House committee rips SBA for unauthorized pilot programs, contracting woes

President Obama has nominated Maria Contreras-Sweet to head the Small Business Administration, which has been without a permanent administrator since August. She has not yet been confirmed. (Alex Wong/Getty Images)

Members of the House Small Business Committee voted unanimously last week in favor of several revisions to the Small Business Administration’s budget proposal, with several lawmakers criticizing the agency for committing too much money to new, unproven programs and too little to fulfilling its underlying responsibilities to small employers.

“By necessity, budgets require hard choices,” committee Chairman Sam Graves (R-Mo.) said during a brief markup of the budget. “To the extent that the SBA ... budget request makes hard choices, they ultimately make them in the wrong place.”

Democrats and Republicans on the panel agreed on revisions that would trim $50 million from the agency’s $710 million budget proposal that was published earlier this month as part of the president’s broader spending blueprint. The committee’s recommendations now move to the House Budget Committee for review.

SBA officials maintain that the proposal would ensure that employers have the resources they need to start and grow their businesses, and it would give the department the resources it needs to expand important exporting, capital access and other educational programs. On the agency’s blog earlier this month, Marianne Markowitz, the agency’s acting administrator, said the plan “builds on SBA’s proven track record of assisting America’s small businesses.”

Quite the contrary, lawmakers on the small-business committee said. During the hearing, they identified several areas in which they feel the agency’s budget outline falls short of its charter to assist small companies.

Namely, they worry that the budget does not include enough resources to combat fraud and abuse in small-business contracting programs.

Several government oversight reports have shown that contracts intended for small businesses are often awarded to large corporations, yet those contracts are sometimes still recorded as having gone to small businesses. In an attempt to remedy that, Congress has in the past two years passed legislation that requires the SBA to improve its contracting database and issue better guidelines to help other departments seek out legitimate small businesses.

However, the agency, which has been without a permanent leader for the past seven months, has not completed several of the tasks in those laws, some of which committee says are now more than a year overdue.

“The committee believes that the SBA undervalues the importance of its mission to ensure that small businesses have a fair shot at winning government contracts,” the panel wrote in a memo concerning the budget request. Lawmakers also urge officials to hire more staff to oversee its procurement programs and combat contracting fraud.

So where would that additional funding come from? In large part, the panel thinks the department should shutter some pilot programs that it says are both unproven and unauthorized by Congress.

“While the SBA is ignoring mandates from Congress, it has the gall to request $39 million to continue entrepreneurial outreach initiatives of its own creation,” Graves said.

Rep. Nydia Velázquez of New York, the committee’s top-ranking Democrat, called the agency’s overall funding proposal “reasonable,” but said she too takes issue with the way the money would be allocated.

The panel advised the administration to take an axe to the Boots to Business program, which targets military veterans-turned-entrepreneurs, Growth Accelerators program, which targets early-stage companies, and its Entrepreneurship Education initiative. All the programs, lawmakers argued in the memo, “have amorphous goals” and replicate existing programs within the federal government.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.



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