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Feds Blasted Over Small-Business Deals

Washington Post
September 30, 2004

The U.S. government came under fire this week for its treatment of small contractors and the way it keeps track of them.

Critics say the federal government isn't complying with mandatory quotas for awards to small business, and is too lax with firms that outgrow their small business status or get bought by bigger companies.

The Center for Public Integrity, a Washington think tank, singled out The Titan Corp. and GTSI Corp. for their use of contracting loopholes, in a report released Wednesday.

The study also found that 189 of the Pentagon's top 737 contractors - the top 1 percent - are classified as small businesses on at least half of their contracts.

Titan, a San Diego-based computer services company, had $1.8 billion in 2003 revenue. The study said it received $550 million in small business contracts from 1998 through 2003 thanks to a string of acquisitions. The firm had nearly $2.4 billion in total defense contracts over the same period, ranking it 34th among all Pentagon contractors, the study said.

Titan representatives couldn't immediately be reached for comment.
GTSI Corp. won the most small business contracts of any nonminority firm: nearly $1.2 billion over the six-year period, the report said.

The firm, a Washington, D.C.,-area technology services provider, "retained its small business status despite long since having grown out of it," the study said.

Total GTSI sales in 2003 were $954 million.

GTSI spokeswoman Fern Krauss had no comment on the contracting rules, or the Center for Public Integrity's assessment. But recent public filings show that the firm is worried about its status and is taking steps to safeguard it.

" To mitigate any potential adverse impact (of losing small-business status), GTSI has developed strategic relationships with small, minority-owned businesses that benefit from the small business benefits described above," GTSI said in its most recent filing with the Securities and Exchange Commission.

The Bush administration said small businesses have benefited from its efforts over the past four years.

Small Business Administration spokesman Evan Keefer said the government is meeting its contracting targets and helping match contractors with opportunities.

" We stand by our numbers. We're confident that small businesses are being able to take advantage of federal procurement better than ever before," Keefer said in a Thursday interview.

But the government's numbers have been questioned for some time.
In a 2003 review, the Government Accountability Office, the investigative arm of Congress, found "gross errors" in federal procurement data.

The agency blasted current practices in May 2003, then followed up with a December letter to the Office of Management and Budget urging speedy modernization of contract tracking systems.

" Regulations permit companies to retain their small business status over the life of contracts - which in today's federal contracting environment could last as many as 20 years," said GAO contracting director David Cooper in May 2003 testimony.



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