The Truth About Fraud in Federal Small Business Contracting was Published 10 Years Ago

I was just banging around on the Internet the other day and guess what I found? The first Associated Press story that ever ran nationally on the diversion of federal small business contracts to Fortune 500 firms. This was a rare find because in that first story, the Feds had not started to lie about it yet. They were actually telling the truth for the first and last time.

The story I stumbled onto was an Associate Press story written by Larry Margasak that ran in dozens of the largest newspaper in the country. The one I found was published on July 11, 2003, in the Honolulu Star Bulletin. It was titled, “Little Big Firms”. It reported how Fortune 500 firms like Verizon, AT&T, Barnes & Noble and the Dole Food Co. were receiving millions of dollars in federal small business contracts.

I found two quotes from federal officials in the story. The first was from David Drabkin, the senior procurement officer for the General Services Administration. He was referring to the fact that the actual percentage and dollar volume of federal contracts awarded to legitimate small businesses was not accurate. Since it was not accurate, the federal government had included billions of dollars in contracts to Fortune 500 firms and thousands of other big businesses in the federal government’s small business contracting data.

He stated, “The numbers are inflated, we just don’t know the extent.”

That was the first and last time any government official ever admitted the actual volume of contracts awarded to small businesses was “inflated” and the federal government had cheated American small businesses out of billions of dollars in contracts.

The story reported, “Once a company’s status in mischaracterized, it stays that way for the life of a contract—which can be 20 years. That means smaller firms the administration intended to help may be frozen out from fresh business by bigger companies with the incorrect designation.”

In referring to the fact that Fortune 500 firms have been classified as small businesses, David Drabkin stated, “not something we can clean up overnight”.

Overnight? Think about this, for over twelve years, dozens of federal investigations have found the government has been diverting hundreds of billions in federal small business contracts to many of the largest corporate giants in the world. Companies like Verizon, General Dynamics, Dell, British Aerospace and Engineering, Finmechannica in Italy, French defense giant Thales, San Jong in South Korea, Rosebornexports in Russian, Oracle, Microsoft, Home Depot, IBM, Chevron, General Electric, Hewlett-Packard, Citigroup, AT&T, Target and thousands more. For over twelve years the federal government has claimed this is the result of “miscoding, computer glitches, anomalies and simple human error.” The SBA has even tried to claim it was a “myth” that large corporations have received federal small business contracts.

I realize they may not have been able to fix the problem “overnight”, but twelve years, come on! In 2014, you have to understand that the diversion of hundreds of billions of dollars in federal small business contracts for over twelve years to Fortune 500 firms, and many of the largest corporations on earth, is clearly willful and intentional.

There is also another quote in the article that is another first and last time any federal official told the truth about why Fortune 500 firms have been allowed to hijack hundreds of billions of dollars in government small business contracts for over 12 years.

I’m talking about the Small Business Administration’s database of small businesses that just happened to include thousands of the largest companies in the world, U.S. Small Business Administration spokeswoman Sue Hensley stated,

 “This transition has led to the apparent diversion of contract dollars intended for small businesses.”

Again, the first and last time any government official admitted that federal small business contracts were being diverted to Fortune 500 firms and thousands of other large businesses.

The actual volume and percentage of federal contracts awarded to legitimate small businesses has obviously been “inflated” as Mr. Drabkin stated. It is also clear the federal government has willfully and intentionally diverted, “contract dollars intended for small businesses”, as SBA Spokeswoman, Sue Hensley, admitted in July of 2003.

In February of 2008, Presidential candidate Barrack Obama released the statement,

It is time to end the diversion of federal small business contracts to corporate giants.

Every year of the Obama Administration, the Inspector General for the Small Business Administration that was appointed by President Obama, Peg Gustafson, has named the diversion of federal small business contracts to large businesses as the number one problem at the SBA.

Dozens of congressional hearings, federal investigations and investigative reports in the media have confirmed the rampant fraud and abuse against small businesses.

In fiscal year 2012, over 235 Fortune 500 firms received federal small business contracts.

This fraud against American small businesses has gone on for over 12 years. The 28 million small businesses where most Americans work have been cheated out of well over a trillion dollars in federal contracts during the last decade. How much longer will the mainstream media, the President and Congress allow this fraud to continue?

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Lloyd Chapman

Lloyd Chapman

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