Lloyd Chapman doesn't mind being a thorn in the side of the U.S. Small Business Administration.

A longtime critic of the agency, Chapman, who is president and founder of the Petaluma-based American Small Business League, recently filed his second lawsuit against the SBA. He plans to file at least two more early next year.

One of Chapman's biggest beefs is that the agency's policies appear to favor big businesses over small ones when it comes to awarding federal contracts.

Chapman bases his conclusion, in part, on studies from the Government Accountability Office, the SBA Office of Advocacy and the SBA Office of the Inspector General, that he says have found some irregularities with the SBA's system. In Chapman's view, the SBA's policies allow large companies to get lucrative federal contracts by improperly calling themselves a small business.

"I think there's a cooperative effort ... to eliminate the federal small business program," he said. "All the reports indicate that."

But SBA officials say there's "no validity" to Chapman's accusation that there is "a conspiracy to favor large businesses." Calling Chapman a "very determined gentleman," Eric Benderson, the SBA's associate general counsel for litigation, said the agency is not trying to "undermine small businesses. ... We have nothing to gain by supporting big businesses, but he's certainly entitled to his view."

Size is a big deal. Last year, the federal government awarded about $65 billion in contracts to small businesses that meet the SBA's guidelines. That's about 23 percent of all goods and services purchased by federal agencies.

Currently, the agency is in the midst of refining its definition of a small business. It currently uses 37 different guidelines to define 1,151 industries and 13 subindustries across the country.

When a small business unsuccessfully bids on a federal contract and believes the winning bidder is not a qualified small business, it can lodge what's called a "size protest."

Chapman's most recent lawsuit, filed last month, said the SBA failed to give him all documents relating to its dismissal of size protests nationwide, under a Freedom of Information Act request he made in 2004.

SBA eventually sent him 118 documents about size protests filed with the San Francisco SBA office. Chapman contended that was incomplete; he wanted documents from SBA regional offices nationwide.

Benderson said Chapman's initial request was too vague, but the agency hopes to reach an agreement with Chapman's attorney before the case goes to court.

According to the SBA, among hundreds of thousands of contracts issued, a total of 1,572 size protests were lodged nationwide between 2002 and 2005.

Gary Jackson, SBA's assistant administrator for size standards, said when a protest is lodged, the agency reviews the questioned company's information, including tax returns and number of employees, to determine whether it truly qualifies as a small business.

Drue Brown, chairman of California Capital, a nonprofit corporation that supports small-business entrepreneurship, said he appreciates Chapman's cause.

"He's doing the right thing and pursuing it correctly," he said, owner of AgCEL, a Sacramento environmental firm. "However, I think it's a humongous task to tackle."

Among the many objections that the Obama administration has raised to the National Defense Authorization Act, a Republican bill that passed the House Friday with a broadly bipartisan margin, 299 to 120, was one that might take small-business owners by surprise: The White House opposes a section of the bill that would direct more government contracts to small companies.

The federal government has a goal of awarding 23 percent of most federal contracting dollars to small businesses. The defense bill would raise that goal to 25 percent and increase the small-business goal for subcontracts to 40 percent, from 35.9 percent. The provision also would require that the small-business goal for each agency be at least 25 percent — currently some agencies’ goals are below the governmentwide goal and some are above, but they average out to 23 percent. The bill would also condition the bonuses of senior executives at agencies in part on reaching these goals.

The White House, in its statement on the bill, called the higher goal “laudable but overly ambitious” and said that the new inflexibility on individual agency goals “could undermine the goals process and take away the government’s ability to focus its efforts where opportunities for small-business contractors are greatest.”

The chairman of the House Small Business Committee, Sam Graves of Missouri, who first introduced the contracting legislation, registered shock at the White House’s criticism in a statement on Friday. “About 90 percent of the businesses who bid on federal contracts are small companies, yet the government only awards around 20 percent of the work to small firms,” he said. “Setting the goal at 25 percent is realistic and achievable.”

But as regular readers of this column know, the government has been unable to meet the current 23 percent goal. And, as regular readers of this column also know, some of the companies that are counted as recipients of small-business contracts are actually very large companies. Given those issues, what good would raising the percentage do? Wouldn’t it be better to first enforce the current goal?

That is the view of the American Small Business League, whose president, Lloyd Chapman, called the measure a “high-visibility publicity stunt.”

“In reality, the measure is irrelevant to small-business concerns because current federal policy still allows the federal government to award small-business contracts to some of the largest companies in the world,” he said.

Mr. Chapman was also disappointed that the final House bill weakened the accountability provision: Mr. Graves’s original bill called for denying bonuses to senior leaders whose agencies did not meet their small-business goals. (It seems to The Agenda, though, that absent tougher rules to prevent contract diversion, the harsh tack on bonuses could backfire: agency heads might be tempted to meet their goals by mislabeling more large contractors as small businesses.)

Mr. Graves, for his part, dismissed these concerns. “Procurement officials won’t change their ways unless an incentive is added to the process, which is something that has never been done before,” he said in the statement. “That’s why we have introduced this bipartisan legislation to hold agencies accountable by making goal achievement an element in their employee performance plans.”

The Democratic-led Senate will write its own defense authorization bill next week. A spokeswoman for the Senate Armed Services Committee declined to say what provisions that bill would contain, though she said the legislation might be made public in two weeks.

The Small Business Administration is asking a judge to dismiss a lawsuit filed by a small business advocacy group for the telephone records of the government agency's head spokesman.

