Nearly Half of Fortune 500 Gets the (Small) Business

The American Small Business League (ASBL) has long fought to stop the flow of federal small business contracts to large companies that exceed the Small Business Administration’s (SBA) size standards. This week, the ASBL reported that 235 companies in the Fortune 500 received hundreds of millions of dollars in small business contracts in fiscal years 2012 and 2013.

Many of the Fortune 500 companies identified by the ASBL are also top federal contractors. Lockheed Martin, number 59 in the Fortune 500 and the federal government’s largest vendor, received more than $110 million in small business contracts in FYs 2012 and 2013. General Dynamics, number 98 in the Fortune ranking and the fourth largest federal contractor, received more than $215 million in small business contracts.

These findings follow the ASBL’s latest annual review of federal procurement data, which found that 71 of the top 100 small business contractors in FY 2012 were large companies. These companies, many in the Fortune 500, received a total of $9.5 billion in small business awards that year.

The federal government has a statutory goal of awarding 23 percent of all federal contract dollars to small businesses. According to the latest Small Business Goaling Report, the government came close in FY 2012 with 22.2 percent. However, as the ASBL has documented, agencies are counting dollars awarded to large companies toward their small business contracting goals.

How do large companies end up winning small business contracts? A 2011 report by the SBA Inspector General cited contractor size falsification or miscalculation as a factor, but placed most of the blame on the government for not adequately training contracting personnel. Lack of training also leads to agencies inflating their annual small business contracting numbers.

The ASBL has its own explanation for the problems in the small business contracting program. In a press statement issued Tuesday, the ASBL decries “rampant fraud at the SBA,” claiming the SBA “intentionally falsified the volume and percentage of federal contracts awarded to small businesses.”

At a time when small businesses, the purported “backbone” of the economy, are feeling the pain of sequestration, it is inexcusable that billions of dollars in federal contracts end up in the hands of the biggest of the big corporations. Whether this happens by outright fraud, innocent error, or a contracting workforce in need of a refresher course, the problems plaguing small business contracting demand immediate attention.