Business Leader To Call for 'Super SBA'

A leading advocate for small businesses plans to detail for the nation's mayors this morning a radical proposal intended to cultivate a better environment for the small business community.

American Management Services Chairman and CEO George Cloutier in a speech accepting an award at the U.S. Conference of Mayors' winter meeting this week in Washington will call for a five-fold increase in the budget for the Small Business Administration, a consolidation of small business programs across some 40 agencies and the creation of something akin to a small business Peace Corps.

Cloutier is also chairman of Partner America, a small business growth program founded in 2000 in partnership with the mayors' group that offers management advice, technical assistance and education and government procurement opportunities.

"The big picture is that the government doesn't devote enough resources to small business," said Cloutier in an interview at offices on Wednesday.

He also is calling for $50 billion of loan guarantees for small firms to be included in President Bush's recently announced stimulus package. "A lot of lawmakers and others are focused on helping big businesses on Wall Street like the Merrill Lynches in an economic growth package and nowhere is there expansion across the board being considered for small businesses."

Cloutier said more than 40 agencies offer some type of small business loans or other programs, but often small business owners "have no idea that this government help exists or they don't know how to apply. Most of the applicants for these programs are within 60 miles of Washington...These programs aren't marketed well...despite gorgeous brochures that are made, but don't go anywhere."

His vision to create a "super SBA" includes offering a single phone number that would house information on all of these agency programs by calling a number such as 1-800-SBA-HELP and a general Web site. An independent panel comprised of members of the business community and lawmakers would offer ideas on how to consolidate the business programs, he said. It would take about two years to create a consolidated, super SBA, according to Cloutier.

Cloutier, who lectures at his alma mater Harvard Business School, criticized the Clinton and Bush administrations for their lack of focus on small businesses: "Both administrations short-sheeted small businesses" through lack of funding and cohesive, efficient programs.

"Soon there will be a new administration and new heads of agencies and that's why we're starting to make noise about this plan now," he said. "People are asking for concrete ideas for change and I'm offering some."

Small Business Blog readers - what do you think of this plan to consolidate small business programs across all agencies into one 'Super SBA" or the idea of a Small Business Peace Corps that would place knowledgeable students at small businesses for a year or two?

By Sharon McLoone |  January 24, 2008; 9:30 AM ET
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I opine that increased spending of tax payer dollars to create a "Super SBA" is misguided. Lowering taxes and reducing gov't intervention will stimulate the entrepreneural market. The existing SBA is a good example of how a lack luster, antiquated gov't agency has minimal impact on the economy. Loan guarantee programs are simply insurance policies for lenders therefore a waste of tax payer dollars. Take a strong look at the recent GAO reports about the malfeasonce in the SBA to understand how ineffective this out of date agency is in today's business world.

Posted by: Donn Nemchick | January 24, 2008 11:44 AM

Mr. Hemcheck's comments seem to directly out of the Heritage Foundation. That organization only appears to center on what they perceive to be SBA's guarantees to lenders for loans. SBA does provide guarantees and many; many small business loans would not be made by the banks due to risk. The SBA guarantees mitigate the risk to the banks and therefore capital is provided where it would otherwise not be provided. But SBA does much more - provides counseling to thousands of firms and education and opportunities to small business, business development expertise for Federal government contractors. To support this view just check with the thousands of small businesses SBA helps. For example, without SBA, Fortune 500 companies would get all Federal contracting dollars, leaving small businesses out in the cold. All this done by an agency of merely 2100 employees (down form over 4,000 in 1995). Yes I believe the case can be made for a Super SBA.

Posted by: Mike O'Neill, Richmond VA | January 25, 2008 7:52 AM


The Federal Government is speeding toward a procurement policy crisis because bureaucrats seldom think of out-of-the-box solutions. This is particularly true when it comes to procurement set-aside policy. They too often are merely interested in the promulgation of their own views even if it means bashing their own experts and disobeying statutory mandates.

A number of women's groups have lambasted the Small Business Administration (SBA) for delaying the implementation of a procurement program - mandated by Congress - intended to boost the number of women-owned small firms that receive federal contracts. The SBA has taken 13 years to come up with a plan, so bizarre, that it would limit the set-aside contracts to four industries, including engraving and metalworking; intelligence; furniture and kitchen cabinetmaking; and . . . some car dealers. Women own roughly 30 percent of all companies in the United States, but in FY FY2006 they received $11.61 billion or 3.41%, well short of the 5 percent Congress wants them to have on a procurement budget which now is over $400 Billion

Too much bureaucracy to solve business issues has lead to a long line of poor decisions, unnecessary delays and bias rulings including justifying the government's own mistakes by claiming miscoding of contracts such that billions of dollars earmarked for small businesses has gone to Fortune 500 companies. When even the Administrator of the Office of Federal Procurement Policy (OFPP) joins this bureaucracy insanity by ignoring his own statutory mandate on the case of the 'FAR Exemptions'. . . it is time for Congress to hold hearings on the illegal FAR Exemptions, as I have requested, so important policy changes can be made and entrepreneurial out-of-the-box solutions can be considered.

Claiming that the Fairness in Procurement Alliance (FPA) recent whistle blower request for a statutory ruling on the 'consistency of the FAR exemptions with the FAR and applicable law' "falls outside the scope of section 25(C)(4)(A) because this section does not cover review of a legal opinion" is bureaucracy at its worst encounter! In fact, the SBA legal opinion of September 4th, 2007 - the OFPP Administrator referred to - had demonstrated the illegality of the exemptions and why the Administrator - by statute - has not only a responsibility, but a duty to eliminate their influence in excluding small businesses on two separate procurement segments: the GSA Schedules and 'foreign procurements.'

