When Lloyd Chapman was a teenager, his father used to talk over dinner about the government contracts he'd put out for bid as a contracting officer in the U.S. Air Force. Chapman wanted to work in retail sales and never dreamed that someday his life would revolve around government contracts.

But today Chapman eats, sleeps and breathes government contracts -- in particular, small-business contracts with the federal government.

For the past three years, Chapman has been on a one-man crusade to expose abuses through which large companies have won billions of dollars' worth of government contracts that were supposed to go to small business. One recent government report concluded that in 2002 alone, $1.7 billion worth of contracts that were listed as going to small business actually went to big corporations like Oracle and Raytheon.

Chapman, a Petaluma resident who still speaks with the twang of his native Texas, has been accused of overdramatizing the problem. He acknowledges that critics view him as a "conspiracy nut." And he remains outside the collegial circle of other Washington-based small business advocacy groups.

Yet his single-minded pursuit of this issue helped lead to a recent series of small-business procurement reforms, and to several government reports that corroborated the charges Chapman had been making for years. Even his opponents grudgingly admit that Chapman and the organization he started, the American Small Business League, have had an impact.

"They have certainly been helpful in identifying these issues and raising awareness of these issues," said Gary Jackson, assistant administrator for size standards at the U.S. Small Business Administration. "You can't say they're the only ones raising them, but they certainly made it more visible."

The stakes in the debate over small-business contracting are high, and the roots of the debate go back half a century.

The U.S. government spends more than $300 billion each year on goods and services, from high-tech military equipment to low-tech janitorial services.

When the federal government first became an economic powerhouse during World War II, small companies started protesting that big defense contractors were getting all the work. In 1953, Congress passed the Small Business Act, which promised a "fair proportion" of all government business to small companies. For years, the government set a goal of giving 20 percent of all contracts to small firms. That goal was increased to 23 percent in 1997.

But small business promotion ran into a conflicting set of policy goals in the 1980s and '90s -- streamlining government. As part of an effort to make its purchasing more cost-effective, the government began issuing large multi-agency contracts that were sometimes harder for small firms to win. Contracts often lasted five years and could be extended several times, for a total of up to 20 years. This created problems in keeping track of small business contracts: A small firm would win a bid, then be acquired by a giant corporation, but might still be listed as a small company for as long as 20 years.

Chapman entered the contracting world himself in the early 1980s, when he moved from Texas to Petaluma and began working at a computer reselling firm. Much of the firm's business came from government contracts.

Chapman's curiosity was initially piqued when he looked at a huge contract for the F-22 Stealth fighter and saw that only 16/100 of 1 percent of the contracting work went to small businesses. Chapman contacted Congress, and ended up winning about $500 million in additional Stealth work for small businesses.

"I thought, 'This is easy, I'll do it some more,' " he said.

It wasn't until 2002, though, that he became deeply embroiled in the contracting issue. One day, a saleswoman came to Chapman in tears: After working for weeks on a bid that was supposedly set aside for a small business, she had lost it to a company named ASAP Software. Chapman looked up ASAP on the Internet, and quickly found it was not a small business at all, but a subsidiary of an Amsterdam firm that had 18,000 employees in 18 different companies.

"I then began to look through the government's database of small businesses," he recalled. "Within one hour, I found dozens of the biggest companies in the world."

That started Chapman on his crusade. He began calling and writing the SBA, Congress and the media. Congress held a hearing on the misclassification of large businesses as small, and in 2003, the Small Business Administration removed 600 large companies like Office Depot and Barnes & Noble from its database of supposedly small businesses. Government officials said the problem was mostly one of miscoding and had been fixed, but Chapman pressed on.

He left the computer business, created the American Small Business League in the same nondescript office building as his old computer firm and began working as a full-time volunteer on the contracting issue.

Then last December, the SBA's Office of Advocacy released a study that concluded that $1.7 billion in contracts labeled as going to small business in 2002 in fact went to big companies. Of the top 1,000 small-business contractors listed in the government's database, 39 were actually large companies including such well-known names as Raytheon, Northrop Grumman, Hewlett-Packard, Oracle and the Carlyle Group.

Federal officials had previously announced that 20.5 percent of government business went to small firms in 2002. If these $1.7 billion worth of contracts had been listed correctly, the SBA report said, the tally of contracts going to small business would have fallen to 19.7 percent.

"This report clearly shows that there are problems with the federal procurement system," said SBA chief counsel for advocacy Thomas Sullivan in a statement accompanying the report.

The December 2004 report was followed by another SBA study released in February that looked at a sample of six major contracts and found that four had gone to companies that were not small. Chapman felt vindicated.

"I'd been saying this for 15 years, and people would treat me like a conspiracy nut," Chapman said. "The sad thing is, in that 15-year time frame, small businesses have been cheated out of billions of dollars."

The SBA reports cited several reasons why large firms were being included in the small business roster. One was the issue of those long, extended contracts, where small firms got bought up but were never reclassified as large firms.

Other problems were that the government relied on companies to self- certify that they were small, and federal contracting officers sometimes didn't have correct information about the parent companies of "small" contractors.

During the past few months, the SBA has taken a number of steps to solve what it calls data errors. In December, the SBA started requiring companies to recertify their size as soon as they are bought by another firm. Recently, it started doing automated reviews of all firms listed in its small-company database to ensure they really meet the size criteria.

"We agree there are concerns, and we have taken steps to adopt or consider new policies," the SBA's Jackson said.

Other prominent small-business advocates have praised the SBA's actions.

"Admitting the system isn't working is a pretty big step," said Molly Brogan, a lobbyist for of the National Small Business Association, which has more than 150,000 members around the country. "As critical as we are, we need to applaud them for acknowledging this."

But Chapman claims that the agency's moves are just window-dressing, and that the abuses go even further than what has been publicly revealed. Chapman is suing the SBA to release the original draft of the December 2004 report, which he predicts will document intentional fraud rather than inadvertent data errors.

"I would bet my life that at least $50 billion a year of federal small business contracts are going to some very, very big companies," Chapman said.

The SBA's Jackson denied Chapman's accusations of fraud and accused Chapman of overdramatizing and skewing the findings of the recent reports.

"Public debate is healthy, but let's make sure the information is accurate and presented in a professional way," Jackson said.

Meanwhile, Chapman's criticisms extend beyond the government to long- established business advocacy groups like the NSBA, the National Federation of Independent Business, and the U.S. Chamber of Commerce. Chapman has sometimes ended up opposing these groups on contracting-related questions, such as how the government should define what constitutes a small business.

"NFIB, NSBA, the Chamber -- how come these guys never call me? How come they never offer to help me out with legal fees?" Chapman said. "I don't think any of these groups represent small business. If any organization were effectively representing small business, this (abuse) wouldn't have happened. I don't want to sound egotistical, but I feel like the only true representative for small business in this country, a kind of Lone Ranger."

A spokesman for the National Federation of Independent Business, which, unlike Chapman's group, monitors a wide range of issues, such as tax policy and health insurance, said Chapman's claim to be the only true representative of small business was "kind of funny."

"We react the way our 600,000 small-business members want us to react," NFIB spokesman Mike Diegel said. "In our last poll of small business' critical problems, the top priorities cited by our members were the cost of health insurance, the cost and availability of liability insurance, and workers' comp costs. Winning government contracts for federal, state, and local government was No. 69 out of 75."