'Small' Business Administration?

Is the Small Business Administration (SBA) lying to Congress and the public about the diversion of federal small business contracts to some of the largest companies in the world?

Last month, in a lawsuit filed by the American Small Business League (ASBL), a federal judge ordered the SBA to turn over more than 10,000 pages of data listing the names of all entities that received federal small business contracts in fiscal years 2005 and 2006. The ASBL is still in the process of reviewing that data, which is available for download on the ASBL's Web site, but it has already made some startling findings.

For one thing, a sizable number of small business contracts are going to some not-so-small companies. Many (Lockheed Martin, Boeing, L-3 Communications, Bechtel, and BAE Systems) are in POGO's Federal Contractor Misconduct Database, which features the 50 biggest federal contractors. According to the ASBL, more than $100 billion a year in federal small business contracts are diverted to large multi-national companies.

The fact that small business contracts wind up in the hands of Fortune 500 giants is not exactly a secret. POGO has highlighted this before (see here, here and here). Much more startling is the ASBL's discovery of hundreds of discrepancies in the data which, as ASBL claimed in a press release last week, shows that the SBA is manipulating the data to disguise the true number of small business contracts that actually wound up going to large companies.

The SBA downplays the extent of the problem. An SBA press release from May 2007 (pdf), in fact, declared it a "myth" that "large companies, including large, multinational corporations are taking away federal contracts specifically intended for small businesses." However, the ASBL found that data involving large corporations was manipulated to make it appear as if they had received significantly less in small business contracts – in some cases, hundreds of millions of dollars less. Conversely, the ASBL also discovered that the SBA inflated the amount of contracts awarded to legitimate small businesses. Taken together, this indicates the SBA is fudging the government's compliance with the 23 percent small business contracting goal mandated by law. Some of the discrepancies the ASBL has found are outlined here (pdf).