Had the OFPP Administrator done his job - as prescribed in the statute that created his office - and ruled that the 'FAR Exemptions' were NOT consistent with the FAR and applicable law, as many Members of Congress were expecting, there would be in excess of $60 Billion in available set-aside contracts with which to level the playing field.

Those facts contradict the SBA Administrator's January 22nd comments which said, "We're making it much harder for [agencies] to hit their numbers" (meaning their set-aside goals.)" Not so. Technology can make it happen now. Too much bureaucracy and red tape combined with a poorly educated contracting community, however, stand on the way of progress! Simplicity and out-of-the-box entrepreneurship solutions are the answer.

The basic point I am making is that bureaucrats, again, took an unnecessary and wasteful amount of time (10 years) to challenge the legality of the 'FAR exemptions.' By avoiding a ruling on those illegal regulations now, the OFPP Administrator has indicated his intention to maintain the status quo and allow the procurement abuses to continue which would not only waste billions in taxpayers dollars but allow for 'large businesses' to continue to monopolize federal procurements.

Public reports have estimated that over the last decade, these illegal FAR exemptions have diverted $640 billion in contracts away from the statutory rights of small businesses.

Is there an entrepreneurship answer to this debacle? Absolutely! An out-of-the-box solution has been staring at the bureaucrats right in front of on their faces and, sadly to say, they have not used it. I am referring to Public Law 95-507.

Executive Order 11458 , which dates back to 1969, made the expansion of procurement opportunities for women already possible. Those provisions were incorporated into P.L 95-507, formally enacted in 1978. P.L. 95-507 stipulates, "It is the policy of the Government to provide maximum practicable opportunities in its acquisitions to small businesses, small disadvantaged businesses and women-owned businesses."

P.L. 95-507 formally established the Small Business Disadvantaged (SBD) Program which IS and has always been the perfect vehicle for bureaucrats to have used to accommodate the 1994 Congressional mandate which would have given women-owned businesses the 5 percent share of Federal contracts Congress wanted. Why bureaucrats took 13 years and never looked outside-of-the-box for the solution bedazzles all of us working on an entrepreneurial solution referred to as the 'umbrella initiative.'

What bureaucrats should be concerned with is to stop large businesses from monopolizing public procurements. Large businesses have managed to unfairly and unethically secure contracts earmarked for small businesses without fear of legal reprisal.

Currently, even if a small business protests a set-aside award to a large business and wins, there are no assurances of getting the contract back or gaining any benefits or compensation for the effort -- and that is simply not only unfair, but un-American. I clearly proved that point when, in 2005, I challenged a large business alleged 'front' and won the case (SIZ-2005-05-09-22), but got nothing for the effort!

Clearly, there is an obvious need to fix the procurement system, including its contracting vehicles or create a new mechanism, which would isolate set-aside contracts, bring more small businesses into the competition and thus prevent the continuation of the abuses and the bureaucratic blunders of the past. The 110th Congress has passed countless bills to bring both oversight and transparency to public procurements. I say, let's continue the progress!

The plight of women-owned businesses and the recent OFPP position on the FAR Exemptions case are clear indications that everyone, small businesses, bureaucrats, and elected officials would be far better off by supporting a creative non-partisan and entrepreneur-driven private initiative to transform and add value, nurture, and enhance procurement opportunities for small and disadvantaged businesses including women-owned businesses.

A joint effort between the Fairness in Procurement Alliance (FPA) and the University of North Florida (UNF) would create a mega small business procurement center as an umbrella of private businesses (with academicians and attorneys as well) responsible for the delivery of essential services and benefits to small and disadvantaged businesses all over the country. The activities of this mega center would be unprecedented because these services would be using the latest technologies to integrate a multitude of existing services into one. Most importantly, the mega Center will be in the hands of entrepreneurs as opposed to bureaucrats and. . . it would have the oversight and transparency, Congress demands.

This new partnership would allow State and local governments with 'procurement set-aside programs' - that are in compliance with Federal statutes - to take advantage of this far reaching effort and save taxpayers dollars at the State and municipal level while helping their local small businesses in the process.

This entrepreneur initiative would be accomplished by eliminating constitutionality issues and duplicative efforts; by enhancing the marketing of the services; and by integrating established services to maximize the benefit of a combined mega effort.

This mega Center would transform countless individual efforts into one essential service to empower and track small and disadvantaged businesses and their progress through the system to make sure they are securing a fair share of public contracts not only at the federal level, but at the municipal and state level as well. Yes, we want these small businesses to grow - and not remain small - which is what the bureaucrat rules encourage.

Procurement set-asides are about opportunities and, when groups end-up having it, they move out of the program so that other small business groups can compete in a level playing field.

With the private umbrella initiative in place, procurement set-aside programs at the state and local government will be better protected from the challenges they have unfairly received when they have been linked to race. Finally, with the inclusion of a legal unit in its mix to both defend their statutory rights, prevent their abuse and facilitate the litigation of their cases - an opportunity they never had - this Mega Center would avert a procurement crisis that would otherwise occur by relying on bureaucrats, until hell freezes over, for the solutions.

Raul Espinosa
Founder and Spokesperson
FAirness in Procurement Alliance (FPA)

Posted by: Raul Espinosa | January 30, 2008 11:24 AM

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