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The subcommittee's investigation found that some contracts meant for small businesses go to large corporations because of a complex system of rules, loopholes and lax oversight.
The inquiry also suggested that possibly willful ignorance of regulations occurred, including those that require subsidiaries of large corporations to be counted as part of the parent operation and not as separate businesses.
Among the top 100 small business federal contractors last fiscal year, 61 were large firms - including major defense contractors such as Lockheed, Raytheon and General Electric - accordin
The subcommittee's findings reflect a similar conclusion by the Office of Inspector General of the Small Business Administration. It has raised concerns about large businesses receiving contracts meant for smaller operations since 2006.
The SBA oversees efforts to spread federal contracts to the entire business sector. The program is similar to outreach attempts to businesses operated by women, veterans and other disadvantaged groups.
SBA regulations generally define a "small business" as one with no more than 500 employees and average annual earnings of $7 million for most non-manufacturing industries. But there are exceptions that have to do with certain industry categories and wholesale vs. retail operations.
Sen. Rob Portman, R-Ohio, the panel's ranking member, said the system had more than 1,000 different industrial codes, making it "incredibly complex to be certified as a small business."
Joseph Jordan, an SBA assistant administrator and contracting official, said businesses that were awarded contracts when they met the rules for being "small" can keep the jobs for the life of the contract, but are then no longer eligible.
"There are many legitimate reasons for a small business contract to look like it was awarded to a business that is other than small," Jordan said.
He defended SBA's oversight of the system and noted that the government was just shy of reaching the goal of 23 percent small business participation last year.
"Unless you're trying to pigeonhole these folks to boost your own numbers, I think it's as plain as the nose on your face that it doesn't make sense," McCaskill said. "This winds up actually harming small businesses, and people are getting fat and happy thinking their goals are being met."
Originally posted by spyder550
If we had a Randian laissez-faire capitalism -- this wouldn't happen. The larger business would see that it is good that the smaller business is allowed to flourish. The larger business would naturally skip over these contracts and would not need to have onerous regulations laid upon them. It slows business down having to figure out the risk-rewards of ignoring or circumventing regulations.
Business just naturally does what is right.