SOURCE: American Small Business League

May 16, 2007 08:00 ET

SBA Myth vs. Fact Press Release Debunked by American Small Business League

PETALUMA, CA -- (MARKET WIRE) -- May 16, 2007 -- The following is a statement by the American Small Business League:

The facts listed in the Small Business Administration's press release on March 11, 2007 are blatantly false and deceptive and can easily be debunked with reports from the SBA's Office of Inspector General and Office of Advocacy.

Fact 1. Large companies, including large, multinational corporations are taking away federal contracts specifically intended for small businesses.

Proof -- Report 5-15 (http://www.asbl.com/documents/05-15.pdf), released by the SBA Inspector General in March of 2005 stated, "One of the biggest challenges facing the Small Business Administration and the entire federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards."

In Report 5-14 (http://www.asbl.com/documents/05-14.pdf), the SBA Inspector General investigated the SBA's own small business contracting statistics. They reviewed the six largest contracts the SBA itself had reported as going to small businesses. Report 5-14 states, "Of the six high dollar contracts reported as going to small businesses, four were awarded to large businesses at the time of the procurement." One of the four small business contracts actually went to Buhrmann NV, a multinational, multi-billion dollar corporation headquartered in Holland with 17,000 employees in 26 countries.

Fact 2. Large businesses and multinational corporations are listed in the General Services Administration's database as holding small business contracts.

Proof -- The Dutch firm Buhrmann NV is a good example. In the SBA response to this point they admit that large corporations have been allowed to acquire small businesses and keep those contracts for the life of the contract, which can be up to 20 years. They refer to this practice as "under federal rules." What the SBA has failed to mention is the SBA is the agency that initiates federal policy on federal small business contracting policy. They created the federal policy that allowed large businesses to acquire a small business and keep that status for 20 years.

Fact 3. The SBA hasn't done anything to stop misrepresentation of these as small business contracts and has made it easier for large businesses to misrepresent themselves.

Proof -- As early as 1995 the SBA Office of Inspector General found fraud in federal small business contracting. In their semi-annual report to Congress, the SBA Inspector General reported officials at the SBA declined to adopt their recommendation to stop the fraudulent activity. SBA official Robert Neal wrote the response to the SBA Inspector General declining to adopt the recommendation to stop fraud. Neal was later convicted of soliciting bribes, extortion, money laundering and witness tampering. He was sentenced to 25 years in prison.

The SBA has refused to place a warning on small business databases informing vendors that misrepresentation of a firm as a small business to illegally receive federal small business contracts is a felony under section 16 (d) of the Small Business Act, with a penalty of up to ten years in prison.

The SBA's currently proposed five-year re-certification rule will allow large businesses, including large multinational firms, to continue to receive federal small business contracts for five more years.

In December, the SBA removed employee and revenue data from the government vendor database, which the public uses to determine small business status of government contractors. Legitimate small businesses used this information to file protests against large businesses falsely claiming to be small businesses. This will make it difficult, if not impossible, for legitimate small businesses to file protests and make it easier for large firms to misrepresent themselves as small businesses.

A prime example of misrepresentation comes in the form of the GTSI corporation case in which the SBA Inspector General recommended GTSI for debarment. To this date the SBA has taken no action and GTSI continues to receive hundreds of millions of dollars in federal contracts.

Fact 4. The new "five-year" re-certification policy allows federal agencies to report billions of dollars earmarked for small businesses to large, multinational corporations until 2012.

Proof -- Noted federal contracting expert Professor Charles Tiefer of the University of Baltimore School Of Law, issued an opinion on the loophole in the SBA's five-year re-certification plan. Tiefer concluded that the "SBA's latest size standard regulations issued in mid-November will still result in the federal government reporting many of it's prime contracts performed by large businesses as small business contract awards for at least five more years to come."

By the time the SBA's five-year re-certification policy goes into effect on June 30th, federal agencies and prime contractors will have had several months to enter into hundreds of long term contracts with hundreds of large businesses that will avoid any of the "triggering events." Another loophole for big business created by SBA Administrator, Steven Preston.

Fact 5. There have been no penalties or consequences for large businesses getting small business contracts.

Proof -- The best information to prove this is in the SBA's own statements. They do not provide any information on firms that have been penalized or prosecuted for misrepresenting themselves as small businesses. They use terms like "will be denied" and "subject to fines." Again the GTSI case is a typical example, they were recommended for debarment by the SBA Inspector General and the SBA did nothing.

