Senate Committee Votes to Give Government Small Business Contracts to Billionaire Venture Capitalists

08/08/2008 05:12 am ET | Updated May 25, 2011

Petaluma, Calif. - Yesterday, the Senate Committee on Small Business and Entrepreneurship passed S. 3362, the SBIR/STTR Reauthorization Act of 2008. The bill will allow some of the world's largest venture capital firms to participate in federal small business contracting programs. The bill was introduced late on Tuesday, July 29th and passed through the Committee before opponents of the bill had a chance to see it. Missouri senator, Kit Bond, was the driving force behind the senate version of the bill to benefit venture capital firms.

On April 16, 2008, Representative Velazquez, the Chair of the House Committee on Small Business introduced the House version of the bill, H.R. 5819, and pushed the bill though the House in record time. As originally introduced, the bill would have allowed a single venture capital firm to control up to 51 percent of a small business and maintain its small business status for the purpose of federal contracting. As passed, H.R. 5819 allows billion dollar venture capital firms to participate in federal small business programs by modifying the existing definition of a small business in the Small Business Act, which requires a business to be "independently owned". Virtually every small business group in the country has opposed the legislation.

Small business owners and advocates across the country are outraged that Congress would even consider legislation that would allow some of the nation's wealthiest venture capital firms to participate in federal small business contracting programs. The American Small Business League (ASBL) maintains that S. 3362 and H.R. 5819 contain numerous intentional loopholes that will compound the widespread fraud and abuse that has already been uncovered in federal small business contracting programs.

Since 2003, over a dozen federal investigations have all discovered billions of dollars in federal small business contracts have actually wound up in the hands of hundreds of the largest companies in the U.S. and Europe. In the spring of 2005, the SBA Office of Inspector General released Report 5-15 which stated, "One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for those awards."

In the last thirty days alone, three separate federal investigations have been released by the SBA Office of Inspector General, General Accounting Office, and the Department of Interior Inspector General which have uncovered rampant fraud and abuse in several federal small business contracting programs. The Department of the Interior Office of Inspector General found that agency had awarded millions in federal small business contracts to numerous Fortune 500 firms such as Dell, Home Depot, John Deere, Sherwin Williams, Starwood Hotels and Xerox.

Small business advocates believe that H.R. 5819 and S. 3362 are prime examples of Congress ignoring the best interests of their constituents and pandering to wealthy venture capitalists that contribute millions to their campaigns.

If the legislation becomes law, members of the National Venture Capital Association (NVCA) and the Biotechnology Industry Organization (BIO) would receive billions in federal small business contracts. During the 2008 election cycle, the NVCA and the BIO have made significant political contributions to key congressional leaders. All the recipients of those contributions are now strongly behind passage of these two bills. According to, 17 members of the House Small Business Committee have received contributions from either the NVCA or BIO during 2008, which represents 55 percent of the Committee. Additionally, five members of the Senate Committee on Small Business received contributions from either NVCA or BIO. House Speaker, Nancy Pelosi, is known to have close ties to the NVCA.

This is the most disgusting and blatant example I have ever seen of Congress completely ignoring the best interest of the American people and selling legislation to the highest bidder.

Our country is in the middle of one of the most dramatic economic downturns in our nation's history. America's 26 million small businesses need the benefits of federal small business contracting programs like never before. It is unconscionable that not only has Congress failed to adopt simple legislation to end the rampant and widespread fraud that has been uncovered in federal small business programs, but instead proposed legislation to give federal small business dollars to billionaires. This legislation is a prime example of why this Congress has one of the lowest public approval ratings in recent history. Any member of Congress that supports a piece of legislation that will cheat America's middle-class businesses does not deserve to stay in office. The ASBL will fight this legislation with all of our resources. If it does pass, we will do everything we can to see that every member of Congress that voted for it will regret that decision.