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Friday, February 27, 2009

Obama Budget Ignores Fraud and Abuse in Small Business Contracting Programs

February 27, 2009

Petaluma, Calif. - President Barack Obama's new fiscal 2010 budget proposal does not contain any specific funding for, or mention of the Small Business Administration's (SBA) biggest challenge, the diversion of federal small business contracts to large corporations.

Since 2003, more than 15 federal investigations have found fraud, abuse, loopholes and a lack of oversight in federal small business contracting programs that have allowed Fortune 500 firms to take billions of dollars in federal contracts earmarked for small businesses. ( ABC, CBS and CNN have aired stories on the investigations. (ABC,; CBS,; CNN,

Report 5-15 from the SBA Office of Inspector General (OIG) stated, "One of the most important challenges facing the Small Business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards." (

In Report 5-16, the SBA OIG found large businesses had committed felony federal contracting fraud by making "false certifications" and "improper certifications." (

A report from the SBA Office of Advocacy found a number of large businesses had illegally received federal small business contracts through, "vendor deception." ( 2002.pdf)

In February of 2008, President Obama stated, "It is time to end the diversion of federal small business contracts to corporate giants." While President Obama's budget mentions a number of specific small business programs; the proposal contains no mention of this issue, which small business advocates maintain is responsible for pulling up to $100 billion in federal small business contracts out of the middle class economy every year. (

In the last year, President Obama has consistently refused to offer a solution to the diversion of billions of dollars in federal small business contracts to Fortune 500 corporations, their subsidiaries and other clearly large firms. President Obama's fiscal 2010 budget proposal represents his 6th opportunity to mention solutions to this devastating problem.

"I would like a member of the White House Press Corps to ask President Obama one question for America's 27 million small businesses," ASBL President Lloyd Chapman said. "Why are you allowing Fortune 500 firms to take federal contracts that have been legally set-aside for small businesses?"


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