The ASBL opposes the diversion of federal small business contracts to large businesses.

When discussing federal contracts for goods and services, most people are amazed to learn that a foreign company with 26,000 employees and offices in 17 countries has been considered a small business in the past and has received federal small business contracts. We estimate that over $100 billion dollars in small business contracts are diverted to large corporations every year.

“One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal Government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.”

-Harold Damlin, Inspector General of the SBA

Legitimate small businesses have been cheated out of trillions of dollars in federal contracts and subcontracts by the long-standing SBA policy of falsifying the federal government’s compliance with the 23% small business contracting goal.

The SBA does this in two ways...

• First, by excluding the vast majority of federal acquisitions from their calculations.
• Second, by including billions of dollars of Federal awards to Fortune 500 firms, their subsidiaries and thousands of recognizable large businesses, in the volume of contracts they claim were awarded to small businesses.

In 2019, the total Federal acquisition budget was over $1.5 trillion. To falsify compliance with the 23% goal, the SBA excluded over $1 trillion in Federal acquisitions and used an acquisition budget of less than $500 billion.

In reality, in FY 2019, legitimate small businesses likely received no more than 3% of the $1.5 trillion in Federal acquisitions. This fraudulent practice has taken place at the SBA for well over two decades.

The SBA’s Office of Inspector General in 1995 reported a “particular fraudulent practice” of companies continuing to falsely claim eligibility for small business set-aside contracts even after the SBA had prohibited them from doing so. SBA 5-09, Page 48.

A decade later, Report 5-16 from the SBA Inspector General cited a multiple-award contract given “based on a false certification.” The company cited had claimed to be a small business and a manufacturer, but in fact was an affiliate of the actual manufacturer, a large business. SBA 5-16, Page 3.

3% of the $1.5 trillion in Federal acquisitions. This fraudulent practice has taken place at the SBA for well over two decades.

There has been a long history of fraud and misrepresentation. The SBA’s Office of Inspector General in 1995 reported a “particular fraudulent practice” of companies continuing to falsely claim eligibility for small business set-aside contracts even after the SBA had prohibited them from doing so. SBA 5-09 Page 48.

A decade later, Report 5-16 from the SBA Inspector General cited a multiple award contract given “based on a false certification.” The company cited had claimed to be a small business and a manufacturer, but in fact was an affiliate of the actual manufacturer, a large business. SBA 5-16 Page 3.

There are more than 36 million small businesses in the United States. Almost all of them – 98% – have fewer than 100 employees. Yet, the basic standard for most industries is 500 employees.

Over the years, the Small Business Administration has revised its “size standard” – the numerical definitions for each industry. A recommendation to reduce the basic employee limit to 100 was halted by the SBA in July 2004, despite response comments that were overwhelmingly in support of the reduction.

The Small Business Administration issued the proposed rule change on March 19, 2004, stating its intention to reduce and simplify the number of size standards. The proposed rule would have helped millions of truly small businesses compete for government contracts. However, the proposal was withdrawn from pressure from some of the 34,000 firms currently recognized as small businesses who would have been reclassified.

The ASBL is committed to reducing the allowable size of small businesses so that truly small businesses have a fair opportunity to compete for government contracts.

“Small businesses are the backbone of the American economy. By working to change the definition of a small business for government contracts from 500 to 100 employees, federal contracts specifically designed to ensure the success of American small business would go where they belong – to support Americans, not big companies dressed in sheep’s clothing.”

-Congresswoman Lynn Woolsey (D-CA)

Over the last 30 years, the SBA’s budget has been cut more than any other agency in government. It should have the biggest budget. It protects the interests of 99.9% of all businesses in America.

But the Trump administration, in 2025, cut its budget to around $600 million, and reduced its staff by over 50%.

For comparison, the 2025 budget for the Commerce Department was almost $10 billion. It represents the interests of only 1% of all U.S. firms.

In that context it is easy to understand how and why small business contracts get diverted to the biggest businesses in the country.

“Lloyd Chapman and the ASBL deserve recognition for the hard work they have done trying to bring an end to the diversion of federal small business contracts to corporate giants.”

-Congressman Hank Johnson (D-GA)

Representative Johnson’s H.R. 2568 in 2009 (the Fairness and Transparency in Contracting Act) would have provided a significant boost to our nation’s middle-class economy. It was referred to the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law where, unfortunately, it was allowed to wait and die.