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Secret Blacklist Provision in Defense Authorization Bill Signals Death Knell for Small Businesses and Transparency in Contracting

8:33 am in Uncategorized by Kevin Baron

photo: Mayu ;p via Flickr

‘Tis the season for the bloated defense authorization bill to begin its journey towards passage, and as usual if you look hard enough, the legislation is stuffed full of all kinds of goodies. Since defense authorization will always pass, it has become an omnibus wish-list bill for anyone who wants anything out of our government, and this year is no different. Considering the size of this legislation, I will focus in on a particularly egregious section that will most likely pass under the radar of most members of Congress unless action is taken.

Section 815 for S. 3454, the National Defense Authorization Act for Fiscal Year 2011, has the innocuous title of “Reduction of Supply Chain Risk in the Acquisition of National Security Systems.” This section could essentially create “de facto” debarments of small businesses across DoD federal contracting programs, with potential for these “de facto” debarments to touch every corner of federal government contracting, thus creating a blacklist where businesses would be debarred from working with the government. The proponents of Section 815 have justified this blacklist as necessary to ensure national security and mitigate supply chain risk.

The beauty of Section 815 is that any firm placed on this blacklist is done so in secret; so much so that DoD officials are not required to notify the blacklisted parties.  This gets even better based on the language which specifically states that only two Department of Defense (DoD) officials will get to determine if any contractor is a “national security threat” worthy of being blacklisted. This falls on the Director of the Defense Intelligence Agency (DIA) and the Assistant Secretary of Defense for Networks and Information Integration (ASD-NII) to make the recommendation to debar a company from contracting with DoD. Small business advocates are concerned that DoD’s decision may flood every government-purchasing agency with a negative impression of blacklisted companies, and thus lead to “de facto” debarments across the federal government.  . . . Read the rest of this entry →

Finally Poking At the Soft Underbelly of Defense Subcontracting

11:30 am in Uncategorized by Kevin Baron

Several months ago I wrote a blog on FireDogLake detailing a small business subcontracting program being run through the Department of Defense called the Comprehensive Subcontracting Plan Test Program (CSPTP).

In a huge step forward for small businesses and all fans of government transparency, a group of legislators have requested that the Government Accountability Office (GAO) investigate and evaluate the CSPTP.  The program, which was launched in 1990, has never been evaluated for effectiveness.  The charge was led by Representative Yvette Clarke (D-NY) and backed by representatives Bennie Thompson (D-MS), Lynn Woolsey (D-CA), Carolyn Maloney (D-NY) and Chellie Pingree (D-ME).

To briefly summarize, the CSPTP was put into place 20 years ago with the stated intent of increasing the volume of subcontracting opportunities available to small businesses through the Department of Defense’s (DoD) contracting programs.  The program was established based on the hypothesis that reducing the administrative burden on large prime defense contractors would give those large prime contractors an imperative to do more work with small businesses.  There’s a major problem with that hypothesis.  As established, the program eliminated subcontracting reports available to the public, and penalties for non-compliance with subcontracting goals.

Translation:  Reduced transparency and accountability.

I am not exactly sure how reducing transparency, accountability and oversight on some of the largest defense contractors in the world is a recipe for increased subcontracting opportunities for small businesses, but apparently legislators thought it was worth a shot.

In the 20 years the CSPTP has been in place, it has been reauthorized by Congress 3 times without a single evaluation. The Acting Director of DoD’s Office of Small Business Programs personally expressed to me that the program has never been evaluated after I sent along a Freedom Of Information Act (FOIA) request seeking copies of the evaluations. As passed, Congress required DoD Officials to conduct an evaluation of the program no later than March 1, 1994. However, based on FOIA requests to DoD and the Small Business Administration (SBA), it seems that the 1994 evaluation was never conducted.

This “test program” has been operating for 20 years and no one knows if it is working.

Research conducted by the American Small Business League (ASBL) has shown that many of the large defense contractors who participate in the CSPTP have historically not met the mandated small business subcontracting goals, and the ASBL suspects this program to be nothing more than a loophole designed to help large prime contractors avoid paying liquidated damages for non-compliance with their small business subcontracting goals.
The program was set to expire on October 1 of this year, but thanks to Congressional delays in passing the Defense Authorization bill, the program has been extended.

