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Gap in awards stymies small firms

A study finds small businesses have not received their portion of government contracts when compared to big corporations.

By Jim Wyss
Miami Herald
September 23, 2006

Small businesses aren't getting their fair share of government contracts, according to a study released Friday by the Small Business Administration's Office of Advocacy.

While 99.7 percent of all U.S. companies are small -- meaning they have fewer than 500 employees -- they receive just 23 precent of all direct federal contracting dollars and 40 percent of all subcontracting dollars.

That is 'not quite commensurate with [small businesses'] relative importance to the U.S. economy," the study found.

Small ventures account for 65 percent of all new jobs, according to the U.S. Census Bureau. In addition, small businesses generate 13 to 14 times more patents per employee than their larger counterparts.

But Friday's study found outdated regulations are stymieing small-business contracting.

The federal government is required to channel at least 23 percent of all federal contracts to small firms. In addition, large companies that win contracts worth more than $500,000 are required to farm out at least 5 percent of that work to small ventures. But those rules are suspended when the contracts are being performed abroad, and that includes billions going toward government contracts in the Iraq and Afghanistan.

"Such policies are a disincentive to small-business owners who are ready, willing and able to compete in the international marketplace," the report said. ``Moreover, these policies may place American small businesses on an unlevel playing field with their foreign competitors."

Carole Hart is the assistant director of the Small Business Development Center at Florida Atlantic University, an organization offering free workshops to small businesses that want to compete for contracts. She said many of her small-business clients find the regulations and paperwork daunting.

"A lot of people we work with are one or two person operations," she said. "And they may spend half their day just trying to find the right person" to handle their bid.

The report also found that the database of government contracts, called the Federal Procurement Data System -- Next Generation, is not providing the quality of information needed.

The FPDS-NG has been under fire since its control and maintenance was handed over from the General Services Administration to a private contractor in 2003.

Last year the Government Accountability Office said it had "concerns" regarding the "timeliness, accuracy, accessibility and ease of use of the system" that is the sole source of information on millions of contracts worth more than $300 billion.

"In 2002 [FPDS-NG] was an open book; you could see everything," said Lloyd Chapman, the president of the American Small Business League, an advocacy group that mined the database to uncover government contracting fraud. ``Now they have a new way of compiling contracting data that is not readily accessible to the public."

The latest report comes as the government has been under fire for failing to ensure that contracts intended for small businesses are actually going to small firms.

In June the SBA announced the government had awarded a record $80 billion in small-business contracts during fiscal 2005. But in July, House Democrats issued their own report saying that among those "small businesses" were at least 2,500 large firms, including Xerox, IBM and ExxonMobil.



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