New SBA Policy Gives Fortune 500 Firms Billions in Small Business Contracts Until 2012, Says American Small Business League

March 22, 2007; 05:42 AM

A new Small Business Administration policy set to go into effect this summer will allow the federal government to report billions of dollars earmarked for small businesses to Fortune 500 companies. Lockheed Martin, Boeing, Northrop Grumman, Raytheon, Rolls Royce and L-3 Communications, to name a few, stand to benefit from this policy through the year 2012.

With barely four months of experience as the new SBA Administrator, Steven Preston finalized a policy that could divert billions of dollars in contracts earmarked for small businesses to these large corporations and their subsidiaries. Under Preston's policy, the federal government will be allowed to count contracts to hundreds of the nation's largest corporations toward the federal government's congressionally-mandated 23 percent small business contracting goal.

As early as 2002, the SBA attributed over 600 large businesses discovered in the SBA's small business database to miscoding, computer glitches and honest mistakes. During the last four years, more than a dozen federal investigations by the Government Accountability Office, the SBA Office of Advocacy and the SBA Office of Inspector General found fraud and a lack of oversight by SBA officials were also to blame.

In March 2005, the SBA Office of Inspector General referred to large businesses receiving federal small business contracts as "one of the biggest challenges facing the Small Business Administration and the entire federal government today."

Critics of the new policy point out Fortune 500 firms and other large businesses that received federal small business contracts through acquisitions, miscoding, honest mistakes, computer glitches, lack of proper oversight and even fraud will be allowed to continue to receive federal small business status for five more years beginning June 30, 2007.

Small business advocates believe thousands of legitimate small businesses across the country could be forced out of business, as they are required to compete head to head with Fortune 500 firms for federal small business contracts. Lloyd Chapman, president of the American Small Business League, says the new SBA policy is tantamount to repealing the Small Business Act for America's 23 million small businesses.

"Fortune 500 firms should be removed from the federal government's small business database tomorrow, not five years from now," Chapman said. "We are talking about an SBA policy that will divert over a billion dollars a week in federal small business contracts to the top 2 percent of firms in America every year for five more years. It's unacceptable that Congress has done nothing to stop this."

The American Small Business League estimates that unless Congress steps in and passes legislation to stop the policy, legitimate small businesses will lose over $300 billion in federal small business contracts over the next five years.