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SBA not meeting goals in contracts to small businesses, critics say

By Marcia Heroux Pounds
Sun-Sentinel.com
August 14, 2006

On the same day, July 26, that Steven Preston was being sworn in as new administrator of the Small Business Administration, Democratic congressional investigators lobbed their latest attack on the SBA's record for meeting federal contract goals to small business.

At least $12 billion in contracts the government claimed it gave to small companies last year actually went to giants including Microsoft, Rolls-Royce, Wal-Mart and Exxon Mobil. Critics point to longtime problems with miscoding of companies, firms that have been acquired by big business still on the small business rolls, and election-year data-spinning.

Last month the federal government reported the amount small businesses received in federal contracts for fiscal year 2005. The government reported that 25.4 percent of federal contracts went to small businesses, or $79.6 billion. At least 23 percent of federal contract dollars are designated for small businesses each year.

But House Democrats said the government missed its small business target for the sixth straight year. Democrats said they found 2,500 large and ineligible companies on the government's list of small-business contract winners.

The percentage for small-business contracts for fiscal 2005 was only 21.37 percent. That cost small business $4.5 billion in lost contracting opportunity in the last year alone, said U.S. Rep. Nydia Velázquez, D-N.Y., ranking Democrat on the House Small Business Committee.

In a separate report, research firm Eagle Eye Publishing said only $65 billion, or 17 percent, of the $377 billion the federal government spent on goods and services in fiscal 2005 went to small businesses.

So many numbers. Whose are correct? The SBA says it's a matter of scoring while critics say the problem is much larger in scope.

Congressional investigators say federal agencies miscode thousands of contracts to big companies as small business awards. And companies that started small, but grew large, or were purchased by corporate giants continue to get small business contracts.

Now the question for small business owners and those who represent them is this: Will Preston finally take action to close the loopholes in big business getting federal contracts that should be going to small business?

"Yes," said SBA spokesman Mike Stamler. But he added, "There's a lot of misinformation about what is going on. Large companies are purchasing small companies that have multiyear contracts, and there's no reasonable provision for simply taking them away.

"What we're talking about is simply a scoring problem -- how agencies score contracts."

The SBA has taken steps to have a more robust reporting system, including requiring small businesses purchased by another firm to recertify as a small business to obtain a contract. The SBA also is developing a rule to require periodic recertification, Stamler says.

Lloyd Chapman, head of the American Small Business League, isn't holding his breath. Chapman has been following this controversial issue for more than a decade and thinks billions of small-business contract dollars are going to big business. "It's not miscoding. If this were the case, why is it that it's always large businesses being coded as small and not the reverse?" he says.

J. Raul Espinosa, CEO of FitNet Purchasing Alliance in St. Augustine, is involved in a coalition that supports an independent arbitrating body to settle government contract disputes. He calls the current system "worthless."

"It's like trying to fix a flat tire on a car whose other tires are ready to pop. You can't address one element without addressing the others."

Marcia Heroux Pounds can be reached at mpounds@sun-sentinel.com or 561-243-6650.

 
 

 
 

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