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Commentary: Donít abolish incentives for minority-owned contractors

By Lloyd Chapman
Washington Post
September 16, 2011

Less than 24 hours after addressing the nation with a new jobs bill titled the American Jobs Act, the Obama administration released plans to eliminate the oldest and most successful program to create jobs for minorities. This seems ill-timed and ill-advised, considering the jobless rate for African Americans alone is at 16.7 percent.

Current federal law requires that the Department of Defense, NASA and the U.S. Coast Guard award a minimum of 5 percent of all federal contract dollars to minority-owned small businesses. The proposed policy will abolish that requirement and prevent contracting officers from taking advantage of incentives that encourage contracting with minority-owned companies.

This is a major blow to the minority-owned business community and minorities nationwide. Approximately 35 percent of the U.S. population is made up of ethnic minorities, and nearly 6 million businesses are minority-owned. The American Small Business League estimates that minority-owned businesses will lose upward of $50 billion annually in federal contracts.

Undoubtedly, countless firms will close their doors and American workers will be laid off. It is difficult to understand why President Obama would, in the midst of one of the worst economic downturns in U.S. history, and less than two years before the next election, end programs designed to create jobs for minority groups.

In addition to the proposal to eliminate programs for minority-owned small businesses, the Obama administration has been widely criticized for diverting hundreds of billions of dollars in federal small business contracts to Fortune 500 companies and some of the largest firms worldwide. Large companies that have received small business contracts include Lockheed Martin, British Aerospace, Rolls-Royce and Italian defense giant Finmeccanica, among many others.

In Report 5-15, the Small Business Administration Office of Inspector General described the diversion of federal small business contracts to large businesses as, “one of the most important challenges facing the Small Business Administration and the entire federal government today.” The SBA Inspector General has named this abuse as a top management challenge for six consecutive years.

The American Small Business League is concerned that this new policy could lead to a domino effect that eventually would end all federal contracting programs for the nation’s 28 million small businesses, where most Americans work. Not only do federal small business contracting programs help minority groups, they create jobs nationwide. According to the U.S. Census Bureau, small businesses create 90 percent of all net new jobs.

In 2008, then-candidate Barack Obama issued a statement that President Obama seems to have forgotten. He said, “Small businesses are the backbone of our nation’s economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.” Apparently he no longer views minority-owned and other small business as a “great resource” worth protecting.



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