Government Small Business Contracts Went to Fortune 500 Companies

On July 1st, 2008, the Department of Interior (DOI) became the latest federal agency to issue a report that found Fortune 500 firms were the actual recipients of federal small business contracts. The report (pdf) also found contracts to Fortune 500 firms were used to falsify the DOI's compliance with its small business contracting goal and significantly misrepresent the Bush Administration's compliance with the Congressionally mandated 23 percent small business contracting goal.

The report stated that despite regulations and policies put in place to ensure data integrity, contracting officers intentionally reported contracts to some of the nation's largest corporations as small business contracts. The DOI Inspector General found contracting officers knowingly entered GSA contract information into the Federal Procurement Data System -- Next Generation (FPDS-NG) improperly, which allowed them to code a contract to an obvious large firm as a small business set-aside contract. The report noted that DOI contracting officers had recently received training on the proper entry of GSA acquisitions into FPDS-NG.

During 2006 and 2007, DOI reported millions of dollars in contracts to Fortune 500 corporations such as Dell, GTSI, Home Depot, John Deere, McGraw-Hill, Ricoh, Sherwin Williams, Starwood Hotels, Waste Management Incorporated, Weyerhaeuser, World Wide Technology and Xerox Corporation as small business contracts.

The DOI Office of Inspector General's report is the latest investigation to contradict two Small Business Administration (SBA) press releases, which claimed that it was a "myth" that large businesses received federal small business contracts.

The General Accounting Office (GAO) first uncovered the diversion of federal small business contracts to Fortune 500 corporations in 2002. Since then, there have been approximately a dozen federal investigations that have all found Fortune 500 firms and other large corporations were the actual recipients of billions of dollars in federal small business contracts every year. Despite the series of federal investigations and over 400 stories in the press since 2002, no legislation has been passed to address the problem.

As opposed to adopting policies to stop the flow of federal small business contracts to Fortune 500 firms, former SBA Administer Steven Preston adopted a SBA policy in June of 2007 that will allow Fortune 500 firms to continue to receive federal small business contracts until the year 2012. Preston also removed all information from the government's Central Contractor Registration (CCR) database that could be used to determine if a firm was small or large. Additionally, Preston refused to release the specific names of all firms that received government small business contracts.

Senator Barbara Boxer (CA-D) has written a bill entitled, the Fairness and Transparency in Contracting Act of 2008. If passed into law, the bill would completely stop the diversion of federal small business contracts to large corporations.

The American Small Business League (ASBL) projects that the diversion of federal small business contracts to large corporations during the Bush Administration could top $800 billion.

Federal investigations have been coming out for roughly 6 years now that clearly show that Fortune 500 corporations are the actual recipients of federal small business contracts and yet the Bush Administration continues to maintain that it is a 'myth' that large firms receive federal small business contracts (pdf). This situation is obviously not limited to the DOI. The intentional diversion of federal small business contract dollars to Fortune 500 firms is a government wide problem. The SBA's own Inspector General found widespread fraud in federal contracting in Report 5-16. (pdf) It is time for Congress to finally pass Senator Boxer's, Fairness and Transparency in Contracting Act of 2008, and it is time for the GAO to look at the federal government as a whole and get to the bottom of this problem. I am confident that if Senator Obama becomes president, his administration will right these wrongs in short order. You won't see Fortune 500 firms receiving U.S. government small business contracts under an Obama administration.

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Comments

[demfriend]

This story shows what we have learned IF we are paying atention about the Bush/Cheney white house. Even though it is good business to hire the tried and true businesses to do the right job it also has come to be that the job line is full of cronies. Like Haliburtin who knows their businesses are capable of doing the jobs still came out they are screwing us with the costs and wastes in Iraq as well as killing our soldiers in their showers and work places. Who really knows how much the war would have cost had Haliburtin done the job as they should have at the price we should have paid if done right. WHile I hate the war and how we got there Haliburtin and the companies Bush/Cheney brought with them have stolen so much money we will never get back and has driven up the costs of the war way beyond reason.

[WorkingClass]

Ah yes. The facts are a myth. An increasingly popular meme.

[kevlar0076]

This just shows another in a long line of investigations proving that the Bush Administration has been giving away money and contracts meant for small businesses to large firms and corporate buddies. I want to know when there will be some oversight, and more importantly, accountability on these issues. Small business built this country and is providing all of the new jobs and innovation, yet continues to lose out on billions of dollars every year in federal contracting money that somehow ends up in the pockets of Fortune 500 firms. This is no coincidence. We need to demand from our lawmakers that some action be taken, although I still remain skeptical that the oversight powers of Congress will continue to go unused.

[KillTheMessenger]

America keeps finding ever new ways of screwing itself. Amazing and mind blowing.

[swift goat pet for truth]

The things one learns when oversight is done.

That is why the GOP canned the oversight.

[evie]

why? why? will any of us ever see any justice served by the astounding arrogance and greed of this administration? The ruin of our na tion has not only begun, but will shortly be completed. The corporations (and majority shareholders? benefit from the huge tax breaks, while closing down operations in the U.S.; the largest shareholders shield their income from the IRS, and receive benefits meant for typical Americans; they fight the estate tax law tooth and nail -- heaven forbid they should ever have to repay the American public for their wealth, earned on our backs or by our hard earned wages. And Congress will do nothing. Will Obama do anything? Will he be able to do anything?

[tompoe]

HuffPost's Pick

Aside from proving party loyalty, small business contracts also required expertise, as in buddy up with big corporation to demonstrate ability. It's a tried and true method for protecting the public's money. Wall Street uses the same criteria for convincing investors to invest in new drug development. Small outfits can negotiate to bring big pharma companies on board, and then investors will be reassured their investments will be sound investments.

It's the captialist way. Until, of course, the whole room collapses around you. Then, it's important to scurry under the dress of government agencies. From personal experience, the SBA agency is a crock for most small business owners. What they say, and what they do are absolutely two different things. It's been a few years since I last checked, but their database setup for electronic bids and awards was such a big joke, and when I attempted to push my complaints, I got nothing but arrogance and rejection. Whatever was going on, it was not something I expected to find in a democratic country.