The Small Business Administration (SBA) has waged a decade long campaign to diminish and cast public doubt on the charge that the agency has overseen the diversion of billions of dollars in federal small business contracts to large corporations. On June 24, 2011, the SBA released the government’s fiscal year (FY) 2010 Small Business Procurement Scorecard, reporting almost $98 billion in federal contracts, or 22.7 percent of contract dollars, went to small businesses.
However, the American Small Business League’s (ASBL) annual analysis of the SBA’s federal small business contracting data again shows that a majority of small business contracts were awarded to large corporations. Of the top 100 recipients of small business contracts in FY 2010, 61 were large firms. These large firms received 62.5 percent of the total dollar amount awarded to those firms, a staggering $8.8 billion dollars. Corporations such as Hewlett-Packard, Lockheed Martin, General Electric, Xerox, 3M Company and AT&T are just some of the mega-corporations that received small business contracts during FY 2010.
Following the release of the ASBL’s FY 2010 data, Michele Chang, the SBA’s senior advisor for government contracting and business development, chose to maintain the course set by a series of SBA spokespeople. According to Ms. Chang, all of the federal agencies charged with small business contracting goals have gone through processes to ensure that data is “clean” and free of data anomalies such as “miscoding.” Chang went on to claim that the SBA is, “confident this is the cleanest data we’ve had and the cleanest it can be.”
Perhaps the most prevalent of the various, unclear explanations for the diversion of billions in small business contracts to corporate giants, so-called “miscoding” is aimed at painting accusations of fraud and abuse as frivolous. Essentially, the SBA claims the diversion of small business contracts is due to computer glitches or simple human error. Former SBA Administrator Hector V. Barreto, his successors Steve Preston and Karen Mills, and SBA Spokesman Mike Stamler have all used this murky term to explain how, year-after-year, large corporations receive small business contracts that are in turn counted toward the congressionally mandated 23 percent small business contracting goal.
It takes only the simplest logic to see that the “miscoding” excuse does not hold up. Random errors in a field with just two possible answers would follow the same pattern of flipping a coin. However, we do not see any “miscoding” errors that categorize small businesses as large. Unless you believe the SBA can flip a coin thousands of times a day, year-after-year and make it come up heads every time, there must be another answer.
Ironically, the SBA’s own Office of Inspector General has disagreed with the well-worn “miscoding” assessment as an explanation for the continued diversion of small business contracts to large corporations.
In Report 5-15, the 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 Report 5-16, the SBA IG attributed the awarding of small business contracts to large firms to “false” and “improper” certifications.
Ms. Chang’s attempt to paint her agency’s grossly distorted data as, “the cleanest it can be” mirrors the explanations put forth by the SBA in regards to FY 2009 data. Joe Jordan, the SBA’s associate administrator for government contracting and business development, said, “I can tell you this data is as clean as its ever been…but it’s not 100 percent free of errors.”(http://www.asbl.com/showmedia.php?id=1493)
And so the issue reaches a tipping point. Ms. Chang further denied the ASBL’s allegation that only five percent, as opposed to the 22.7 trumpeted by the SBA, of recipients of small business contracts were actually small businesses. However, when asked if Lockheed Martin, AT&T and Hewlett-Packard received small business contracts, Chang said she “can’t comment on them specifically.”
I would ask the public, the small business community, and any citizen concerned with job creation to take a moment and consider this contradiction. The SBA’s spokesperson feels comfortable claiming in the media that the ASBL’s allegations are untrue, while simultaneously expressing her own inability to comment on the most damning evidence in the SBA’s own data: the names of mega-corporations continue to surface in small business contracting data, as they have for over a decade.
The ASBL maintains that the Obama Administration has dramatically inflated the percentage of contracts awarded to small businesses by under-reporting the actual federal acquisition budget, and by including billions of dollars in contracts awarded to large businesses.
If over-reporting the dollar amount awarded to small businesses in federal contracts by as much as seventeen percent is the cleanest the data can be, everyone working at the SBA is completely incompetent. Furthermore, if the SBA’s officials cannot provide substantive oversight of federal contracting programs the Obama Administration must appoint an SBA Administrator who can. Otherwise, the President is sending an unmistakable message to our nation’s top job creators: as small businesses your interests do not align with those of this Administration.