SBA "Safe Harbor From Fraud" Policy Gets Thumbs Down From Public

PETALUMA, Calif., Sept. 10, 2014 /PRNewswire-USNewswire/ -- The Small Business Administration (SBA) has concluded taking public comment on a controversial new policy that would create a "safe harbor from fraud penalties" for large businesses that commit fraud to illegally land federal small business contracts.

Not surprisingly over 90 percent of the public comments the SBA received on the "safe harbor fraud penalties" policy were strongly opposed to it. The SBA only received two comments that favored the new policy and both of those were from law firms that represent large businesses.

One comment from Edward Kinberg describes, "This rule will open the door to government sanctioned fraud. Rather than take any action to ensure a business meets the size standard for a procurement, they would be able to "guess" that they do, win the contract and IF their fraud is discovered claim it was an innocent mistake."

The American Small Business League (ASBL) sent the SBA a comment that was strongly opposed to the policy they believe will actually encourage fraud in federal small business contracting programs and protect fraudulent firms.

Under current federal law, the penalty for any large business that misrepresents itself as a small business to illegally land federal small business contracts is up to ten years in prison, a $500,000 fine per occurrence or both. Under the proposed "safe harbor from fraud penalties" policy, a large business that commits felony federal contracting fraud can avoid all penalties by simply claiming they "acted in good faith."

A survey of over 2000 Chambers of Commerce across the country by the American Small Business League found the overwhelming majority of Chambers were strongly opposed to the policy.

Every year since 2005 the SBA's own Office of Inspector General has named the diversion of federal small business contracts to large businesses as the number one problem at the SBA. In Report 5-15 the SBA Inspector General described the problem as, "One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal government today…"

Report 5-16 from the SBA Inspector General found large businesses were committing fraud to hijack federal small business contracts by making "false certifications."

Even President Obama recognized the magnitude of fraud in federal small business contracting programs when he released the statement, "It is time to end the diversion of federal small business contracts to corporate giants."

Dozens of major newspapers along with ABC, CBS, NBC, CNN, MSNBC, RTTV, Fox News and CNBC have all reported on the issue.

The SBA Office of Inspector General began finding widespread fraud in federal small business contracting programs as early as 1995.

It is unclear what the SBA's next step will be in attempting to adopt the "safe harbor from fraud penalties" policy considering the overwhelming public opposition to the policy.

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SOURCE American Small Business League