Federal Investigators and Congress Uncover SBA Data Significantly Inflated

PETALUMA, Calif., Sept. 30, 2014 /PRNewswire-USNewswire/ -- New investigations by the Small Business Administration (SBA) Office of Inspector General have found SBA Administrator Maria Contreras-Sweet's announcement that small businesses received 23.39 percent of all federal contracts was greatly exaggerated.

On September 24, 2014, the SBA Inspector general released Report 14-18 that found over $1.5 billion in contract actions where firms that were no longer qualified for the 8(a) and HUBZone programs were included in the 23.39 percent the SBA claimed was awarded to small businesses.

The SBA Inspector General also found another $400 million in contract actions that were awarded to ineligible firms which resulted in the significant overstatement of small business contracting dollars.

In a recent hearing in the House Committee on Small Business SBA Administrator Contreras-Sweet was confronted with data confirming the SBA had included billions of dollars in federal contracts to Fortune 500 firms in the $83 billion the SBA had claimed was awarded to small businesses. Some of the firms the SBA included in their small business contacting data included Northrop Grumman, Raytheon and Chevron.

The most recent data from the Federal Procurement Data System indicates of the top 100 recipients of the highest dollar amount of federal small business contracts, over 75% were actually current large businesses.

The latest investigation from the SBA Inspector General is in stark contrast to a new policy the SBA recently proposed that would create a "safe harbor from fraud penalties" for large businesses that are caught misrepresenting their firms as small businesses to illegally land federal small business contracts.

Under current federal law, any firm that misrepresents its status as a small business to hijack federal small business contracts can be punished by up to 10 years in prison, a $500,000 fine, or both. Under the "safe harbor from fraud penalties" policy, firms that commit felony federal contracting fraud can avoid any penalties by simply claiming they "acted in good faith."

After a public comment period of eight weeks, the SBA only received two comments that favored the new "safe harbor from fraud penalties" policy. Both of those comments were from law firms that represent large businesses. Every other comment received by the SBA was vehemently opposed to the "safe harbor from fraud penalties" policy.

The first SBA Inspector General investigation that uncovered fraud in federal small business contracting was released in 1995. In 2003 an investigation by the Government Accountability Office found over 5,000 large businesses were receiving federal small business contracts.

The American Small Business League (ASBL) has launched a national campaign to secure a Government Accountability Office (GAO) and FBI investigation to uncover the specific individuals that were responsible for the two decades of fraud that have been uncovered at the SBA.

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SOURCE American Small Business League