Now, the House Defense Authorization bill did not include reauthorization for the CSPTP, but the Senate version did include reauthorization. As has been the track record for this Congress, if reauthorization is included in the Senate version, then it will most likely be in the final version. Couple that with the fact that several DoD officials (who will remain anonymous as they are not authorized to discuss such matters) assured me that this program will be reauthorized.

Back to the good news, the GAO request referenced above was issued on October 21, and represents a major step towards transparency and accountability in DoD small business contracting programs.  Frankly, the small business community needs congress to proactively think about the needs of small businesses.  Elimination of the comprehensive test program could mean a tremendous uptick in the volume of federal dollars flowing to small businesses. That uptick directly translates to jobs.  Small businesses are the backbone of the nation’s economy, and according to economists like Robert Reich the best way to stimulate the economy, and job growth, is for the government to send federal infrastructure funds to small businesses.  In this tough economic time, this type of action should be a major priority for our nation’s legislators.

In case you’re wondering, there are 14 participants of the CSPTP.  Participants of the program include BAE Systems, GE Aviation, Lockheed Martin, Raytheon, and Harris Corporation and eight other prime contractors.  According to federal data, participants of the CSPTP received $55.24 billion in contracts from DoD during fiscal year (FY) 2009. 1 out of every 6 dollars spent by DoD during FY 2009 were awarded to participants of the program.  As long as the CSPTP is in place, small businesses will continue to lose out on billions of dollars every year.

The ASBL and small businesses across the country applaud Representatives Clarke, Thompson, Woolsey, Maloney and Pingree, and thank them wholeheartedly for their efforts fighting for transparency, accountability and increased oversight in federal small business subcontracting programs.  This is a first step, but it is a large one.

The Senate Small Business Jobs Bill is Anti-Small Business and Will Not Create Jobs…Discuss

8:51 am in Uncategorized by Kevin Baron

Yesterday the Senate ended debate on H.R. 5297, the highly touted Small Business Jobs Act, which is being sold as a magic elixir cure-all for small businesses by the White House and most Democratic members of Congress. The problem is that this bill will not help small businesses or create jobs, in fact, language included the bill will actually be harmful for small businesses. I know, I know, it just seems so weird that a bill literally called the Small Business Jobs Act will actually do the opposite of what we are being told.

The Small Business Jobs Act, as it will be passed in the Senate this week, is going to create a $30 billion lending fund and offer $12 billion in tax breaks to small businesses. Surveys and research being conducted by real small business organizations, such as the American Small Business League (ASBL), and faux small business organizations, such as the Business Roundtable or US Chamber of Commerce, agree on one point: small businesses do not need loans, they need an increase in sales. Small businesses must have more customers walking in the door seeking goods and services.

Over the past two years, the focus on helping small businesses has been on increasing loans and access to capital. There are some small businesses that do need loans, but when it comes to job creation…loans and tax breaks are not going to work. The only way to create jobs and economic growth is by an increase in demand.

According to the Economic Policy Institute, “The theory of tax cuts as economic stimulus has been put to the test – and failed – twice in the past six years alone.” Alan Blinder, professor and co-director of Princeton University’s Center for Economic Policy Studies, has stated that for every budgetary dollar spent by the government, on things like unemployment insurance or on infrastructure, the real economic growth to the GDP is the equivalent of $1.60 to $1.70. Whereas he stated that every dollar in tax cuts only creates $0.35 in GDP growth. So why does our government keep insisting that tax cuts for small businesses is the best way to create jobs and stimulate the economy?

The best part about this Small Business Jobs Act is a little tiny paragraph snuck into the section on small business contracting. On the face of it, Section 1341 of the bill will help provide greater protection and oversight of small business contracting programs, which have been rife with fraud and abuse for years. Then you get to paragraph 4, which states,

The problem with this language is that it creates a giant loophole to allow large firms to defraud the government by claiming to be a small business, and then be immune from any prosecution for doing so. This language legalizes fraud while removing accountability. It allows the Administrator of the Small Business Administration (SBA) to create regulations to protect individuals or firms from liability. The catch is that the SBA has been claiming for years that large firms receive small business contracts because of “miscoding” or “simple human errors.”