In the unusual case, the group -- the American Small Business League -- is requesting the phone records of SBA Press Office Director Mike Stamler because the league's president, Lloyd Chapman, believes Stamler has slandered and defamed him, mainly in emails and phone conversations with journalists.

For instance, Chapman said he has obtained one email in which Stamler refers to him as a "lunatic." Stamler, the SBA spokesman, has declined to be interviewed about the case, as it is focused squarely on him.

In attempt to prove the alleged slander, the league in 2008 requested all of Stamler's emails and phone records under the Freedom of Information Act. The SBA, which two weeks ago swore in a new leader appointed by President Barack Obama, responded by sending the league boxes of email printouts and discs containing Stamler's phone records. But the league has been dissatisfied with the number of documents turned up, saying evidence appears to have been unlawfully withheld.

On March 12, in pursuit of more phone records, the San Francisco-based league filed suit with the United States District Court, Northern District of California. Chapman has told HispanicBusiness.com that he soon intends to follow up with a similar lawsuit for more emails.

The SBA on April 16 filed a suit asking the court to dismiss the March 12 case, saying its efforts to turn up all the documents has been reasonable.

"Plaintiff's assertion that more records must exist is mere speculation," said the SBA's attorneys in a motion.

Ever since founding the league in 2004, Chapman has sued the SBA five times, and insists he's won every case -- except for the one that's ongoing. The new SBA administration has declined to confirm or deny the contention.

Source:  http://www.hispanicbusiness.com/entrepreneur/2009/4/22/sba_asks_judge_to_dismiss_advocacy.htm

President Bush on June 25 tapped a career bureaucrat in charge of economic development for the Commerce Dept. to lead the Small Business Administration. But it could be months before the nominee, Sandy Baruah, goes before the Senate for confirmation—the last SBA head was approved two months after his nomination. And if he's confirmed, Baruah won't have much time before a new Administration enters the White House next year.

As head of the Commerce Dept.'s Economic Development Administration, Baruah is charged with leveraging government investments to support regional economies and encourage innovation, competitiveness, and entrepreneurship. He has pointed to small businesses as the driver of economic growth in a global marketplace. "I believe the strategy for the U.S. in competing in the 21st century is built around the following equation: Entrepreneurship drives innovation. Innovation drives productivity. Productivity drives higher wages and higher standards of living," Baruah said in remarks at a forum in Kansas City, Mo., in September.

Limited Experience

Baruah, 43, has served in the Commerce Dept. since 2001, currently as assistant secretary for economic development. Before that, he worked as a business consultant with Portland (Ore.)-based Performance Consulting Group for six years "assisting medium- and large-sized firms improve business practices, communications, and efficiency," according to information he submitted to the Senate for his previous appointment.

But Baruah has never run a company, and his résumé suggests limited experience with small business. The consulting stint was Baruah's only time in the private sector. Prior to that, he held posts at the Labor and Interior Depts. during George H. W. Bush's Administration and also worked on Republican campaigns. A native of Oregon, he has an MBA from Willamette University in Salem.

If confirmed, Baruah would take over an SBA that has faced widespread criticism over its handling of disaster loans (BW SmallBiz, Winter, 2005), falling short of targets (BW SmallBiz, Fall, 2006) for awarding federal contracts to small businesses, and declining loan volume (BusinessWeek.com, 5/14/08) in its government-backed lending program. The agency's budget has also fluctuated wildly in recent years, from $1.175 billion in 2007 to an estimated $530 million this year, with an estimated $825 million allocated in the President's fiscal 2009 budget.

Confirmation Outlook

The SBA's previous administrator, Steven Preston, was appointed to lead the Housing & Urban Development Dept. in April (BusinessWeek.com, 5/23/08) after less than two years at the SBA's helm. Since then, deputy Jovita Carranza, a former UPS (UPS) vice-president, has been acting as administrator.

It's unclear whether Baruah, who was confirmed to his current post by the Republican Senate in 2005, will face opposition this time around. A spokeswoman for Senator John Kerry (D-Mass.), chair of the Small Business Committee, said the committee would scrutinize Baruah but declined to comment on when a confirmation hearing might be scheduled. Kerry said in a statement: "For seven years the Bush Administration has put Wall Street ahead of Main Street and denied the SBA the funding and staff needed to serve our small businesses," adding that Preston's successor would need to address the credit crunch and contracts for minority- and women-owned businesses. Senator Olympia Snowe (R-Me.), the ranking Republican on the committee, agreed the agency needs more funding. "Although Mr. Baruah would serve for only half a year if confirmed, it is crucial that he act expeditiously to reverse years of budget shortfalls that are hampering economic growth and job creation," Snowe said in a statement.

The U.S. Chamber of Commerce praised Baruah in a statement on its Web site, saying "his dedication is strong when it comes to supporting America's small businesses." But others disagree. Lloyd Chapman, a persistent critic of the SBA who has successfully sued the agency over data about the size of companies getting federal contracts, believes Bush is trying to dismantle the agency or fold it into the Commerce Dept. Chapman questioned Baruah's qualifications. "He's the third nominee to head the SBA who has no background and experience and interest in small business in any way," he said. But with the time until the next President takes office ticking away, it may not make a difference—Baruah could be on his way out before he unpacks his boxes.

Tozzi covers small business for BusinessWeek Online.

Source:  http://www.businessweek.com/