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Report: Federal small-firm money goes to big companies

By Jan Norman
OC Register
August 13, 2009

Five of the top 10 small-business federal contractors this year are really big companies, according to a report for Petaluma-based American Small Business League.

The federal government still hasn’t released its list of small businesses that received federal contracts in the 2008

Lloyd Chapman

Lloyd Chapman

fiscal year, so the league got a list from Fedmine, a database that aggregates data from different federal sources. Among the top money recipients, according to Fedmine and ASBL:

  • Nuclear Fuel Services, annual revenues of $67 million and subsidiary of McDermott International Inc., a public company with 28,000 employees and annual revenues of $5.6 billion; has received $87 million in federal contracts
  • Security Consultants Group Inc., 1,155 employees and $53 million in annual revenue; received $82.2 million in contracts
  • SGT Incorporated, $112 million in annual revenues; received $75.4 million in contracts
  • Paragon Systems Inc., publicly traded company with 2,500 employees and $75 million in annual revenues; received $60.5 million in contracts
  • Chenega Technology Services Corp., 700 employees and $150 million in annual revenues; received $56.7 million in contracts

“The government used to release this data in February (four months after the end of the fiscal year) but they’ve moved it to October,” Chapman said. “There’s no reason to delay; it’s a real-time database. And they moved the data from a government agency to a private contractor so it’s harder to get.”

There’s no legal requirement to give contracts to small businesses, but since 1953, the federal government has encouraged its biggest agencies to spend  some money with the little guys that account for half the nation’s gross domestic product, more than half the jobs and more than half the net NEW jobs.

The stated goal is 23% of procurement spending, and agencies report annually their contracts to “small businesses.”

The league’s founder Lloyd Chapman has been noisily insisting for years that these reports are at best mistaken and at worst fraudulent and involve “$100 billion a year.”

He’s in town this week to attend the Department of Energy contracting conference.

He created the league to call public attention to the issue. Over the years he has pointed out that such major corporations as Raytheon and General Dynamics are in the federal small-business procurement database.

He’s not alone in pointing out the issue. The Center for Public Integrity said that 30% of defense contracts reportedly given to small- or minority0owned companies from 1998 to 2003 ended up at the lagest defense contractors. In a separate report the Office of Advocacy within the U.S. Small Business Administration estimated $2 billion in contracts when to large companies.

In the past, the SBA has attributed the issue to data-entry mistakes, to companies winning contracts while they were small but then outgrowing the limit and to multi-year contracts automatically renewed for as long a s 20 years if a business did a good job.

It’s not that the definition of a small business is so restrictive. In some industry categories, a company can have 1,500 employees or $35.5 million in annual revenues. Click here for a summary. Some 27 million U.S. businesses are classified as small.

The league has written a bill introduced this year by Rep. Hank Johnson, D-Georgia, to halt all contracts to companies once they outgrow the small-business definition, are acquired by a big company or go public. The company could keep the contract but it and its federal client could no longer claim it as a “small business contract.”

Source:  http://jan.freedomblogging.com/2009/08/13/report-federal-small-firm-money-goes-to-big-companies/19733/



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