Small Business is Not So Small - Industry Influence - RegWatch

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Friday, October 21, 2005

Small Business is Not So Small

The government's definition of small business is so expansive that billion dollar corporations are receiving Katrina cleanup contracts dedicated to small businesses. From the Washington Post:

The government's list of small businesses receiving Katrina-related federal contracts along the Gulf Coast includes one of the largest debris-removal firms in the country and a billion-dollar corporation that boasts former vice president Dan Quayle on its board of directors.
Neither company is a small business by any conventional standard. But because of a loophole in federal regulations, a company can be counted as one if it was once small even if it is not now, raising questions about the statistics the government has been citing to defend itself from charges that it has favored big companies in the massive Hurricane Katrina cleanup.

Big businesses taking advantage of special breaks provided for small businesses is not limited to Katrina clean up.

A study last year for the Small Business Administration found $2 billion worth of contracts awarded in fiscal 2002 that were listed as going to small businesses that were not really small. A Government Accountability Office review in 2003 found $460 million worth of small-business awards to five large firms in fiscal 2001.
"This is not an occasional occurrence. This is a problem they've had for quite some time. And they seem either unwilling or unable to correct it," said Steven Sims, vice president of the National Minority Supplier Development Council, a trade group.

Businesses that fall under the SBA's definition receive preferential treatment in the rulemaking process and in Congressional initiatives for regulatory reform. Under the Regulatory Flexibility Act, regulators have to consider the impact of regulations on small businesses. In Congress, legislators continually hold up the plight of small businesses as a rationale for regulatory reform. Yet the businesses that benefit are rarely the romanticized mom and pop store. Large corporations are in better position to take advantage of these special breaks while real small businesses are continually left out in the cold.