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When small business meets big fraud

Marketplace Staff Feb 9, 2009

When small business meets big fraud

Marketplace Staff Feb 9, 2009


Steve Chiotakis: Many small business owners want to see the government change how it does business with them. Over the past six years, more than a dozen federal investigations show billions of dollars earmarked for the little guy were diverted to corporate giants. From Washington, Ronni Radbill reports.

Ronni Radbill: Small businesses advocates say the government’s giant bailout does nothing to address contracting fraud and abuse. The government is legally required to award 23 percent of its contracts to small companies. Those are defined as independently owned and operated firms with up to 500 employees.

Lloyd Chapman is president of the American Small Business League. He says instead, most of the business goes to the big guys.

Lloyd Chapman: You can imagine what happens when you pull $100 billion a year out of the middle-class economy where all the jobs are created, where most Americans work, and divert that money to Fortune 500 corporations that are shifting jobs overseas.

In one investigation, the Interior Department’s Inspector General discovered small business contracts were finding their way to companies like Xerox, Dell and Lockheed. In other cases, big corporations bought small firms and then kept their contracts.

Dan Fahey owns a small IT consulting company in Rockville, Maryland:

Dan Fahey: He who has the power has the ability to get it. And what happens is it’s one of those things that’s hard to prove but you see it happening in front of you, and there’s nothing you can do about it.

The corporations say they never intentionally diverted work from small companies.

The U.S. Small Business Administration is responsible for the accuracy of the contracts. A spokeswoman there says sometimes errors in contracts are overlooked, but she says the agency is fixing the problem.

Congressman Lynn Westmoreland is a small businessman from Georgia. He sits on the House Small Business Committee. Westmoreland says Congress needs to take a closer look at how the government prepares its contracts.

Lynn Westmoreland: Sometimes they put together a contract that’s so large that a small business can’t do it.

He says SBA oversight together with loosening up tight credit are critical to small businesses.

Westmoreland: I’ve got small businesses that are going bankrupt every day. Until we get the credit down to those small business guys in somebody’s home town, I don’t think the economy’s going to ever straighten out.

Small business owners echo that sentiment. They caution if it’s business as usual in Washington, more jobs will be lost and small companies will continue to fail.

In Washington, I’m Ronni Radbill for Marketplace.

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