Small Business Contracting Inflated: Report: $12B Went to Large Businesses, Not Small Miscoded contract records inflated the small business share of the federal market by 15% last year, according to an analysis by Democrats on the House Small Business Committee. The Democratic staff said it documented nearly $12 billion in contracts that were reported as going to small businesses but actually went to large companies, universities or other nonprofits. As a result, the report says, small firms received 21.57% of prime contract dollars in fiscal 2005, compared to 25.36% in the official figures reported by the Federal Procurement Data System. “Taking into account these misrepresentations drastically reduces the overall small business achievement,” the Democrats said in their annual Scorecard report. The report says more than one-third of the miscoded contracts were awarded to large businesses; another third went to small companies that had outgrown size standards; and about one-sixth went to small businesses that had been acquired by large ones. SBA’s inspector general has identified the issue as one of the agency’s top management challenges. “Although the extent of such over-reporting is unknown, studies that we and the GAO have conducted suggest that the problem may be widespread,” IG Eric Thorson told the Senate Small Business Committee last month. In 2003 SBA proposed a regulation requiring small firms to recertify their status ever year, but no final rule has been issued. The Senate committee has recommended requiring annual recertification. (See separate story.) The Senate bill contains provisions to make it easier to prosecute companies for intentionally misrepresenting their size. The IG has proposed that Congress give SBA the authority to debar a contractor for size misrepresentation, but agency officials oppose that. The House Democrats called for a Government Accountability Office investigation to determine whether large businesses are intentionally claiming to be small. They asked the inspector generals of the four agencies that had the most incidents of miscoding – Treasury, Transportation, State and Education – to conduct investigations to determine if their contracting officers are deliberately using miscoding to meet small business goals. The Congress members also are sending letters to each of the 2,500 large businesses and other entities that received small business awards, asking that they take action to correct the records. The Democrats’ analysis also found evidence of increased use of contract bundling. It said total contracting dollars have increased by almost 60% over the past five years, while the number of contract actions to small firms over that period declined by 55% --“a clear indication of bundled contracts,” the report concluded.