A small business advocacy group is suingthe Small Business Administration for what it calls "creative accounting" andmisrepresentation of federal contracting goals.

The American Small Business League(ASBL) filed a lawsuit  May 3 againstthe SBA, claiming the agency has adopted the practice of awarding smallbusiness contracts to Fortune 500 companies and "inflating the percentage ofawards to small businesses to fabricate the government's compliance with thesmall business goals by using a much lower acquisition budget."

"As has been the case in all previousyears in which the SBA has released an annual goaling report, the SBA'sassertion that the percentage of the total value of all prime contract awardsawarded to small businesses met or exceeded the congressional mandate of 23percent is false," court documents state. "SBA can only make this statement bycreating, through agency fiat, a class of government contracts which are,solely in the view of the SBA, subject to exclusion from being considered aspart of 'the total value of all prime contract awards' as stated in the SmallBusiness Act. Although the language of the statue is crystal clear, every yearthe SBA redefines 'total value' as meaning total value minus the contracts SBAdecides to exclude from the equation."

But John Shoraka, SBA's associateadministrator of Government Contracting and Business Development, told FederalNews 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 in2009, 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 exclusionsas they stood when we arrived, to make sure we weren't accused of sort offiddling with the numbers and making it look like we were having success."

'Misrepresent and fabricate'

SBA in March released its annual report card on smallbusiness federal contracting. Fiscal 2015 was a record-setting year, accordingto the report, with the government for the first time reaching its 5 percentwomen-owned small business [WOSB] contracting goal since the bar was setin 1996.

The government spent $17.8 billionworking with WOSBs, according to the report. The government also reached —and in fact surpassed — its 23 percent overall small business procurementgoal 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, thelawsuit said, under the Small Business Act the agency must report on why itfailed to meet the goals, as well as provide a plan to achieve them the nextyear.

Lloyd Chapman, ASBL president, said inan interview with Federal News Radio the administration's practice of excludingcertain contracts is a way to "misrepresent and fabricate" compliance with thosegoals.

"As a result, failed goals are notreported, no analysis is done, no remediation plans are created, and Congress'sclear directive that the SBA continue to monitor and improve its small businessparticipation programs is left unheeded," the lawsuit states.

But the SBA is monitoring small businesspolicies, Shoraka said. When the National Defense Authorization Act of2013 came out, it directed SBA to re-evaluate all exclusions.

"There were a number of things that wereeventually put back in," Shoraka said. "For whatever reason, there werereally small agencies that had been included on this exclusion list. Thatwas the first thing we adjusted. Then the other thing we noticed is that leaseshad been excluded … leases like commercial vehicle leases. Those had beenexcluded and we put that back in, in 2015."

Shoraka said overseas contractsalso needed re-evaluation. SBA consulted its Office of General Counsel onwhat, if anything, should still be excluded under that category.

Other than two instances with theDefense Department — contingency operations and the Status of ForcesAgreement — the overseas contracts category  was removed fromthe exclusion list.

"We worked with all of our sisteragencies, especially the ones that are going to be impacted most significantly,like the Department of Defense, U.S. Agency for International Development, theState Department," Shoraka said. "And we made sure that their acquisition folksunderstood what the change meant, how that change would be implemented and weworked very closely with the Office of Federal Procurement Policy in thetiming; just announcing ahead of time so nobody's surprised, phasing it in andmaking 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 tonegative 2 percent impact on the overall percentage of small businessgovernment contracts.

Artificial inflation

Chapman and the small business leaguearen't the only ones who've put small business contracting under amicroscope.

Rep. Steve Chabot (R-Ohio), chairman ofthe Small Business Committee, introduced legislation to change the way SBAcounts agency spending with small firms.

Tony Franco, a partner with the law firmof PilieroMazza in Washington, said he looked at the methodology of the SBAreport, and said it was confusing in part because it appears the agency iscounting contracts under multiple categories, such as an 8(a) [small,disadvantaged] business being counted for both the 8(a) pool and small businesspool.

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