Small-business numbers questioned

The Small Business Administration may have overstated the percentage of federal contracts going to small businesses in a recently released report, according to outside experts.

An SBA report released this week states that small businesses were awarded $69.23 billion worth of prime federal contracts in fiscal 2004, just over the minimum 23 percent statutory requirement.

But the percentage calculations exclude a slew of agency procurements, including contracts performed outside the United States and those funded by a number of agencies such as the Transportation Security Administration and the U.S. Postal Service.

“If you included the money that’s excluded right now, the percentage would go down a couple points,” said Paul Murphy, president of Eagle Eye Publishers, a government market intelligence firm.

Why some contract dollars were excluded from the study baseline is unclear, Murphy said. “It needs to be demonstrated, to validate the methodology. Otherwise, it just looks like they are artificially inflating the small-business share.”

Rep. Nydia Velázquez (D-N.Y.), ranking member of the House Small Business Committee, also attacked the numbers. SBA “continues to inflate, manipulate and misrepresent contracting data with the goal of hiding the true picture of what agencies are doing, which only masks the problems facing small firms today,” she said in a written statement.

Excluded contracts could add 10 percent to the approximately $300 billion worth of prime contracts awarded in 2004, said Raul Cisneros, an SBA spokesman. As a matter of agency policy, the baseline against which small-business wins are measured includes contracts funded with appropriated money that are covered by the Federal Acquisition Regulation, an agency document states.

“We anticipate following the same procedure when we next update the goaling guidelines,” Cisneros added.

The agency’s report marks the first time SBA has used the Federal Procurement Data System-Next Generation (FPDS-NG) as the source for the small-business report. Critics complain that the revamped federal database contains errors. The SBA report said that transitioning to FPDS-NG has created a number of data challenges but said the business impact of most of those challenges is minimal.

Evaluating impact is a matter of perspective, said Timothy Yeaney, Eagle Eye’s vice president. “With 1.7 billion records and only tens of thousands of errors, I guess you could call it minimal,” he said.

Yeaney said that vendor information transferred from another database into FPDS-NG introduced numerous errors because “they basically opened the floodgates and turned off all error checking.”

About the Author

David Perera is a special contributor to Defense Systems.

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