Since 2003, there have been over a dozen federal investigations, which have found Fortune 500 firms and thousands of large companies around the world as the actual recipients of federal small business contracts. The SBA’s Inspector General has listed this problem as the number one management challenge facing the agency for the past five consecutive years and referred to this problem as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.

Report 5-16 from the SBA Inspector General referred to these misrepresentations as, “false certifications” and “improper certifications.” Other federal investigations described the blatant fraud as “vendor deception.”

So this legislation will allow the SBA Administrator, who claims that over $100 billion a year in small business contracts go to corporate giants due to innocent mistakes, to create a loophole to allow firms that defraud the government in order to win small business contracts to avoid any punishment for fraud because of “unintentional errors, technical malfunctions, and other similar situations.”

President Obama and the Congress should be focused on legislation that will actually help small businesses and create jobs. Legislation like H.R. 2568, the Fairness and Transparency in Contracting Act, a bill that will actually do what it says, and end fraud in small business contracting programs. Cleaning up the rampant fraud and abuse in small business contracting programs would be a huge first step when it comes to driving over $100 billion a year in demand back into the hands of small businesses, who create over 90 percent of all net new jobs.

But, I guess this has become the norm in Washington, DC, where down is up, left is right, and the Small Business Jobs Act will help small businesses and create jobs.

Is President Obama Trying to Channel His Inner FDR?

4:49 pm in Uncategorized by Kevin Baron

[Ed. note: Promoted as this post deserved far more discussion considering how much change we still need in economic policies to help small business generate jobs.]

I think it’s cute that finally, since taking office, President Obama has decided that it is time to focus on jobs and the economy.  I should not jump the gun yet, he has only given one speech, so it may be premature to say that he is focused. But what are you supposed to say on Labor Day to a huge gathering of union folks at “Laborfest” when there are over 15 million Americans who are unemployed, and millions more that have either stopped looking or are underemployed? While the President has done well when it comes to lofty rhetoric, it is the follow-through I am more concerned with. In his State of the Union Speech, the President basically said that 2010 was going to be about, “jobs, jobs, jobs.” The problem was that we all thought he meant creating them… not losing them.

The President’s speech from Monday outlined a plan to spend $50 billion on infrastructure projects such as: roads, railways and runways, essentially anything that you can drive a car, truck, train or plane on. The good news is that this spending will be paid for by rolling back one of the numerous tax subsidies to the oil and gas industry, which, I think you will be hard pressed to find anyone (outside of the oil and gas industry, that is) who would disagree with that. When Exxon Mobil pays no income tax in the U.S., I don’t oppose having them help fund the rebuilding of our crumbling infrastructure.

Increased infrastructure spending is definitely a good start when it comes to economic growth and job creation, but the focus needs to be in the right place. The President is talking about this $50 billion plan as the start of a larger six-year infrastructure plan. On Wednesday, the President will also speak about giving small businesses tax breaks and tax incentives as part of the plan to spur job creation and economic growth. As has been proven time and again, tax breaks do nothing when it comes to job creation. The best detail to come out of the President’s new focus is that he finally sounds as if he is actually ready to be the leader many of us thought he was going to be, especially when it comes to the economy and unemployment. He actually sounded a bit like FDR on Monday. The question remains, will President Obama be willing to buck the moneyed powers-that-be (like the U.S. Chamber of Commerce) in order to do what is needed to fix the economy?

As the President begins to find his inner FDR, we need to make sure that when it comes to helping small businesses, and the American economy overall, the focus is in the right place. In this sense, the President’s plan may be a bit misguided.  . . . Read the rest of this entry →

Checking My Crystal Ball on the FY 2009 Federal Small Business Contract Numbers, Part 2

10:53 am in Uncategorized by Kevin Baron

You may have seen a blog I wrote a few weeks ago making several predictions regarding the Small Business Administration’s (SBA) release of its Small Business Goaling Report and Procurement Scorecard for fiscal year (FY) 2009. It has been customary for the SBA to release this information late on a Friday when it seems no one is paying attention, and this year is no different. To that end, this past Friday afternoon, the SBA released the government’s Small Business Procurement Scorecard for FY 2009, to very little fanfare or media attention. In fact, the only media attention I saw on this came in the form of a press release that the SBA put out, which seemed to get picked up only by a few random blogs.

