June 29, 2011
Petaluma, Calif. – A new bill aimed at closing loopholes and ending fraud and abuse in federal small business contracting programs could rescue the national economy. The Fairness and Transparency in Contracting Act focuses on ending the diversion of federal small business contracts to large businesses, a problem preventing the creation of upwards of 1.8 million new jobs. Representative Hank Johnson (D-GA-04) is expected to introduce the bill later this year.
The bill targets ambiguous provisions within the Small Business Act of 1953 that have allowed publicly traded and foreign-owned firms to qualify as small businesses for the purpose of receiving federal small business contracts. This will help the federal government award contracts to legitimate small businesses and reach its congressionally mandated goal of awarding 23 percent of the total value of all prime contract dollars to small businesses.
According to the U.S. Census Bureau, small businesses create more than 90 percent of all net new jobs. Moreover, a recent study by the Kauffman Foundation found that since 1980 businesses less than five years old have created nearly all new jobs. However, based on government data, the American Small Business League (ASBL) estimates that every year up to $200 billion in federal small business contracts is diverted from the nation’s chief job creators—its 27 million small businesses—to some of the largest corporations in the U.S. and Europe. The new law would end this abuse.
Since 2003, a series of federal investigations have uncovered billions of dollars in fraud and abuse in small business contracting programs. In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the problem as, “One of the most important challenges facing the SBA and the entire federal government today.” For six consecutive years, the SBA IG has named the issue as the number one challenge facing the SBA.
In Fiscal Year (FY) 2010 large companies like Lockheed Martin, Dell, Hewlett-Packard, General Electric, 3M and AT&T received federal small business contracts.
“The Fairness and Transparency in Contracting Act is the most efficient, effective solution to job creation that has ever been proposed,” ASBL President Lloyd Chapman said. “It requires no new spending, no new taxes, and it is deficit neutral. Just take existing federal infrastructure spending, and direct it to the nation’s chief job creators; its small businesses.”
Public Affairs Analyst
American Small Business League