Petaluma, Calif. – No problem facing the Small Business Administration has been the subject of more federal investigations and more media attention than the diversion of federal small business contracts to Fortune 500 firms. The American Small Business League (ASBL) has estimated that every year more than $100 billion in federal small business contracts are diverted from legitimate small businesses to some of the largest corporations in the United States and Europe.

Since U.S. Census Bureau statistics show that firms with less than 20 employees create more than 97 percent of all new jobs in America, bringing an end to the diversion of billions of dollars in federal small business contracts to "corporate giants" should be the first order of business for incoming SBA Administrator Karen Gordon Mills.

In March of 2005, the SBA Office of Inspector General (OIG) released Report 5-15 which stated, "One of the most important challenges facing the Small Business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards." (http://www.sba.gov/IG/05-15.pdf)  

Every major newspaper in the country has written about the diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 firms and thousands of other large businesses in the United States, and even Europe. (https://www.asbl.com/documentlibrary.html) 

ABC, CBS and CNN have aired investigative stories, which found corporate giants such as Rolls Royce, Wal Mart, Microsoft, Xerox, Sherwin-Williams, John Deere, Raytheon, General Dynamics and British Aerospace (BAE) had been the actual recipients of federal small business contracts. (ABC, https://www.asbl.com/abc_evening_news.wmv; CBS, https://www.asbl.com/cbs.wmv; CNN, https://www.asbl.com/showmedia.php?id=1170) 

In February of 2008, President Obama recognized the gravity of the issue when he released the statement, "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) 

As a first order of business at the SBA, Karen Mills should immediately remove all Fortune 500 firms, large businesses and their subsidiaries from any and all government databases of firms claiming status as small businesses.  This would once and for all bring an end to the "miscoding" that has plagued the SBA for the last eight years.

Next, a warning should be placed on the government's Central Contractor Registration (CCR) Database warning all government suppliers that misrepresenting a firms status as a small business to illegally receive federal small business contracts is a felony under section 16(d) of the Small Business Act, which carries a penalty of up to 10 years in prison and a $500,000 fine per occurrence.

Finally, Administrator Mills should ask President Obama to issue an executive order immediately directing all federal agencies and all prime contractors to stop reporting awards to publicly traded firms as small business awards. The Small Business Act clearly defines a small business as "independently owned." Publicly traded firms are certainly not small businesses, and do not qualify as "independently owned."

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