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Court hearing challenging SBA contracting figures canceled

The San Francisco hearing in a federal injunction case against the Small Business Administration (SBA) that was scheduled for October 6th was canceled on October 5th with no reason given.

The case, filed by the American Small Business League (ASBL), was aimed at garnering injunctions in two instances: first, towards preventing the SBA from excluding portions of federal contract funding from the total for purposes of measuring compliance with small business contracting participation goals and, second, towards preventing the SBA from counting contracts with Fortune 500 companies and other large businesses towards those same participation goals.

Small business participation in federal contracting is mandated by law to reach a minimum of 23 percent. The SBA has made the claim that small businesses received 24.9% of federal contracts in 2015; however, the ASBL estimates that small businesses received only 3 percent to 4 percent of all federal contracts in that year. This estimate is based in part on the fact that the Congressional Budget Office (CBO) reported there to be $1.2 trillion of federal contracts in 2015, while the SBA arrived at its measurement by using a figure of $370 billion for the total funding of federal contracts.

The SBA argues that it is acting within the law in this regard by defining "federal agencies" as excluding "non-executive branch federal government entities". The SBA also excludes federal contracts under a wide array of other rubrics, with the end result that large amounts of medical spending, state and local spending with federal grants, and spending for entities as varied as the Postal Service, the CIA, and the court system, are all not counted when making the small business participation assessment.

The other half of the ASBL's case revolves around misrepresenting the size of businesses to which small business contracts are awarded. Some of the contracts the SBA reported as going to small businesses have in fact been going towards firms including but not limited to Apple, Pepsi, and Rolls Royce. The SBA argues that many of these errors are the fault of the relevant corporations for failing to re-certify the size of businesses they acquire. The SBA also blames human error.

While the hearing of the ASBL's case may have been canceled, the allegations and complaints against the SBA they have voiced are longstanding. The SBA's own Office of Inspector General names the awarding of small business contracts to large businesses as the number one problem at the SBA, and has done so every year since 2005. An investigation by the Government Accountability Office (GAO) in 2003 concluded that the SBA had inappropriately counted billions of dollars of contracts awarded to large businesses towards the small business participation goals. President Obama, additionally, made a statement expressing disapproval of the problem in 2008.