Small Businesses Cheated out of $100 Billion A Year in Federal Contracts, says the American Small Business League

July 27, 2006; 06:58 AM
PETALUMA, Calif. - Last year, the Small Business Administration Office of Advocacy reported that $119 billion was awarded to small businesses in prime and subcontracts. But the American Small Business League has projected that small businesses with 100 employees or less received no more than $20 billion that year. The remainder of the awards went to large businesses, including major defense contractors like Boeing, Lockheed, Northrop Grumman, Raytheon, Bechtel, and General Dynamics.

The Small Business Administration announced in June that small businesses had received a "record-breaking" $79.6 billion in federal prime contracts for 2005, or 25.4% of total procurement dollars. ASBL research has led to the conclusion that not only are small businesses not getting the 25.4% of federal contracts the government claims, but in reality small firms are getting less than 5%.

The ASBL has based its conclusions on U.S. Census Bureau statistics that 98% of firms in the United States have fewer than 100 employees. These 23 million firms are where over half of all Americans work. Every major business group in the country including the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB) has reported that the vast majority of their members have less than 100 employees. In the NFIB's case—72% of its members have less than 10.

Federal law mandates that small businesses receive their fair share—a minimum of 23%—of the total volume of government contracts. Using the 100-employee definition as the most appropriate standard for a small business in America, the ASBL projected that these firms are receiving less than 5% of all federal contracts.

A study performed by Eagle Eye Publishers on the government's data, reported only $65 billion in prime contracts coded to small business or 17% in of total federal procurements for 2005, including thousands of awards to Fortune 1000 firms and their subsidiaries. Eagle Eye president Paul Murphy told Washington Technology that the SBA is "either comparing apples to oranges" or else "has access to numbers that the general public does not." Murphy believes that the SBA is "manipulating the appearance of success."

The SBA's June announcement cited a total procurement figure of $314 billion for 2005, yet this is not the total volume of federal contracts. The SBA's figure is derived from taking total contracts and subtracting a number of exclusions including billions in government credit card purchases, contracts performed outside the U.S., and contracts with a variety of agencies including the Transportation Security Administration and Federal Aviation Administration. According to information obtained by the ASBL through the Freedom of Information Act, the total volume of federal contracts in 2005 was $380 billion. The ASBL believes that this figure is still low and may be as high as $450 billion if unreported defense contracts are included.

"It's time for small business owners to realize that business groups that have historically claimed to represent them are conspicuously silent on this issue," stated Lloyd Chapman, president of the American Small Business League. "The absence of any objections from these major groups in the face of the wholesale diversion of billions in contracts to large corporations is proof that they do not have the best interest of small business at heart."

The Senate Small Business & Entrepreneurship Committee will address some of these issues during their Small Business Reauthorization meeting this Thursday, July 27th.

About the ASBL
The American Small Business League was formed to promote and advocate policies that provide the greatest opportunity for small businesses - the 98% of U.S. companies with less than 100 employees. 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. Representing small businesses in all fields and industries throughout the United States, the ASBL monitors existing policies and proposed policy changes by the Small Business Administration and other federal agencies that affect its members.