How Big Is Small?

Federal contracting scam

Lockheed Martin doesn't fit most people's definition of a small business. The defense contractor has 140,000 employees, and in 2007 it netted $3 billion in profits. Yet $143 million of its revenue that year came via 207 federal government contracts dedicated to "small businesses."

Congress requires that just under a quarter of all government contracts go to small businesses. According to an investigation by The Washington Post, at least $5 billion of the $89 billion in government contracts allegedly awarded to small businesses in 2007 went to entities that don't fit that description.

The Small Business Administration (SBA) claims the errors came not from chicanery but from "miscodings" based on bad data. Since the federal government kept records of 6 million contract actions in 2007, the SBA maintains, the mistakes identified by the Post represent a very low error rate and suggest that the agency was actually on the ball. "The Post's report, taken along with other credible analyses," acting SBA Administrator Sandy K. Baruah said in a statement, "should lay to rest once and for all the unsubstantiated or uninformed claim that scores of billions in small business contracts is purposely diverted to large businesses."