Ninety-eight percent of Washington companies have less than 100 employees. Under the new SBA policy, these small businesses will be forced to compete head to head with firms such as Lockheed Martin, Boeing, Northrop Grumman, Raytheon, Rolls Royce and L-3 Communications for federal small business contracts over the next five years.

With barely four months of experience as the new SBA Administrator, Steven Preston ignored the recommendations of the SBA’s own Inspector General that would have prohibited large businesses from receiving federal small business contracts. Preston’s policy will allow the federal government to count contracts to hundreds of the nation’s largest corporations toward the federal government’s congressionally mandated 23 percent small business contracting goal until 2012.

As early as 2002, the SBA attributed over 600 large businesses discovered in the SBA’s small business database to miscoding, computer glitches and honest mistakes. During the last four years, more than a dozen federal investigations by the Government Accountability Office, the SBA Office of Advocacy and the SBA Office of Inspector General found fraud and a lack of oversight by SBA officials were also to blame.

In March 2005, the SBA Office of Inspector General referred to large businesses receiving federal small business contracts as “one of the biggest challenges facing the Small Business Administration and the entire federal government today.”

Critics of the new policy point out Fortune 500 firms and other large businesses that received federal small business contracts through miscoding and even fraud will be allowed to continue to receive federal small business status for five more years beginning June 30.

Small business advocates believe thousands of legitimate small businesses in Washington and all across the country could be forced out of business, as they are required to compete against Fortune 500 firms for even the smallest federal small business contracts. Lloyd Chapman, president of the ASBL, says the new SBA policy is tantamount to repealing the Small Business Act for America’s 23 million small businesses.

“Fortune 500 firms should be removed from the federal government’s small business database tomorrow, not five years from now,” Chapman said.  “We are talking about an SBA policy that will divert over $300 billion in federal small business contracts to the top two percent of firms in America over the next five years. It’s unacceptable that Congress has done nothing to stop this.”.