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GSA to Report Findings: "Are Big Businesses Being Awarded Contracts Intended for Small Businesses?"

Set Aside Alert
May 2, 2003

The General Accounting Office has been investigating whether large corporations are unlawfully posing as small ones to get federal contracts.

GAO will present its findings to the House Small Business Committee at a hearing scheduled for May 7, according to a committee staff member.

The investigation grew out of complaints by Lloyd Chapman, president of the Microcomputer Industry Suppliers Association in Novato, CA. Chapman says he has found evidence that large companies are claiming to be small to qualify for set-aside contracts.

Based on his own investigation over several months, Chapman said he believes some companies have committed "blatant fraud". But he acknowledged in an interview that some firms have benefited from loopholes in the regulations.

Chapman said he has been invited to testify at the House hearing along with Bush administration officials and GAO investigators.

SBA said it has documented widespread impact of the current regulatory loopholes. It found four large companies that where counted as small when receiving GSA schedule orders worth $190 million in fiscal 2001. In each year, those unidentified companies were awarded more than 1000 task orders.

In a recent case, the SBA inspector general began a criminal investigation of one company listed on PRO-NET. The IG said the company, which was not named, had its small-business status revoked as a result of a bid protest.

Later it registered on PRO-NET under another name.

The company was kicked off the database again and the case was referred to the U.S. Attorney for the District of Colombia, but that office declined to prosecute "in light of the administrative remedies being considered by" SBA, the IG said.

Chapman says that outcome is typical. It is a felony to misrepresent oneself as a small business in order to obtain a contract, but he says the government treats violations "less seriously than a parking ticket".



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