January 28, 2010
Petaluma, Calif. - The following is a letter to President Barack Obama from American Small Business League President Lloyd Chapman:
I just finished watching your State of the Union address.
You said something that really caught my attention. You said, "let's try common sense." I have some common sense suggestions for you. Creating jobs and trying to boost our nation's struggling economy is obviously the number one issue all Americans want you to address.
Based on the latest data from the U.S. Census Bureau, small business are responsible for virtually 100 percent of net new jobs in America. So far your administration has allocated less than 3 percent of stimulus funds directly to small businesses. Wouldn't it make sense to shift more money to small businesses?
Current federal law requires that a minimum of 23 percent of the total value of all federal contracts and subcontracts be awarded to small businesses. (http://www.smallbusinessnotes.com/fedgovernment/sba/sbact.html) That certainly makes sense. What better way to invest hard earned taxpayer dollars than to reinvest those funds with the small businesses where most taxpayer's work and nearly all net new job are created?
Unfortunately, since 2003 over a dozen federal investigations have reported that billions of dollars a month in federal small business contracts have been diverted to Fortune 500 firms. Based on data from the investigations it appears that between $75 and $120 billion a year in federal small business contracts are diverted to large businesses. (http://www.asbl.com/documentlibrary.html)
In 2005, the Small Business Administration (SBA) Office of Inspector General (IG) referred to this problem as, "One of the most important challenges facing the Small Business Administration and the entire Federal government today." Recently, for the fifth consecutive year, the SBA IG reported the diversion of federal small business contracts to corporate giants as the number one management challenge facing the agency. (http://www.asbl.com/documents/05-15.pdf; http://www.sba.gov/idc/groups/public/documents/sba_homepage/oig_reports_tmc_fy10.pdf)
According to the most recent data released by your administration firms counted as small businesses included: Xerox, Bechtel, Lockheed Martin, Boeing, Raytheon, Northrop Grumman, British Aerospace (BAE), Ssangyong Corporation headquartered in Seoul, South Korea and Finmeccanica SpA, which is located in Italy with 73,000 employees. (http://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)
You seemed to recognize the magnitude of this problem during your campaign when you released the statement, "It is time to end the diversion of federal small business contracts to corporate giants." (http://www.barackobama.com/2008/02/26/the_american_small_business_le.php)
It is now time to honor that campaign promise. You could issue an executive order directing the SBA and every federal agency to immediately halt the practice of diverting federal small business contracts to Fortune 500 firms and other large businesses.
You could also solve this problem by passing a bill I wrote titled, H.R. 2568, the Fairness and Transparency in Contracting Act. To date, H.R. 2568 has 20 co-sponsors. (http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2568ih.txt.pdf)
Redirecting $75 to $120 billion a year in current federal infrastructure spending back to the small business that create 100 percent of net new jobs would clearly slash unemployment. It would also put more money into the middle class economy than anything you or Congress have proposed so far.
Most importantly, it is what you said you would do. Now that's common sense.