Each year, the federal government awards more than $400 billion in contracts, and Congress requires that 23 percent of those lucrative awards be set aside for small business.

The point of the mandate is to encourage and strengthen the sector that employs more than half of American workers and generates many of our most important innovations.

But a disturbing trend appears to be developing.

Corporate giants, including Fortune 500 companies and even foreign firms, are elbowing in on awards that are intended for small businesses.

This can happen in a number of ways. The Small Business Administration acknowledges that small businesses that win lucrative multiyear government contracts often grow into major corporations, but are allowed to keep their status as small businesses. In other cases, small companies that win long-term government contracts are acquired by corporate giants that inherit the contracting windfall.

Then there are the companies that make “false certifications” about their size, as the SBA Office of Inspector General reported in a 2005 report.

The companies are not the only problem. The federal agencies themselves have been caught fudging on exactly how many of their contracts went to small business. For example, the inspector general for the U.S. Department of the Interior noted in July that the DOI misrepresented its performance on small business goals by including awards to companies like John Deere, which employs 52,000 and has annual revenues $23 billion.

As it is, the SBA has a rather liberal definition of a “small business.” Generally, the cutoffs are: fewer than 500 employees for most manufacturers or 100 employees for wholesale trade industries, $33.5 million in annual sales for most general industry and $7 million for retail and service industries.

Does that sound confusing? The Bush administration isn’t making things any clearer. Under a 2008 policy, companies will no longer be required to list their annual revenues or number of employees on the federal government’s Central Contractor Registration database.

The policy helps muddy the waters for those trying to protect small businesses’ rightful share of government contracts, according to the American Small Business League, a California-based association that has been campaigning for years for small business contract rights.

Lloyd Chapman, president of the ASBL, argues that shortchanging small business interests in federal contracting is a bipartisan game.

Chapman notes that House Speaker Nancy Pelosi, a Democrat from California, pushed a bill through the House this summer that would allow a company to retain its small business status for contracting purposes even if a major venture capital firm owns up to 98 percent of the company.

Chapman argues that the biotechnology industry and the venture capital giant Kleiner Perkins Caufield & Byers, who have contributed heavily to Pelosi’s campaigns, stand to gain from the legislation.

Last year, the SBA issued a press release that said it was a “myth” that “large multinational companies are taking away federal contracts specifically intended for small business.”

But Chapman said 10,000 pages of government contracting documents he later obtained by federal court order over the SBA’s objections show that the Bush administration has “fabricated small business contracting data and lied to the public.”

The congressional mandate to help small business is valid and needs to be enforced, if not expanded.

For the sake of a healthy economy, the interests of small businesses and their workers need protection from the more powerful.