KITTERY, Maine - Many small businesses depend on government contracts from Portsmouth Naval Shipyard to complement the work they do in the private sector.

Recent reports suggest these contracts are more often being given to larger companies because of government loopholes.

Lloyd Chapman, founder of the American Small Business League, claims large corporations are outbidding small, independent contractors by taking advantage of recent pro-corporation rulings. He hopes by putting pressure on Sen. Olympia Snowe, R-Maine, and chair of the Senate Small Business Committee, he can persuade her to change the laws in favor of small companies.

"This is the largest problem facing small businesses today," Chapman said. "Its especially important for towns around military installations."

Federal law stipulates 23 percent of federal contracts must go to small businesses. What Chapman and the independent Government Accountability Office (GAO) have found, however, is that many of these small-business contracts are going to large companies that have bought smaller businesses in order to keep their contracts.

The law then allows these companies to keep the small-business contract for 20 years, giving them the ability to bid against smaller, less competitive companies.

Chapman also disagrees with the governments definition of a small business, which is any non-manufacturing company with fewer than 500 employees. Because 98 percent of all companies in America have fewer than 100 employees, Chapman feels this limit needs to be lowered.

"When you set a limit that high, it makes it very difficult to start a small business," he said.

Because the majority of government contracts last year were through the U.S. Department of Defense, Chapman said small businesses that work with military bases are disproportionately affected.

According to small businesses that contracted work through the shipyard, however, the situation Chapman is portraying is not that dire.

Dan Corcoran, owner of Jackson Hardware in Kittery who occasionally places bids with the shipyard, said contract work is a small but vital part of his revenues.

"I dont always make a whole lot of money off of them," Corcoran said. "It pays for building maintenance and the lights. Its a government bid and theyre trying to get the best price."

Even though he does not make a significant amount of money on shipyard contracts, others who have contracts buy supplies from his store, increasing his profits indirectly.

Another contractor, Patten Tools in Kittery, is one of the few local companies that make machine parts for Portsmouth Naval Shipyard. Owner Charlie Patten says it makes up only a small part of his companys total business.

"About 10 percent of our business is with the shipyard," Patten said. "I would like it to be a lot more."

Peter Spampinato, owner of Capital Machine in Salem, N.H., has done contract work for the shipyard for 25 years. He also said the work does not generate the bulk of his companys income.

Spampinato does not feel competition with larger companies is the reason for the small number of contracts, but a result of the lack of demand for his product.

"Im pretty established there," Spampinato said. "I have a particular niche that big businesses wouldnt even touch."

According to the Portsmouth Naval Shipyard Public Relations Office, "(contract) opportunities under $100,000 are reserved for participation by small businesses." These opportunities vary from one-time-only requests to long-term jobs.

None of the contractors said they felt discriminated against or looked over, but some did wish the work was more plentiful.

Corcoran agreed the shipyard tries to spread the wealth when it comes to handing out contracts and is, in his experience, fair.

Rob Yunich, communications director for the National Small Business Association, said his organization has identified the employment limits as a problem, but its not one of its key issues.

He attributes the differing reports on the state of contracting to location. In Maine and New Hampshire, the majority of businesses are small; hence, they get most of the work. In a state with many large corporations, such as California or Illinois, the climate for small businesses could be much different.

Chapman said he is looking at resolving the problem nationally. Although Snowe has sponsored numerous laws to help small business and has spoken out on the issue in Congress, Chapman would like to see the loopholes closed as soon as possible.

"There have been five studies documenting this (problem) and no congressional committee has sat down to address this," Chapman said. "As chair of the Small Business Committee, Sen. Snowe has an obligation not just to Maine, but the entire country."

INSIDE THE NUMBERS:

According to the American Small Business Association:

• The United States spends more than $200 billion annually on goods and services.
• Nearly 98 percent of American companies have fewer than 100 employees.
• Nearly 98 percent of Maine non-manufacturing companies are small businesses.
• Small businesses employ 51 percent of all private-sector workers.
• Seventy-five percent of net new jobs are created by small businesses.
• Small businesses make up 97 percent of U.S. exporters and 29 percent of all export value.