New SBA Grandfathering Policy to Face Legal Challenge

PETALUMA, CA--(Marketwire - July 2, 2007) - The following is a statement by the American Small Business League:

The Small Business Administration's new five-year grandfathering/five-year re-certification policy went into effect on Saturday, June 30th. Under the controversial new policy the federal government can officially count federal contracts to hundreds of Fortune 1000 firms towards the government's 23 percent small business procurement goal through the year 2012.

When a 2002 investigation by the General Accounting Office found the SBA had reported contracts to thousands of big business as small business contracts, the SBA responded by saying the contracts had been "miscoded."

The new five-year grandfathering/five-year re-certification policy will now allow the SBA to officially report the miscoded contracts and thousands of other government contracts to Fortune 1000 firms and other large businesses as small business awards for at least five more years. Without the new policy, the SBA could no longer claim the federal government was reaching the minimum 23 percent small business procurement goal required under current federal law.

Small business owners around the country are outraged and the American Small Business League is preparing to take the SBA to federal court to stop the new policy. The ASBL believes the new SBA five-year grandfathering/five-year re-certification policy will destroy thousands of legitimate small businesses by forcing them to compete head to head with Fortune 1000 firms for even the smallest federal small business contracts. Additionally, the ASBL projects if the new SBA policy is allowed to stand, up to 300 billion dollars in federal small business contracts will be diverted to the top 2 percent of American firms over the next five years.

Over a dozen federal investigations have found billions of dollars in federal small business contracts actually went to hundreds of the largest corporations in the United States and Europe. Many of the investigations attributed the problem to SBA policies, which allowed the government to include contracts to firms like Boeing, Lockheed Martin, AT&T, L3 Communications, Raytheon, Northrop Grumman, Rolls Royce, General Dynamics, SAIC and Bechtel towards the federal government's 23 percent small business contracting goal.

The American Small Business League plans to file their case this summer in federal court. Their legal challenge will be based on three fronts: (1) The SBA does not have the governmental authority to adopt such a broad reaching federal policy, (2) The new policy is inconsistent with previous annual re-certification policies adopted by the Office of Management and Budget, (3) The new SBA policy is inconsistent with the specific wording and the Congressional intent of the Small Business Act as it was passed in 1953.

The ASBL has won three previous federal lawsuits against the Small Business Administration.

Contact Information: Contact: Lloyd Chapman President American Small Business League (707) 789-9575