Big guys took small-biz deals, CPI says

A new report from a public interest group shows that 30 percent of defense contract money that agency officials said had been awarded to small businesses actually went to large firms.

The Center for Public Integrity documented the figures, highlighting an issue that has long been a sticking point for small companies and the Small Business Administration — loopholes in the rules that allow larger companies to take small-business dollars.

According to the CPI report, Defense Department officials awarded more than $47 billion in contracts designated for small businesses to companies that have each earned more than $100 million during the six-year period studied — 1998 to 2003.

There are a number of ways that large companies can get the small-business contracts, often without technically violating any rules. The CPI study, for example, refers to Titan Corp.'s acquisition of SenCom Corp. in 2000. Titan officials acquired the small company and its $176 million in contracts that had been meant for small business.

A new SBA rule set to go into effect in December would require companies to recertify their size status after an acquisition.

Companies that win contracts while small had long been able to retain the small status for the duration of the contract, which can be 20 years for General Services Administration schedules and some other vehicles. In recent months, SBA officials and others have wrangled about possibly requiring small businesses to recertify their size as often as one a year.

GSA and Office of Federal Procurement Policy officials have taken some steps that SBA officials have not followed so far, said Dave Nadler, a procurement attorney with Dickstein Shapiro Morin & Oshinsky LLP. GSA officials require business owners to recertify their company size every five years. OFPP officials require annual recertification of vendors on governmentwide acquisition contracts.

This week, a small-business advocacy group, called the American Small Business League, filed a lawsuit demanding that SBA officials release a report that ASBL founder and president Lloyd Chapman believes will reveal extensive fraud among government contractors.

"The Center for Public Integrity's study on contract abuse is just the tip of the iceberg," he said.

According to CPI, 55 of the top 100 defense contractors received at least $10 million in contracts with small-business designations during the past six years, at a total value of $9.3 billion.