As a small business owner, these kinds of stories are just pretty... discouraging. There should be a general rule of thumb for small businesses of $10 million in sales or less - don't depend on government contracts for the bulk of your business, because most likely it's going to get jimmied away from you by big business
sooner or later.
Cindra Stolk was on the telephone one day in May when her son walked into the office, slapped a fax on her desk and walked out without saying a word.
Stolk, chief executive officer of Federal Edge Inc., a small, family-run computer reseller in Riverside, Calif., looked at the piece of paper and says she felt "the hair stand up on the back of my neck." It was a note from the Hill Air Force Base in Utah informing her that a federal-government contract of more than $600,000 to provide computer equipment was not going to her company, but rather to GTSI Corp., Chantilly, Va.
As part of the government's efforts to help entrepreneurs get a slice of the lucrative federal contract market, this contract had been set aside for bidding by small businesses only.
With eight employees and $6 million in sales last year, Stolk's company was allowed to apply. But so was GTSI, which had sales of $954 million in 2003 and employed 685 people as of March 1. "This is small?" asks 49-yearold Stolk, who opened Federal Edge in 2000 and works alongside her husband and two sons.
Each year Congress establishes small-business buying goals for most federal agencies and for the government as a whole. The overall goal is 23 percent of all prime-contract dollars.
Although there are no legal ramifications if goals aren't met, there is substantial pressure to try, and agencies are encouraged to set aside some contracts for bidding only by the nation's 25 million small businesses.
While the government missed the 23 percent goal for several years running, the U.S. Small Business Administration announced earlier this year that the Bush administration had met the 2003 target and called it a "victory for America."
Two separate studies, however, have noted that some contract awards reported as going to small businesses have actually been in the hands of large companies. Several weeks ago, the Center for Public Integrity, a nonprofit, nonpartisan research group in Washington, released a report saying that 30 percent of all defense-contract money reported as going to small businesses and special minorityowned businesses ended up with top defense companies in 1998 to 2003.
Those findings echo a review completed last year by the U.S. Government Accountability Office, which also found awards to big companies getting recorded as small-business contracts. The GAO said its findings raise "serious questions" about relying on current data to measure federal agencies' efforts to meet the government's overall 23 percent small-business goal. "Everyone wants to be seen as the good guys to small businesses," says Larry Makinson, the senior fellow at the Center for Public Integrity who led its research. "Looking through the data, it seems they are cutting every corner they can to get to that 23 percent." Controversy surrounding contracting set-asides is nothing new. A Civil Rights Commission draft report in 1986 said 20 percent to 25 percent of federal set-aside contracts were going to bogus minority fronts. And there have long been questions as to whether there should be set-asides at all.
Yet NFIB tells their members about Bush: Small Business Has a Friend in the White House. Ugh.