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Owners slip through the small business loophole

By Nicole Haley
Daily News Tribune
May 15, 2007

Frene is president of TransAction Associates, a transportation consulting firm on Main Street. Hers is one of the small businesses around the country that could be hurt by a federal bill passed in the House last week.

Dubbed the "Small Business Fairness in Contracting Act," HR1873 has been criticized for a loophole that lets large corporations snag small-business contracts.

Many corporate giants have already slipped through an existing loophole and have taken an estimated $60 billion a year in small-business contracts, said Lloyd Chapman, president and founder of the American Small Business League.

Chapman says the U.S. Small Business Administration should be giving that money to small businesses like Frene's.

As HR1873 moves along to the Senate, Chapman said he pushing for what he says is a vital amendment to the bill. Currently the legislation does not require annual re-certification as a legitimate small business for firms with existing government contracts. That means, Chapman said, the government would continue overestimating its support to small businesses by billions of dollars.

"I just think that it's difficult enough to do work with the government if you're a small business. And for them to pass a bill that eliminates the need to certify as a small business allows anybody to apply for something," said Frene. "If they're going to set aside money for small businesses they should make sure it actually goes to small businesses."

The Small Business Administration, under Bush administration, has provided 23 percent of all government contracts to small businesses, according to the organization's Web site. However, several investigative reports in recent years have shown major corporations holding small-business contracts.

A July 2003 Associated Press report found several internationally known companies listed in the government contractor database as "small businesses."

The list included Verizon Communications, AT&T Wireless, and Barnes & Nobles booksellers. Without required annual re-certification, Chapman said those companies could continue taking small-business dollars.

The House bill has some worthwhile facets, Chapman said, including upping the goal for small business federal contracts from 23 to 30 percent, with contracts reserved for female-owned small businesses up from 5 to 8 percent. However, without annual re-certification to make sure the contracts are going to legitimate small businesses, Chapman said the increases hold little meaning.

"What difference does it make if it's 23 or 30 (percent) if it includes Fortune 1000 companies?" Chapman said.

Chapman is holding out hope that U.S. Sen. John Kerry, D-Massachusetts, will add an amendment for re-certification before the bill is passed by the Senate as early as the end of this week. Chapman said Kerry, chairman of the Small Business Committee, has publicly supported re-certification in the past.

Frene, whose business holds several statewide contracts but no federal contracts as of yet, also wants to see the bill amended.

"It just seems that the federal government should really try to make sure that money is going to a small business and not just being funneled to another large corporation," she said.

A call to U.S. Sen. Edward Kennedy's office, D-Massachusetts whose district includes Waltham, was not immediately returned yesterday.



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