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The Misreporting Scandal: The SBA's Official Numbers
By Bizbox
So it looks like the Washington Post (our corporate brother) had its numbers right yesterday when it reported that somewhere in the neighborhood of $5 billion in small business contracts awarded last year by U.S. government agencies in reality went to big businesses like Northrup Grumman, Dell, and others. Reports Sharon McLoone and the New York Times, the Small Business Administration announced yesterday that $83.2 billion in contracts actually went to small businesses: an amount that constitutes roughly 22% of all government contracts, one percentage point shy of the 23% that was mandated to go to small businesses by 1997's Small Business Reauthorization Act.
That's fairly good news, all in all. In fact, $83.2 billion is a record. Now come our major caveats:
-Around $5 billion misreported seems small when there's over $83 billion that was correctly reported, but that's about a 6% error rate. And we happen to agree with Acting SBA Administrator Sandy Baruah that "there are errors out there and we need to do more to correct them."
-These "small businesses" aren't always truly, well, small. The exact definitions vary depending on the industry in question, but generally, a company may employ up to 500 and make up to $17 million per year and still qualify as a small business for these purposes. Plenty of our readers would no doubt have a good, if bitter, laugh at the thought of a five-office, 200-employee, $15 million company being considered a "small business".
-As we pointed out yesterday, the biggest offenders--the government agencies which, together, accounted for over two-thirds of misreported small business contracts--were the Departments of Defense and Homeland Security and the General Services Administration (which, ironically, is charged with keeping these very stats). Still, out of 27 government agencies to which this applied, a paltry four met their legally required numbers in all five contracting categories. (Many fell short in the area of contracting to woman- and minority-owned businesses, a problem we've reported on.)
Still, there is cause to hope that 2008 and beyond will be better, thanks to a rule that went into effect in the middle of last year requiring small businesses to get themselves recertified as small in the event of a merger. Additionally, while the SBA's decision to "scrub the data" starting in 2005 clearly hasn't been successful enough, hopefully those efforts will bear more fruit as the years progress.
One more note: in response to the Post article, which in detail chronicled the misreporting problem along with some of its most egregious manifestations, Baruah said that an article such as that one "helps us get the word out and adds transparency to the situation." Very classy.
Comments (0)October 23, 2008 1:08 PM
