Petaluma, Calif. – The Small Business Administration Office of Inspector General (SBA OIG) has named the diversion of federal small business contracts to large businesses as a top management challenge for the seventh consecutive year. The announcement came Thursday during a hearing of the House Small Business Subcommittee on Investigations, Oversight and Regulations.

Since 2003, a series of federal investigations have uncovered the diversion of billions of dollars a month in federal small business contracts to corporate giants.  This diversion has lead to a significant shortfall in the volume of federal contracts actually awarded to legitimate small businesses.

The federal government has a congressionally mandated goal of awarding 23 percent of the total value of all contract dollars to small businesses. However, the government’s database of federal small business contractors is crowded with names like Raytheon, Lockheed Martin and General Electric. The American Small Business League (ASBL) conducted a review of the top 100 small business contractors and identified 60 large companies.

In 2005, the SBA OIG released Report 5-15 and described the diversion of federal small business contracts to large businesses as, “One of the most important challenges facing the Small Business Administration and the entire federal government today.”

During his presidential campaign, Barack Obama stated, “Small businesses are the backbone of our nation’s economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.” Yet the SBA OIG’s comments Thursday and recent findings within the government’s own federal contracting data prove that the Obama administration has not taken steps to solve this abuse.

“It is unbelievable that rampant fraud and abuse in federal contracting has gone on for this long,” said ASBL President Lloyd Chapman. “The SBA needs to listen to their inspector general and end the diversion of federal small business contracts to large businesses immediately.”

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