SBA Data Show Large Firms Are Nabbing Contracts Reserved for Small Businesses
By Charles S. Clark
October 2, 2014
Federal procurement data show that large companies, including leadingdefense contractors, last year received millions of dollars in contractsintended for small and disadvantaged businesses. The data was obtained lastweek by the American Small Business League, which fought a multi-year court battle toobtain the information from the Small Business Administration.
The group, based in Petaluma, Calif., and run by software entrepreneur LloydChapman, has been a thorn in the side of SBA for years. It accuses the agencyof catering to large companies that misrepresent themselves as small businessesto win government contracts.
Last week the league obtained from SBA an Excel file containingnearly 107,000 entries of vendors that received $83 billion in small businesscontracts in fiscal 2013. While SBA annually releases analytical informationabout small business contracting, it took a lawsuit from the league to forcethe agency to release its list of vendors who receive small businesscontracts.
The agency sought to protect its list from disclosure on the grounds that itis compiled from data it culls from a General Services Administration database.U.S. District Judge Marilyn Hall Patel found that reasoning flawed and in a 2008 ruling ordered theinformation released. This is the first year SBA has provided theinformation without a court battle, Chapman said.
Prepared by SBA's Office of Government Contracting and Business Development,thelist is drawn from the fiscal 2013 Federal Procurement Data System. Thelist does not include any information about the contracts themselves, only thenames of vendors who received small business contracts and the amounts theywere awarded. It includes entries for such contractors as Chevron U.S.A. Inc.($8.5 million); Lockheed Martin Management Systems Designers, Inc. ($47million); Northrop Grumman Systems Corp. ($455,636); Raytheon BBN TechnologyCorp. ($5 million); Raytheon Company ($418,766); and General Dynamics C4 Systems($947,203).
"This list of companies is the biggest piece of evidence the American SmallBusiness League has ever received from the SBA through a FOIA request," saidChapman. In the past, attorneys for the SBA claimed the agency had noknowledge or information on the actual recipients of federal small businesscontracts, he said.
Chapman believes the administration is trying to dismantle the SBA"through policies that dramatically increase the federal definition of asmall business, and we can't let him do that," he said.
The SBA inspector general last month substantiated the notion that theagency mischaracterizes companies in a damningreport that found many agencieswhile striving to reach the governmentwidegoal of awarding 23 percent of contract collars to small businesseswere"overstating" the eligible firms. The watchdog identified more than $400million in contract dollars that went to firms too large to qualify for theSection 8(a) set-asides for small businesses and those in poor communities.
The IG recommended that the SBA's associate administrator for governmentcontracting and business development strengthen controls between SBA databaseson certification data of 8(a) and HUBZone firms to improve the accuracy ofinformation reported to the Federal Procurement Data System. The SBA largelyagreed.
A previous league study concluded that 75percent of such awards were given to large firms.
On Wednesday, the small business league said the administration "has adopteda new strategy to close the agency with a series of policies that appear to bedesigned to dilute and dismantle federal small business programs," a referenceto a seriesof proposed rules SBA began releasing in that the league says "dramaticallyincreased the federal definition of a small business in hundreds ofcategories."
One proposedrule out in August would remove the Information Technology Value AddedResellers exception under North American Industry Classification System 541519.It also "proposes to increase employee-based small business size standards for30 industries and three sub-industries."
The league says that would mean that a small information technology firm"with annual sales in excess of $27.5 million will be considered a largebusiness while contractsto firms like Lockheed Martin, Northrop Grumman and Raytheon will continue to be counted assmall business contracts."
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