The General Services Administration is in trouble with the American Small Business League (ASBL), which is alleging in a lawsuit that federal contracts intended for small companies are being awarded to large corporations. ASBL, which represents 100,000 businesses, contends Washington has never complied with its own rules requiring 23% of contracts go to small businesses. League president Lloyd Chapman says as much as $10 billion a month that should be going toward small businesses is actually going to Fortune 500 companies, like General Dynamics, Xerox, Lockheed, Dell and General Electric.
The General Services Administration has been accused of destroying database records that could prove these violations. It also has been criticized for eliminating a field from its database that required companies to identify themselves as small businesses. Companies that lie about their size can be fined up to $500,000, and executives subject to a prison term of up to 10 years. Such penalties are rarely imposed.
The Small Business Administration insists if large corporations are getting contracts set aside for small companies, it’s simply a mistake and not a matter of fraud.
Another problem is that the public’s perception of small businesses is different from the government’s definition, which includes entities with up to 99 employees. Super-small businesses, those with less than five employees, make up 70% of all small businesses.