Politicians love to talk about small business being the backbone of the American economy. They feel so strongly about giving the "little guy" a fair shot at government contracts that there is a regulation requiring 23 percent of federal contracts to go to small businesses each year.

With the feds awarding approximately $314 billion in such contracts annually, that adds up to a sizable chunk of change for the nation's small-business owners.

According to the government's definition, small businesses have fewer than approximately 500 employees (although the limit can vary depending on the industry). Retail companies generally can have average annual receipts of $6.5 million or less to fall into the small-business category.

So why did companies such as Wal-Mart Stores Inc., Exxon Mobil Corp. and Google Inc. all receive federal small-business contracts in 2005?

That question is at the heart of a report released Wednesday by Democratic congressional investigators. The report says that at least $12 billion in federal contracts that supposedly went to small companies last year instead went to companies such as Microsoft and Rolls Royce.

In many cases, investigators found, government agencies simply classified the companies as small businesses and no one questioned it. That is one reason why the Small Business Administration was able to report last month that 25.4 percent of federal contract dollars in 2005 went to small businesses - well above the 23 percent requirement. But investigators say that figure drops to 21.6 percent when larger, ineligible companies are weeded out.

The report prompted U.S. Rep. Nydia Velazquez, the top Democrat on the House Small Business Committee, to ask the Government Accountability Office as well as internal watchdogs for the State, Treasury, Defense and Transportation departments to look at their contracting procedures and determine if criminal activity is involved. Representatives of large companies who falsely claim to be small businesses can face up to 10 years in prison, $500,000 in fines and a permanent ban from doing government business under federal law.

While outright fraud may play a role, the larger problem appears to lie in federal agencies simply being lax in oversight. Investigators found thousands of contracts to big companies were miscoded as going to small businesses. Other small businesses grew larger or were purchased by corporate giants but still received small-business contracts.