In November of 2008 I predicted President Obama would try and close the Small Business Administration, as Ronald Reagan did, by combining it with the Department of Commerce. He proved me right in January of 2012 when he announced his plan to do exactly that.
When SBA Administrator Karen Mills resigned, the agency went without a new leader for eleven months. During that time President Obama reiterated his plan to combine the SBA and the Department of Commerce to “streamline government.” When Ronald Reagan clearly stated he wanted to permanently close the SBA his plan was to combine it with the Department of Commerce. Make no mistake; President Obama’s attempt to combine the SBA with the Department of Commerce was an attempt to close the agency.
Notice how Obama has made no further mention of his plan to combine the SBA and the Department of Commerce. On January 14, 2014, an article in Forbes agreed with me that Obama was really trying to close the SBA. Two days later Obama appointed Maria Contreras-Sweet as the new SBA administrator.
When you look at every policy the Obama administration has adopted around the issue of federal small business programs, an obvious pattern can be seen. They all hurt legitimate small businesses and help big business.
In 2010, the Obama administration removed the parent company Dunn & Bradstreet number from the government’s database of suppliers. Why? The Bush administration removed virtually all data that could be used to determine if a firm was a small business or a large business. The number of employees, annual revenue, primary NAICS codes and the capabilities statements were removed. The only remaining piece of information that could be used to determine if a firm was a legitimate small business or a subsidiary of a Fortune 500 firm was the parent company D & B number.
Removing the parent company D & B number makes it easier for Fortune 500 firms and other large businesses to misrepresent their subsidiaries as small businesses to illegally hijack billions of dollars in federal small business contracts. The result, every year of the Obama Administration, billions of dollars in federal small business contracts have been diverted to Fortune 500 firms, their subsidiaries and hundreds of other clearly large businesses.
That’s disappointing coming from a man that during his campaign for president released the statement, “It is time to end the diversion of federal small business contracts to corporate giants.”
The most recent information from the Federal Procurement Data System indicates of the top 100 recipients of federal small business contracts, over 75 percent would not currently qualify as small businesses.
Even the House Small Business Committee has challenged the SBA’s inclusion of Fortune 500 firms in their small business contracting data.
What else could President Obama do to dismantle federal small business contracting programs and help big businesses hijack small business contracts from legitimate small businesses? What about a new policy to create a “safe harbor from fraud penalties” for large businesses that are caught misrepresenting their firms as small businesses? That’s exactly what the Obama Administration did last month.
Under current federal law, misrepresenting a firm’s status to illegally land federal small business contracts is punishable by up to 10 years in prison, a $500,000 fine or both. Under the new “safe harbor from fraud penalties” policy, a firm that commits felony federal contracting fraud can avoid any and all penalties by simply claiming they “acted in good faith.”
According to the latest data from the U.S. Census Bureau, 98 percent of all U.S. firms have less than 100 employees and 89 percent have less than 20 employees. In June, the Obama administration increased small business size standards in hundreds of categories up to 1500 employees. These new size standards, like all other Obama Administration policies involving small businesses, will make it more difficult for legitimate small businesses to compete for federal small business contracts. It will also make it easier for large firms to land small business contracts and make it easier for federal agencies and Pentagon prime contractors to claim they have reached the 23 percent small business-contracting goal.
A Washington Post story on the new policies was titled, “How 8,500 large companies will become small businesses overnight.”
On September 10, the SBA announced a new change to the federal small business size standard for small businesses that provide IT products to the federal government and prime contractors. Under the new policy, a small business in the IT industry with annual sales in excess of $27.5 million will now be considered a large business. If the new size standard is adopted, affected small businesses will be forced to compete head to head with firms like IBM, Dell and Hewlett-Packard for even the smallest government orders for IT products.
Federal contracts to corporate giants like Lockheed Martin, Boeing, Raytheon and Northrup Grumman will be counted as small business contracts but contracts to IT firms with annual sales of over $27.5 will be counted as large business contracts. These insane and blatant anti-small business polices are what I have come to expect from the Obama administration.
When you look at all the Obama administration’s small business policies there is an obvious pattern. All the policies dismantle or weaken federal programs designed to help legitimate small businesses and help large businesses hijack more federal small business contracts.
After realizing the attempt to close the SBA failed, as Ronald Reagan did by trying to combine the SBA with the Department of Commerce, Obama is now trying to quietly dismantle the SBA with a series of policies that have received little to no media attention. If you’re not reading my blogs and press releases it’s unlikely you would even hear anything about this travesty against the middle class.
I think there will be more policies from the Obama administration in the future that will continue the undeniable pattern of dismantling federal programs designed to help the 28 million small businesses where most Americans are employed.
Small businesses are responsible for over 50 percent of the Gross Domestic Product, over 50 percent of the private sector work force and over 90 percent of the net new jobs in America. Dismantling the SBA would be economic suicide. Its time for the mainstream media and Congress to intervene and save the SBA and federal small business programs from the greedy corporate giants that seem to run our government.
I’m certainly doing all that I can to stop them, how about a little help from Congress.
Chapman is president and founder of the American Small Business League.