Advocacy group sues SBA

A small-business advocacy group has sued the Small Business Administration, claiming the agency is withholding information on contracting abuses.

The American Small Business League, in a suit filed today in U.S. District Court for the Northern District of California, alleges that the agency has refused its requests to identify Fortune 1000 companies that got small-business contracts in 2005 and 2006.

The ASBL has filed Freedom of Information Act requests asking SBA to release the names of all firms listed as small businesses in those years. The group says SBA has refused to do so.

Several investigations have revealed that large companies sometimes reap the benefits of small-business set-aside contracts. In early 2005, SBA officials released a 2004 report showing that $2 billion of the $50.8 billion earmarked for small businesses in fiscal 2002 did not get to them. The study found that of the top 1,000 businesses receiving federal small-business set-aside contracts in 2002, 44 were not small businesses.

In the past, companies could acquire small businesses and agencies could continue to count contracts they held with the small businesses as contributing to their small-business contracting goals. A new rule that went into effect in 2007 requires the small firms to recertify their size after being acquired. If the firms no longer qualify as small, agencies lose the credit and have the option of terminating the contract.

Other possible reasons for the mis-spending of small business dollars include using incorrect industry codes and deliberate fraud. The system SBA uses to determine whether a business is small is complicated, and efforts to simplify it have so far not been successul.

ASBL believes SBA officials are concealing information that would illuminate the full scope of the problem. The new lawsuit is the fourth that the organization has filed seeking to force the release of information.

"I am sure that we will win this lawsuit," ASBL President Lloyd Chapman said. "I want people to know that when the government diverts $100 billion a year in contracts from middle-class America, there is a staggering negative economic impact. I don't think there is any question that the Bush administration's anti-small-business policies have been a contributing factor to our nation's current economic woes."

The group plans to file similar lawsuits against the Defense Department and the General Services Administration in the next couple of months.

"We don't know anything about this lawsuit. We haven't seen it yet," said an SBA spokeswoman. "What we do know is there are two government run public web sites that provide this" information.

The sites are the Federal Procurement Data System at http://fpdsng.gov, and http://usaspending.gov.