Reporting of Small Business Contract Awards Does Not Reflect Current Business Size

We have prepared this report in response to concerns about whether large companies are receiving federal contracts intended for small businesses. We reviewed awards to five large companies to determine (1) how contracts awarded to the companies were reported in Federal Procurement Data System (FPDS), (2) why federal contract officials reported the contracts as small business awards, and (3) what actions are being taken to address any identified problems.

The five large companies that we reviewed received contracts totaling $1.1 billion in fiscal year 2001, including $460 million reported as small business awards. To understand why awards to these large companies were listed in FPDS as small business awards, we focused our review on 131 individual contract actions awarded to these companies by four federal buying activities. The predominant reason why these contract actions were reported as small business awards is because federal regulations generally permit a company to be considered as a small business over the life of the contract--even if they have grown into a large business, merged with another company, or been acquired by a large business. In today's federal contracting environment, contracts can extend up to 20 years. Additionally, agencies' reliance on various databases containing inaccurate information on current business size has led to misreporting of small business achievements. The General Services Administration, the Office of Federal Procurement Policy, and the Small Business Administration have each taken or proposed a number of actions aimed at requiring small businesses to re-certify and not retain their small business status for the life of the contract. While these proposed actions do not directly address the database problems we identified at the four federal buying activities, there are a number of initiatives under way designed to improve federal contract databases.