A report released in 1995 by the SBA Inspector General is another great example. They found fraud in federal small business contracting and the SBA took no action against those firms. In another instance, the SBA Office of Advocacy commissioned an investigation that found large businesses were guilty of "vendor deception" a synonym for fraud to receive small business contracts. The SBA took no action against those firms. Furthermore, On February 24, 2005 in Report 5-16 the SBA Inspector General found "false certifications" and "improper certifications," more synonyms for fraud responsible for large businesses receiving federal small business contracts. The SBA took no action against those firms.

Fact 6. Small businesses are forced to compete with large businesses under the new re-certification rule.

Proof -- This was established in SBA Inspector General Reports 5-14, 5-15 and 5-16. The SBA uses the term "set aside for small business." This avoids addressing the 90 percent of the contracts the government reports as going to small businesses that were not "set aside" contacts. They do not address the thousands of small business contracts that are already in place with hundreds of Fortune 1000 firms and international firms. Once again they try to divert attention from the billions of dollars in existing contracts with large corporations by talking about firms that might be merged or acquired in the future.

Fact 7. SBA refuses to release names of small businesses awarded federal contracts.

Proof -- Try and find them. On numerous occasions the ASBL has asked the SBA to release the names of firms reported as small businesses several times. They have consistently refused. As far as the Federal Procurement Data System-Next Generation, the ASBL challenges anyone to try and use it. In 2006, ASBL President, Lloyd Chapman offered a $10,000 reward to anyone that could provide him with an accurate list of the firms the federal government reported as small businesses. No one was able to provide the information. Even experts like Paul Murphy of Eagle Eye Publishers wasn't exactly sure who got the contracts. Dozens of journalist have asked the SBA for the information, but the SBA routinely declined the requests.

Fact 8. Since 2002, 14 federal investigations have found billions of dollars have been diverted from legitimate small businesses to Fortune 1000 companies and subsidiaries across the country.

Proof -- The SBA's assertion that there have not been 14 federal investigations is blatantly false. These reports and key statements are readily available on the ASBL website (www.asbl.com). In this response the SBA tries again to mislead by diverting attention from the fact that only a very small percentage of the contracts that the federal government reports as going to small businesses are actually formal set aside contracts. Again, the SBA fails to mention, that the policy allowing Fortune 1000 firms to acquire a small business and keep the small business status for 20 years was originally drafted by the SBA.

Again, SBA Inspector General Reports 5-14, 5-15 and 5-16 all found large businesses were receiving federal small business contracts. The Eagle Eye report from the SBA Office of Advocacy found "vendor deception" -- more evidence of fraud. A report from the Center for Public Integrity found the Pentagon alone had awarded over $47 billion in small business contracts to some of the nations largest defense contractors. Investigative reports by ABC, CBS and CNN all found Fortune 1000 firms were receiving billions of dollars in federal small business contracts to Firms like Boeing, Lockheed Martin, Raytheon, Titan Industries, L3 Communications, Rolls Royce and AT&T, who did not recently out grow their small business status.

Fact 9. SBA's re-certification proposal is the same as the unpopular "grandfathering" plan proposed by the SBA in 2004.

Proof -- In their response to the ASBL press release the SBA said, "No proposal for a 'grandfathering' provision was ever made..." Yet, it was published in the Federal Register in volume 69, 70200, No 232 on December 3, 2004. And, multiple publications prove otherwise. Also, in a June 9, 2005 story in the Miami Herald titled "Small Business Seek Fair Fight for Contracts," SBA spokesman Gary Jackson admitted that the SBA would pursue a five-year grandfathering plan. Again, in the Chicago Tribune on June 21, 2005 in a story titled "SBA Hearing Fields Opinions on Small Business," an SBA spokesperson talked about a five-year plan. Several other stories were written about the SBA grandfathering proposal.

The SBA grandfathering plan would allow any firm with an existing federal small business contract to keep it for five more years. The five-year re-certification plan will allow any firm with an existing small business contract to keep it for five more years.

As far as the federal small business contracts currently held by Fortune 1000 firms, grandfathering and 5-year recertification are virtually identical.

Contact Information

  • Contact:
    Lloyd Chapman
    President
    American Small Business League
    Email Contact
    (707) 789-9575