Small Businesses get Stiffed, GAO Report Reveals

by on September 27th, 2007

A September 26, 2007 Government Accountability Organization (GAO) report revealed that small businesses received only 28 percent of federal contracts for “Katrina-related projects.”

The Small Business Administration (SBA), formed after the Small Business Act of 1953, released a report in August 2007 which revealed 22.8 percent of “prime contracting dollars” were warded to small businesses by federal agencies. Under the Small Business Act there is a 23 percent statutory goal. The SBA report also found that federal agencies did not meet goals of awarding contracts to women-owned businesses, or “veteran service-disabled owned businesses.”

For a business to be eligible for the Small Business Act’s Business Development Program, which helps small, disadvantaged businesses, it must be “owned and controlled by one or more socially and economically disadvantaged individuals who are U.S. citizens.” It must also demonstrate “the potential for success.”

Federal Acquisition Regulation (FAR) requires businesses who received a prime government contract give small businesses the “maximum practicable opportunity to participate in the contract.” It also requires that competition be full and open.

The House’s Committee on Government Reform released a report June 2006 titled, “Dollars not Sense.” The report detailed government contracting under the Bush administration. The report stated that as of June 2006 the Federal Emergency Management Agency and the Army Corps of Engineers awarded “$9.7 billion to private contractors for Gulf Coast recovery and reconstruction following Hurricane Katrina.” Less than 30 percent of the contracts were awarded with “full and open competition,” and more than 50 percent were “awarded on a

sole-source basis.”

The Committee on Government reformed released a report this year, “More Dollars, Less Sense” which revealed the six companies who received the biggest federal contracts: Lockheed Martin, Boeing, Northrop Grumman, Raytheon, General Dynamics, and Halliburton. Together they received $99.9 billion in 2006, which accounted for 24 percent of all federal procurement spending.

Last year the GAO released a report concerning Katrina-related government contracts. The report compared the Katrina contracts to ones awarded in Iraq. The GAO stated that Iraq contracts are “without effective acquisition planning, management processes, and sufficient numbers of capable people, poor acquisition outcomes resulted.”

Pre-Katrina Corruption

The Federal Emergency Management Agency (FEMA) contracted out the evacuation of New Orleans to Innovative Emergency Management (IEM), a Baton Rouge based company. IEM did not have experience evacuating a city, but they were one of the largest contributors in Louisiana to the Republican National Committee.

Dr. Ivor Heerden, Deputy Director of the Louisiana State University Hurricane Center, offered a plan to FEMA but they refused to use it. The computer model’s at the Hurricane Center showed the “federal government had built the levees around the city a foot-and-a-half too short.” Heerden told investigative journalist Greg Palast that he knew “how to save New Orleans from a hurricane’s devastation” but was a “target of an official and corporate campaign to bury the information.”

Gina-Marie Cheeseman