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Policy Matters
a weekly column
Counting ROISometimes, it's pretty easy to let yourself be amazed by what lawmakers get excited about. Let's face it: fiscal responsibility rhetoric aside, the SBA's funding is a drop in the bucket of the overall federal budget. Which means, among other things, that no matter how much waste, fraud, abuse and duplication Congressional overseers are likely to ferret out, the savings involved are likely to represent a drop in the bucket of the federal government's multi-trillion dollar red ink. So it's difficult to take inquiries into a drop-in-a-drop-in-the-bucket seriously when balanced against other federal expenditures — like the amount of money the federal government doles out to large corporations.
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This week's news briefs
House Panel Looks for Inefficiencies at SBA
Every now and then, federal lawmakers are seized with budget cutting zeal, which inspires them to start hunting for wasteful spending in federal programs. That sort of thing is going on right now, in both the House and the Senate. Late last month, the House Committee on Small Business held a hearing on whether certain SBA programs were duplicative and/or wasteful, particularly SBA's entrepreneurial development programs. The SBA has three main entrepreneurial development programs: the Small Business Development Center program (SBDC), SCORE (formerly the Service Corps of Retired Executives), and the Women's Business Center program (WBC). In addition, there are programs targeting specific populations (veterans, Native Americans) and programs that kick in under certain circumstances (federal procurement, microfinance). And that's just at the SBA. All told, there are 80 economic development programs (including those entrepreneurial development programs) across four different federal agencies.
During the hearing, there was a great deal of talk about the fact that there are so many programs, at the SBA and elsewhere, that do essentially the same things — including American Express OPEN, the private sector service provider representative at the hearing. At the same time, those same witnesses urged Congress not to throw out the baby with the bathwater. The issue, they all said, was to reach every small business owner who needed services, wherever they are. No one agency, program or even private sector provider is going to be able to do that. The real trick is to coordinate everyone's efforts so that services delivery is as efficient as possible. In fact, that's the real issue: efficiency, not duplication. The good news is that no one was talking about getting rid of any of the SBA's entrepreneurial development programs. In spite of the partisan sniping and the fiscal austerity rhetoric, nobody went that far.
Senate Focus on Fraud in Oversight Hearing
Last week, the Senate Committee on Small Business and Entrepreneurship held its own oversight hearing to examine fraud, waste, abuse and duplication at the Small Business Administration. Perhaps the largest difference between this hearing and that held before the House Small Business Committee a week earlier was that this hearing focused early on fraud. Because of that, the first part of the hearing demonstrated the concern of lawmakers about the amount of taxpayer funds being lost to fraud in the SBA's lending and procurement program and what is being done by the agency to prosecute the perpetrators and recover those taxpayer dollars. There were no dramatic Perry Mason-style confessional moments. Rather, there was quite a bit of the usual "we look forward to working with you" language, as all the parties involved promised to continue to work on the problems. In other words, nothing new and we'll see just how much progress the relevant parties are able to make before they get replaced, sooner or later.
It was during the second panel that what witnesses discussed began to sound more like that previous House Small Business Committee hearing. For starters, Bill Shear of the Government Accountability Office was back to testify again that the problem identified by his agency's audits is a lack of coordinated effort on the part of the federal agencies involved in all these economic development programs to establish complimentary processes in which they shared resources where possible, thus saving taxpayer dollars and delivering services in a more efficient manner. Other witness testimony had to do with improving efficiencies at the SBA without necessarily eliminating the programs altogether. The only jarring notes were sounded by Senators who were determined to use the occasion to get into contenious issues that had little to do with the topic of the hearing, further evidence that the once-fabled bipartisan bonhomie that characterized both Small Business Committees does not seem to be in any danger of reapearing.
GAO Finds Small Biz Procurement Problems
Of everything the federal government does that is supposed to work in support of small businesses, the one that is perhaps most direct is federal procurement. Not only is it the most direct, it has the potential to be the most effective. The best and most rational way for small businesses to increase their revenues is to increase their sales. The United States government is the worlds top purchaser and it buys everything. Unfortunately, as with everything else the federal government tries to do to help small businesses, federal procurement does not live up to its small business support potential, for a few different reasons. To begin with, most procurement officials will tell you that microbusinesses lack the capacity to fulfill a government contract — thus excluding 90% of the nation's small businesses and making it difficult to meet its own procurement goals.
At the other end of the spectrum, as a report released last week by the GAO demonstrates, there are too many ways in which federal bureaucrats seem able to thwart Congressional attempts to help small businesses sell to the feds. Back in 1978, Congress amended the Small Business Act, requiring each federal agency to create an Office of Small and Disadvantaged Business Utilization (OSDBU), whose director would report directly to either the first or second banana of that agency. The thinking behind the reporting requirements was that the directors of the OSDBUs would be better able to advocate effectively for small businesses, and would be less easily ignored within the framework of a large federal bureaucracy, if they had ready access to the top official(s) in the agency. Unfortunately, not all federal agencies are in compliance, sometimes in sly and slithery ways. Federal procurement needn't necessarily be a closed door to microbusinesses, if certain procedural reforms were to happen. But there's little chance of that when Congress can't even persuade government bureaucrats to comply with existing small business friendly procurement rules.
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