As more details about wasteful spending and outright fraudulent practices at the General Services Administration are emerging, it becomes clearer every day that there is a far deeper, government-wide contracting problem plaguing the nation.
News of the scandal broke two weeks ago, when GSA Administrator Martha Johnson resigned following the agency inspector general’s report claiming that more than $800,000 of federal spending on a GSA employee conference held in Las Vegas in 2010 was “excessive, wasteful, and in some cases, impermissible.”
Of particular concern to small-business advocates, the IG’s report found that the GSA allegedly awarded “a $58,000 contract to a large business in violation of small-business set-asides.”
This problem of large companies receiving federal contracts that are reserved by law for small businesses is a decades-old scandal of corrupt federal spending and undue corporate influence over politics.
Overall, waste, fraud and abuse in federal small-business contracting programs (across all federal agencies) results in tens of billions of taxpayer dollars a year being illegally diverted to large companies, often some of the largest companies in the world.
Research we finished last month using the federal procurement data system even suggested that companies such as Apple, the New York Times Co., Lockheed Martin and General Motors received hundreds of millions of dollars worth of federal contracts reserved for small businesses in fiscal year 2011 alone.
The New York Times was prompted by our report to investigate how the New York Times Co. — which has more than 7,000 employees and more than $2 billion in annual revenue — could possibly be counted as a “small business” in federal spending reports.
This shows how completely unwilling the federal government is to clean up its contracting programs, especially small-business contracting programs — but it’s certainly not the first proof of federal contracting malfeasance.
Since 2003, a series of federal investigations have discovered hundreds of billions of dollars a year in federal small-business contracts actually being awarded to Fortune 500 firms and other corporations.
In Report 5-15 the Small Business Administration Office of Inspector General described the abuse of federal small business contracts as “one of the most important challenges facing the Small Business Administration and the entire federal government today.”
SBA Inspector General Peggy Gustafson even testified before Congress in October 2011 and named the abuse of federal small-business programs as a top management challenge facing the SBA for the seventh consecutive year.
While this blatant federal contracting abuse has been well documented for more than a decade, true reform has not been accomplished — recent measures approved by the House and Senate to supposedly address small-business contracting issues merely skirt the main problem and will do nothing to protect the waste of taxpayer money through scandals like we have seen at the GSA.
Elliott Rosenfeld is public relations director of the American Small Business League in Petaluma, Calif.