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Fewer Small Business Contracts for Big Business? House Bill Aims to Curb Diversion

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By Caleb Groos on June 01, 2009 11:33 AM

Recently, a bill was introduced that could potentially help ensure that federal small business contracts actually go to small businesses. The Fairness and Transparency in Contracting Act of 2009 would modify the definition of small business in the Small Business Act to exclude publicly traded companies and would create a complaint system for resolution of disputed contract awards.

Reports of government small business contracts going to subsidiaries of large corporations are not new. Since 2003, at least a dozen federal investigations have reportedly found contracts meant for small business going to Fortune 500 and other large companies around the world. This past March, the Government Accountability Office (GAO) released a report finding fraud and abuse in the SBA's Historically Underutilized Business Zone (HUBZone) initiative regarding approximately $30 million in contracts.

The most important change the Fairness and Transparency in Contracting Act of 2009 is also the most simple -- excluding publicly traded companies from the Small Business Act's definition of "independently owned and operated" businesses, which can qualify as small business concerns. Lloyd Chapman on the Huffington Post foresees this seeming no-brainer having huge effect if enacted. He cites high level government sources stating that up to 86% of small business contracts end up in the hands of big business.

The bill, introduced by Georgia Representative Hank Johnson, would also require each federal department and agency to maintain a database detailing each business awards a contract based on being classified as a small business.

Furthermore, the bill would also create a system through which complaints could be filed with the SBA or head of any department or agency regarding contract awards to businesses of disputed smallness. Annually, the SBA would be required to report to Congress on these complaints and how they were resolved.

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