The American Small Business League wants thelast word on whether a Fortune 500 company can be considered a "smallbusiness."

The ASBL recently filed an appeal withthe U.S. Court of Appeals for the Ninth Circuit, against a judge'sdecision to dismiss the league's case against the Small BusinessAdministration.

"Of course, I was very disappointed the judgedismissed the case, but the way he dismissed it I was happy with,"said Lloyd Chapman, ASBL president. "Our case was really about trying toget an injunction to two SBA policies that we feel are illegal: thegrandfathering policy that allowed for them to report awards to Fortune 500firms as small business contracts and the exclusionary rule that they useto exclude two-thirds of the federal acquisition budget from theircalculations." 

"When you look at the judge's ruling, itreally doesn't even look like the same case," Chapman continued. "Itlooks like a ruling about someone who's challenging in the way informationis reported."

The dismissal states that Congress established the law requiring SBAto give lawmakers information on federal small business contracting.

"If the Small Business Administration isgiving Congress bad information, then Congress can do something about it,either in an oversight or legislative capacity," the dismissal states. "Havingrequested the report, Congress, not the judiciary, is in the best position to decidewhether it's gotten what it wants."

Every year agencies must report to the SBA onwhether or not they met small business contracting goals, and if an agencydoesn't meet the goal, it must provide SBA with the reasons why the goal wasn'treached and a plan on how to address it.

The SBA shared earlier this year that infiscal 2015, the government reached — and in fact surpassed — its 23percent overall small business procurement goal by spending 25.75 percent, or$90.7 billion on small business contracts.

The ASBL filed its original lawsuit  May 3 against the SBA, claiming theagency has adopted the practice of awarding small business contracts toFortune 500 companies and met its goaling reports through "creativeaccounting."

"SBA characterizes contracts awarded toFortune 500 corporations as 'small business contracts' for the purpose ofclaiming federal agencies have attained their small business contractinggoals," the ASBL stated in its lawsuit.

The ASBL also claims in its suit that the SBAcan only say it meets the 23 percent goal by "creating, through agency fiat, aclass of government contracts which are, solely in the view of the SBA, subjectto exclusion from being considered as part of 'the total value of all primecontract awards' as stated in the Small Business Act."

The SBA in its motion to dismiss, said it'snot SBA's practice of "misclassifying contracts," but rather "the Department ofDefense, [General Services Administration], and NASA — through the FAR,and under guidance from the Office of Management and Budget — make each agencyindividually responsible for submitting and certifying the veracity of itscontracting data to Federal Procurement Data System."

John Shoraka, SBA's associate administratorof Government Contracting and Business Development, told Federal News Radio ina May interview that SBA's exclusion practice was a carryover from the previousadministration, but is being updated.

The judge who dismissed the case said underthe Administrative Procedure Act, federal courts are not allowed to revieweverything an agency does, only "final agency action."

The SBA goaling report doesn't meet the testfor final agency action, according to court documents.

"It neither alters the legal regime to whichindividual agencies or small businesses are subject, nor results in direct andappreciable legal consequences," the dismissal states. "The report does notcarry penalties for an agency's failure to meet the small businessparticipation goal. It does not bind agencies to comply with any proposedremediation plan. Any appreciable consequence of the report — such as anagency's decision to start awarding more contracts to small businesses — would beindirect, because the agencies make the ultimate decision whether and how toaward contracts."

Despite the legal setback, Chapman remainsoptimistic.

"Well, I think Congress passed the SmallBusiness Act and it's the Justice Department's job to enforce that law, and thejudge cannot think that it's up to Congress to do this," Chapman said. "I thinkthe ninth circuit will agree with me, that Fortune 500 firms aren't smallbusinesses, and the word all means all. The Small Business Act says allsmall businesses shall receive a minimum 23 percent of all contracts. Yet theSBA has admitted that they use their exclusionary rule to exclude contracts fora variety of reasons."

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