The American Small Business League, a nonpartisan group (it has endorsed Sen. Barack Obama for president) that represents 100,000 small businesses nationwide, has been hammering away at a very specific aspect of the $700 billion bailout bill, which was passed yesterday by the U.S. Senate and now heads back to the House, which rejected an earlier version of it this past Monday.

Though the ASBL has not come out straight and said the bill ought to be defeated, period, it has made a substantial critique of the bill, asserting that its vague language could disadvantage small businesses in terms of receiving federal government contracts. According to the ASBL, the bill would authorize the Secretary of the Treasury to waive provisions of the Federal Acquisition Regulation that stipulate that some federal contracting go to small businesses, minority-owned businesses, veteran-owned businesses, and woman-owned businesses. "The federal government’s ability to exclude small businesses could last years, and middle-class firms could continue to lose billions of dollars in government contracts and subcontracts," the group said. It also ties it to what it said is a larger pattern of the Bush administration's trying to circumvent the law in order to steer maximum government contracts to big corporations.

Wisely, the ASBL advocates not just taking the damaging language out and securing the relevant provisions of the Federal Acquisition Regulation, but also changing an important aspect of the current law so that it more accurately reflects its initial intent: to ensure that an adequate percentage of federal contracts are awarded to small businesses. The problem appears to be that, right now, the government can award contracts to large businesses under certain circumstances and still report them as small-business procurements. The ASBL's proposal would adopt the Small Business Act's definition of a small business as one that is "independently owned" and would include in the bailout bill the sentence: "As of January 1st, 2009, the federal government will no longer report awards to publicly traded firms as small business awards." The addition of that one sentence and its subsequent enforcement could redirect as much as $100 billion per year in federal contracts to true small businesses, the ASBL estimates.

Given that, according to ASBL President Lloyd Chapman, a number of reported small-business procurements have recently gone to such tiny firms as Home Depot, John Deere, and Starwood Hotels, this proposal seems sensible to us.