SBA: Some contracts to large firms counted as small-biz deals

About $2 billion in federal contracts were miscoded as going to small rather than large businesses in fiscal 2002, resulting in distorted procurement statistics, according to a report issued this week by the Small Business Administration's advocacy office.

A study done for the office, completed by Eagle Eye Publishers Inc. of Fairfax, Va., found that 44 of the top 1,000 small business contractors with contracts totaling $2 billion in 2002 were miscoded as small businesses. Among those companies were 39 large companies and five contractors classified as 'other' entities, including non-profit and government organizations.

If these awards had been coded as going to large businesses or 'other' entities, the share for small business procurements for 2002 would have been lowered from 20.5 percent to 19.7 percent, the report said.

The business coding analysis report looked at contracts awarded to the 1,000 largest federal small-business contractors, according to their dollar volume, in 2002. Data from the federal government's master contract database, called Individual Contract Action Report, was combined with Eagle Eye's proprietary data on parent firms listed in the ICAR database as well as with other commercial and federal databases.

'This report clearly shows that there are problems with the federal procurement system,' said Thomas Sullivan, chief counsel for the SBA's Office of Advocacy, the government's small-business watchdog. 'We now have hard data, and not just anecdotes, from across federal agencies that show contracts meant for small businesses were going to larger firms.'

The report said small-business coding problems in the Individual Contract Action Report database, which is maintained by the General Services Administration's Federal Procurement Data System, appear to have been caused by:

  • Erroneous company size or type codes assigned by contract officers

  • Large firms acquiring small firms during the fiscal year

  • Small-business designations linked to GSA schedule contracts remaining unchanged through the five-year terms of a company's schedule contract, or small firms outgrowing some of their size standards during the fiscal year

  • Firms designating all revenues as small-business revenues when they are qualified as small in just one or a small number of North American Industry Classification System categories

  • Incorrectly assigned parent company affiliations

  • Unreported GSA schedule and multiple award contract awards.

As a remedy, the report recommended:

  • Federal policymakers review and streamline agency policies for designating vendors as small businesses

  • Contract officers have clear and consistent guidelines for identifying small vendors as they complete various contract reports

  • Database update procedures be reviewed to ensure that information from the government's official vendor data repository, the Central Contract Registry, is always current and accurate

  • GSA's Federal Procurement Data Systems report contract awards in a more timely manner to enable public challenges to contract winner size designations within the allotted time for post-award size protests, as well as to assist SBA and other agency small-business officials in reviewing small-business size.

'What's needed is more transparency in the contracting system and timely public access to user friendly procurement data, so that mistakes and other problems can be quickly corrected,' Sullivan said.

Last week, SBA set a new policy requiring businesses to recertify themselves as small for federal contracts transferred to them from another business if the contract is to be counted as a small-business contract. See story.

The report is available here


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