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Trump Administration Fails At Creating Jobs By Missing Small Business Contract Targets

By Charles Tiefer
June 5, 2017

In a May 18 press release, the Small Business Administration claimed the federal government had achieved the small business procurement contracting goal for the fourth consecutive year. The SBA states that in fiscal year 2016 small businesses received $99.96 billion in federal contracts, which it claimed was 24.34 percent of all federal contracts. To me, this is not credible.


This matters a lot because a key way the federal government helps small business is by awarding federal contracts to small business. The SBA sets overall government goals for small business awards, which it then makes into goals for each department and agency. When the SBA says it meets its goal, the whole federal machinery for awarding small business contracts believes it has achieved victory and, in effect, can take it easy. This suggests the Trump Administration is not making the kind of effort it promised.


A statement by the American Small Business League (ASBL) responding to the SBA claim shows why, in vital respects, the SBA really is not meeting its target. First, the SBA is counting federal acquisition for FY 2016 at around $410 billion. That is an artificial and unconvincing low figure. I have written in the past that the actual figure is more than double that. The SBA is only counting one type of acquisitions, in one data base. Many agencies do not enter their acquisitions in that database. Agencies do not count certain kinds of payments for goods: for example, it counts drugs bought with federal dollars for VA hospitals, but not the same drugs bought with federal dollars for Medicare at private hospitals.


   Even more culpably, the ASBL says, “The SBA had been fabricating the true volume and percentage of federal contracts that have been awarded to legitimate small businesses for over two decades.” That is, large businesses receive contracts intended for, and counted as going to, small business. According to data from the Federal Procurement Data System (FPDS) compiled by FEDMINE, the $99.96 billion the SBA claimed was awarded to small businesses was greatly inflated. A report compiled by FEDMINE found over 100 Fortune 500 firms received small business contracts.


Of the $99.96 billion the SBA claimed went to small businesses, it appears no more than 50% of that number actually went to firms that currently legally qualify as small businesses. In reality, legitimate small businesses may well have received no more than $50 billion in federal contracts and subcontracts in FY 2016. That would come out to just mid-single digit percentages of the full level of federal acquisitions for FY 2016, a far cry from the 24.34 percent claimed by the SBA.


Numerous reports from a variety of observers concur that intended, and claimed, small business procurement instead goes to large businesses. The Government Accountability office and the SBA Office of Inspector General (and the inspectors general of other agencies) report this.


The story was first reported by the Associated Press in 2003. Since 2003 the SBA’s efforts to fabricate and falsify the diversion of hundreds of billions in federal small business contracts to Fortune 500 firms has been the topic of large numbers of articles. ABC, CBS, NBC, CNN, CNBC, MSNBC, and Fox News have all covered the abuses. In 2014, Public Citizen released an investigative report titled ‘Sleighted’ that exposed the fraud and abuses in federal small business programs. In 2015 Mother Jones released their investigative report ‘Giant Corporations Are Reaping Billions From Federal "Small Business" Contracts.’


Every year for 16 years the SBA Inspector General has reported the diversion of federal small business contracts as the number one problem at the SBA. SBA Inspector General Report 5-15 stated, “One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal Government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.’


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