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Lloyd Chapman

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Senate Probes Small Business Administration on Billions in Fraud and Abuse

Posted: 07/26/11 08:47 PM ET

At a hearing Tuesday of the Senate Homeland Security and Governmental Affairs Subcommittee on Contracting Oversight, senators challenged the Small Business Administration's (SBA) claim that 22.7 percent of federal contract dollars went to small businesses in 2010.

Chairwoman Senator Claire McCaskill (D-Mo.) called the SBA's claim "an empty achievement." Billions of contract dollars the agency reported as going to small businesses actually went to large businesses. The federal government is required by law to award at least 23 percent of all prime contract dollars to legitimate small businesses.

The federal government's data indicates that during fiscal year (FY) 2010, billions of dollars went to some of the largest corporations in the United States, Europe and Asia. These include Italian defense giant Finmeccanica, Lockheed Martin, Rolls-Royce, British Aerospace (BAE), Raytheon, General Electric and Ssangyong, a multinational corporation based in South Korea.

Senator McCaskill pressed SBA spokesman Joseph Jordan on why large companies receive small business contracts. She said that counting contract dollars awarded to a business that is no longer small as small business contract dollars is "misleading." Jordan argued that it was unfair to "punish" a government agency because a business it contracts with becomes successful.

He went on to say that the 2010 contracting data was "the cleanest data ever" despite the fact that, according to the Federal Procurement Data System-Next Generation, 61 of the top 100 small business contractors were actually large businesses.

Since 2003, a series of federal investigations have uncovered billions of dollars in fraud and abuse in small business contracting programs. In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the problem as, "One of the most important challenges facing the SBA and the entire federal government today." For six consecutive years, the SBA IG has named the issue as the number one challenge facing the SBA.

In 2008, President Obama recognized the magnitude of the issue stating, "It is time to end the diversion of small business contracts to corporate giants." http://www.asbl.com/documents/20081007_Obama_Promise_Website.pdf

I believe Joe Jordan is lying through his teeth. To claim that we are punishing agencies by preventing them from reporting contracts to Fortune 500 firms as small business contracts is ludicrous. He should be forced to resign immediately for making such statements.

 

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