SBA Denies Responsibility for Fraudulent Policies in Federal Injunction Case, ASBL Reports

PETALUMA, CA--(Marketwired - August 03, 2016) - In responding to the federal lawsuit filed by the American Small Business League (ASBL) for diverting federal small business contracts to Fortune 500 firms, the SBA is arguing they have no legal responsibility to ensure the accuracy of their reports.

ASBL attorney Robert Belshaw stated, "The SBA is trying to deny any legal obligation to give an accurate report on the true level of small business participation as the statutes requires."

The ASBL is asking the court to stop two specific policies the SBA has created that are a direct violation of the Small Business Act. The ASBL believes the illegal SBA policies cheat small businesses out of billions of dollars in federal contracts every year.

Federal law mandates that small businesses receive a minimum of 23% of all prime contracts. The SBA created an "exclusionary rule" that excludes the vast majority of the total federal acquisition budget from their calculations. This policy has dramatically reduced the volume of federal contracts that are actually awarded to small businesses. According to the Congressional Budget Office, the total acquisition budget for fiscal year 2015 was $1.2 trillion. For 2015, the SBA used a number of just $391 billion. The ASBL believes in 2015 small businesses lost over $186 billion in contracts as a result of the SBA's "exclusionary rule."

In an interview with Mother Jones, nationally recognized expert on federal contracting law, Professor Charles Tiefer, estimated in 2011 the SBA had excluded $677 billion in federal contracts. Based on Professor Tiefer's calculations, the SBA "exclusionary rule" cost American small businesses $155.7 billion in federal contracts in 2011.

The ASBL is also asking the court to halt the SBA policy of diverting billions of dollars a year in federal small business contracts to Fortune 500 firms. SBA Administrator Maria Contreras-Sweet admitted the SBA created a "grandfathering rule" that allows them to divert federal small business contracts to Fortune 500 firms such as Northrop-Grumman, Chevron and Raytheon.

The SBA's Inspector General stated, "One of the most important challenges facing the Small Business Administration (SBA) and the entire federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards."

President Obama acknowledged the magnitude of the abuse at the SBA when he released the statement, "It is time to end the diversion of federal small business contracts to corporate giants."

In attempting to justify the SBA "exclusionary rule," SBA Associate Administrator John Shoraka stated, "When we came in as an administration in 2009, we wanted to be able to continue to measure apples to apples to apples, to see if we're actually progressing… We kept those exclusions as they stood when we arrived, to make sure we weren't accused of sort of fiddling with the numbers and making it look like we were having success."

The first court date for the case is set for September 29, 2016.