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Federal Contracts Draw New Scrutiny

New questions about federal contracts for small businesses that aren’t.

The federal government's dismal record on small-business contracts has again drawn scrutiny. In June, the Small Business Administration released the original draft of a 2004 report that sheds light on just how companies like Hewlett-Packard and Raytheon have been miscategorized as "small businesses—and thus eligible for some of the $60 billion a year the Feds earmark for such companies. A California court ordered the SBA to release the document in April.

The draft report's existence came to light thanks to Lloyd Chapman (below), a self-styled small-business advocate and longtime SBA critic. In 2003, Chapman's testimony before Congress on the subject led to the SBA purging 600 large firms from its in-house database of "small contractors.

One difference between the draft and the published report is the deletion of "vendor deception as a reason for misdirected contracts. Chapman believes this indicates that the SBA awarded contracts to big corporations intentionally. Though the SBA admits no wrongdoing, it is soliciting public feedback on how to improve small-business contracting.

Last updated: Aug 1, 2005

DARREN DAHL is a contributing editor at Inc. Magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, NC.

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