Lax Oversight a Problem in Federal SMB Programs

Ann All

I wrote last year about concerns associated with the growing number of federal outsourcing contracts during the Bush administration and the government's apparently lax oversight of those contracts.


Oversight appears to be an especially big issue for the Small Business Administration. The agency's HUBZone program, which is supposed to award government contracts to SMBs in economically disadvantaged areas, is at the center of a controversy following the release of a Government Accounting Office report that highlighted a number of problems.


After determining six out of 10 of the Washington, D.C.-area companies it examined failed to meet the program's goals but nonetheless were collectively awarded more than $100 million in HUBZone contracts, the GAO set up four fictitious SMBs. All were readily accepted into the HUBZone program, despite the fact that one listed a Starbucks outlet as its headquarters and another submitted forged documents to the SBA, according to a report on AllBusiness.


Problems were also discovered in a separate investigation by the Department of the Interior's Office of Inspector General, which found that Fortune 500 companies like Home Depot and John Deere had wrongfully been awarded DOI contracts intended for SMBs. The DOI attributed the mistakes to "incorrect coding, data entry mistakes, or insufficient verification of business size" and said such errors accounted for $1.03 million, or 0.06 percent of the total $1.6 billion such contracts awarded in fiscal 2007.


Yet the American Small Business League believes the problem is much more widespread than the DOI's report indicates. After reviewing the top 100 recipients of DOI small business contracts for fiscal years 2006 and 2007, the ABSL said that 22 large companies received more than $200 million in federal small business contracts in 2006 and 28 large companies got more than $230 million in such contracts in 2007.


Says ASBL President Lloyd Chapman:

The Bush administration has tried to convince us for six years now that the diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 firms is the result of 'miscoding' or random data entry errors. It is simply not believable that for over six years every time a contract is "miscoded" it just happens to inflate the Bush administration's small business contracting statistics.

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