Should technology Goliaths Oracle and Hewlett-Packard have received government contracts earmarked for small businesses?

They have, according to the government's own tallies. Lloyd Chapman doesn't think that's right.

Chapman, president of the Petaluma-based American Small Business League, says lax oversight by the federal government allows those companies and other industry giants to frequently win contracts for goods and services that have been set aside for small companies. Among other behemoths who have been awarded government contracts set aside for small businesses are Raytheon, Northrop Grumman and AT&T.

''Clearly it's a major problem,'' Chapman said.

Chapman was one of more than two dozen small-business owners and others who testified Tuesday in San Francisco before officials with the U.S. Small Business Administration who are considering changes to how small businesses are defined.

Federal law mandates that 23 percent of all federal government contracts go to small firms -- awards potentially worth about $87 billion a year. Those contracts can cover anything from paper clips, grass cutting and trash removal services to advanced cancer research efforts.

About $47 billion dollars in federal small-business contracts were awarded to companies too large to qualify as small firms during a five-year period ending in 2003, according to the Center for Public Integrity, a non-profit, non-partisan research group.

The Small Business Administration's own tallies found that about $2 billion in federal contracts set aside for small companies actually went to large firms in 2003, said Jim Gambardella, deputy area director for government contracting for the Small Business Administration's San Francisco office.

Mostly that happened because of coding errors or because divisions of major companies were counted as individual firms.

Software giant Oracle received $11.5 million in small-business contracts in 2002, according to a Small Business Administration report released last year. Hewlett-Packard received $12 million in small-business contracts in 2002, the report said.

Each year, between 300 and 400 cases are reported in which companies too large to fit the government's definition of a small business apply for and receive small-business contracts, said Gary Jackson, assistant administrator of the office of size standards for the U.S. Small Business Administration.

Some violations occur when companies that met federal standards for small-business contractors at the beginning of a multiyear contract later grew in revenue or number of employees. The companies are permitted to finish out their contracts even after growing past the small business threshold, Jacksonsaid, because agencies receiving the goods or services under the contracts want continuity.

Other violations result when small firms that get bought by larger companies fail to voluntarily reclassify themselves as ineligible for small-business contracts, Jackson said.

Currently, the federal government's definition of small business varies widely by industry. For example, a breakfast cereal maker with up to 1,000 workers can apply for a small-business contract. On the other hand, a computer software maker can qualify as a small business only if it reports annual revenues of less than $21 million.

The government is considering a uniform size standard -- based on either a maximum number of employees or revenues -- for all industries wanting to apply for federal contracts.

Whether to require companies to be recertified annually as small businesses is also under consideration. Currently, companies retain their small-business designation for the duration of an existing contract, although a firm that grows too large may not apply for new small-business contracts.

Since the spring, the Small Business Administration has held a series of public hearings in cities across the nation to find out what small-business owners think about the proposed changes.

There's no consensus on the best solution.

Some speakers at Tuesday's hearing wanted the number of employees to determine what's a small firm in all cases. But Cheryl Garcia -- secretary-treasurer of B&C Janitorial Service, a San Pablo company with 40 workers and $1 million in revenue -- said that isn't always the best measure.