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Lawsuit accuses SBA of cover-up

Trade group upset report on contracts hasn't been released

By Bob Egelko
San Francisco Chronicle
October 7, 2004

A small-business trade group sued the Small Business Administration on Wednesday, seeking disclosure of a report on the government's awarding of small-business contracts to big businesses.

"The SBA has had a report on small-business contracting since January but refuses to release it,'' said Lloyd Chapman, president of the American Small Business League, a Petaluma organization that advocates for companies with fewer than 100 employees.

"We believe its report confirms widespread fraud in federal contracts and that the SBA is covering up the problem.''

An association lawyer said, however, that the report is still being prepared and would be released when it was ready, probably in a couple of months. He also said it has nothing to do with fraud.

"This is not some secret conspiracy, just a study that we have initiated to make sure agencies have reported the number of contracts going to small business,'' said Eric Benderson, the association's associate general counsel. He said the lawsuit "sounds like a publicity thing.''

The suit, filed in U.S. District Court in San Francisco, accuses the association of illegally withholding a contractor's study on how often and why small-business contracts, legally limited to companies with 500 or fewer employees, are awarded to larger companies. Federal agencies are required by law to set goals of awarding 23 percent of their contracts to small businesses.

Chapman said the contractor told him the report was submitted in January. The suit said the trade group filed a Freedom of Information Act request for the draft document in July that was denied by the association.

Congress' General Accounting Office reported in May 2003 that large companies were receiving billions of dollars in federal contracts designated for small businesses. The primary reason, the office said, was that federal regulations allow a company to be considered a small business over the life of a contract, as long as 20 years, even if it has grown into or has been bought by a large business.

Last week, the nonprofit Center for Public Integrity reported that some of the Pentagon's largest contractors were classified as small businesses in at least half of their contracts.

The congressional study did not accuse contractors of fraud, but some members of Congress called for further investigation. Chapman said Wednesday the report his group is seeking would include information on the extent to which large companies misrepresented their size to win contracts.

But Benderson said the report is "not about fraud but about miscoding,'' the mistaken classification of companies by federal agencies.



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