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Pentagon Program Promotes Fraud and Abuse in Federal Sub-Contracting

February 20, 2008

The American Small Business League has launched a national campaign to abolish the Defense Department's Comprehensive Subcontracting Plan Test Program, which it believes encourages fraud and abuse in federal small business subcontracting.

Under FAR clause 52.219-16, titled "Liquidated Damages-Subcontracting Plan (Jan 1999)," any government contractor that fails to meet its small business-contracting goal is required to pay damages to the federal government in the amount of the deficiency.  However, participants in the comprehensive test program, like: BAE Systems, GE Aviation, General Dynamics, L3 Communications, Lockheed Martin, Northrop Grumman, and Raytheon are allowed to circumvent the liquidated damages clause and therefore avoid penalties for non-compliance with federal law which mandates contracting with small businesses.

In 1990, Congress passed Public Law 101-189, which established the Comprehensive Subcontracting Plan Test Program.  Opponents of the Comprehensive Subcontracting Plan Test Program believe that it was created as a loophole to allow prime contractors to circumvent the liquidated damages clause by removing the primary reporting function used by the federal government to review compliance with subcontracting goals and by removing the penalty for non-compliance.
 
"The Comprehensive Subcontracting Plan Test Program was clearly written by lobbyists for major prime contractors in the defense and aerospace industry and needs to end immediately," President of the American Small Business League Lloyd Chapman said. "It is ridiculous to think that 18 years ago they passed a test program and it is still in place.  This legislation was passed to help prime contractors circumvent their small business subcontracting goals and was never intended to help small businesses in any way.  With that in mind, we are going to do everything that we can to see that this program is eliminated as soon as possible."

The ASBL estimates that over the last 18 years, hundreds of billions of dollars in federal small business subcontracting dollars have been diverted from legitimate small businesses by participants of the Comprehensive Subcontracting Plan Test Program.

The ASBL's campaign to abolish the Comprehensive Subcontracting Plan Test Program will be a campaign to educate every member of Congress, presidential candidates, members of the media and chambers of commerce across the country about the negative impact that the program has had on small businesses in every state. Additionally, the ASBL intends to encourage small businesses around the country to file litigation under the False Claims Act against prime contractors that have falsified their subcontracting plans, initiate an GAO investigation and push for congressional hearings on the subject.


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