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Watchdog: Accountability

Small Business Administration hardly bothers with 'economic disadvantage' scrutiny for minority contractors

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Business,Watchdog,Federal Budget,Corruption,Waste and Fraud,Luke Rosiak,Accountability,Small Business Administration,Race and Diversity

Business owners who want to receive federal contracts reserved for minorities by law must explain to the Small Business Administration exactly how their race has hindered them in the corporate world, but companies are routinely approved for such preferences despite giving token answers, according to records obtained by the Washington Examiner.

Members of certain races are automatically deemed "socially disadvantaged," but they must also document in a written statement specifically how their race has made them "economically disadvantaged."

The applicants must "prove," in the language of the SBA, that their "ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities." One answer that SBA accepted consisted entirely of repeating those requirements word for word.

One in 10 "statements of economic disadvantage" reviewed by the Examiner from firms approved for what are known as 8(a) contracts cribbed the following copied-and-pasted statement, including identical spelling errors:

"Personal networth is the below the financial level set by the SBA. The assistance of the SBA 8a certification and other programs offered to assit small businesses is needed in order to aid our business in competing against larger...more capitalized firms.Provide access to addtional business development tools, SBA loans, training, contracting opportunities, etc."

The first sentence was sometimes replaced by a dollar amount in the six figures -- SBA rules say a person can be "disadvantaged" as long as his net worth, excluding his home, business and retirement fund, is less than $250,000.

One black-owned business said it was experiencing economic hardship in part because it had suffered through the employment of "disadvantaged" workers from government programs who lacked an appropriate work ethic:

"We have used various District of Columbia based programs such as the... On the Job Training Program (OTJ) which provides individuals to companies in order that they can learn skills to assist them in securing a permanent employment. To date, we have utilized approximately 3 individuals through this program.

"Unfortunately, we have not been able to offer permanent employment to any of these individuals due to various reasons such as criminal backgrounds, drug dependency or lack of work ethic."

In another case, a black accountant gained preferential treatment for government contracts after claiming that when working for an accounting firm run by the then-mayor of the majority-black Hampton, Va., "I later learned from an administrative assistant that the partners held a staff meeting prior to my start date to let the staff new [sic] that their first Black staff member was going to be starting so they wouldn't be surprised! ... As mayor of Hampton, James Eason was able to place staff members on boards of civic organizations to get their names out to begin getting the personal contacts that would help the firm. I was never offered any of these opportunities."

Eason told the Examiner that the allegations were untrue and that the SBA made no attempt to verify the woman's claims.

"I cannot imagine what the circumstances are that generated that, it's sort of left me speechless... I won five elections and had strong support from the black community, which I really treasured," he said.

Another minority business owner said that his race has caused him hardship because people assumed he was "given money from the government ... My minority status often deters people from doing business with my company, believing I have money given to me for doing nothing."

He said this in his application for a high-dollar government set-aside program, to which he was accepted.

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Author:

Luke Rosiak

Senior Watchdog Reporter/Data Editor
The Washington Examiner