Federal Injunction Against SBA Could Boost Funds for Small Businesses by Billions

PETALUMA, Calif., May 5, 2016 -- The American Small Business League (ASBL) has filed for an injunction in Federal District Court in San Francisco to stop two specific Small Business Administration (SBA) policies the ASBL believes have defrauded small businesses including  women-owned, minority-owned and disabled veteran-owned small businesses out of hundreds of billions of dollars in federal contracts.

The Small Business Act requires that small businesses shall receive a minimum of 23% of the total value of all prime contract awards each year.

The SBA created a policy they call their "exclusionary rule" which excludes billions of dollars in federal contracts from their calculations to significantly inflate the percentage of awards to all categories of small businesses. The Congressional Budget Office indicates a total discretionary budget of $1.2 trillion for fiscal year 2015. Professor Charles Tiefer, one of the nation's leading authorities on federal contracting law, has issued a legal opinion putting the total annual federal acquisition budget at well over $1 trillion dollars.

The SBA falsely claimed the federal government achieved all its small business contracting goals in fiscal year 2015 with women, minorities and disabled veterans by using a federal acquisition budget of just $352 billion.

The second policy the ASBL is hoping to eliminate is the SBA's longstanding practice of including billions in federal contracts to Fortune 500 firms, their subsidiaries and thousands of other large businesses in the volume of contracts they claim the federal government awarded to legitimate small businesses.

The SBA refers to this policy as their "five-year rule" or "grandfathering rule". These policies were adopted shortly after a Congressional investigation, conducted in 2003, where the Government Accountability Office (GAO) uncovered over 5,300 large businesses including Fortune 500 firms were the actual recipients of billions of dollars in federal contracts the SBA claimed had gone to small businesses.

The ASBL believes the SBA hurriedly adopted the "grandfathering rule" in an attempt to legitimize the rampant fraud and corruption that had been uncovered by the GAO. 

In 2009, the GAO released Report 10-108 that seemed to accuse the SBA of encouraging fraud in a federal programs. That investigation stated, "By failing to hold firms accountable the SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud or abusing the intent of the SDVOSB program."

Some of the firms federal agencies have claimed were small businesses include, Rolls Royce, Hewlett-Packard, IBM, Oracle, Disney, Titan Industries, Wal-Mart, Home Depot, Bechtel, SAIC, Honda, Raytheon, Citigroup, Johnson & Johnson, General Electric, Microsoft and British Aerospace. 

The ASBL Believes if their injunction is granted federal contracts to all categories could increase by well over $100 billion a year.

ASBL attorney Robert Belshaw stated, "I think we have a very strong case here. I think the SBA is going to have a difficult time convincing the court Fortune 500 firms are small businesses."

CONTACT: Alyssa Prophet
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