SBA rolls out 'safe harbor' policy to protect fraudulent firms

Over the last twenty-five years I have seen the federal government do some pretty slimy things but the latest proposed policy from the Small Business Administration (SBA) takes the cake.

The SBA is proposing a new policy to create a “safe harbor” from penalties for firms that have committed felony federal contracting fraud.

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I don’t expect most people would believe that, so hit the above link to the actual policy and read it for yourself.

Section 16 (d) of the Small Business Act states that any firm that misrepresents it’s self as a small business to illegally receive federal small business contracts may “be punished by a fine of not more than $500,000 or by imprisonment for not more than 10 years, or both.” It seems very clear how Congress felt about large businesses masquerading as small business to hijack federal small business contracts.

Under the new proposed SBA “safe harbor” policy, any large business that misrepresents it’s self as a small business to illegally receive federal small business contracts can simply claim they “acted in good faith” and they are exempt from any jail time or penalties.

Does this sound like the SBA is encouraging large business to commit felony federal contracting fraud and misrepresent themselves as small business to steal federal small business contracts? Oh, you would have to be a conspiracy nut to believe that, wouldn’t you? Oh wait, that’s just what the conspiracy nuts over at the Government Accountability Office found after investigating the SBA.

The Government Accountability Office essentially accused the SBA of encouraging firms to commit fraud in Report 10-108. The report states, “By failing to hold firms accountable, SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud.”

Every year for the last decade, the SBA Office of Inspector General has named the diversion of federal small business contracts to corporate giants as the number one problem at the SBA. Since 2002, a long series of federal investigations and congressional hearings have uncovered rampant fraud in virtually all SBA managed programs.

Investigative reports from ABC, CBC, NBC, CNN and some of the largest newspapers in America have all found wide spread fraud in federal government programs designed to help small businesses.

Here is the really funny part. For over 14 years the SBA has consistently denied that there is any fraud in federal small business programs. They have claimed for over a decade that many of the largest firms in the world have continued to receive hundreds of billions of dollars in federal small business contracts year after year as a result of miscoding, anomalies, computer glitches and simple human error.

So why do they need a new policy to protect fraudulent firms from penalties with a “safe harbor” if there is no fraud?

Apparently there is the wide spread and rampant fraud I have been talking about for over twelve years. I guess I’m not the conspiracy nut the SBA has spent so much time and energy trying to convince journalists I am.

So let’s see what we have:

1.      Dozens of federal investigations, congressional hearings and investigative reports in the media all found rampant fraud in federal small business contracting programs.

2.      The SBA has claimed for over a decade that there is no fraud in federal small business programs.

3.      Now the SBA has proposed a new policy to protect fraudulent firms from any penalties with a “safe harbor”.

Call me a conspiracy nut but it looks like there is fraud in SBA managed small business programs and the SBA is trying to legalize it.

Maybe instead of a new SBA policy that essentially legalizes fraud,  it’s time for the Justice Department and the FBI to step in and see how much fraud we’re looking at, who is responsible, are there any federal employees involved and how quick can we get these slime balls in jail.

Chapman is president and founder of the American Small Business League.