As Congress works to reauthorize the Small Business Administration’s financing and economic development programs, some critics say big business is winning contracting dollars intended for small firms.

The issue has been around for years, and industry and government policy-makers have debated potential remedies without results. A recent SBA news release said small businesses won a record $79.6 billion in contracts in fiscal 2005. The media and small-business advocacy groups greeted the announcement with sharp criticism.

“Flaws in the procurement process have allowed large companies to receive small-business awards and agencies to receive small-business credit for contracts performed by large businesses,” said Eric Thorson, SBA’s inspector general, in testimony this month at a Senate Small Business and Entrepreneurship Committee hearing. “We believe the problem to be widespread.”

Paul Murphy, president of Eagle Eye Publishers, said his analysis of government procurement data lists multibillion-dollar companies, such as Science Applications International Corp., Lockheed Martin and Northrop Grumman, among the top 100 small-business contractors in fiscal 2005.

“Regulatory loopholes are allowing large companies to perform small-business contracts,” Thorson told lawmakers at the hearing. “Studies have found that agencies count toward small-business goals contracts performed by companies that have either been acquired by large firms or outgrown small-business size standards.”

“The acquisitions of small companies by large companies may well be a factor in the reports of large companies receiving small-business awards,” said Northrop Grumman spokesman Gus Gulmert. “We are actively engaged with SBA to identify and correct any of our records that need to be updated. Once that is complete, we should have a better understanding of any problems with the existing process.”

The Commerce Department’s Commerce Information Technology Solutions Next Generation (COMMITS NexGen) contract vehicle, which is open only to small businesses, is a case in point. A Government Accountability Office briefing in June noted that “many of the 55 COMMITS NexGen contractors have grown significantly or have been acquired by larger businesses and may no longer meet small-business size standards.”

Despite questions about the data, SBA has touted the fiscal 2005 numbers as evidence of success in its government contracting programs.