A small business advocacy group is suing

the Small Business Administration for what it calls "creative accounting" and

misrepresentation of federal contracting goals.

The American Small Business League

(ASBL) filed a lawsuit  May 3 against

the SBA, claiming the agency has adopted the practice of awarding small

business contracts to Fortune 500 companies and "inflating the percentage of

awards to small businesses to fabricate the government's compliance with the

small business goals by using a much lower acquisition budget."

"As has been the case in all previous

years in which the SBA has released an annual goaling report, the SBA's

assertion that the percentage of the total value of all prime contract awards

awarded to small businesses met or exceeded the congressional mandate of 23

percent is false," court documents state. "SBA can only make this statement by

creating, through agency fiat, a class of government contracts which are,

solely in the view of the SBA, subject to exclusion from being considered as

part of 'the total value of all prime contract awards' as stated in the Small

Business Act. Although the language of the statue is crystal clear, every year

the SBA redefines 'total value' as meaning total value minus the contracts SBA

decides to exclude from the equation."

But John Shoraka, SBA's associate

administrator of Government Contracting and Business Development, told Federal

News Radio that SBA's exclusion practice is:

• A continuation of the previous
  
  administration's rules.

• Being updated to be more inclusive.

"When we came in as an administration in

2009, we wanted to be able to continue to measure apples to apples to apples,

to see if we're actually progressing," Shoraka said. "We kept those exclusions

as they stood when we arrived, to make sure we weren't accused of sort of

fiddling with the numbers and making it look like we were having success."

'Misrepresent and fabricate'

SBA in March released its annual report card on small

business federal contracting. Fiscal 2015 was a record-setting year, according

to the report, with the government for the first time reaching its 5 percent

women-owned small business [WOSB] contracting goal since the bar was set

in 1996.

The government spent $17.8 billion

working with WOSBs, according to the report. The government also reached —

and in fact surpassed — its 23 percent overall small business procurement

goal by spending 25.75 percent, or $90.7 billion on small business contracts.

As a whole, the government received an

"A" on its report card for fiscal 2015.

If the SBA doesn't meet its goals, the

lawsuit said, under the Small Business Act the agency must report on why it

failed to meet the goals, as well as provide a plan to achieve them the next

year.

Lloyd Chapman, ASBL president, said in

an interview with Federal News Radio the administration's practice of excluding

certain contracts is a way to "misrepresent and fabricate" compliance with those

goals.

"As a result, failed goals are not

reported, no analysis is done, no remediation plans are created, and Congress's

clear directive that the SBA continue to monitor and improve its small business

participation programs is left unheeded," the lawsuit states.

But the SBA is monitoring small business

policies, Shoraka said. When the National Defense Authorization Act of

2013 came out, it directed SBA to re-evaluate all exclusions.

"There were a number of things that were

eventually put back in," Shoraka said. "For whatever reason, there were

really small agencies that had been included on this exclusion list. That

was the first thing we adjusted. Then the other thing we noticed is that leases

had been excluded … leases like commercial vehicle leases. Those had been

excluded and we put that back in, in 2015."

Shoraka said overseas contracts

also needed re-evaluation. SBA consulted its Office of General Counsel on

what, if anything, should still be excluded under that category.

Other than two instances with the

Defense Department — contingency operations and the Status of Forces

Agreement — the overseas contracts category  was removed from

the exclusion list.

"We worked with all of our sister

agencies, especially the ones that are going to be impacted most significantly,

like the Department of Defense, U.S. Agency for International Development, the

State Department," Shoraka said. "And we made sure that their acquisition folks

understood what the change meant, how that change would be implemented and we

worked very closely with the Office of Federal Procurement Policy in the

timing; just announcing ahead of time so nobody's surprised, phasing it in and

making sure that it became effective for 2016."

This will be applied to the 2016 report,

Shoraka said, and will likely have a  negative 1.5 percent to

negative 2 percent impact on the overall percentage of small business

government contracts.

Artificial inflation

Chapman and the small business league

aren't the only ones who've put small business contracting under a

microscope.

Rep. Steve Chabot (R-Ohio), chairman of

the Small Business Committee, introduced legislation to change the way SBA

counts agency spending with small firms.

Tony Franco, a partner with the law firm

of PilieroMazza in Washington, said he looked at the methodology of the SBA

report, and said it was confusing in part because it appears the agency is

counting contracts under multiple categories, such as an 8(a) [small,

disadvantaged] business being counted for both the 8(a) pool and small business

pool.

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