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Getting Small Business Contracts to Small Businesses

Volunteers Attend To Landscaping At Arlington Cemetary

Operation Comfort Warriors: Our Pride and Purpose

Week of 20 July 2009

Big businesses gobble up procurement deals that should go to smaller firms. A proposed new law aims to change that.

Getting Small Business Contracts to Small Businesses

(By Ian Mount- Fortune Small Business) -- In 2008 a lucky engineering firm snagged the top spot on a list of leading small business contractors to the federal government. Based in Alexandria, Va., the company had signed an impressive 39 contracts with government entities ranging from the U.S. Navy to the Department of Energy. The catch? The "small business" in question, VSE Corp. (VSEC), employs 1,920 workers and posted $1 billion in revenues last year.

VSE's incongruous distinction illustrates a persistent problem in the federal contracting system: the mislabeling of corporate titans as small businesses. Federal guidelines mandate that 23 percent of all government contracts be awarded to small businesses, which generate roughly half of private-sector employment and more than half of private, nonfarm GDP.

But at least 16 companies with more than $1 billion in annual revenues were among the top 100 small business contractors in 2008, according to Eagle Eye, a Virginia research firm that tracks federal spending. In addition to VSE, giant defense contractors Lockheed Martin (LMT, Fortune 500) and General Dynamics (GD, Fortune 500) each earned more than $120 million in small business contract payments last year.

On May 21, Rep. Hank Johnson, D-Ga., moved to remedy this situation by introducing the Fairness and Transparency in Contracting Act, which prohibits publicly traded and foreign-owned companies (or their subsidiaries) from being classified as U.S. small businesses for government contracting purposes. The bill also requires that small business contract holders have their names reported quickly and that they be listed by the name of their parent companies so that large firms can't hide behind small subsidiaries.

"For far too long, large corporations have benefited when they should not have," Johnson says.

Small business advocates give the bill mixed grades. "Tightening the definition of small business would create significant opportunities for actual small businesses," says Brad Close, vice president of public policy at the National Federation of Independent Business, an advocacy group based in Washington, D.C.

Others argue that excluding public companies could make it harder for growing businesses to snag their fair share of federal contracts.

"Contracting is being bifurcated into two communities, a number of very large businesses and a number of protected small businesses," says Giovanni Coratolo, vice president of small business policy at the U.S. Chamber of Commerce. "I can't digest that you don't let public companies be counted as small. Why? You don't advocate for small business and put a ceiling on their ability to grow."

Large firms often end up on small business contractor lists because they buy small firms that have scored federal procurement contracts. Case in point: In September 2006 the Department of Homeland Security announced that 28 small businesses had been awarded portions of a large computer contract called Eagle. Since then at least 11 of these firms have been acquired. One, Alpha-Insight of Falls Church, Va., was bought by information technology giant CACI International (CACI) six months before its government contract win was announced.

In the end, small businesses would be helped most by the speedy removal of large businesses from the small business contract statistics, which would push government agencies to find true small businesses in order to reach their 23 percent goal. "More than likely, having correct data would drop the numbers," says Robert Burton, a former senior official at the Office of Federal Procurement Policy. "And there's no question that the government would come under intense scrutiny to meet its target."

Meanwhile, some tenacious small companies have managed to buck the system. In 2004 Federal Edge, a small computer reseller based in Riverside, Calif., lost out to technology behemoth GTSI (GTSI) for a $600,000 small business contract to provide computer equipment to the Air Force. GTSI grossed $1.1 billion in 2004 but had been incorrectly classified as a small business, says Federal Edge vice president Rod Stolk. Federal Edge filed a protest with the Air Force, won the contract and attracted media coverage from the Wall Street Journal, CBS News and this magazine. "We were barraged with e-mails, phone calls and letters from small business owners across the country saying, 'Us too! Us too! Keep it up!'" Stolk recalls. "It's a tough gig for small businesses out there."

