Contracting Update: Play It Again, (Uncle) Sam

In Casablanca, the classic 1942 movie, Capt. Renault uttered an immortal line after the evil Major Strasser had been shot in Rick's bar: "Round up the usual suspects."

The statement could also apply to the Small Business Administration, which just released the latest figures on contracts awarded last year to small businesses under various set-aside programs. It seems more than two thirds of the agencies failed to meet contracting goals again last year, causing the government to miss its overall target for the fifth year in a row as well.

For the SBA, it was time to round up the usual suspects.

During a recent teleconference, SBA Administrator Steven Preston cited "miscoding" as one of the main reasons that several large and well-known corporations were still receiving federal small business contracts. His statements produced an immediate reaction from one of the agency's longtime critics.

"For the fifth consecutive year the Small Business Administration has cited miscoding as one of the primary reasons for the diversion of billions of dollars in federal small business contracts to some of the nation's largest defense contractors," said Lloyd Chapman, president and founder of the American Small Business League.

"In the last five years, the SBA has been unable to explain why miscoding, which should be a random occurrence, tends to happen only in situations involving contracts to large companies miscoded as small business contract awards and not as large business contract awards to small companies," he added.

For his part, Preston did his best to highlight the positive. "We have a lot of work to do," he acknowledged. "But we are going in the right direction." By that he meant a new "traffic light" rating system to measure how well various agency were doing in complying with contract set asides. The SBA has also asked agencies to scrubbed their contract roles to eliminate miscoded contracts.

In all, small businesses received contracts worth $77.7 billion, which, by SBA estimates, constitutes 22.8 percent of all federal contract dollars. By law, the government must award 23 percent of all contracts to SMBs.

But even those numbers are suspect. Eagle Eye Inc., a Fairfax, Va., research firm that tracks government contracts, said in a recent report that by its count only 20 percent of all prime contracts went to small businesses last year.

According to Senate small business committee Chairman John Kerry, D-Mass., the administration's track record could have been even worse. Almost $72 billion in contracts were excluded in the SBA's accounting because of special exemptions and other reasons. Those contracts would have reduced SMB awards to 19 percent.

The government also fell short of contracting goals for women-owned, veteran-owned, and disabled-veteran-owned firms and firms located in disadvantaged areas, known as HUBZones.

Disappointment with the SBA's record was bipartisan. "I am dismayed by the myriad ways that government agencies have time and again egregiously failed to meet most of their small business statutory 'goaling' requirements," said Sen. Olympia Snowe, R-Maine, the Senate small business committee's ranking member.