The federal government has a goal of awarding 23 percent of the total value of its purchases to small businesses. It is not currently meeting that goal. A recent study by the American Small Business League (ABSL) found that small businesses only receive between 2 and 6 percent of federal government contracts (PDF).
The top “small business” contractors of 2008 included Lockheed Martin, Boeing, Raytheon, 3M, Hewlett-Packard, AT&T, Rolls Royce and General Electric (PDF).
Since 2003, more than a dozen federal investigations have found billions of dollars in federal contracts intended for small businesses actually flowing into the hands of Fortune 500 firms and other large businesses. In Report 5-15, the Small Business Administration Office of Inspector General referred to the issue as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.”
The ABSL has estimated that this issue pulls more than $100 billion a year in federal contracts out of the middle class economy. With that in mind, President Obama should use the power of his office to directly impact these issues, and stimulate the economy in the following ways:
1. Issue an executive order that would keep his campaign promise to, “end the diversion of federal small business contracts to corporate giants.” Economists agree that the best way to stimulate the economy is to direct federal infrastructure spending to small businesses. Ending this abuse would infuse the nation’s middle class economy with billions of dollars a month in existing federal infrastructure spending.
2. Support the passage of H.R. 2568, the Fairness and Transparency in Contracting Act. H.R. 2568 represents a pure, simple and effective means of directing billions of dollars in existing federal spending to the nation’s 27 million small businesses. The bill was introduced by Congressman Hank Johnson (D – GA) and currently has bi-partisan support from 26 co-sponsors.
3. Restore the Small Business Administration’s budget and staffing to pre- Bush Administration levels. The SBA had a larger budget during the Reagan Administration than it does today. Since 2003, a series of federal investigations have pointed to a lack of oversight as a major contributing factor to fraud and abuse in small business programs. President Obama should ensure that the SBA is fully capable of supporting small businesses, and adequately providing oversight on America’s small business programs.
4. Eliminate the Comprehensive Subcontracting Plan Test Program, which allows prime contractors to circumvent federal small business subcontracting goals. It is imperative that the Obama Administration hold prime contractors accountable for hitting small business subcontracting goals.
5. Stop the pentagon from dismantling federal contracting programs for minorities. The federal appeals court ruling in Rothe Development Corporation v. Department of Defense (DoD) effectively ended small business preference programs for Small Disadvantaged Businesses (SDB). President Obama should take steps to ensure that SDBs are protected in federal contracting programs.
In November of 2009 Robert Reich stated, “Who is going to buy the stuff we make, or the services we provide? Right now there is only one buyer left… the government. The only way to get jobs back right now is for the federal government to spend even more on the roads, bridges, schools, parks, public transport and everything else we need. Make up for the cut backs on the state level, and in this way, put Americans back to work.”
As the White House well knows, small businesses are responsible for creating between 65 and 90 percent of net new jobs (PDF). It is critical for our economic recovery that the government takes steps to make sure that 23% of federal contracts actually go to small businesses, and not Fortune 500 companies.
Lloyd Chapman is the founder of the American Small Business League
Other posts in this series:
. Question: What Things Can Obama Do Now?
. Bill Black: What Obama Could Do Now
. Alan Grayson: What Obama Could Do Now
. Glenn Greenwald: What Obama Could Do Now
. James Galbraith: What Obama Could Do Now
. Cynthia Kouril: Five Things President Obama Can Do Now
. Jon Walker: What Obama Could Do Now