News From the
Committee on Small Business
Nydia M. Velázquez, Ranking Democratic Member

For Immediate Release
July 26, 2006

CONTACT: Kate Davis (202) 225-4038

Federal Government Fails to Meet Small Business Goal
Report shows large businesses recieving small business awards, Democrats call for investigation

WASHINGTON - Today, Democrats on the House Small Business Committee released a report, showing that the federal government failed to meet its small business contracting goal for the sixth consecutive year. Scorecard VII found that nearly $12 billion dollars had been miscoded as small business awards, when in reality the contracts went to large businesses in FY 2005. The Bush administration recently stated that the federal government had achieved their goal by 25.36 percent; however, when miscoding was accounted for, the small business achievement was only 21.57, costing these firms $4.5 billion in lost contracting opportunity in the past year alone.

"What we are seeing is a sheer lack of accountability from the administration that is resulting in these large businesses receiving small business awards," Congresswoman Nydia M. Velázquez, Ranking Democrat on the House Small Business Committee said. "As a consequence, entrepreneurs are getting less and less contracting opportunities each year."

Miscoding first became a large concern in 2004 when the Small Business Administration's (SBA) Office of Advocacy released a report showing that $2 billion had been miscoded in 2002. Four years later, six times that initial amount has been miscoded - leaving small businesses with even less contracts and inflating agencies' small business achievements. The analysis found that over 2500 large companies and ineligible entities received contracts, including Fortune 500 companies, universities and not-for-profits. Of these firms, only 3 percent were small businesses that grew - illustrating that the majority are large companies or ineligible entities receiving small business awards. By creating a false perception that small business goals are met through miscoding, Scorecard VII concluded that agencies are engaging in practices harmful to small businesses, such as contract bundling. The report found those agencies with over 15 percent of miscoded businesses also showed indications of bundling.

These practices contributed to the federal government's overall failing grade this year of D. Twelve agencies received failing grades in Scorecard VII, and the Departments of Education, Energy and USAID have received Fs every year since the inception of the report. Not only was the small business goal not met, but not one of the sub small business goals were met, including women business owners and minority entrepreneurs. Women business owners lost out on $5.2 billion and minority business owners lost out on $4.5 billion. Congresswoman Velázquez commented on the myriad of issues plaguing small businesses in the federal marketplace, "What we need to see today is action - these are not just numbers or issues, these are problems for real life small business owners that must come to an end."

Democrats on the committee called on the GAO to investigate whether or not these large businesses are intentionally certifying themselves as small. In addition, they are requesting that the Inspector Generals for the four agencies which had the most incidents of miscoding - Departments of Treasury, Transportation, State and Education - conduct investigations to determine if their contracting officers are utilizing miscoding to meet small business goals. The committee is also sending letters to each of the 2500 large businesses and ineligible entities that received small business awards, asking that they take responsibility and action to rectify the situation.

"While agencies and big businesses turn their backs, the problem is only getting worse for small businesses, to the point where we are seeing record lows of small business achievement in the federal marketplace," Congresswoman Velázquez said. "Today's report shows that the problems facing this nation's small businesses are only getting worse - and it is my hope that the release of the report today will help put an end to all of this."

First established in 1999, the Scorecard report is the first ever comprehensive report of its kind, evaluating how small businesses are faring in the federal marketplace.

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