Federal Investigation Reveals that Gov't Small Business Contracts went to Large Firms
By J. Nisen
July 11, 2008
With the Small Business Act of 1953, the U.S. Congress established that as many Federal Government contracts as practical should be awarded to small businesses. Specifically, the federal marketplace has a mandated small business contracting goal of 23 percent.
A recent report from the Department of the Interior's Office of Inspector General reveals that not only is that goal being missed, it's being done so to the benefit of large firms, including Fortune 500 companies.
The report, "Interior Misstated Achievement of Small Business Goals by Including Fortune 500 Companies" indicates that during fiscal years 2006-2007 approximately $5.7 million in contracts that were supposed to be set aside for small businesses went to the likes of Dell, Home Depot, John Deere, McGraw-Hill, Sherwin Williams, and Xerox Corporation--and the DOI improperly received small business credits for them.
The errors stem from both existing and improperly entered data within and Federal Procurement Data System-Next Generation (FPDS-NG). According to DOI Inspector General Earl Devaney, "The main reasons that contracts to large businesses have been incorrectly coded as small business contracts relate to data entry mistakes, reliance on incorrect data, and a failure on the part of contracting officials to verify business size reported in Central Contract Registration."
The report says "the incorrect data brings into question the accuracy of the small business goal achievement" that the DOI reported.
The U.S. Small Business Administration, whose mission is to "aid, counsel, assist and protect the interests of small business concerns," says that the DOI IG report is consistent with its own findings. According to a department spokesperson, the SBA's perspective is that "a miniscule percentage of contracts held by large businesses" had been miscoded. Further, the SBA indicated that the DOI report "demonstrates that SBA's partnership with the Office of Federal Procurement Policy to clean contracting data is working."
As of press time, the SBA could not be reached for further comment.
The American Small Business League, a non-partisan group committed to addressing issues that cost small businesses government contracts, disagrees with the SBA's assessment.
"Federal investigations have been coming out for roughly six years now that clearly show that Fortune 500 corporations are the actual recipients of federal small business contracts," ASBL President Lloyd Chapman told the media. He added, "This situation is obviously not limited to the DOI. The intentional diversion of federal small business contract dollars to Fortune 500 firms is a government-wide problem."
Congress has attempted to address this issue as well. In May 2007, the House passed H.R. 1873, The Small Business Fairness in Contracting Act.
The bill addresses contract bundling, procurement procedures, audits of the Central Contract Registration to ensure there are no fraudulently designated small businesses, and it aims to increase the mandated government-wide small business procurement contract goal to 25 percent, among other measures. The bill was given to the Senate May 11, 2008, where it has yet to be addressed.