PETALUMA, CA--(Marketwired - Jul 10,
2014) - According to the American Small Business League (ASBL),
the Small Business Administration (SBA) has finally acknowledged the existence
of fraud in federal small business contracting
programs. Based on the SBA's new policy that would
create a "safe harbor"
from penalties for firms that have committed fraud, it would appear the level
of fraud is much more pervasive than the SBA has ever acknowledged.
For over 20 years a series of federal investigations have uncovered wide spread fraud in federal small business
contracting programs. As early as 1995 the SBA Inspector General reported on
what they called, "a particular fraudulent
In 2004 the SBA Office of Advocacy
released the Eagle Eye report that
found large businesses were guilty of "vendor deception" to illegally
receive federal small business contracts.
In 2005 the SBA Inspector General
released report 5-15 that referred to the diversion of federal small business
contracts to big businesses as, "One of the most important
challenges facing the Small Business Administration (SBA) and the entire
Federal Government today..."
In Report 5-16 the SBA Inspector
General found large businesses had committed fraud by making "false certifications" and
"improper certifications" to illegally land federal small
SBA Inspector General Report 5-14 discovered
the SBA was diverting small business contracts to large businesses including
such firms as Buhrmann NV in Holland with 28,000 employees worldwide in 26
Every year since 2005 the SBA
Inspector General has named the diversion of federal small business contracts to large
businesses as the number one problem at the agency.
In 2009 after investigating the SBA,
the Government Accountability Office released Report 10-108 that stated, "By failing to hold firms
accountable, SBA and contracting agencies have sent a message to the
contracting community that there is no punishment or consequences for
In 2012 NBC found 24 large businesses
in northern California that had received 299 small business contracts worth
over $77 million. The SBA responded with the statement, "SBA has no tolerance for fraud, waste and abuse and
takes corrective steps when actionable information comes to light."
Section 16 (d) of the
Small Business Act mandates a penalty of up to10 years in prison, a $500,000
fine, or both, for firms that misrepresent their status to illegally receive
federal small business contracts.
Under the new SBA "safe
harbor" policy, firms that are found to be fraudulently misrepresenting
their status as a small business can avoid all penalties by simply claiming
they "acted in good faith."
The SBA will be taking public comment on the
proposed policy until August 15th.
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