The $787 billion stimulus package signed into law in February has reignited concerns among some small-business owners and advocates, who question whether the U.S. Small Business Administration is prepared to handle the massive expansion of lending and investment programs.
The government's goal to award almost one quarter of its contracts to small businesses should mean plenty of work for the sector that generates six out of 10 of the country's new jobs. But these days optimism is quickly replaced by frustration. That's because many entrepreneurs are skeptical these contracts will actually go to small firms. They point to widely reported cases in which large companies have obtained small-business contracts through loopholes, government mismanagement, and even fraud.
House Committee on Small Business Chairwoman Nydia M. Velásquez (D-N.Y.) said the committee is specifically concerned about problems with the HUBZone program, which provides contract opportunities to small businesses in low-income or underdeveloped areas. An investigation by the Government Accountability Office found the SBA was doing next to nothing to verify the information of applicants who misrepresented the locations of the companies.
"The fact that (fraud) is still occurring is disturbing," she said.
Headed into the second quarter of 2009, reforms are planned. The administration intends to hire dozens more staff members to boost productivity, verify the sizes of companies, and enforce contract laws, according to Velasquez and other SBA officials.
The agency also plans a comprehensive review of those small companies that felt slighted and reach out to them to encourage them to apply for new contracts.
In mid-March, the House Committee on Small Business submitted recommendations for the Small Business Administration's Fiscal Year 2010 budget, doubling previous budgets by proposing $1.43 billion in funding for agency programs that will assist small businesses. The recommendations submitted by the committee would restore SBA funding levels similar to those under the last year of the Clinton administration.
Plans also call for $69.5 million for targeted SBA contracting programs that help small firms navigate the federal procurement process, funding for Entrepreneurial Development Programs such as the Small Business Development Centers, Women's Business Centers and other minority-run programs.
More change is ahead.
Although some critics are skeptical of the selection of venture capitalist Karen Mills to serve as SBA administrator, she has bipartisan support in Congress and she has pledged to immediately free up cash for small businesses, in an effort to salvage the battered agency and reinvigorate the economy.
Flaws In Process Cited
The SBA manages and oversees the procurement process across the federal government, including contracts tailor-made for small companies and disadvantaged and minority-owned businesses.
It negotiates small-business contracting goals with federal agencies, and then tracks their progress.
But the SBA's Inspector General and other studies have shown that management flaws have allowed large firms to receive small-business awards. A Washington Post analysis in October revealed that federal agencies made at least $5 billion in mistakes in their procurement reports, listing companies such as Lockheed Martin and Dell Computer as small. (The firms denied it was their fault).
In a HispanicBusiness magazine interview with Hector Barreto, the former administrator acknowledged serious contracting problems under his watch. But he believes that the widely publicized contracting problems were the exception rather than the rule. Toward the end of his time as head of the SBA the agency began work on closing loopholes that allow companies to continue to be classified as small businesses if they were purchased or merged with larger firms. Some of those regulations, such as a 2007 rule that requires small companies to recertify their size if they merge or are purchased by a big firm, were put in place after he left.
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