to win the contracts.

The AP was cited as receiving five small business contracts valued at $31,600. Three of the contracts were awarded by the State Department, one was given by the U.S. Coast Guard and the fifth was from the Department of Transportation.

AP said the original Coast Guard contract, an $8,000 award described as a "phototechnology maintenance contract," didn't list it as a small business. AP spokeswoman Linda Wagner said the news organization couldn't find any records involving the other four contracts.

The largest AP contract, a $19,100 award for software support to the secretary of transportation, cited the news organization as a small business. Wagner said it appeared to be a government error.

"We do not believe AP has signed any government contract that specified small business status for the vendor," she said.

The AP, a not-for-profit cooperative, employs about 3,700 people in more than 240 locations around the globe. It reported 2005 revenues of $654 million.

"Since we do not categorize The New York Times as a small business, clearly this was an error," Times spokeswoman Abbe Serphos said of two General Services Administration contracts totaling $10,875 that the government reported as small business contracts.

The Times' parent company also publishes The Boston Globe, International Herald Tribune and 15 other daily newspapers. It reported $3.4 billion in revenue in 2005 and has about 12,500 employees.

Tara Connell, a spokeswoman for Gannett Co., the parent company of USA Today International, said records showing the subsidiary received a $12,690 small business contract from the Bureau of Indian Affairs was obviously a "clerical error."

Gannett, headquartered in McLean, Va., is the nation's largest newspaper company. It reported $7.6 billion in operating revenue in 2005 and has 52,600 employees.

Bloomberg, which employs 8,200 people and reported annual revenues of $3.2 billion in 2005, gave a similar account. "We do not categorize ourselves as a small business nor do we represent ourselves as a small business," spokeswoman Judith Czelusniak said.

The government is required to spend 23 percent of roughly $314 billion in contracts with small businesses. Last month, the Small Business Administration claimed the government more than met that goal in 2005.

An investigation by House Democrats found the number was closer to 22 percent because about $12 billion in contracts to big companies were mistakenly cited as going to small businesses.