The American Small Business League (ASBL) has more distressing news about federal small business contracting. ASBL reviewed the federal government's fiscal year 2011 contracting data and found that the number of large businesses winning small business contracts has increased, and that many of these awardees are some of the largest companies in the world.

The federal government has a statutory goal of awarding 23 percent of all federal contract dollars to small businesses. According to the latest Small Business Goaling Report, the government fell slightly under that goal in FY 2010 (22.7 percent). However, as ASBL has repeatedly documented, government agencies fudge the numbers by reporting contracts awarded to large businesses as small business contracts.

Sure enough, ASBL found that 72 of the top 100 federal “small” business contractors in FY 2011 were actually large companies, a 20 percent increase over the previous fiscal year. These 72 large businesses received $16.4 billion, or 77.6 percent, of the total awarded to the top 100, which includes several companies in POGO’s Federal Contractor Misconduct Database:

#4 – Atlantic Diving Supply, Inc. ($1.1 billion)
    • 425 employees, $968 million annual revenue

#5 – Mission Essential Personnel, LLC ($689.2 million)
    • 1,900 employees, $350 million annual revenue

#6 – Sierra Nevada Corporation ($396.8 million)
    • 1,800 employees, $938 million annual revenue

As well as subsidiaries of FCMD companies:

#14 – Metro Machine Corporation ($237.5 million), a subsidiary of General Dynamics

    • Metro Machine: 4,000 employees, $125 million annual revenue
    • General Dynamics: 81,000 employees, $2 billion annual revenue

#16 – Precious A-Mark Metals, Inc. ($231.9 million), a subsidiary of Spectrum Group International, Inc.  
    • Precious A-Mark Metals: 22 employees, $2 billion annual revenue
    • Spectrum Group International: $6 billion annual revenue

#19 – Petro Star, Inc. ($218 million), a subsidiary of Arctic Slope Regional Corporation
    • Petro Star: 319 employees, $777 million annual revenue
    • Arctic Slope: 6,600 employees, $974 million annual revenue

Among the small business contractors below the top 100 (meaning they received less than $86 million that year), ASBL found a “who’s who” of large federal contractors, including Lockheed Martin, BAE Systems,  L-3 Communications, Finmeccanica, IBM, and SAIC.

The Small Business Administration Office of Inspector General (SBA OIG) recently warned that the SBA’s most serious management and performance challenges are procurement flaws that allow large companies to obtain small business awards and agencies counting contracts performed by large companies towards their small business goals:

OIG audits and other governmental studies have shown widespread misreporting by procuring agencies since many contract awards that were reported as going to small firms have actually been performed by larger companies. While some contractors may misrepresent or erroneously calculate their size, most of the incorrect reporting results from errors made by government contracting personnel, including misapplication of small business contracting rules.

POGO has been pointing out the problems in federal small business contracting for a long time and will continue to do so. With a new SBA rule increasing some small business size standards, we expect these problems to get worse.

Small business is frequently touted as the “backbone” of the economy. What happens to that backbone if billions of dollars in small business contracts end up in the hands of Fortune 500 companies?

Neil Gordon is a POGO investigator.