Rep. Hank Johnson, D-Ga., has introduced a bill that would ensure that small business government contracts go only to small businesses instead of the subsidiaries of large companies.

Small businesses are especially keen to get their share of federal contracts now that the stimulus package has begun to take effect. H.R. 2568, “The Fairness and Transparency in Contracting Act of 2009,” is the result of more than 15 investigations that have exposed widespread abuses in a system that is supposed to direct a proportion of federal contracts toward small businesses.

The Small Business Administration Inspector General found in 2002, for example, that at least 4.4 percent of 1,000 contractors awarded federal funds designated for small businesses did not meet basic requirements to receive those contracts. Large companies such as Bechtel and HP were awarded small business contracts by government agencies, and those funds counted toward the agencies’ small business contracting goals.

To correct this, H.R. 2568 would modify the definition of a small business in the Small Business Act by including the additional requirement that no publicly traded company can qualify as a small business in relation to these funds. It also allows a person to file a complaint if they have evidence that a small business contract was improperly awarded.

“It’s unconscionable that some large corporations are the beneficiaries of small business contracts, especially given how many small businesses are struggling in this recession,” said Johnson (pictured) in a statement. “H.R. 2568 will go a long way in helping correct this egregious error.”

If passed, the bill would require the SBA to submit to Congress an annual report detailing the nature of the complaints and the resolution.

American Small Business League President Lloyd Chapman lauded Johnson’s efforts.

“Every small business in America owes Congressman Johnson a debt of gratitude for introducing this bill,” said Chapman. “Small businesses create more than 97 percent of all net new jobs, and this bill will do more to help those firms than any stimulus plan proposed so far. It will create millions of new jobs and provide a dramatic boost to the middle class economy.”

Notification and reporting requirements in the bill include notification for government agencies and contractors of changes in the bill. The bill also requires the SBA to make public which companies are receiving small business contracts, and requires each federal agency to report on their Web site a list of companies receiving small business contracts from that agency. In addition, the bill requires that the agency responsible for maintaining the database of all federal contractors provide an adequate warning about the penalties for misrepresenting the status of a business concern or person in order to obtain certain federal contracts.

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