"The Small Business Act provides that any person or entity that intentionally misrepresents the status of any concern or person as a "small business concern"... in order to obtain for him/ herself or another any of the contracting opportunites... will be subject to the penalties set forth... Any person who violates shall be punished by a fine of not more than $500,000 or by imprisonment for not more than 10 years, or both."

-Small Business Act: Section 16D

To the best of our knowledge no firm has been prosecuted or punished by the federal government for committing any of the following examples of blatant felony contracting fraud. The refusal of the federal government to prosecute even a single case of blatant small business contracting fraud in the last decade has exascerbated the problem and encouraged the rampant levels of contracting fraud that we see today. Here are some of the more common examples of felony federal contracting fraud that the ASBL has been able to document.

Misstatement of number of employees. Companies are misrepresenting number of employees they have in order to unfairly compete for small business contracts. These companies intentionally misrepresent themselves as qualifying for small business set-aside contracts on Pro-Net and CCR, the databases used by federal agencies.

Misuse of NAISC codes. Companies claim that their primary business is something other than what it is so they can use an NAISC code with a much higher small business size standard. For example, a computer reseller with more than 500 employees would not qualify for small business contracts, but by claiming to be a manufacturer it can qualify with up to 1,000 employees.

Large businesses passing off a subsidiary or division as an independent small business. Under federal law the employees of a parent company must be considered in determining proper size standards. The division or subsidiary of a large business would not constitute a legitimate small business. Yet subsidiaries consistently are awarded small business contracts. In addition, companies that were at one time legitimate small businesses but have grown into large business continue to represent themselves as legitimate small businesses.

Companies that have been formally found ineligible for small business contracts by one government agency continue to claim they are small businesses and receive contracts from other agenices. The SBA has refused the ASBL's request to routinely publish a list of these businesses to notify all agencies of their status.

Companies that have never been certified as small disadvantaged businesses or failed to qualify are representing themselves as small disadvantaged businesses in order to receive federal small business contracts and subcontracts.

Government agencies claim that contracts they awarded to large business really went to small businesses in an effort to meet their small business allocation goals. Documented in a 2003 report- DOE Inspector General's office found DOE prime contracts were showing awards to large businesses as awards for small businesses in an effort to falsify reports.

Prime contractors falsify their standard 294 subcontracting reports and dramatically overstate their awards to legitimate small businesses.

Large businesses that acquire a legitimate small business through the existing GSA schedule contract will provide items that are not on the contract as a small business and buyers will show purchases not on the contact as an award to a small business.

Anti-Small Business Policies

Changing the size. Even though 98% of all Ameri can businesses have fewer than 100 employees, the Small Business Administration and the Office of Management and Budget decided 20 years ago to change the definition of a small business from 100 to 500 for non-manufacturers. This change, covering the vast majority of the goods and services purchased by the federal government, forced legitimate small businesses into head-to-head competition with large corporations, driving thousands of legitimate small compaines across the country out of business.

Rewriting the law. Even though Congress passed legislation mandating that all federal acquisitions between $25,000 and $100,000 be exclusively set aside for small businesses, the SBA and the OMB have adopted a policy that has effectively repealed this legislation. The SBA and the OMB exempted any federal acquisition from this mandatory set-aside that is currently on the GSA Schedule. Since 99% of what the government buys is on this schedule, what the SBA and OMB have done is overturn a law designed to help small businesses.

Allowing exceptions. The SBA and the OMB have adopted a policy that allows a small business acquired by a large business to continue to claim its small business status for up to 20 years. This policy has forced thousands of legitimate small businesses out of business when they are forced to compete with large businesses around the world for small business set-asides.

Discouraging protests. A small business filing a protest against a set-aside contract that was awarded to a large company frequently is informed that the contract was not really a set-aside and there is no grounds for a protest. For the last few years the SBA has dismissed hundreds of legitimate protests from small businesses against by saying the contract was not a set-aside acquisition.

Avoiding prosecution. Another policy that hurts legitimate small businesses prevents a large corporation from being prosecuted for small business contract fraud unless it can be shown that the firm intended to commit fraud.

Delaying notification. Large companies that win small business contracts are protected from legitimate protest challenges by some federal agencies that withhold the name of the winning supplier until the time frame for filing a protest has expired. This technique is preventing legitimate small businesses from filing protests against fraudulent firms.