Small Business Administration Myth vs. Fact News Release Struggles to Defend New Multi-billion Dollar Loophole for Big Business

Petaluma, Calif. – In the Small Business Administration’s July 18th news release, they claim that it is a myth that there is a loophole in their latest five-year grandfathering/five-year re-certification policy that will allow the SBA to continue to report contracts to large business as small business awards until the year 2012.

Nationally recognized federal contracting expert Professor Charles Tiefer of the University of Baltimore School of Law disagrees. In Professor Tiefer’s December 5, 2006 opinion on the new SBA policy entitled, “Opinion on the Loophole In SBA Size Standard Regulations,” Professor Tiefer stated: “The Small Business Administration’s latest size standard regulations issued in mid-November will still result in the federal government reporting many of its prime contracts performed by large businesses, as small business contract awards, for at least five years to come. I have reviewed the new regulations. Also, I have reviewed the many independent inquiries about the government's enormous loopholes for large businesses to enjoy contracts purportedly awarded to small businesses. It is clear that, after three years of hesitation about doing something, the SBA simply ducked action for even partially closing those loopholes.”

Professor Tiefer is not alone in his opposition to the new SBA five-year grandfathering/five-year re-certification policy. In 2006, the Senate Committee on Small Business and Entrepreneurship voted to close loopholes that have allowed the SBA to report billions of dollars in contracts to many of the largest firms in America as small business awards (http://www.asbl.com/showmedia.php?id=296). They voted unanimously to endorse the annual re-certification policy that was originally proposed by the Office of Federal Procurement Policy in February of 2003 (http://www.washingtontechnology.com/print/17_22/20148-1.html). An annual re-certification policy would require all firms claiming small business status to recertify that status annually, as opposed to every five-years as dictated by the SBA’s recently implemented policy.

Under the annual re-certification policy, large businesses with existing federal small business contracts and firms holding small business contracts that were acquired or had out grown their small business status, would be allowed to keep the contracts they were awarded. However, the federal government would no longer be allowed to include those contracts towards the federal government’s 23 percent small business contracting goal. This would ensure that firms transitioning from small to large would not be punished for growing, and that only contracts to legitimate small businesses would be counted towards the government’s 23 percent small business contracting goal.
Other supporters of the annual re-certification policy included the SBA itself before the arrival of current SBA Administrator Steven Preston, the SBA Office of Inspector General, and the Office of Management and Budget.

SBA Administrator Preston ignored the overwhelming support for an annual re-certification policy and instead initiated the current five-year re-certification policy the SBA had originally proposed in 2005 as a five-year grandfathering policy.

The American Small Business League plans to file their fourth federal lawsuit against the SBA to overturn the policy. They believe the five-year grandfathering/five-year re-certification policy is an intentional loophole the SBA has created that will falsify the government’s compliance with the 23 percent small business contracting goal and divert billions of dollars in federal small business contracts to Fortune 1000 firms and other large businesses.

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ASBL: Under U.S. Small-Firm Programs, Big Dollars Flow To Big Firms

This story was posted today and covers problems in federal small business contracting from numerous angles. The story contains statements from Lloyd Chapman, President and Founder of the American Small Business League, in addition to statements by Senator John Kerry and Administrator of the Small Business Administration Steven Preston.

Here is the link:

http://www.defensenews.com/story.php?F=2898263&C=america

ASBL: Question for the Presidential Candidates

Here is a great video clip that we submitted to the CNN/YouTube presidential debates page. It features a sampling of headlines from the more than 500 stories that have been written on the diversion of federal small business contracts to large firms. Here is the embedded clip, and I have included a link to the clip at the bottom of the page. Enjoy.




http://www.youtube.com/watch?v=VbSU8SIAex0

ASBL: More Documents Supporting Charles Tiefer's Opinion

Many of you requested that we post the documents that Professor Tiefer refers to in his opinion on the Small Business Administration's June 30th policy. The documents are available in the media section on http://www.asbl.com/ or by visiting the link below.

Here is the link:

http://www.asbl.com/documents/SBA_krachman.pdf

ASBL: Professor Charles Tiefer Agrees with ASBL on New SBA Policy

On June 30th, the Small Business Administration enacted a policy that will allow large companies who currently hold long term small business procurement contracts, to maintain those contracts through 2012. Last December, noted federal contracting expert Professor Charles Tiefer of the University of Baltimore School of Law issued an opinion on the loophole in new SBA size standard regulations. After a review of the regulations and related documentation, Tiefer concluded, "SBA's latest size standard regulations issued in mid-November will still result in the federal government reporting many of its prime contracts performed by large businesses as small business contract awards for at least five years to come."

Here is a link to Professor Tiefer's opinion:

www.asbl.com/documents/TieferOpinion.doc

ASBL on The U.S. Chamber of Commerce

We posted this video on YouTube yesterday. In it the American Small Business League discusses the U.S. Chamber of Commerce and their opposition of the removal of Fortune 1000 corporations, their subsidiaries and other large firms from federal small business contracting.

Top Defense Contractors Are Now Small Businesses Under New SBA Policy

July 9, 2007

PETALUMA, CA -- On June 30th, a Small Business Administration policy went into effect that will allow the federal government to count hundreds of contracts to many of the nation's largest defense and aerospace contractors as federal small business contracts through 2012.

The SBA's new five-year grandfathering/five-year re-certification policy will allow the federal government to include billions of dollars in contracts to firms like Boeing, Lockheed Martin, Northrop-Grumman, Raytheon, SAIC, L3 Communications and General Dynamics towards the government's 23 percent small business contracting goal.

In 2005, the SBA included over $650 million in government contracts to defense giant L3 Communications towards the government's small business contracting goal. For 2006, the SBA reported over $500 million to SAIC as small business contracts.

Small business owners around the country are outraged at the new policy and are pledging to take their complaints to Congress and federal court.

When the SBA originally proposed their grandfathering plan in 2005, it would have allowed the SBA to continue to report awards to any firm that had small business contracts towards the federal government's 23 percent small business procurement goal for five more years. This would have included: small business contracts found by the SBA Inspector General as being fraudulently obtained, contracts to large businesses the SBA acknowledged were miscoded as small business contracts, contracts to large businesses that had accidentally claimed small business status, contracts to firms that had outgrown their small business status and contracts to firms that had been acquired by a large business.

When the SBA asked for public comment on the proposed policy in 2005, they were bombarded with over 6000 angry comments opposing the grandfathering policy. Small business owners and small business groups, including the NFIB and Chambers of Commerce across the country, were strongly opposed to the proposed plan.

Even after the SBA received an overwhelmingly negative response to the proposed policy, SBA spokespersons told reporters for the Miami Herald and the Chicago Tribune in June of 2005 that the SBA still intended to implement the five-year grandfathering plan.

Shortly after new SBA Administrator Steven Preston was confirmed, he directed that the unpopular five-year grandfathering policy be renamed five-year re-certification and implemented. The net effect of the five-year re-certification and the five-year grandfathering policy are identical. Under the five-year re-certification policy, the same large businesses that would have benefited from the five-year grandfathering policy will be allowed to maintain their small business status until the year 2012. This will allow the SBA to continue to report contracts to hundreds of Fortune 1000 firms and other large businesses as small business awards for at least five more years.

SBA critics like the American Small Business League believe the real purpose of the SBA's five-year grandfathering/five-year re-certification policy is to artificially inflate the federal government's small business contracting statistics to create the false impression that the government has reached the Congressionally mandated 23 percent small business contracting goal.

ASBL estimates if the policy is allowed to take full effect, legitimate small businesses across America could lose over $300 billion in federal small business contracts over the next five years.