President Obama’s attempt to close the Small Business Administration (SBA) by combining it with the U.S Department of Commerce has failed. Now he has cut the SBA’s budget more than any other agency. In addition to the impending renewal of the Comprehensive Subcontracting Plan Test Program that removes all transparency and penalties for Pentagon prime contractors that cheat small businesses, his administration is rolling out a new weapon against American small businesses.
On Wednesday, June 25, 2014, the Small Business Administration announced a new policy to create a “safe harbor from fraud penalties” for big businesses that fraudulently misrepresent themselves as small businesses to illegally hijack federal small business contracts.
This is so astonishing it’s actually difficult to believe. Luckily for President Obama he can count on the mainstream media to completely ignore his latest assault on federal programs to assist America’s 28 million small businesses. Unless you read something I have written on this issue you would never even know about this travesty.
Section 16 (d) of the Small Business Act stipulates the penalty for large businesses misrepresenting themselves as small businesses to steal federal small business contracts is up to 10 years in prison, a $500,000 fine or both.
Under the new SBA “safe harbor from fraud penalties” policy, all you have to do to avoid going to prison for felony federal contracting fraud is just tell the SBA you “acted in good faith”. No, I’m not joking, that’s what it actually says. It’s a lot like a Monopoly get out of jail free card.
Every year of the Obama Administration the SBA Inspector General, Peg Gustafson, appointed by President Obama has named the diversion of federal small business contracts to large businesses as the number one problem at the SBA.
A long series of federal investigations and investigative reports in the media have all found “widespread fraud” and abuse in federal small business contracting programs. Federal investigators have found large businesses have committed felony federal contracting fraud by making “false certifications”, “improper certifications” and by “vendor deception”.
A recent legal opinion by Professor Charles Tiefer, one of the nation’s leading experts on federal contracting law, found no legal justification for the Obama Administration’s inclusion of billions of dollars in federal contracts to large businesses in their small business contracting data. He also found the SBA dramatically inflates the percentage of contracts awarded to small businesses by using a federal acquisition budget that is much smaller than the actual federal acquisition budget which is closer to one trillion dollars.
President Obama even acknowledged the rampant fraud in federal small business contracting programs when he released the statement, ‘It is time to end the diversion of federal small business contracts to corporate giants.”
Since President Obama made that statement some of the firms that have received federal small business contracts include: Oracle, Hewlett-Packard, IBM, Chevron, Apple, General Electric, AT&T, Verizon, UPS, Bank of America, Citigroup, Home Depot, Microsoft, Wells Fargo, Pepsi, Boeing, Lockheed Martin, Northrop Grumman, American Airlines and John Deere.
After investigating the SBA, the Government Accountability Office (GAO) essentially accused the SBA and other federal agencies of encouraging fraud to inflate and fabricate their small business contracting data. GAO Report 10-108 stated, “By failing to hold firms accountable, SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud.”
So the GAO has accused the Obama Administration of encouraging fraud in federal small business contracting programs. The SBA Inspector General has named it the biggest problem at the SBA every year President Obama has been in office. Obama personally admitted it was a significant problem and now they want to create a “safe harbor” for firms that commit felony federal contracting fraud.
It’s astonishing, stunning and unimaginable. Can you guess what is going to happen to the level of fraud and abuse in federal small business contracting programs once the “safe harbor” is adopted?
Here is the good news. The SBA will be taking public comment on their new “safe harbor” for felony federal contracting fraud until August 25. Here is how you can tell the Obama Administration what you think about their new “safe harbor” to protect and encourage contracting fraud against the 28 million legitimate small businesses where most American’s work.