New Republican Policies Would Divert Billions from Small Businesses

While billions of dollars in small business contracts are being diverted to companies like Boeing, Lockheed, Bechtel, and Northrop Grumman, Senate Small Business Committee Chairman Olympia Snowe is favoring a plan that would create yet another loophole.

Under the proposed plan, the government would be able to report grants and contracts to some of the world’s largest banks as small business awards. The proposal would allow venture capital companies with controlling interest of 51% in a small research or R&D company to be eligible for small business status and all the benefits that come with it under the SBIR (Small Business Innovation Research) program.

Current guidelines prevent majority private equity-backed companies from participating in the SBIR program, which was created to strengthen the role of innovative small business concerns through access to federal grants and contracts for research and development.

“The ASBL fully supports government funding for critical research and development, however, the SBIR program was created to assist legitimately small businesses, not giant financial institutions,” stated Lloyd Chapman, President of the American Small Business League.

The ASBL also discovered that House Small Business Committee Chairman Don Manzullo recently proposed the repeal of a long-standing federal policy that prevents large franchisors from using their franchisees as fronts to illegally receive federal small business contracts. Under the new policy, franchises of large companies would be granted small business status. Critics are concerned that Manzullo, an Illinois Republican, proposed the change within a matter of days after Steven Preston, former executive of giant Illinois franchisor ServiceMaster, was nominated for Administrator of the SBA.

“It’s hard to imagine that these two congressional leaders have proposed two more loopholes that will only exacerbate the problem that the SBA’s Inspector General called one of the biggest challenges facing the government today,” stated Chapman. “These policies clearly indicate that Republicans have no intention of proposing any legislation that will end fraud and abuse in small business contracting. Quite to the contrary, these policies will divert funds from small firms and allow the government to report contracts to the nation’s largest corporations and financial institutions as small business awards.”