December 07, 2006 08:15 ET

SBA Loses Legal Battle With the American Small Business League

GTSI Was Recommended for Debarment by SBA Inspector General

PETALUMA, CA -- (MARKET WIRE) -- December 7, 2006 -- After over a year of legal wrangling, the Small Business Administration (SBA) has capitulated in a lawsuit with the American Small Business League (ASBL). In June 2005, the SBA Inspector General recommended a firm be debarred from government contracting for misrepresenting its size as a small business. On April 19, 2006, the ASBL filed suit against the SBA under the Freedom of Information Act to obtain the name of this firm. Earlier this week, SBA Chief Counsel Eric Benderson contacted the ASBL and acknowledged that GTSI was the company the SBA Inspector General had recommended for debarment. It is unclear whether or not the SBA plans to take any action against GTSI.

Under section 16d of the Small Business Act, falsely misrepresenting a firm's size as a small business in order to receive a federal small business contract is a felony carrying a penalty of up to 10 years in prison, a $500,000 fine, and permanent debarment from government contracting. SBA Inspector General Eric Thorson recently acknowledged in testimony before the Senate Committee on Small Business and Entrepreneurship that the SBA has never prosecuted any firm for illegally receiving federal small business contracts.

In a report to GTSI stockholders in 1999, the company stated, "As a result of the acquisition of the BTG Division in February 1998, GTSI no longer qualifies as a small business for contract awards after February 1998." In spite of this, GTSI has been listed as one of the top recipients of federal small business contracts for the last several years. Between 2002 and 2005 alone, the government reported over $1.5 billion in contracts to GTSI as federal small business awards, according to information obtained from the Federal Procurement Data System-Next Generation.

"The SBA Inspector General does not recommend firms for debarment lightly," stated Lloyd Chapman, president of the American Small Business League. "For the Inspector General to recommend that GTSI be debarred, the evidence against the company must have been very compelling. It's time that the FBI step in and investigate the SBA's handling of these matters."

A report issued by the House Small Business Committee this year found that 2,500 large businesses in the government's database of small contractors had received over $12 billion in federal small business awards. The SBA Inspector General has identified this problem as the SBA's number one management challenge.

This case represents the third victory for the American Small Business League in federal lawsuits against the Small Business Administration.

About the ASBL

The ASBL is founded on the principle that small businesses, the backbone of a vital American economy, should receive the fair treatment promised by the Small Business Act of 1953. See

Contact Information

  • Contact:
    Lloyd Chapman
    American Small Business League
    Email Contact