Federal Agencies’ Small Business Contracting Milestone Questioned

    By Adrienne Burke | Small Business

    Earlier this month the Yahoo! Small Business Advisor Profit Minded Blog reported here on an apparently momentous achievement the Small Business Administration had announced: "For the first time in eight years, the federal government has achieved its goal to award at least 23 percent of all federal contracts to small businesses ... Just over 23 percent of contracts, accounting for $83.1 billion, were awarded to small businesses in 2013. Of 24 federal agencies, only 4 failed to meet their agency-specific goal."

    But some have since challenged the SBA's claims.

    Washington Post digital editor J.D. Harrison reported on the milestone, but asked, "Did the government actually hit the target? Only time will tell. But there's ample room for skepticism."

    Harrison points out that General Services Administration fine print notes that "SBA's annual reports are generated by taking a snapshot of data from the Federal Procurement Data System on a certain date." But the database is "dynamic" with changes and updates continually being made by the federal agencies. And Harrison says those snapshots reported to the public do not "stand the test of time" when reviewed later. For instance, Harrison reports:

    "In 2012 SBA reported that small businesses claimed 22.25 percent of work, based on the snapshot of the moment. Now, two years later, the database shows they claimed 22.17 percent."

    A 0.08 percent difference seems trivial, until you put it into dollars: even such a slight reduction in the $83.1 billion that SBA claims was awarded in 2013 would translate to a loss of more than $66 million for small business.

    Lloyd Chapman, the outspoken founder of the American Small Business League in Petaluma, Calif., thinks the discrepancy is even greater. He has long accused the government of fraudulently awarding contracts meant for small businesses to large corporations and says the 2013 record is no different. "The ASBL believes that small businesses got only one-tenth of what the SBA says they did and will be moving forward with inquiries on that subject," Chapman announced on the ASBL website. "The most recent information from the Federal Procurement Data System indicates that 175 Fortune 500 firms and their subsidiaries received small business contracts in FY 2013," he says.

    Chapman also points to a 2013 statement by Charles Teifer, a University of Baltimore Law School Professor of Government Contracts, who says that "large contractors wrongfully hold small business contracts," and that "vast sums of Federal payments to businesses should be, but are not, counted when figuring the 23 percent goal for small business." Teifer says that the Small Business Administration does not deny that large contractors hold the contracts, but excuses the practice by explaining that it is a result of large companies acquiring the contracted small business, or of contractors expanding beyond the small business category during the contract term.

    In the trade publication Government Executive last week, reporter Charles S. Clark asked an SBA official to respond to the ASBL's argument. Associate administrator for government contracting and business development John Shoraka told Clark:

    “This occurs for a variety of reasons, including the growth of a business, mergers and acquisitions, or human data entry error.  ... The fact that a contract awarded to a large business is coded in a database as an award to a small business does not mean that the contract was taken away from a small business or that small businesses suffered. Unless a contract was set aside for a small business, the designation as a small business does not benefit that business in receiving the award. The designation could be a result of a mistake on the part of the contracting officer, who actually enters the designation in the database, or the firm when filing its representation for that contract.”

    Like Harrison reported at the Washington Post, "only time will tell" if the 2013 contracting record was actually something to celebrate.

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