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Department of Interior Awarded Over $430 Million in Small Business Contracts to Corporate Giants, According to New Study


On July 1st, 2008, the Department of Interior (DOI) Office of Inspector General released a report, which found Fortune 500 firms were the actual recipients of federal small business contracts. The report examined three tenths of one percent of contracts the DOI had reported as going to small businesses during 2006 and 2007 and found that the agency had awarded Fortune 500 corporations $5.7 million in federal small business contracts.

According to the DOI Inspector General, divisions of Xerox and John Deere had misrepresented themselves as small businesses within the government's database of federal contractors as small businesses. Section 16 (d) of the Small Business Act states that any large firm that misrepresents itself as a small business for the purposes of obtaining a small business contract is guilty of felony contracting fraud and subject to a penalty of ten years in prison, a $500,000 fine per occurrence and debarment from federal contracting programs. Based on a review of the report, the ASBL believes contracting officers at the DOI intentionally falsified information entered into the Federal Procurement Data System -- Next Generation (FPDS-NG) as a means of fabricating the DOI's and the Bush Administration's small business contracting statistics.

In response to the DOI IG report, the ASBL conducted a review of the DOI's top 100 recipients of federal small business contracts for both 2006 and 2007. The lists were obtained from Fedmine.us, which has direct access to information within FPDS-NG.

Within the DOI's top 100 recipients of federal small business contracts for 2006, the ASBL found 22 large firms, most of which were Fortune 500 companies. Those 22 large firms received more than $200 million in federal small business contracts, which were spread across 894 contract actions. Within the DOI's top 100 recipients for 2007, the ASBL found 28 large firms, which received more than $230 million in federal small business contracts. The awards for 2007 were spread across 912 contract actions, which make 26.55 percent of all contract actions awarded to the top 100 for 2007. Between the two top 100 lists, the ASBL found more than $430 million in federal small business contracts awarded to large corporations.

In all, the ASBL found a total of 31 large companies within the top 100 lists from 2006 and 2007 combined. Of the 31 firms found, 16 companies were found to have received federal small business contracts from the DOI in both 2006 and 2007. In addition to the firms ASBL was able to determine were large, the following clearly large firms were found within the DOI small business contracting data: Booz Allen Hamilton*, Sprint Communications Company, Perot Systems Government Services*, Hewlett Packard Company, and KPMG*.

(* Received small business contracts in 2006 and 2007.)

According to Fedmine.us, the DOI reported $2.5 billion in contracts to small businesses in 2006 and $1.5 billion in contracts to small businesses in 2007. Based on the DOI IG's methodology for conducting their recent report, the total amount of small business contracts awarded to large corporations by the DOI could exceed $1.7 billion for 2006 and 2007.

The Small business Administration (SBA) attempted to portray the $5.7 million reported by the DOI IG as the total amount of small business contracts that had actually been awarded to Fortune 500 companies by the DOI. In reality the $5.7 million was only three tenths of one percent of the total amount of small business contracts awarded by the DOI during those years. The ASBL believes that the SBA misrepresented the DOI IG's findings in its statements to the press.

Under the Freedom of Information Act (FOIA), the ASBL intends to request the specific names of all of the firms that were coded as small businesses by the DOI during 2006 and 2007. The ASBL will request the specific names of all of the firms that were included. The ASBL expects to find hundreds of millions of dollars actually wound up in the hands of Fortune 500 corporations and other large businesses.

If obvious Fortune 500 firms like Xerox and John Deere are listed as small businesses in the governments contractor database, every federal agency and every prime contractor in the country is reporting awards to these firms as small business awards. The Bush administration has tried to convince us for six years now that the diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 firms is the result of "miscoding" or random data entry errors. It is simply not believable that for over six years every time a contract is "miscoded" it just happens to inflate the Bush administration's small business contracting statistics. This is obviously intentional felony contracting fraud on the part of large businesses and federal contracting officials. It's time for the FBI to investigate this and it's also time for Congress to pass legislation to stop the wholesale diversion of federal small business contracts to corporate giants. Any member of Congress that won't support legislation to end fraud and abuse in federal contracting should be voted out of office.

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