SBA: Large firms credited with small-biz deals

Analysis of Type of Business Coding for the Top 1,000 Contractors Receiving Small Business Awards in FY 2002

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Large businesses took $2 billion in federal contracts that had been intended for small firms in fiscal 2002, according to a report released late last month.

The report, written by Eagle Eye Publishers and released by the Office of Advocacy at the Small Business Administration, shows that some companies have been miscoded as small businesses. Contracts to those businesses are wrongly credited as small-business contracts, according to Thomas Sullivan, chief counsel for advocacy at SBA.

"We now have hard data and not just anecdotes from across federal agencies that shows contracts meant for small businesses were going to larger firms," he said. "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 quickly be corrected."

Eagle Eye analysts studied contracts that went to the 1,000 largest small businesses. The analysts used a combination of data from the government's Individual Contract Action Report and Eagle Eye's proprietary data. The report found that 44 of the firms were not small businesses, 39 were larger companies and five were classed as "other," which encompasses nonprofit organizations and government entities.

The companies include well-known contractors, such as Anteon, BAE Systems, Computer Sciences Corp., Northrop Grumman, Raytheon and Titan.

According to the report, correctly accounting for he $2 billion in misclassified small business contracts would have reduced the total reported small-business deals in fiscal 2002 from $50.8 billion to $48.8 billion. The finding also cuts the percentage of procurement awarded to small firms that year from 20.5 percent to 19.7 percent, based on Eagle Eye officials' estimates.

The report notes that the incorrect classifications could have arisen for a number of reasons, including coding errors and cases where the larger company acquired a small business during the fiscal year.

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