Federal Government Misses Small Business Contract Goal - Again

By: CNN Posted By: Stephanie Schultz
By: CNN Posted By: Stephanie Schultz

NEW YORK (CNNMoney) -- For the sixth year in a row, the government has missed its goal to award 23% of all federal contract dollars to small businesses.

On Tuesday, the Small Business Administration reported that federal agencies gave out 21.7% to small companies. That sounds close, but means that small businesses did not receive $3.8 billion set aside for them.

The contracts are awarded by all federal departments for a wide array of projects and jobs. They funnel hundreds of billions of dollars every year to the private sector.

The awarding goal, which was raised slightly to 23% in 1997, was part of the same 1953 law that established the SBA. It was created to support small companies and avoid having large ones, such as Boeing and Lockheed Martin, gobble up all the federal money.

But the government has missed the target consistently. Small businesses have missed out on at least $25.7 billion in contracts since 2006, the last year the government reached its goal.

The SBA did not provide comment about the failure of agencies to meet the goal. It pointed to a blog post that discussed its efforts to minimize fraud and increase participation of small companies.

The chairman of the House Small Business Committee, Rep. Sam Graves (R-MO), has pushed legislation that aims to increase transparency in contracting and punish the agencies that fail to meet the goal.

The legislation also provides for educating contracting officers who often mislabel contracts worth millions as "small business" contracts, even though they're directed to subsidiaries of major corporations.

A provision in the legislation also raises the goal from 23% to 25%, which sounds unrealistic given the track record. But Graves insists even the higher target is achievable.

"Solutions to both of these problems can be accomplished at the same time. The goal hasn't been met, because there hasn't been an incentive for agency staff to do so," Graves said.

The government has reached its 23% target only three times in the past dozen years.

One group long critical of federal contracting procedures said the situation is worse than it appears.

The American Small Business League, which analyzes thousands of contracts every year, points to mistakes by federal contract officers and said they inflate the numbers.

"I endorsed Barack Obama for president, but I couldn't be more disappointed," said Lloyd Chapman, the group's president. "Ending the diversion of federal small business contracting to corporate giants around the world would create more jobs than anything President Obama has ever proposed."


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