Feds Short-changed Small Businesses Out of $200 Billion in Contracts in 2015 Alone, Says Advocacy Group
By Nash Riggins
Small Business Trends
October 31, 2016
The UnitedStates government agency responsible for supporting entrepreneurs has beenaccused of short-changing small business owners out of $2 trillion infederal contracts over the last ten years.
Federal lawcurrently dictates that small businesses must receive a minimum of 23 percentof all government contracts granted, and the Small Business Administration (SBA) is responsible forhelping to ensure that target is met by connecting government agencies withbusiness owners.
Yet accordingto advocates at the AmericanSmall Business League (ASBL), the SBA has been "falsifying" thegovernment's 23 percent target compliance by using inaccurate budgetingfigures.
In 2015, the Congressional Budget Office (PDF) reported anacquisition budget of $1.2 trillion. This would mean that small businessesshould have been legally entitled to receive a minimum $276 billion worth ofgovernment contracts that year. But according to the ASBL, the SBA only used anacquisition budget of $370 billion in its figures thus "inflating theirnumbers" to show that small businesses received 24.9 percent of all federalcontracts in 2015.
As a result,the ASBL asserts small business owners received just $40 billion of the $276billion in contracts that should have been set aside for them last year,landing them with just three percent of all federal contracts.
In addition,the ASBL accused the SBA of diverting billions of dollars in federal contractsto larger companies thanks to a grandfathering rule that continued to classbusinesses that had grown substantially in size over time as "small".
Thoseaccusations led to the ASBL filing a controversial injunction against the SBAin May, although Federal District Judge Vince Chhabria ultimately tossed out the injunction (PDF) on October 18. Heargued that, if the SBA has indeed falsified meeting its target requirements,it should be Congress not the courts that hold the agency to account.
In anrelease, ASBL President Lloyd Chapman said the court's decision isdisappointing setback in the group's battle to hold the SBA responsible.
"If thelawsuit had been allowed to get its rightful day in court on the merits, thelawsuit would have required the SBA to give all small businesses and doubly so for minority, women-owned, and disabled veteranbusinesses a larger and proper share of federal procurement," Chapmansaid.
"Dismissingthe suit frustrates the legitimate rights of small businesses to their propershare of the true scale of government contracting."
The SBA hasyet to issue a statement following the court's decision to toss out theinjunction. The ASBL has said it plans to appeal.
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