Small Business Contractors Get a 'John Deere' Letter

Three weeks ago, the Department of Interior Office of Inspector General (DOI-IG) released a report entitled Interior Misstated Achievement of Small Business Goals by Including Fortune 500 Companies. The report found the DOI awarded $5.7 million in small business contracts in fiscal years 2006-2007 to companies that are anything but small, including Dell, Home Depot, John Deere and Xerox.

How did contracts intended for small and/or disadvantaged businesses end up in the hands of some Fortune 500 giants? The report blames three culprits: data entry mistakes, reliance on incorrect data, and the failure of contracting officials to verify business size data as reported in federal vendor databases like the Central Contractor Registration (CCR), Federal Procurement Data System-Next Generation (FPDS-NG), and Online Representations and Certifications Application (ORCA).

Despite the DOI issuing a number of policy statements in recent years to ensure the accuracy of procurement data, contracting officers keep making or keep overlooking serious data entry mistakes. Sometimes, the contracting data in CCR, FPDS-NG and ORCA on which DOI contracting officers rely is either extremely outdated or otherwise incorrect. As a result, divisions of John Deere (#102 on the Fortune 500, with over $24 billion in annual revenue and 52,000 employees) are being awarded contracts intended for small businesses.

Last month, we blogged about the American Small Business League's (ASBL) claim that the Bush administration, through the Small Business Administration (SBA), has lied to Congress and the public about the extent to which federal small business contracts end up going to some of the world's largest companies. With the release of this DOI-IG report, the ASBL reiterates that claim. According to the ASBL, the SBA is misleading the public in press statements that characterize the $5.7 million cited in the report as the total amount of small business contracts that went to large companies, neglecting to point out that the figure comes from a survey of just a tiny fraction of all small business contracts awarded by the DOI.

The report reviewed just 0.3% of the $4 billion DOI bureaus awarded to small business entities during fiscal years 2006-2007. The ASBL, however, decided to investigate further. It conducted a review of the DOI's top 100 recipients of federal small business contracts for 2006 and 2007. Between the two top 100 lists, the ASBL found more than $430 million in federal small business contracts had been awarded to 31 large corporations, most of which are Fortune 500 companies. Based on the DOI-IG report's methodology, the ASBL estimates the total amount of small business contracts awarded to large corporations by the DOI could exceed $1.7 billion for 2006 and 2007.

Some may scoff at the ASBL's findings and somewhat heated rhetoric. However, a glance at Appendix 3 in the DOI-IG report, which lists numerous other recent government reports that highlight serious problems in the small business contracting program, indicates the ASBL is probably on the right track.