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Fraud, Abuse in Small Business Contracting Programs Needs to End Now

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One of the most important problems raised by recent news of the General Services Administration's (GSA) trip to Las Vegas on the taxpayer's dime is the abuse of federal small business contracting programs.

The GSA Inspector General's (IG) report on over $800,000 of taxpayer money that was spent on a GSA Las Vegas "conference" in 2010 found that the GSA was guilty of "awarding a $58,000 contract to a large business in violation of small-business set-asides."

Current federal law states that 23 percent of all federal contracts must be awarded to small businesses. This is extremely important for the national economy because small businesses create 90 percent of net news jobs, according to the U.S. Census Bureau, and because the U.S. government is the world's single largest buyer of goods and services (spending more than $500 billion every year through federal contracts).

Unfortunately, fraud and abuse in small business contracting programs like what we have seen from the GSA consistently stifles economic growth and job creation. Even worse, rampant fraud and abuse in federal small business contracting programs is not exclusive to the GSA.

What hasn't been made clear by the president, Congress and the mainstream media is that the GSA scandal is a sample of what has been going on daily, at every federal agency, for over a decade.

Research into the Federal Procurement Data System by the American Small Business League suggests that federal small business contracting fraud and abuse costs small businesses over $100 million a day.

Additionally, there has literally never been a single federal investigation into federal small business contracting programs that did not reveal blatant instances of large companies receiving federal small business contracts. A series of over a dozen federal investigations conducted since 2003 confirm that every year tens of billions of dollars worth of federal contracts that are meant for small businesses are illegally diverted to large companies.

As a result, the national economy suffers and small businesses receive far less than 23 percent of all federal contracts.

GSA IG Brian Miller testified before the House Oversight and Government Reform Committee on Monday, confirming that the bidding process for the $58,000 small business contract awarded by the GSA to a large company for the Las Vegas Conference, was rigged. The favored bidder was given information about its competitors' bids. In his testimony, Mr. Miller said this was "about as much against the rules as you can think of."

Acting GSA administrator Dan Taghlerini also testified Monday that "the report details violations of ... acquisition rules, and good conduct." (Acquisition is a word that describes the process of when federal agencies issue contracts to vendors for the purchase of goods and services). In his testimony, Taghlerini promised that he is "committed to taking whatever steps necessary... to ensure that nothing like this ever happens again."

Therefore, the American Small Business League would like to renew dialogue about abuse of federal small business contracting programs.

We ask that the GSA official who rigged the bidding process in Las Vegas and awarded a contract that should have been a small business set-aside to a large company be investigated for felony contracting fraud and prosecuted to the fullest extent of the law if found guilty.

Section 16(d) of the Small Business Act states, "whoever misrepresents the status of any concern or person as a 'small business concern,'" shall be subject to a fine of as much as $500,000, up to 10 years in prison, or both. ASBL attorneys believe contracting officers and government officials fall under the jurisdiction of section 16(d).

Failing to prosecute government officials and firms who commit felony contracting fraud will ensure that contracting abuses continue to occur every day in the federal marketplace. In fact, Government Accountability Office report 10-108 found that "By failing to hold firms accountable, SBA and contracting agencies send a message to the contracting community that there is no punishment or consequences for committing fraud." The same obviously applies to government officials.

To Mr. Taghlerini: When you swore before Congress on Monday that you would ensure that nothing like we have seen at the GSA Las Vegas "conference" would ever happen again, I hope that meant you would act to end the diversion of federal small business contracts to large companies government-wide, starting with your own agency.