The Obama Administration recently announced
it had reached 24.99% in small business procurement, exceeding the government’s
23% goal for the second year in a row. But instead of cheers, they got jeers.
Business Administration’s celebratory news was met with a stunningly negative
response in some quarters.
“The SBA is
robbing small businesses,” Rep. Steve Chabot, R-OH, who chairs the House Small
Business Committee, said in his official statement in response to the
announcement. “The reason Congress asks for these numbers is so we can use
them, not so that the Administration can pat itself on the back once a year.”
objects to the SBA’s accounting methods, was not the only critic this year.
While conservative gadfly Lloyd Chapman has been accusing the SBA of “fraud” in
its small business goal achievement for several years, this year a consumer
watchdog group, Public Citizen, also jumped into the fray, citing several of
Chapman’s allegations almost verbatim.
tricks create false impression that small businesses are getting their share of
federal procurement money,” Public Citizen claimed in its May 6 report (http://goo.gl/FVjjcM).
should have been expected that once the small business goals were met in fiscal
2013 and in fiscal 2014, after years of effort, the tables turned. Suddenly,
the rules surrounding the goals are being harshly questioned.
these valid criticisms, sour grapes, or just sourness? And even if alleged
“accounting tricks” are a factor, are the problems significant enough to affect
the goal achievement? Set-Aside Alert is looking for answers.
To start, we
examined the main allegations contained in Public Citizen’s recent report.
Their claim is that the SBA is wrongly counting some large businesses as small.
The government’s success in small business contracting “relies on methodologies
that present a false impression,” the Public Citizen report claimed. “For
example, the list of contracts the government counted toward meeting its small
business contracting goals in 2013 included some held by the largest companies
with which the government does business.”
Seven of the
10 largest contractors received at least one contract that the SBA counted
toward small business goals that year, the report said. It named Lockheed
Martin Corp., Raytheon Co., General Dynamics Corp., Northrop Grumman Corp. and
several others as large contractors with small business awards counted toward
the government’s goals. The report did not show the value of those awards.
Set-Aside Alert’s research
Alert decided to compile our own list--not just of the 10 largest--but of
the 100 largest federal contractors in fiscal 2014 and their small business
awards, if any.
Our goal was
to independently estimate the value of the small business awards going to the
100 largest contractors, to see if it is large enough to affect goal
achievement. Our secondary goal was to further examine whether Public Citizen’s
allegations were valid.
Of those top
100 contractors, 57 had small business contract actions in fiscal 2014
(presumed to have been reported for small business goal achievement). Those
small business awards totaled $289 million. That included $293 million in 45
awards minus $4 million in 12 negative awards (values below zero).
At the same
time, those top 100 contractors received $236 billion in contract awards in
fiscal 2014. Their small business awards totaled about 1/10 of 1%.
context of small business contracting, the $289 million was less than a third
of 1% of all small business contract value and 7/100ths of 1% of total eligible
contract value available to small firms.
Based on Set-Aside
Alert’s review, there was no indication that the top 100 contractors in
fiscal 2014 were receiving small business awards at a level that would have
materially affected small business goal achievement.
Public Citizen’s response
shared those findings with Public Citizen, Taylor Lincoln, author of the study,
said while it’s clear some awards to large businesses are being included in
SBA’s small business goal achievement,total dollars involved might be low.
further research,” Lincoln told Set-Aside Alert. “It is possible that
the totals (of large businesses receiving small business awards) do not
materially affect the goals,” he said.
Citizen also cited the SBA inspector general’s 2014 finding of $400 million in
“ineligible” 8(a) and HUBZone set-aside contracts. However, the IG previously
told Set-Aside Alert that while the firms were ineligible under those
set-aside programs they still may have been eligible for credit as small
More research details
Alert’s list of the top 100 contractors with small business actions had
these top 10:
- Lockheed: $2 million (15 actions)
- Boeing: $-41,000 net (33 actions)
- General Dynamics: $2.6 million (43
- Raytheon: $2.6 million (56 actions)
- Northrop: $48,000 (6 actions)
- McKesson: $554,000 (32 actions)
- United Tech: $442,000 (42 actions)
- L-3: $8.2 million (39 actions)
- BAE Systems: $17,000 (9 actions)
- Huntington Ingalls: $23 million (56
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