woman-311335_640The Small Business Agency (SBA) is a federal department that was designed to encourage and assist startup businesses in the United States. In pursuit of that goal, the federal government established an SBA 8(a) program which was primarily intended to help minority business owners as well as businesses that are socially or economically disadvantaged. What has happened in the past and continues today, is that these set aside contracts are often subcontracted to larger corporations, where the lion’s share of the award ends up.

Here is how small businesses lose out with this system.

Diverted Funds Equals Lost Funds

The 8(a) program was designed to help small businesses grow, not simply make a few dollars profit. The subcontracting, presumably arranged ahead of time with the larger corporation, steals money from qualified companies that would use the money the way is was intended. These prearranged transfers do little, if anything, for small business growth. What is hidden behind these payments to large companies is that the small business awarded the contract could have subcontracted with other small businesses to perform the work.

System Wide Corruption Equals Loss of 8(a) Integrity

From the investigation, both the large company and the small business are responsible for initiating the subcontracting arrangement. Large companies seek out small businesses who will get preferential treatment knowing they will likely be in violation of the 8(a) rules. The small business is equally aware but chooses to do little work in return for a piece of the set aside award money. The honest small businesspeople who work hard to bid on the awards realize the system is rigged against them, losing out on an opportunity to expand their business and earn an honest living.

Irresponsible and Lazy Contracting Officers Equals Lost Opportunities

Beyond the incompatibility of the SBA rules and the Federal Acquisition Regulation general contracting rulebook, there was no effort to make sure that the contracting officers knew both sets of rules. This magnitude of ineptness and laziness allows the corrupt small businesses to continue their deceptive practices without fear of being penalized. Should the contracting officers apply the rules and enforce them, the aberrant businesspeople would either be forced into compliance or lose their preferred status. Over time, this would leave only the qualified and honest businesses competing. As the process stands now, the best small businesses are seeing opportunities for growth and hiring being lost to others companies who choose to ignore the rules and manipulate the system.

Other Casualties

Other than the honest small businesses, there are other losers in this lame game of incompetence. Taxpayers head this list, since it is their money that finances the SBA and provides the money that is awarded. Another group who loses is minority businesses, as the intent of the 8(a) program was to help them overcome their social and cultural limitations in the current system.

The third casualty of this mess – success - deserves its own space here. Too many hard working taxpayers who hear about this systematic corruption wonder why success in so many instances is measured by money. Money, whether in large or small amounts, is what is at the heart of the corruption. Yet most small businesses began with an idea and a dream to make that idea become a reality. Money was the result of success instead of money buying success – if that makes any sense.

There are many places that the blame can be distributed among. But for the small businesses who are on the losing end of this administrative horror, the blame does not matter. The reason is they are on the outside looking in and feel helpless, leaving them to go back to their company and mind their own business.