Looming large: are small-business contracts really going to the big guys?

Entrepreneur, Sept, 2003 by Stephen Barlas

SIZE COUNTS. OR AT LEAST IT SHOULD WHEN IT COMES to the federal government's vendor database, Pro-Net/CCR. Too many big businesses are listed there as "small," allowing them to be awaked "an alarming percentage" of small-business set-aside contracts, according to Lloyd Chapman, president of the Microcomputer Industry Suppliers Association.

The General Accounting Office (GAO) backed up Chapman's complaint in a recent report. David E. Cooper, contracting issues director at the GAO, told the House Small Business Committee that five large companies received $460 million in small-business contracts in fiscal year 2001. He wasn't able to provide the total large-business bite out of the small-business pie, however. Federal law says small business should get 23 percent of federal prime contract dollars, which totaled $50 billion in fiscal 2001.

Many big companies listed as "small" in Pro-Net/CCR started out below the SBA small-business-size ceiling, which differs from industry to industry. But they eventually outgrew that designation, a fact that was not reflected, in the database. "Over the past six months, more than 600 businesses have been removed from Pro-Net because they are not small businesses," says the SBA's Fred C. Armendariz.

The SBA has had trouble keeping Pro-Net/CCR data accurate,because Congress did not allocate funds for the SBA line-item appropriation for Pro-Net/CCR in fiscal 2002 and 2003. In fiscal 2001, the SBA had $500,000 to run the database. Negotiations to move the database from the SBA to a better-funded agency, such as the Defense Department, are underway.

STEPHEN BARLAS is a freelance business reporter who covers the Washington beat for 15 magazines.