New Loopholes Could Cost Small Businesses Billions

The Senate Committee on Small Business and Entrepreneurship unanimously approved measures, included in legislation reauthorizing the Small Business Administration (SBA), that will allow the government to report billions of dollars in contracts to large firms as federal small business awards.


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“If these new loopholes become law, they will do more to divert funds from small businesses than any potential solutions the Senate has proposed will fix,” Lloyd Chapman, president of the American Small Business League said. The American Small Business League was formed to promote and advocate policies that provide the greatest opportunity for small businesses, -- the 98 percent of U.S. companies with less than 100 employees.

The first provision will allow the largest financial institutions to receive federal small business status through owning a controlling interest in a small firm in the Small Business Innovation Research (SBIR) program. The second provision will allow the SBA to increase the size standards for small businesses by 150 times, to up to 1,500 employees.

A year ago, both provisions were resoundingly rejected when the SBA issued them as proposals for public comment. The response to these proposals was the highest the SBA has ever received and more than 95 percent of the comments received were violently opposed to creating new loopholes increasing the opportunities for large businesses to obtain federal small business contracts.

“I think the U.S. Senate need to realize that this country is a democracy. When the government asked people for their comments, they responded with an overwhelming 95 percent against adopting these measures,” Chapman stated. “In a country where we elected a president based on a 2 percent margin, 95 percent should be considered a mandate.”

In recent months, 13 federal investigations have found billions in small business contracts have been awarded to such large companies as Microsoft, Wal-Mart, AT&T, Rolls Royce, Lockheed Martin and Northrup Grumman.

Chapman believes the loopholes are inconsistent with the Congressional intent of passing the Small Business Act, explaining “We know that large corporations have a very strong voice in Congress. It looks like the best interests of small firms are being sold out again in favor of big money contractors.”

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