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.