Before delving into my own scorecard of predictions to see if I can get a job with the Psychic Friends Network, let us look briefly at the SBA’s scorecard. Once again, for yet another consecutive year, the government missed the mandatory 23 percent small business goal. This year, the SBA claims small businesses received approximately $96 billion in contracts, which amounted to 21.8 percent of the total dollar amount of government contracts. In order to downplay missing the goal, the SBA is selling this as a “victory” by claiming it was a record year for small businesses, which is exactly the same thing the SBA did last year when the scorecard came out. The bottom line is that even when using the government’s own numbers, which are completely flawed, small businesses lost out on billions of dollars in opportunities in federal contracts.

In checking my own scorecard of predictions, #1 was that the SBA would release the FY 2009 small business Procurement Scorecard and Goaling Report late on a Friday afternoon. As I just mentioned, that is exactly what they did; score one point for me. The other half of that prediction was that the President’s Interagency Task Force on Federal Contracting Opportunities for Small Businesses would release their report and recommendations on small business contracting at the same time. While the 90-day window the taskforce was given to issue a report is up, at this point, the White House has not released to the public the report and recommendations from the taskforce. Due to the taskforce not publicly releasing the report at the same time as the SBA released the small business scorecard, I will take away a half-point.

As a side note to the release of the SBA’s Procurement Scorecard, the SBA did not release the FY 2009 Goaling Report that normally would accompany the scorecard. The Goaling Report is an agency-by-agency breakdown, as well as the aggregate totals of contract action awards and dollars that each agency conducted with every category of small business over the course of the fiscal year. This data has not been released by the SBA, at least it does not appear in the Goaling Report section of the SBA’s website, which, like most government websites, generally takes an unusually long time to be updated. The fact that the actual numbers and data have not been released calls into question the legitimacy of the SBA’s numbers and how they arrived at the totals that they did. A study conducted earlier this year by the American Small Business League (ASBL) found that for FY 2009, legitimate small businesses actually received approximately 5 percent of the total dollars in federal small business contracts, due to the majority of those contracts being awarded to large businesses, Fortune 500 firms and multinational corporations.

This brings me to prediction #2, which was that once the contracting numbers are examined, the data will show that the majority of small business contracts actually went to large businesses. Since this point was made just above, I will chalk up one more point for me.

Prediction #3 was that the SBA will claim that large companies receive small business contracts due to “miscoding” or “simple human errors,” and that the “data is as clean as it has ever been.” The only press release issued by the SBA does not even mention large companies receiving small business contracts. And it seems that so far, no one at the SBA has talked to any reporters about this on the record. To help put this into context, the SBA’s Inspector General has said for the past five consecutive years that the number one management challenge at the SBA is,

In the press release, the SBA did state, “As it does every year, the SBA has closely examined federal procurement reporting and data to ensure the greatest level of transparency possible. After identifying anomalies in initial reports, the SBA has worked collaboratively – and will continue to work – with agencies across the government to correct as many data issues as possible, and improve the integrity of all small business federal contracting reporting moving forward.” For those of you who are not fluent in government-speak, this means that there were simple “miscoding” and “data entry” errors and that the “data is as clean as it has ever been.” Score one more point for me.

Prediction #4 was that the SBA would overstate the percentage of the federal acquisition budget and the dollar volume flowing to small businesses. Without even looking at the actual Goaling Report, I can tell you that this is accurate. Again, I will draw your attention the recent study released by the ASBL, linked here, which shows several different ways that the SBA overstates the amount of contracts small businesses receive from year to year. The most obvious being that large businesses receive billions of dollars a month in contracts that are supposed to go to small businesses. Score one more point for me.

In examining the point totals, I received 3.5 out of 4 points, which means I can fulfill my dream of being a psychic. The really sad part is what this actually means. It means that for another year, America’s small businesses have lost out on billions of dollars in federal contracts. It means that the one sector of our economy that is responsible for creating over 90 percent of net-new jobs lost out on billions of dollars in opportunities for job creation and economic growth. It means that because small businesses suffer, the U.S. economy has suffered during the worst economic downturn in over 70 years. It means that while the importance of small businesses gets thrown around quite a bit in Washington, the Obama Administration is still not serious about helping and working with small businesses. It means that until the government’s actions match its rhetoric on small business issues, I am going to hold off on starting a career as a psychic.

