WASHINGTON,D.C. – Claims in recent years by the U.S. Small Business Administration (SBA)that the government has met or nearly met a requirement to make 23 percent ofits purchases from small businesses are misleading and rely on methodologiesthat conflict with federal law and regulations, according to a new Public Citizen report.

For example, in 2013, seven of the 10 largest federal contractors received atleast one contract that the SBA counted toward fulfillment of small businessgoals, according to the report "Sleighted:Accounting Tricks Create False Impression That Small Businesses Are GettingTheir Share of Federal Procurement Money, and the Political Factors That MightBe at Play." The release of the report coincides with NationalSmall Business Week, which President Barack Obama proclaimed is designed tocelebrate America's small businesses, which he called the backbone of theeconomy.

In the report, Public Citizennotes several political factors that could be motivating a bias toward largebusinesses in contracting and inhibiting outcry from members of Congress. Theseinclude the vast number of jobs that large defense contractors provide tomembers' constituents; defense contractors' lucrative employment opportunitiesto former military officials; contractors' significant political campaigncontributions and lobbying expenditures; and, potentially, influence garneredthrough undisclosed contributions contractors make to nonprofit groups thatengage in electioneering activities.

Public Citizen and others are encouraging Obama to issue an executive orderrequiring government contractors to disclose political spending made viathird-party groups. "This report shows that the deck is already stacked infavor of large contractors," said Lisa Gilbert, director of Public Citizen'sCongress Watch division. "At a minimum, we should know if contractors are usingsecret purse strings to line up even more advantages."

SBA Administrator Maria Contreras-Sweet said in congressional testimony in 2014that contracts held by very large businesses could count toward small businessgoals because of a rule allowing small businesses that are acquired by largebusinesses to have their small business status "grandfathered in" for up tofive years.

In response to questions from Public Citizen that cited applicable federalregulations, a spokeswoman for the SBA acknowledged last week that "in the caseof a merger or acquisition, the agency should be notified within 30 days andthe small business credit should be discontinued."

Aside from counting contracts with large businesses toward small businessgoals, the SBA's data create an inflated impression of the government'spercentage of purchases from small businesses by excluding whole categories ofprocurement from its calculations. This methodology conflicts with the SmallBusiness Act's stipulation that procurement from small businesses shall be "notless than 23 percent of the total value of all prime contracts" issued by thefederal government.

"This program is vital because small businesses are better job creators andmore engaged in their local economies," said David Levine, CEO of the AmericanSustainable Business Council. "More effective implementation and oversight willdeliver many times over the return on investment in job growth as well ascommunity revitalization."

Many observers have leveled allegations over the years that the government hasfailed to adequately police its small business contracting programs:

·        Everyyear since fiscal year 2006, the SBA's Office of Inspector General has listedprocurement flaws that "allow large firms to obtain small business awards" asthe first item in its annual enumeration of challenges facing the SBA.

·        Largebusinesses received $13.8 billion out of $50 billion (or nearly 28 percent) inprocurement that was categorized as going to small businesses in 2001, the U.S.General Accounting Office (now called the Government Accountability Office) reported.

·        Ofthe 100 contractors receiving the most federal dollars counted toward smallbusiness goals in 2012, 71 did not meet the government's standard to qualify assmall businesses, according to the American Small Business League (ASBL), aPetaluma, Calif.-based watchdog group. The ASBL report concluded that these 71businesses received 56 percent of procurement payments made to the top 100purported small business contractors.

To view full Public Citizen press release,click here: http://www.citizen.org/pressroom/pressroomredirect.cfm?ID=5503