The Small Business Jobs Act being pushed by President Obama contains a loophole that will legalize contracting fraud while protecting large fraudulent businesses from prosecution, and stands in stark contradiction to a campaign promise made by President Obama.

In February of 2008, President Obama stated, “It is time to end the diversion of federal small business contracts to corporate giants.” (http://www.barackobama.com/2008/02/26/the_american_small_business_le.php) President Obama made this statement to address ongoing fraud and abuse in federal small business contracting programs that cost small businesses over $100 billion a year in missed contract opportunities. Federal law currently mandates that a minimum of 23 percent of all federal contract dollars go to small businesses.

Since 2003, there have been over a dozen federal investigations, which have found Fortune 500 firms and thousands of large companies around the world as the actual recipients of federal small business contracts. The Small Business Administration’s (SBA) Inspector General has listed this problem as the number one management challenge facing the agency for the past five consecutive years and referred to this problem as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” (https://www.asbl.com/documentlibrary.html)

Section 1341 of H.R. 5297, the Small Business Jobs Act, contains specific language that will allow the SBA to develop policies and procedures to protect large businesses that have misrepresented themselves as small businesses from prosecution for felony contracting fraud. Section 16(d) of the Small Business Act prescribes a penalty of up to ten years in prison and a fine of not more than $500,000 per occurrence for firms that have misrepresented themselves as small businesses.

Some of the firms that have received government small business contracts include: Rolls-Royce, British Aerospace (BAE), Lockheed Martin, Boeing, Northrop Grumman, L-3 Communications, SAIC, Titan Industries, Raytheon, Dell Computer, Xerox, French firm Thales Communications, Italian firm Finmeccanica SpA, and Ssangyong Corporation headquartered in Seoul, South Korea. Textron, a Fortune 500 firm, received over $775 million in federal small business contracts in a single year.

“It is unbelievable that President Obama is going to create a loophole to benefit the corporate giants he promised to kick out of federal small business contracting programs,” ASBL President Lloyd Chapman said. “When you see President Obama on television, I want every American to realize that his administration is giving over $1 million a minute in small business contracts to some of the largest companies in the world.”