09/08/2008 05:12 am ET Updated May 25, 2011

SBA Blackwater Problem Just a Piece of a Bigger Issue

Today, the Washington Post's, "Government Inc." blog by Robert O'Harrow Jr. stated:

"Like companies across the land, Blackwater sought to be designated as a small business to win contracts more easily from the State Department or other agencies. But is it also possible that government procurement officials wanted to apply the designation to Blackwater to make it easier to award the contracts?

Don't laugh. It happens all the time."

The re-emergence of this issue brings us back to a press release distributed by the American Small Business League (ASBL) on July 30th, which found that from 2004 to 2008 Blackwater received upwards of $1.07 billion in federal contracts coded as small business contracts. Additionally, the ASBL reported that if the SBA had made the determination that Blackwater's 1000 "independent contractors" were employees as opposed to independent contractors, the firm would have exceeded the small business size standard for its industry by 250 employees. To read more please click here

Since 2002, there have been more than a dozen federal investigations and private studies that have all found that the actual recipients of federal small business contracts were Fortune 500 corporations. In fact, as recently as July 1st, the Department of Interior Office of Inspector General found that the DOI had inflated its and the federal government's small business contracting statistics by counting contracts to Fortune 500 corporations.

The report specifically referenced the household names of Dell, Xerox, and John Deere as firms that had received millions of dollars in federal small business contracts from the DOI. In an independent study of the DOI's top 100 recipients of federal small business contracts from both 2006 and 2007, the ASBL found that the DOI had reported more than $430 million in federal small business contracts to large firms. 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.

Clearly, Blackwater receiving federal small business contracts is just the tip of the iceberg. The diversion of small business contracts to large corporations is not an isolated issue. Every year, billions of dollars in contracts intended for legitimate small businesses are awarded to some of the largest corporations in the United States and Europe, and the federal government is using those contracts to meet its small business procurement goal.

It is time to address this issue, and it is time to solve this problem.

To read the entire Washington Post blog, please click here: