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Small Business Administration Uses Variety of Accounting Tricks to Give Contracts to Big Businesses

By Steve Straehley
May 10, 2015

Lockheed Martin is the largest federal contractor. It had more than $45 billion in revenue in 2013 and currently employs 112,000 people. But as far as the Small Business Administration (SBA) is concerned, it can be counted as a small business.

The federal government reserves some of its contracts, 23% for prime contracts and 36% of subcontracts, for small businesses. What constitutes a small business varies, but generally it can’t have more than 1,500 employees or have more than $38.5 million in revenue.

So how did Lockheed Martin and other huge corporations such as Boeing and General Dynamics qualify for contracts set aside for businesses of that size? At least partly due to the misconception that a small business acquired by a giant corporation may keep its status for several years, according to a report (pdf) by Public Citizen. That misconception starts at the top. SBA Administrator Maria Contreras-Sweet was asked last year by a House panel why large corporations were getting contracts set aside for small businesses. “We have a rule in place that says that once you get in a contract with government, that you are given five years. And so if a large company acquires a small business, then it is grandfathered in for a number of years,” Contreras-Sweet replied.

Except that’s not the case. According to a 2007 rule:

“In the case of a merger or acquisition, where contract novation is not required, the contractor must, within 30 days of the transaction becoming final, recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is other than small, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status.”

To view full article, click here: http://www.allgov.com/news/where-is-the-money-going/small-business-administration-uses-variety-of-accounting-tricks-to-give-contracts-to-big-businesses-150510?news=856445




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