Small Business Administration Defends Methods for Documenting Contracting Goals

Attorneys for the Small Business Administration are headed to court in October hoping to dismiss a suit brought by the Petaluma, Calif.,-based American Small Business League, which claims the agency’s reports on achievement of small-business contracting goals are legally suspect and harmful.

The league’s complaint, filed in May against Administrator Maria Contreras-Sweet in federal District Court in San Francisco, charges that the SBA’s “illegal policies” have “defrauded small businesses and small businesses owned by women, minorities and disabled veterans out of hundreds of billions of dollars in government contracts,” the league said.

Specifically, it argues that the SBA should not be able to exclude certain contracts when calculating whether agencies meet the 23 percent goal in small business contracting. Those exclusions include contracts performed outside of the United States, acquisitions by agencies on behalf of foreign governments, or all contracts involving more than two dozen agencies on a list that ranges from the Federal Deposit Insurance Corp. to the Transportation Security Administration.

Such exclusions in measuring the percentage of prime contracts awarded to small businesses is “arbitrary, contrary to the clear directive of the Small Business Act, and thus exceeds the SBA's authority,” the league’s attorney argued. He noted the statute’s requirement that the SBA monitor agencies that fail to meet small business contracting goals so they execute a remediation plan. Yet “through creative accounting . . . failed goals are not reported, no analysis is done, no remediation plans are created, and Congress' clear directive that the SBA continue to monitor and improve its small business participation programs is left unheeded,” the brief said.

Late last month, just before the filing deadline, the SBA responded with a motion to dismiss. “SBA’s requirement to publish agency remediation plans stems directly from the Small Business Act. Though the implementation of this requirement is tied to the outcomes published in the goaling reports, it is the statute—not the reports—which binds SBA to act,” the agency argued. “Moreover, the alleged legal consequences for plaintiff are speculative and result not from SBA’s actions but from individual contracting decisions across multiple federal agencies.”

SBA added that the court lacks the federal subject-matter jurisdiction, and said the plaintiff alleges no “final agency action” that would invoke a waiver of sovereign immunity under the Administrative Procedure Act. “The goaling report does not amount to agency action, which must be analogous to ‘rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act’ as defined by the APA,” SBA said. “Even if the goaling report constitutes agency action, it is not final agency action because the report does not consummate any SBA decision making process, and because it does not directly result in legal consequences for either party.”

League president Lloyd Chapman told Government Executive the SBA’s brief “completely side-stepped the two main issues of the case—their grandfathering rule and their exclusionary rule,” to “try and have the case thrown out on a technicality. Based on their weak response, we feel we have an excellent chance of prevailing.” 

He is seeking an injunction against excluding certain contractors from the calculation, an amended goaling report and attorneys’ fees.

Separately on Tuesday, the SBA unveiled a new website called certify.sba.gov to help women-owned and economically disadvantaged contractors navigate the application and certification process. It includes a tool that poses 15 questions to help firm owners determine their status in qualifying for government set-asides.