Small Business Group: Loopholes Will Give Big Companies Small Business Deals

Small-business legislation approved by a Senate panel would open up loopholes allowing for large venture capital firms to grab contracts meant for small companies, according to an organization that advocates for small business.

The Senate Small Business and Entrepreneurship Committee passed S. 3362, the SBIR/STTR Reauthorization Act of 2008. SBIR and STTR are programs that provide federal funding for small businesses to pursue research and technology projects.

The bill will allow some of the world's largest venture capital firms to participate in federal small business contracting programs, the American Small Business League says. The league says it was formed in 2004 as an offshoot of the Microcomputer Industry Suppliers Association to address the needs of all small businesses competing for federal contracts.

The Senate bill was introduced late on Tuesday, and passed through the committee before opponents of the bill had a chance to see it, the league complains. Senator Kit Bond (R-Mo.) was the driving force behind the senate version of the bill to benefit venture capital firms, the league adds in a statement.

Small business owners and advocates across the country are outraged that Congress would even consider legislation that would allow some of the nation's wealthiest venture capital firms to participate in federal small business contracting programs, the league says. The American Small Business League maintains that S. 3362 and House companion H.R. 5819 contain numerous intentional loopholes that will compound the widespread fraud and abuse that has already been uncovered in federal small business contracting programs, the organization charges.

Since 2003, more than a dozen federal investigations have all discovered billions of dollars in federal small business contracts have actually wound up in the hands of hundreds of the largest companies in the U.S. and Europe. In the spring of 2005, the Small Business Administration Office of Inspector General released a report which says, "One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal government today
is that large businesses are receiving small business procurement awards and agencies are receiving credit for those awards."

In the last 30 days alone, three separate federal investigations have been released by the SBA Office of Inspector General, General Accounting Office, and the Department of Interior Inspector General which have uncovered rampant fraud and abuse in several federal small business contracting programs. The Department of the Interior Office of Inspector
General found that agency had awarded millions in federal small business contracts to numerous Fortune 500 firms such as Dell, Home Depot, John Deere, Sherwin Williams, Starwood Hotels and Xerox.

Small business advocates believe that H.R. 5819 and S. 3362 are prime examples of Congress ignoring the best interests of their constituents and pandering to wealthy venture capitalists that contribute millions to their campaigns, the league says in its statement.

If the legislation becomes law, members of the National Venture Capital Association (NVCA) and the Biotechnology Industry Organization (BIO) would receive billions in federal small business contracts, the league further charges. During the 2008 election cycle, the NVCA and the BIO have made significant political contributions to key congressional leaders, the small business league adds. All the recipients of those contributions are now strongly behind passage of these two bills, it adds. According to Opensecrets.org, 17 members of the House Small Business Committee have received contributions from either the NVCA or BIO during 2008, which
represents 55 percent of the panel. Additionally, five members of the Senate Committee on Small Business received contributions from either NVCA or BIO.

"This is the most disgusting and blatant example I have ever seen of Congress completely ignoring the best interest of the American people and selling legislation to the highest bidder," ASBL President Lloyd Chapman says. "Our country is in the middle of one of the most dramatic economic downturns in our nation's history. America's 26 million small businesses need the benefits of federal small business contracting programs like never before. It is unconscionable that not only has Congress failed to adopt simple legislation to end the rampant and widespread fraud that has been uncovered in federal small business programs, but instead proposed
legislation to give federal small business dollars to billionaires.

"This legislation is a prime example of why this Congress has one of the lowest public approval ratings in recent history," Chapman adds. "Any member of Congress that supports a piece of legislation that will cheat America's middle-class businesses does not deserve to stay in office. The ASBL will fight this legislation with all of our resources. If it does pass, we will do everything we can to see that every member of Congress that voted for it will regret that decision."

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