SBA Seeks to Prevent Corporations from Landing Small-Business Contracts

Democrats call the agency's new regulations inadequate and vow tough oversight hearings next year.

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Among the many challenges facing the Small Business Administration in the coming year, topping the list are "procurement flaws" that allow large companies to obtain federal contracts set aside for small businesses, according to a recent report by the agency's Inspector General.

The report, dated Oct. 16, covers the fiscal year ending Sept. 30 and cites progress made in other SBA programs and operations. Earlier this month, the agency unveiled tougher regulations aimed at preventing contract miscoding.

The new regulations, which take effect next June, will require small-business contractors to re-certify their size every five years of a federal contract -- some of which can span 20 or more years -- and whenever a contract option is exercised. SBA Administrator Steve Preston, who has called fixing miscoded contracts a top priority, said the regulations were a "win-win situation for everyone."

Yet, the IGO report cited an earlier proposal calling for businesses to be re-certified every year, and pledged to "re-evaluate the matter to assess whether the agency should take other steps to address this problem" in light of the new regulations -- which were still pending at the time the report was completed.

The report also recommends the SBA take steps to better train federal agency contracting personnel in small-business procurement, while developing a plan to ensure they accurately report the number of small-business contract awarded every year.

Sen. John Kerry (D-Mass.), the incoming chairman of the Senate Committee on Small Business and Entrepreneurship has called the agency's new regulations inadequate.

"If there's a way to guarantee no abuse, that's our concern," Kerry said in a conference call with reporters on Nov. 16. "I know five years is too broad for that."

He vowed to launch "aggressive" oversight hearings when Congress reconvenes next year to ensure contracts are ending up in the right hand.

Congress sets a goal of awarding 23 percent of all federal contracts in a given year to small business. According to Eagle Eye Publishers, a Fairfax, Va.-based market research firm, only 17 percent of a total $377.5 billion in federal contracting dollars went to small businesses in 2005, based on figures from the General Services Administration's Federal Procurement Data System and the Department of Defense.

A report issued by Democrat lawmakers in July estimates that some 2,500 of those contracts, worth roughly $12 billion, were awarded to large companies, including Wal-Mart, Microsoft, and Coca Cola.