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June 14, 2005
Federal Procurement Overlooks Small Biz
Small businesses are getting short shrift from federal agencies, receiving only 20% of their contracting dollars last year, far below the government's goal. And the problem goes beyond one lackluster year:
When Congress set up the U.S. Small Business Administration in 1953, it declared that small businesses would be awarded at least 23% of all federal government prime contracts.
It hasn't been easy going.
A preliminary analysis of fiscal 2004 contract data by Eagle Eye Publishers, a Fairfax, Virginia-based firm that monitors federal procurement, puts last year's percentage at a mere 20%. While the SBA has yet to release the official data, Eagle Eye President Paul Murphy doesn't think that further number-crunching will get them to 23%. "The numbers just look way down from last year," he says.
And the troubles go way deeper than a disappointing 2004. Federal agencies have been caught miscategorizing large companies as "small businesses" casting doubt on past data. For instance, many question whether the agencies did in fact award 23.6% of their contracting dollars to small businesses in 2003--the first year that the government reached its goal since 1999.
In the past few years, billions of dollars in federal contracts that purportedly went to small businesses actually lined the pockets of giants such as Titan Corp., Raytheon Co., General Dynamics Corp., Booz Allen Hamilton Inc., Archer Daniels-Midland, and Hewlett-Packard Co.
Even the SBA admits that it has inadvertently given small business contracts to big companies, though SBA officials contend that only a small portion of the government's small business contracts are affected and that database errors are to blame.
Small business advocates beg to differ.
"I believe that 80 to 90% of the contracts they say are going to small business are actually going to large businesses," Lloyd Chapman, president of the California-based American Small Business League, tells the New Mexico Business Weekly. "Everywhere you look you find blatant fraud and abuses by agencies like the Small Business Administration. They say these are honest mistakes and computer glitches, but these glitches inflate their numbers 100% of the time and divert funds away from small businesses."
Chapman advises the SBA to start by reworking its definition of small businesses, which the agency says can include some companies with as many as 500 employees. Meanwhile, Chapman notes, 98% of all U.S. firms have 100 workers or fewer.
Other reasons cited for the falling percentage of federal contracts going to small businesses include spending in Iraq (as reconstruction, logistics and weapons contracts were mostly awarded to large companies) and the practice of bundling contracts into packages (which also favors big companies because of the breadth of the agreements).
Sources:
Small Business Losing Ground on Federal Contracts
Kent Hoover
Silicon Valley/San Jose Business Journal, May 9, 2005
sanjose.bizjournals.com/sanjose/stories/2005/05/09/smallb4.html
Federal Contracts Bypass Small Biz
Dennis Domrzalski
New Mexico Business Weekly, May 9, 2005
albuquerque.bizjournals.com/albuquerque/stories/2005/05/09/story4.html
Small Businesses Find Federal Contracts Tough Going
Laura Newpoff
The Business Journal of Phoenix, May 16, 2005
phoenix.bizjournals.com/phoenix/stories/2005/05/16/smallb1.html
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Comment
4 CommentsPeople were against a set aside for minority owned business, and now we are seeing the death of small business in America.
Obviously a set aside of 10% was needed to insure the economy, and compared to today's financial picture I think it did its job effectively.
I once worked for MTDB and my job was to research the sub contractors, and to make sure they were minority or woman owned. When I completed the list, few were actually certified, my supervisor was not happy with me, I was taken off the job and later let go.
I have been asked to research a contract with MTDB for a member of the Women's Chamber, only to find the same company has held the contract since the beginning of time. I went a bit farther and I discovered a state representative is involved in the contract or family member.
Should this be allowed? Isn't this a conflict of interest? Government is turning into a competitor, and worse then that, takes the opportunity away from the people to even compete for the business. I am quessing but the SBA has most likely been privatized which has its own stockholders to keep happy, just like Fanny Mae, and the Better Business Bureaur. If it hasn't yet done so, GO FOR GROWTH Small Business owners merge and privatize the SBA in your area, and become a piece of the rock. I'm available to help, I always wanted their job.
I would advise anyone who is concerned about this problem to forward a copy of this article to their senators and congressmen, as I am doing, and ask those elected representatives exactly what they are doing about it.
My experience with most politicians (whether democrat, republican, or independant), is that they are sloth to move on any issue, until they see that a majority of voters are about to change their personal job situation for them via the ballot box.
