By Lloyd Chapman
Worcester Business Journal
September 13, 2010
In the summer of 2002, I was the sales manager for a small computer company, and a young woman stormed into my office in tears. She had spent several weeks working on a government small business set-aside contract which she lost to Buhrmann NV, a Dutch multinational with more than 28,000 employees in 32 countries. I was shocked.
That night, I sat down at a computer and poured over the government’s PRO-Net database of contractors. I found hundreds of the largest companies in the world listed as small businesses. I called people in Washington, spurring an investigation by the U.S. Government Accountability Office (GAO).
In March of 2003, I testified before Congress regarding the GAO’s investigation. The Associated Press picked up the story, and it ran in several dozen newspapers across the country. I thought that the problem was going to be over. I was wrong. That was more than seven years ago, and today I am still fighting to get the U.S. government to simply stop giving federal small business funds to some of the largest companies in the world. Additionally, since that initial federal investigation, more than a dozen subsequent investigations have further uncovered the diversion of small business contracts to corporate giants.
The U.S. Census Bureau tells us that small businesses create more than 97 percent of net new jobs. There are 27 million small businesses, they employ more than 50 percent of the private sector workforce, they generate more than half of the gross domestic product, and they are responsible for more than 90 percent of all U.S. exports and innovations.
During the Obama administration, the focus has been on stimulating the economy. Yet, the administration has failed to address the base of that economy, small businesses.
Not only has the government ignored small businesses with the distribution of its stimulus funds, but the government is failing to meet its congressionally mandated small business goals. Federal law requires a minimum of 23 percent of the total value of all prime contracts to go to small businesses.
Recently, the government released reports on its small business goal achievement for fiscal year 2009. Federal officials claimed the government awarded a record $96.8 billion to small businesses. The truth is, of the top 100 recipients of federal small business contracts, 60 were large businesses. To make matters worse, government data suggests that our nation’s chief job creators actually received less than 5 percent of the government’s purchases.
We must end the diversion of federal small business contracts to corporate giants.
I wrote a draft of a bill, which has been introduced into Congress, that would accomplish that goal. HR 2568, the Fairness and Transparency in Contracting Act, would stop the federal government from continuing to award federal small business contracts to Fortune 500 firms and other clearly large businesses. The bill was introduced by U.S. Rep. Hank Johnson (D-Georgia) and it currently has 26 co-sponsors.
If passed, HR 2568 would direct more than $100 billion a year in existing federal spending back to small businesses in the middle-class economy.
Additionally, the legislation would force the government to increase the percentage of its contracts awarded to small businesses from 5 percent to 23 percent.
In February 2008 President Obama promised to “end the diversion of federal small business contracts to corporate giants.” President Obama was right. Ending the diversion of federal small business contracts to corporate giants would be the single most powerful economic stimulus that has ever been proposed.
It is time for President Obama to honor his promise; our nation’s small businesses and economic outlook depend on it.
Lloyd Chapman is the founder of the California-based American Small Business League. For more information, visit www.asbl.com.