Audit questions SBA awards to security giant Blackwater

Blackwater Worldwide and the private security company's affiliates may have misrepresented their size to win more than $100 million in government contracts set aside for small businesses, according to a report released Monday by the Small Business Administration's Office of Inspector General.

The audit found that from fiscal 2005 to fiscal 2007, Blackwater and affiliates won 32 small business contracts worth more than $2.1 million even though the work was restricted to companies with revenue of $6.5 million or less.

In the same period, Blackwater's airline affiliate won more than $107 million in contracts set aside for companies with revenues of less than $25.5 million or fewer than 1,500 employees.

The IG report questioned whether Blackwater could meet any of those limits and says the company may have misrepresented itself. Blackwater executives said last week they are on track to reach annual revenues of $1 billion per year by 2010.

The report also criticized the SBA for not examining Blackwater's contention that its security forces in Iraq and Afghanistan are not employees, but independent contractors.

Anne Tyrrell, a spokeswoman for North Carolina-based Blackwater, said in a statement that "expert accounting and outside legal counsel have determined that Blackwater's classification of security personnel as independent contractors is reasonable, correct and legally protected. ... If after fair and complete examination of the facts, the appropriate authorities have alternate recommendations about our worker classification, we are open to considering other options so long as we can continue to serve our government clients in the best way possible."

The audit was requested by House Oversight and Government Reform Chairman Henry Waxman, D-Calif.