Stupid Economy – It’s About Small Business

9:11 am in Uncategorized by Kevin Baron

Is good policy defined as legislation that is bipartisan? Apparently President Obama and his administration seem to believe so. Before leaving on a vacation yesterday, the president gave some brief remarks in the Rose Garden, most of which were centered on small businesses, specifically the need for Senate Republicans to stop blocking the passage of the small business lending bill that has been languishing in the Senate, after passing in the House weeks ago.

President Obama said,

Of course, the president also said that this bill is supported by the U.S. Chamber of Commerce, which immediately should raise red flags for any pro-small business person. So because this bill is “bipartisan” in nature, according to the White House, that makes it sound policy, but then why are no Republicans willing to support? Ok, ok, dumb question.

The real problem with the Senate small business lending bill is that it is focused on increasing lending to small business through private banks (which is in and of itself a major roadblock) and on tax breaks. These are the same two areas of focus that have dominated the small business discussion in Washington for two years now. And for the past two years, Congress and the White House have enacted legislation that has sought to increase lending to small businesses and provide tax breaks or tax incentives. I have a small piece of advice for President Obama, THIS HAS NOT AND WILL NOT WORK TO CREATE JOBS!!! I feel like I am taking crazy pills. How many times do we have to try the same thing, expecting different results, before the men in white coats come to take us away?

The U.S. Department of Labor released a report yesterday showing that jobless claims surpassed the 500,000 mark for last week, making it the fifth consecutive week jobless claims have risen. This marks the highest number of jobless claims since November 2009, suggesting that the U.S. economy is creating fewer jobs now than in the first half of this year.

To add insult to injury, the Labor Department released another report this week showing that small businesses are shedding the most jobs in the fourth quarter of this year than any other business category in the private sector. The report shows that businesses with less than 50 employees accounted for 61.8 percent of all job cuts, while that same category only added 54.1 percent of new jobs. This is a stark shift from one year ago, when small businesses were creating more jobs than losing jobs.

Back to the president’s comments from yesterday. While President Obama was excoriating Senate Republicans to end their obstruction to the small business bill, the president said that the Labor Department report,

I think the president is absolutely right, this report should compel both Congress and White House to act…just not on passing the Senate small business bill, which will have little to no impact on job creation or economic growth for small businesses in the middle class economy.

It is time for bold action in a different direction.

The focus needs to shift from small business loans and tax breaks to demand stimulation. More and more small businesses are saying that access to capital is not their main concern; it is a lack of demand- a lack of customers walking through the door.

When the private sector and consumers fall short on their demand for goods and services, the government can step in and help to stimulate demand, in fact it does already. The federal government is the largest purchaser of goods and services in the world, spending over $500 billion a year with private sector businesses. Fifty-seven years ago, Congress had the foresight to pass the Small Business Act, which now mandates that small businesses receive not less than 23 percent of the total dollar amount of all federal contracts. That translates to approximately $125 billion a year in contracts that should be going to small businesses. It could be as high as $230 billion a year in small business contracts if you include intelligence and “black projects” in the official acquisition budget.

The problem is that a series of federal investigations, and research conducted by the American Small Business League (ASBL) shows that the majority of small business contracts go to large businesses, Fortune 500 firms and multinational corporations. In fact, small businesses on average receive less than 5 percent of the federal governments total purchases every year. Meaning, small businesses are losing out on roughly $100 billion in federal contracts every year.

There is a different bill rotting in the House right now that would end the fraud and abuse in these small business contracting programs and bring over $100 billion a year, and every year, in contracts back into the hands of small businesses. The bill, H.R. 2568, the Fairness and Transparency in Contracting Act would do more to help small businesses than anything the White House has proposed or pushed thus far. The government can utilize these existing small business contracting programs as a means to drive demand to small businesses in order to make up for the lack in consumer spending.

