SBA draft report emerges

SBA draft report

Small Business Administration officials have released an early draft of a published report that documents inaccuracies in the reporting of small-business contracting dollars. But it does not document deliberate fraud as an activist who had fought for the report had hoped it would.

SBA had released a final version of the report in late 2004, showing that of the top 1,000 contractors receiving small-business contracts, 44 could not be accurately classified as small. The report, conducted by Eagle Eye Publishing, concluded that 39 of the 44 were large businesses, and five were classified as other. The miscoding in fiscal 2002 caused officials to inaccurately report $2 billion as small-business contracting, the report concludes.

Eagle Eye originally filed the report in 2003.

The report and SBA officials avoided trying to identify the causes of the inaccuracies, citing several possible reasons without delving further. Lloyd Chapman, president of the American Small Business League, filed a Freedom of Information Act request and then a lawsuit demanding earlier drafts, which he believed showed evidence of deliberate fraud that SBA officials removed from the final version. A judge ruled in Chapman's favor in May.

The draft document does list vendor deception as one possible cause, a consideration that does not appear on the list of possible reasons in the final version. However, the draft is equally inconclusive about which of the possible causes are likely to be true.

"The study does not attempt to assign blame or prove guilt but rather describe the scope of the small-business coding problem in order to improve contract data reporting," the draft report states.

Chapman said he believes SBA has not yet released all of the documents he wants, and he plans to continue pushing for more.

John McDowell, press secretary at the SBA's Office of Advocacy, said Chapman is looking for something that isn't there.

"All of our edits were designed to eliminate speculation and produce a quality report that was grounded in sound data," he said. "It is disappointing that [Chapman's] only reaction to an original draft that does not contain a smoking gun was to allege that the Chief Counsel for Advocacy violated a court order by releasing the wrong document."

Chapman said he believes that SBA officials are trying to make it easier for large companies to take small-business contracts. His organization believes that small businesses should be defined as those with less than 100 employees and that there should be no intermediate period or grandfathering mechanism that allows companies that outgrow their small status to continue benefiting from small-business programs, even temporarily.