The vast majority of “small businesses” that won the largest share of federal contracts last year turned out to be large companies, according to the American Small Business League.

 

Businesses qualify as “small” based on their annual revenue and the number of their employees. The qualification standards vary according to the industry. For example, wholesale trade businesses must have 100 employees or less, but most manufacturing and mining firms can have up to 500 employees. Retail businesses qualify if their annual revenue over three years averages less than $7 million, but heavy construction companies are allowed to make up to $33.5 million a year.

 

However, of the top 100 federal small business contractors in fiscal year 2011, 72 were big businesses, which took home $16.4 billion (77.6%) of the total awarded.

 

The federal government, by law, is supposed to award 23% of all contracts to small businesses. A recent audit of the Small Business Administration (SBA) by its inspector general listed as the number one challenge “Procurement flaws allow large firms to obtain small business awards and agencies to count contracts performed by large firms towards their small business goals.” Large businesses have been known to wait until a smaller company has won an SBA contract and then buy out the smaller company and make it a subsidiary.

 

Among the biggest recipients of small business contracts were:

 

·       Atlantic Diving Supply (ADS) of Virginia Beach, Virginia, which was awarded more than $1 billion in SBA contracts despite having an annual revenue of $968 million

·       Mission Essential Personnel (MEP), based in Columbus Ohio, which gained $689 million in contracts despite having more than 1,900 employees in the U.S. and 8,200 worldwide

·       Sierra Nevada Corporation (SNC) of Spraks, Nevada, which won $397 million in contracts despite having more than 2,100 employees and an annual revenue of $938 million. It is the number one woman-owned federal contractor.

 

ADS specializes in military clothing and other gear. MEP supplies translators and intelligence personnel in Afghanistan and elsewhere. SNC specializes in microsatellites, nanotechnology and other electronic systems.

 

Beyond the top 100, other large corporations enjoyed smaller deals intended for small businesses. These recipients included Lockheed Martin, BAE Systems, L-3 Communications and IBM.

 

On March 12 new SBA guidelines will go into effect allowing larger businesses in 34 industries to qualify as small businesses.

-David Wallechinsky

 

Large Businesses Winning More Small Business Government Contracts (by Neil Gordon, Project on Government Oversight)

Fiscal Year 2011 Top 100 Federal Small Business Contractors (American Small Business League) (pdf)

Obama Administration Allows Bigger Businesses to Qualify as Small Businesses (by David Wallechinsky and Noel Brinkerhoff, AllGov)

Fiscal Year 2012 Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration (Office of the Inspector General, U.S. Small Business Administration) (pdf)