SBA fights back on contracting goals lawsuit

The Small Business Administration is asking a judge to toss out a lawsuit claiming it cooks the books when it comes to federal contracting goals.

The Small Business Administration is asking a judge to throw out a lawsuit claiming it uses “creative accounting” for federal contracting benchmarks.

SBA filed a motion to dismiss the lawsuit, which was filed in May by the American Small Business League, related to the agency’s annual goaling report.

“SBA’s requirement to publish agency remediation plans stems directly from the Small Business Act,” SBA counsel stated in court documents. “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. Moreover, the alleged legal consequences for [ASBL] are speculative and result not from SBA’s actions but from individual contracting decisions across multiple federal agencies.”

ASBL in a statement called the motion a dodging of fraudulent policies.

“The SBA has obviously sidestepped the relevant issues of this case because their policies are undeniably in direct conflict with the Small Business Act,” said Robert Belshaw, an attorney for ASBL. “The SBA is trying to deny any legal obligation to give an accurate report on the true level of small business participation as the statutes requires.”

Making the grade

SBA in March released its annual report card on small business federal contracting. As a whole, the government received an “A” on its report card for fiscal 2015.

For the first time the government reached its 5 percent women-owned small business [WOSB] contracting goal since the bar was set in 1996. The government spent $17.8 billion working with WOSBs, according to the report.

The government also passed its 23 percent overall small business procurement goal by spending 25.75 percent, or $90.7 billion on small business contracts.

SBA explained in its motion that “each agency submits a report to the SBA Administrator at the end of each fiscal year indicating whether the agency achieved its goals, any justifications for failure, and a remediation plan.”

The business league takes issue with what it says is the SBA practice of excluding certain contracts in a way to “misrepresent and fabricate” compliance with those goals, resulting in Fortune 500 companies being awarded small business contracts.

In a May interview with Federal News Radio, SBA’s associate administrator of Government Contracting and Business Development John Shoraka said the agency’s exclusion process was both a work in progress and a holdover from the previous administration.

“When we came in as an administration in 2009, we wanted to be able to continue to measure apples to apples to apples, to see if we’re actually progressing,” Shoraka said. “We kept those exclusions as they stood when we arrived, to make sure we weren’t accused of sort of fiddling with the numbers and making it look like we were having success.”

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A request for comment from SBA was not immediately returned.

In SBA’s motion, the agency makes three arguments for tossing the lawsuit. One argument is that the agency’s goaling report is not equal to a rule or order.

“The criteria used to determine which contracts qualify as small business, and which contracts qualify as goaling exclusions, are already determined by existing laws and policies that govern the SBA and other agencies,” court documents state. “Though SBA is also directed by statute to publish the information found in the goaling reports, the reports themselves do not ‘implement’ the law.”

Another argument is that the reporting does not directly impact legal rights.

“Whatever legal consequences might accrue to [ASBL] would be the result of further contracting decisions by other federal agencies, not the goaling reports or agency remediation plans,” the motion states. “The data contained in the goaling reports does not create SBA’s responsibility to publish remediation plans, which already exists under the Small Business Act.”

The third argument rests on what SBA says is a lack of “final agency action,” which ASBL needs to be able to file a lawsuit under the American Procedure Act.

“The APA permits suit against an agency when a person has suffered a ‘legal wrong because of agency action’ or has been ‘adversely affected or aggrieved by agency action within the meaning of a relevant statute,'” the motion states.

“SBA’s reporting of small business contracting achievements is not final agency action within the meaning of the APA, and thus cannot be challenged in federal court. While SBA is required by statute to report these achievements and agency remediation plans, the reports themselves do not affect the law or SBA policy, nor impose direct, legal consequences for either party.”

A hearing on the motion is scheduled for Sept. 29.

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