Report on Large Firms Scooping Small Business Contracts to be Released
The U.S. District Court for the Northern District of California has ordered the U.S. Small Business Administration (USSBA) to release to the American Small Business League (ASBL) a draft report on the awarding of government contracts. The SBA report describes how large companies are improperly winning contracts in the Federal government’s $60-plus billion small business contracting program.
The Small Business Act of 1953 directs that at least 23% of federal government prime contracts go to small business, but a host of abuses and loopholes have allowed large companies to pick up contracts in this category. The SBA released an edited version of the report on December 28, 2004, acknowledging that small business contracts had gone to such “small businesses” as Raytheon Co., BAE Systems, Northrop Grumann Corp., Carlyle Group, Electronic Data Systems Corp., Booz Allen Hamilton Inc., Hewlett-Packard Co., and Buhrmann NV.
The report in question was prepared by Eagle Eye Publishers and delivered to the USSBA on November 14, 2003. ASBL submitted a Freedom of Information Act (FOIA) request to the SBA on July 6, 2004, asking for a copy of the report. The USSBA had refused, citing FOIA exemptions. The U.S. District Court for the Northern District of California ruling removes that protection.
Although the edited version of the report released in December listed only 44 large companies receiving small business contracts in fiscal year 2002, the SBA in 2003 removed nearly 600 large businesses from its small business database after an ASBL investigation discovered them. Investigations by the Congressional General Accounting Office, SBA Office of Inspector General, and Center for Public Integrity have found fraud, misrepresentation and loopholes allowing large businesses to receive billions in federal small business contracts.
This despite Section 16D of the Small Business Act of 1953, which states:
“The Small Business Act provides that any person or entity that intentionally misrepresents the status of any concern or person as a “small business concern”…in order to obtain for him/ herself or another any of the contracting opportunities…will be subject to the penalties set forth…Any person who violates shall be punished by a fine of not more than $500,000 or by imprisonment for not more than 10 years, or both.”
The ASBL notes that no firm has been prosecuted or punished by the federal government under this section, despite practices that have included:
- Misstatement of number of employees.
- Misuse of NAISC codes.
- Large businesses passing off a subsidiary or division as an independent small business.
- Companies that have been formally found ineligible for small business contracts by one government agency continue to claim they are small businesses and receive contracts from other agencies.
- Companies that have never been certified as small disadvantaged businesses or failed to qualify representing themselves as small disadvantaged businesses.
- Prime contractors falsifying their standard 294 subcontracting reports to dramatically overstate their awards to legitimate small businesses, or (per a 2003 Dept. of Energy Inspector General’s Office report) showing awards to large businesses as awards for small businesses.
- Large businesses that acquire a legitimate small business providing items that are not on existing contracts as a small business, and buyers showing purchases not on the contact as an award to a small business.
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