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Pelosi Asked to Remove Loophole for Fraudulent Contractors

September 17, 2010

Petaluma, Calif. – On behalf of America’s 27 million small businesses, the American Small Business League (ASBL) has asked Speaker of the House Nancy Pelosi to remove language in H.R. 5297, the Small Business Jobs Act, which may allow large businesses to receive federal small business contracts without fear of prosecution for felony contracting fraud. (www.asbl.com/documents/20100916_LTR_SPKPelosi.pdf)  

Since 2003, a series of federal investigations have found billions of dollars a year in federal small business contracts are diverted to Fortune 500 firms and some of the largest companies around the world. (http://www.asbl.com/documentlibrary.html) Some of the firms that are currently receiving federal small business contracts include: Lockheed Martin, Boeing, Raytheon, L-3 Communications, British Aerospace (BAE), Northrop Grumman, General Electric, Booz Allen Hamilton, Thales Communications, General Dynamics, and Dell Computer.

In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the diversion of federal small business contracts to corporate giants as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” (http://www.asbl.com/documents/05-15.pdf)  

In Report 5-16, the SBA IG found large businesses had received federal small business contracts illegally by making “false certifications” and “improper certifications.” The SBA Office of Advocacy found large businesses had received small business contracts illegally through “vendor deception.” (http://www.asbl.com/documents/05-16.pdf)  

The ASBL is concerned that Section 1341, paragraph 4 of H.R. 5297, will create a legal loophole that could allow fraudulent firms to avoid prosecution and penalties for felony contracting fraud by claiming that the contracts were awarded as a result of, “unintentional errors, technical malfunctions, and other similar situations.”  

In June, the ASBL conducted a review of the top 100 recipients of federal small business contracts for FY 2009. Within its sample, the ASBL identified 60 large firms, which received 64.5 percent of the total dollars the government claimed to have awarded to small businesses. (http://www.asbl.com/documents/ASBL_2009_dataanalysis.pdf)  

“We do not need more loopholes and protection for fraudulent contractors,” ASBL President Lloyd Chapman said in a letter to Speaker Pelosi Thursday.  “The American Small Business League (ASBL) strongly urges you to remove Section 1341, paragraph 4 from H.R. 5297 as a means of protecting the nation’s small businesses.”






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email to rbrownlie@asbl.com




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