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Volunteers Attend To Landscape At Arlington Cemetery

In continuing coverage, NBC Nightly News(7/13, story 11, 2:35, Williams, 8.37M) broadcast, "It was shortly after sunrise" Monday when a "small army" of 400 volunteers "began to arrive" at Arlington National Cemetery to "spruce up the landscape in America's most hallowed grounds." Phil Fogerty, "a landscaper from Cleveland, first planted the idea more than a decade ago," and it has now "grown into an annual project he calls 'Renewal & Remembrance.'" Fogerty was shown saying, "We want every one of those families that lost a loved one in World War I, World War II, Korea, Vietnam, Iraq or Afghanistan, to know that there is a group of people that absolutely refuses to forget the sacrifices that were made." The AP (7/13) noted that the Renewal & Remembrance project is "hosted by the Professional Landcare Network, known as PLANET." The CNN (7/13, Vowell) website also covered this story.

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Operation Comfort Warriors: Our Pride and Purpose

By American Legion National Commander David K. Rehbein

During my year as national commander, I often speak of pride and purpose. I mention the pride that we should all have as veterans and the purpose that Legionnaires have in continuing to serve our great country. No example better encapsulates this theme than Operation Comfort Warriors.

Operation Comfort Warriors provides direct assistance to patients at U.S. military hospitals and warrior transition units in the form of comfort items and other goods that are not normally purchased through government channels.

Since December, the American Legion family has raised nearly $165,000 for these heroes. We have provided sweat suits, DVDs, puzzles, electronics, books, calling cards and other comfort items to those who have already sacrificed so much for us. I am proud of the Legionnaires, Auxiliary members, Sons of the American Legion members and all of those who have given so far. But more needs to be done.

Nearly 35,000 of our men and women in uniform have been injured in Iraq or Afghanistan since the war on terrorism started. Add to that the countless thousands who are hospitalized because of illnesses or accidents and you can appreciate the scope of the need.

We have already spent 75 percent of the fund on these wounded warriors and will need to replenish the coffers quickly. Don’t worry about the other 25 percent; it will be spent soon enough and for the intended purposes. In fact, not a single penny of donated funds is spent on administrative costs or fundraising. Those expenses are paid from our headquarters budget.

This year at our 91st Annual National Convention in Louisville, The American Legion will host a donation booth for our hospitalized heroes. Departments will be able to present their checks directly to me on the stage of the Convention. If you won’t be able to make it to Louisville, you can donate online at legion.org or send a check to:

Operation Comfort Warriors
PO Box 1055, Indianapolis, IN 46206.

As national commander, I visit hospitalized troops often. They are truly inspirational. Many express the desire to re-join their units in combat even after they lost a limb. Their thoughts are not about their own plight but about the safety of their buddies and whether they will be allowed to accomplish the missions that America sent them to do.

They fight to protect our homeland, which includes people like 15-year-old Amanda Braum, a high school sophomore in Simla, Co., who raised $530 for Operation Comfort Warriors. There are also people like World War II veteran Donald Williams, a Legionnaire from Clinton, Minn., who along with a check sent a note imploring us to "keep Operation Comfort Warriors going."

Not only are our men and women serving in the military a special breed, so are many of the people back home. Adm. Mike Mullen, Chairman of the Joint Chiefs of Staff, also believes this. "The American people have been spectacular in their support of our men and women in uniform — and I am very grateful for that, and so are they," he said. "As a country, I would hope we keep our focus on our people, particularly those who have been wounded, and their families, and the families of the fallen. These are people who have paid, in many cases, the ultimate price. And I think we as a country must repay that debt."

Operation Comfort Warriors won’t be able to make all of our troops "whole" again, but it will show them that we care. These troops are our pride and our purpose.

David K. Rehbein, of Ames, Iowa, is national commander of the 2.6 million-member American Legion, the nation’s largest wartime veteran’s organization.

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