Stop Fraud in Federal Small Business Contracting

Recommendations to End Fraud, Abuse and Loopholes in
Federal Small Business Contracting

1. Establish an annual recertification policy for all firms with existing Federal small business contracts, effective June 30, 2007. Current federal policy requires all government vendors to update their information annually on CCR, therefore annual recertification can be completed at that time simply by updating one box in the database. Annual recertification will be a simple, easy, quick and efficient way to stop the flow of billions of dollars in federal small business contracts to Fortune 1000 firms and other large businesses. In the past annual recertification has already been endorsed by the SBA (prior to the arrival of Steven Preston), the SBA Office of Inspector General, the Office of Federal Procurement Policy, the Senate Small Business Committee and the Office of Management and Budget.

2. Establish a federal policy that precludes any award made to a Fortune 1000 firm, its subsidiaries, or any of its divisions from being reported as a small business award. A company’s small business status should end the day that the firm is acquired by a large business.

3. Amend the Small Business Act to require annual re-certification. Require all government suppliers claiming status as a small business to recertify their size status on an annual basis. This can be done easily and efficiently online.

4. Ensure that all federal small business contracts that are only reported in the name of the parent company, removing any confusion about the actual recipients of the award.

5. Aggressively prosecute fraud and misrepresentation. Misrepresenting the size of a firm in order to illegally receive federal contracts and subcontracts is a felony with penalties of up to 10 years in prison, a fine up to $500,000, cancellation of all contracts and debarment from selling to the government. Policy should require the SBA to respond to any protest against any firm that misrepresents its size, regardless of whether or not the contract is a small business set-aside. Section 16(d) of federal code makes no differentiation as to the type of contract; therefore current SBA policy is illegal and clearly does not address the magnitude of the problem.

6. Abolish any federal policy giving special preference to Alaskan Native Corporations under the 8(a) program that is not given to other participants in the 8(a) program.

7. Publish a warning on all contractor databases. Any and all government databases for small business should clearly state the penalties for misrepresentation.

8. Enforce “Liquidated Damages” and all other existing federal laws for prime contractor non-compliance with small business goals. Because this law has never been enforced, most prime contractors never achieve the small business goals stated in their government prime contracts.

9. Remove any and all exemptions to the $100,000 small business set-aside. Congress passed legislation mandating all federal acquisitions between $2,500 and $100,000 to be automatically set-aside for small business. The SBA and the FAR Council essentially repealed this valuable piece of legislation by exempting all acquisitions on the GSA schedule from this policy.

10. Eliminate the “Comprehensive Test Program.” This program allows major prime contractors to avoid complying with their small business goals by eliminating specific small business reporting on individual contracts. It also eliminates “Liquidated Damages” for those companies under the program.

11. Force the SBA to publish a list of firms that have been removed from the small business contractor database for misrepresentation and add firms to the list monthly that lose their small business status through protests. Provide it to all federal agencies and prime contractors.

12. Establish federal policy that precludes the SBA from dismissing small business protests on non-small business set-aside contracts.