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Report: Administration misleads on small-business contracts

By Alexander Bolton
The Hill
June 27, 2011

The Obama administration reports it has nearly met Congress’s goal of giving 23 percent of federal contracts to small businesses, but a new analysis shows that claim is significantly overstated.

A report by the American Small Business League found the administration came close to the 23 percent goal counting contracts with large companies, including Fortune 500 companies as small-business contracts.

The federal government counted businesses with hundreds or thousands of employees and hundreds of millions of dollars in revenues as small businesses, the report found.

The group reported that the top five recipients of federal small business contracts were actually large businesses, such as Sensor Technologies, a company with 8,500 employees, and Seta Corporation, a firm with 1,500 employees and $699 million in annual revenue. The full report will become public on Tuesday.

One of the top 100 recipients of small-business contracts in 2010 was the defense giant Lockheed Martin, the group said.

The analysis undermines the Small Business Administration’s claim that the federal government gave 22.66 percent of federal contracts to small businesses in 2010, a hair short of its 23 percent goal.

“The biggest companies in the world are getting small-business contracts,” said Lloyd Chapman, president of the American Small Business League. “If you’re trying to create jobs and know small businesses create 90 percent of jobs, wouldn’t be a no-brainer to stop giving small contracts to Fortune 500 companies.”

Chapman is a major Democratic donor. He gave $27,800 to Democratic candidates, including $1,000 to President Obama in 2008, according to data compiled by the Center for Responsive Politics. But Chapman is frustrated that Obama’s administration is misleading the public over how many federal contracts are going to small business.

He argues the Small Business Administration has inflated the reported percentage of contracts going to small businesses by underreporting the federal acquisition budget.

He claims the budget for federal contracts is closer to $1 trillion than the $430 billion the administration claims. The SBA counts a budget of $430 billion because it doesn’t count classified spending or contracts not eligible for small businesses, according to the American Small Business Leaguge.

“Small business are getting one-tenth of what they’re supposed to,” Chapman said.

Mike Stamler, spokesman for the Small Business Administration, defended the claim that 22.7 percent of federal contracts have gone to small businesses. He said it was based on data provided by federal agencies.

“We use data that federal contracting officers across the government put into the federal contracting database,” he said.

However, he acknowledged that agencies sometimes make errors. He also noted that the federal government often awards contracts to businesses that are considered small at the time of signing but are then later acquired by larger businesses.

“Every federal agency certified that the data is correct, which is not always true. There are lots of errors. There are 6 million contract actions a year on average,” Stamler said.

Stamler said the SBA is trying to reduce errors by working with federal procurement officials “to give them the tools to improve the data.”

“We conduct training so the data put into database will be more accurate,” Stamler said. “We’re focused on increasing contracting opportunities for small businesses.”

Christopher Gunn, spokesman for the American Small Business League, said the group came up with its findings by reviewing contracts classified as small-business contracts in the federal procurement data system.

The other top-five recipients of small business contracts were Atlantic Diving Supply, Inc., a company with 300 employees and $350 million in annual revenue; and Aegis Mission Personnel, a company with 1,900 employees and $350 million in annual revenue, according to the small-business league.

Gunn said his organization estimates that less than 5 percent of federal contracts went to small businesses, far below the 22.7 percent claimed by the SBA.



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