So if President Obama is concerned about small businesses and pushing Congress to pass small business legislation, then why has he been silent on this contracting issue and why would he not push Congress to pass H.R. 2568? If having bipartisan legislation is the president’s definition of good policy, then he should definitely support H.R. 2568, which has 26 co-sponsors, two of which are Republicans. That is already more Republican support than the president has received on any of his major policies.

Checking My Crystal Ball on the FY 2009 Federal Small Business Contract Numbers

2:39 pm in Uncategorized by Kevin Baron

Ms. Cleo from the Psychic Hotline has nothing on me. I am going to put my psychic abilities to the test here. Historically, the Small Business Administration (SBA) releases its Small Business Goaling Report and Procurement Scorecard on the previous fiscal years small business contract activity with the federal government towards the end of August. This means the FY 2009 numbers should be coming out within the next few weeks. Additionally in April, President Obama formed a small business taskforce to look into federal contracting opportunities for small businesses and will be presenting the president with a report on its findings within the next few weeks. We all know that commissions and taskforces are a way to whitewash important issues, (this one is no different) and it will be interesting to see if the taskforce recommendations match any of the dozens of federal investigations that have come out over the past decade showing rampant fraud and abuse in small business contracting programs.

So here is prediction #1: The SBA will release the FY 2009 Small Business Goaling Report and Procurement Scorecard on a Friday afternoon, possibly right before Labor Day weekend, and President Obama’s small business taskforce will release its report at the same time. We all know the government has a track record of releasing really bad news on Friday afternoons when most people are distracted. This way, no one will notice or pay any attention to what will be another consecutive year that our government has not achieved its small business mandates, and has continued its horrendous track record of working with small businesses.

Prediction #2: When examining the data on the actual small business contract recipients for FY 2009, the majority will be large businesses, Fortune 500 firms and multinational corporations. In fact, this is already true. Several months ago, the American Small Business League (ASBL) conducted its own analysis and report of the Top 100 small business contract recipients for FY 2009 and found that 61 out of 100 were not actual small businesses. These 61 large firms received 64 percent of the total dollars for the Top 100, which came out to almost $10 billion. The ASBL’s report can be found here.

Prediction #3: The SBA will make the claim that large firms received small business contracts because of “miscoding,” “simple human errors,” and “data entry mistakes.” The SBA has been making that claim every year since at least 2002, and every year they say the contracting data is scrubbed of these errors and that the “data is as clean as it has ever been.” It is almost amusing that every year, simple miscoding and data entry mistakes seem to give billions of dollars in small business contracts to large firms, but never the other way around.

Prediction #4: The SBA will overstate the percentage of the federal acquisition budget and the dollar volume flowing to small businesses. During FY 2008, the SBA claimed small businesses received over $93 billion in contracts, which amounted to 21.5 percent of the governments 23 percent mandate. The truth is that the SBA falsely inflates its small business numbers. One way of doing this is by counting large firms as small businesses. The SBA also deflates the contract dollar totals. The SBA claims that for FY 2008, the total “small business eligible dollars” was just over $434 billion, which, when you take $93 billion out of $434 billion, comes to 21.5 percent. The problem is that the total dollar amount of all prime contracts for that year (the number the SBA is supposed to be using) was over $536 billion. Now, the SBA has never defined or been able to explain what a “small business eligible contract” is or where the law states that they can use this figure instead of the actual total. This is just a way to make it appear that small businesses are doing more work with the government than they actually are.

On another interesting note, if you take into account all of the “black” projects and intelligence operations that do not get counted officially as part of the government’s procurement numbers, the dollar amount spent on contracts for FY 2008 jumps to right around $1 trillion, which would mean that small businesses should be receiving close to $230 billion in contracts.

The fraud and abuses will continue in small business contracting programs until federal agencies are held accountable and the SBA actually admits there is a serious problem instead of trying to deny the issue. There is legislation in Congress right now, H.R. 2568, the Fairness and Transparency in Contracting Act, introduced by Congressman Hank Johnson (D-GA-4) that currently has 26 cosponsors, which will do more to end these abuses, and bring billions of dollars a year in contracts back into the hands of small businesses than anything proposed so far. And when we talk about job creation and economic growth, we are talking about small businesses, so why not utilize small business contracting programs as a means of driving demand into the hands of our small businesses? The programs are already in place and would be deficit neutral. All we need is for Congress to finally do something that will actually help small businesses and pass H.R. 2568.

