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Big firms got small business cash

By ASSOCIATED PRESS
Published July 27, 2006

WASHINGTON - A report released Wednesday by Democratic congressional investigators shows at least $12-billion in contracts the government said it gave to small companies last year wound up instead in the coffers of large companies like Microsoft and Rolls-Royce, investigators said.

When small business contracts with large companies are excluded, the government missed for a sixth straight year a requirement that 23 percent of its $314-billion in annual contracts go to small businesses, the report said.

There were two basic problems, the investigators said: Federal agencies miscoded thousands of contracts to big companies as small business awards. And many other companies that started small grew large or were purchased by corporate giants but continued to get small business contracts.

"It's just unbelievable," said Rep. Nydia Velazquez of New York, the top Democrat on the House Small Business Committee. "We have just got to start holding agencies accountable."

Velazquez has asked the Government Accountability Office and internal watchdogs for the State, Treasury, Defense and Transportation departments to investigate their contracting procedures and see if criminal activity is involved.

Under federal law, representatives of large companies that falsely claim to be small firms can be punished with 10 years in prison, $500,000 in fines, and a permanent ban from doing government business.

Generally, the government defines a small business as one with fewer than 500 employees, though that limit can vary among industries. In general, retail firms can only have maximum average annual receipts of $6.5-million.

The Small Business Administration last month issued a report saying the government gave 25.4 percent of its contract dollars in 2005 to small firms. SBA said it relied on contracting figures provided by each federal agency. The Democrats' report said the accurate figure was 21.6 percent.

When asked about corporate giants appearing in the tally, SBA spokesman Raul Cisneros said, "That's the official information that agencies give us."

The House Democrats' report, however, said the administration's tally of small business contracts in 2005 included some of the world's largest companies:

- Computer giant Microsoft Corp. won eight small business contracts worth $1.5-million. Five contracts, worth $475,000, came from the Pentagon. The others came from the DEA and the Bureau of Prisons.

- Rolls-Royce PLC received $2.2-million in 63 separate contract actions. The bulk came from the Navy, which spent $2-million on 53 Rolls contracts.

- Wal-Mart Stores Inc., whose more than 1.5-million workers make it the nation's largest private employer, received three small business contracts totaling $14,232 from the Army.

- Exxon Mobil Corp., with $370-billion in annual revenues in 2005, won a $63,855 contract from the Pentagon's Defense Logistics Agency and a $50,000 award from the Interior Department's Minerals Management Service. A spokesman said the company was investigating the issue but said the Irving, Texas-based corporation has thousands of annual transactions with the government.

- Google Inc., the Internet search giant, won separate contracts from the U.S. Coast Guard ($41,800), the Peace Corps ($15,000) and the Federal Highway Administration ($2,995).

Tom Greer, a spokesman for Lockheed Martin, said it's a common problem. The Bethesda-based aeronautics giant has 135,000 employees and reported $37-billion in sales last year. The House panel, however, found that government agencies classified $8-million in Lockheed contracts as small business awards. Greer said the company has often had to ask federal agencies to correct records showing Lockheed as a small business.

"We don't compete with small businesses for federal contracts," he said.

Velazquez said she plans to write about 2,500 big companies, asking them to remove their names from a government list of approved small business firms, and will seek legislation to punish agencies that cheat.

House Republicans said much of the controversy can be attributed to small businesses that have prospered under the Bush administration, either adding enough employees to become a large company or being acquired by large businesses.

"Should the firm be penalized for success?" said Rich Carter, a GOP spokesman for the House Small Business Committee.

[Last modified July 27, 2006, 01:01:14]