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Not Enough Federal Money Going to Small Businesses
By Marc Tracy
Last year, there was a bit of a scandal when it turned out that roughly $5 billion in federal contracts that were reported as having gone to small businesses actually went to very large businesses (usually via subsidiaries), and that the 22% of federal contracts that actually did end up going to small businesses fell short of the 23% legal requirement; moreover, many other legal requirements, concerning department-by-department procurement standards for small businesses and woman- and minority-owned businesses, were not honored.
So, did the federal government improve on last year's debacle? Actually, if anything, things got even worse. The Small Business Administration reports that 21.5% of all federal contracts went to small businesses in Fiscal Year 2008 (which ended last October). For those of you keeping score at home, that figure falls short not only of the 23% mandate but of last year's 22% score.
You're The Boss's Robb Mandelbaum is the must-read here: he is at once funny and devastating on the SBA's valiant but futile effort to put a positive gloss on what is, frankly, bad news.
In places, the SBA made his job easy: bragging about a record-high amount of absolute contract dollars instead of admitting that the far more relevant percentage of dollars actually fell does have the effect of making the SBA a bright red target.
But Mandelbaum is also quite shrewd. There's a key dynamic whereby the percentage is taken from the total dollar-figure of all contracts made by agencies and under circumstances to which the 23% mandate applies--those which are, as the SBA calls them, "small business eligible". But the term is misleading: it excludes contracts that could, theoretically, go to a small business (which would be the literal definition, it seems to us, of "small business eligible"). Include all of those contracts in the calculation, and the central figure drops to closer to 19%.
And even these calculations, of course, do not broach the even bigger problem: that even that 21.5% or 19% figure could very well be phony, with many of those ostensible small-business contracts in fact having gone to the some of the world's largest corporations. In its response, the American Small Business League--which essentially exists to try to rectify this problem--claims that some of those contracts in fact went to Lockheed Martin, Boeing, Dell Computer, Xerox, Home Depot, Northrup Grumman, General Electric, AT&T, and Rolls-Royce.
Mandelbaum accuses Sen. Mary Landrieu (D-La.), the chair of the Small Business & Entrepreneurship Committee, of going soft in her tepid statement on the FY 2008 numbers. The ASBL suggests that we pass the Fairness and Transparency in Contracting Act. Here's our idea: Sen. Landrieu could lead the charge. August recess will be over before long....
Comments (0)August 26, 2009 3:27 PM