Break out your scorecards and within a few weeks we will see how accurate my psychic abilities are…

Department of Defense: The Black Hole of Small Business Contracts

2:02 pm in Uncategorized by Kevin Baron

The federal government has a congressionally mandated goal when it comes to giving contracts to small businesses. The Small Business Act states,

The Government-wide goal for participation by small business concerns shall be established at not less than 23 percent of the total value of all prime contract awards for each fiscal year.” So the government must spend a minimum of 23 percent of all prime contract dollars with small businesses every year.

Each fiscal year, the Department of Defense (DoD) consistently accounts for between two-thirds to three-quarters of our entire governments procurement budget. For example, in fiscal year 2008, it is reported that the government spent a total of approximately $536 billion on prime contracts (not including black-op and intelligence spending, but that is for another post), of which DoD accounted for approximately $392 billion, or 73 percent.

There are several programs that have been set-up through DoD that are supposed to be beneficial for small businesses, but end up doing the complete opposite. One program in particular is the Comprehensive Subcontracting Plan Test Program (CSPTP). The CSPTP was passed by Congress in 1989 and went into effect on October 1, 1990, and is currently set to expire on September 30, 2010 unless reauthorized.

The program was established based on two concepts. The first was to make contracting easier for large prime contractors by reducing their paperwork and reporting requirements on their contracts. The second was to increase the opportunities for small businesses to work with the participating large prime contractors. I am not sure how decreasing transparency on contracts awarded to the biggest defense contractors in the country will increase opportunities for small businesses, but apparently enough members of Congress at the time thought it would work.

About six months ago, I filed a Freedom of Information Act (FOIA) request to DoD asking for the most recent audit, review or evaluation of the program in order to determine if the CSPTP was meeting its stated goals of increasing subcontracts for small businesses, especially Small Disadvantaged Businesses (SDBs), veteran and service disabled veteran owned businesses, woman owned businesses and HUBZones.

I got a phone call a few days later from the Acting Director of the Office of Small Business Programs at DoD, who told me she had received my request and was sending a non-response response, but she wanted to explain. She told me that they had no documents for what I was requesting because the program had never been evaluated. Now, take that in for a moment- a program has been in place for 20 years and has never been evaluated to see if it is working. Essentially, DOD has to conduct an evaluation on the program once it expires, but the program has been reauthorized three times since its inception, and every time it is reauthorized, it kicks back the date of the evaluation.

There are currently 14 participants in the CSPTP, consisting of companies like Boeing, Lockheed Martin, L-3 Communications, Northrop Grumman, and General Dynamics. One of the main problems with the CSPTP is that there is no penalty for non-compliance with the small business subcontracting goals. That means that when a high-dollar contract is awarded to one of these firms, if the small business subcontracting goals that are automatically attached to the contract are not met, or the company fails to meet the small business subcontracting goals as established in their own small business subcontracting plan, there is no punishment or penalties. So where is the incentive for these firms to subcontract with small businesses?

I have filed numerous FOIA requests asking for information on this program and DoD has turned me down on every one to date, although we plan on pursuing legal action if necessary. What we have seen in looking at subcontracting reports on these same firms through other agencies is that often, they are not meeting their small business subcontracting goals. It appears that the CSPTP is nothing more than a loophole to get large defense contractors out of having to meet government mandated small business goals.

The CSPTP needs to be eliminated. DoD accounts for almost three-quarters of the government’s entire procurement budget, and in fiscal year 2009, the 14 firms participating in the program received approximately 18 percent of DoD’s contract dollars. In fiscal year 2009, one out of every six dollars that DoD spent was going to one of the companies that participated in the program. This means that small businesses were losing out on literally billions of dollars in subcontracts every year for the past 20 years.

Now for the kicker, CSPTP reauthorization was not included in the House’s Defense Authorization bill that passed a few weeks ago, however, it is included the in Senate’s version. In S. 3280, a four-year reauthorization of the program is included in Title VIII, subtitle A, section 805.

I have spoken to numerous members of Congress about this program and have not found one yet who was familiar with the CSPTP. Why would this program continue to be reauthorized when no one, including DoD and members of Congress, has any idea as to whether it is working?