Federal procurement databases are still rife with examples of large businesses listed as small ones, despite repeated, well-publicized efforts to scrub the data, the Interior Department inspector general has found.

In a July 1 report, the IG said three divisions of Xerox Corp. were currently listed in the Central Contractor Registration as small businesses. Two of the divisions also showed up in CCR’s Dynamic Small Business Search.

John Deere Construction & Forestry, a division of John Deere Co., was identified as a small business in CCR, the Dynamic Small Business Search and the Online Registrations and Certifications (ORCA) database. The IG said the company claimed it qualified because it has fewer than 500 employees and less than $2 million in annual revenue, but its parent has $22 billion in annual revenue.

The IG found Dell Federal Systems GP LLC, a subsidiary of Dell Inc., was identified as a small business in its CCR registration. Its parent has more than $57 billion in annual revenue.

Contracting officers in all agencies rely on those databases to determine whether a company qualifies as small.

If companies misrepresent their eligibility for small business preferences, “that’s felony federal contracting fraud,” said Lloyd Chapman, president of the American Small Business League in Petaluma, CA. He has long contended that large companies are masquerading as small ones to take advantage of the preferences.

SBA and the Office of Federal Procurement Policy last year announced a major effort to improve the accuracy of contracting data. Agencies are now required to verify their reports to the Federal Procurement Data System-Next Generation. Then-SBA Administrator Steven Preston asked chief executives of up to 800 of the largest federal contractors to voluntarily correct records on any contracts that identify their corporations or subsidiaries as small firms.

SBA said a scrub of 2005 data found $4.6 billion in contracts credited to small business that actually went to large corporations. However, a study of the same data by the Democratic staff of the House Small Business Committee identified $12 billion going to companies erroneously counted as small. That is about 15% of all small business awards. (SAA, 8/31/07; 8/11/06)

The Interior IG examined the department’s 2006 and 2007 contracts, awarded after the data-scrubbing push began. In addition to the preceding examples, it found contracting officers had identified Home Depot, Waste Management Inc., McGraw-Hill, Sherwin Williams and Starwood Hotels as small in their official reports to FPDS. The auditors said about $5.7 million in contracts awarded to large businesses were counted toward the department’s small business goals in 2006 and 2007.

The IG’s findings indicate that some Interior Department contracting officers have ignored several directives since 2004, cautioning them to be more careful about the reporting of small business contracts. One contracting officer said, “If contracting officers did their job, [FPDS-NG errors] wouldn’t happen.” Another told the auditors, “Contracting officers often click through mindlessly when entering contracts in FPDS-NG.”

FPDS-NG, introduced in 2003, has many features that fill in forms automatically, to avoid data-entry errors. For example, when a GSA Schedule delivery order is entered into the system, it automatically determines whether GSA considers the contractor large or small. The IG said some contracting officers defeated that feature by entering GSA delivery orders as “purchase orders,” and filled in the small business block manually.

In other cases, the auditors found, GSA’s classification of a small business was wrong, but the contracting officer could not change it in FPDS-NG.

Both the Interior IG and SBA have blamed most of the misidentified contracts on data-entry errors.

Chapman, of the American Small Business League, charges the Bush administration is cooking the books to play down the problem. “What are the chances that it’s not just [happening] at Interior?” he asked in an interview. “This is just the tip of the iceberg.”

In May U.S. District Judge Marilyn Patel ordered SBA to turn over more than 10,000 pages of data listing the names of all firms that received federal small business contracts for fiscal years 2005 and 2006.

The Small Business League said its preliminary review indicates “that Bush Administration officials manipulated the data to disguise the true volume of government small business contracts that actually wound up in the hands of Fortune 500 corporations and other large businesses.”