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House Dems blast lack of fed policy change for small biz

By Ethan Butterfield
Washington Technology
September 28, 2006

Democrats on the House Small Business Committee today said Congress has failed in its efforts to help small businesses, specifically sighting its lack of action over the last two years.

The committee today released an assessment of the 109th Congress, detailing how not updating the tax code and failing to reform labor laws and procurement policies have contributed to what the report called "an environment where small firms often lack the tools to compete effectively."

During the two-year reign of the 109th Congress, 280 bills became public laws, yet only 8 percent of those dealt with small business, the report stated.

"We talk about leaving no child behind, but we have left thousands of small businesses behind," said Rep. Nydia M. Velazquez (D-N.Y.).

With interest rates rising and credit conditions tightening, small businesses are struggling to gain access to capital.

One key legislative change will affect small IT companies looking to acquire funding to develop new products. The change stems from a regulatory decision by the Small Business Administration that prevents venture capital-backed companies from using the Small Business Innovation Research program. SBIR offers funding to help small firms research and develop new products and technologies.

Legislation was introduced to allow companies to access both funding sources, but the bill has not been passed, the report states.

A key issue affecting small IT companies is the inaccurate representation and reporting of federal contracting data. A report released by the Democrats on the House Small Business Committee in July found almost $12 billion in miscoded federal contracts in fiscal 2005.

As a result, SBA's claim that the federal government awarded 25.4 percent of all federal contracts to small companies is flawed, the report stated. When contracts awarded to large companies and other ineligible organizations, such as non-profits and state and local governments, were counted as going to small businesses are removed from the equation, the percentage of contracts given to small companies drops to 21.4 percent.

The federal government's mandated goal is to award small businesses 23 percent of all contracts.

The report also noted the rise in contracts going to Alaska Native Corporations, and how that is leading to more contract bundling and hurting other minority business owners under SBA's 8(a) Business Development program.

Because ANC's can grow large and maintain their small disadvantaged business status, federal agencies "are increasingly likely to consolidate contracts and award these giant packages to ANC's than to resolve the root problem of contract bundling," the report stated.

ANC contracts have increased from 13 percent of all 8(a) contracts in fiscal 2004 to 22 percent of all 8(a) contracts in fiscal 2005, according to the report.

 
 

 
 

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