« Social Entrepreneurs Recognized | Entrepreneurs Look Back on Their Forecasts for 2004 »
January 03, 2005
Report on Government Contracts for Small Business Shows Few Surprises
Once again we have evidence of the utter ineptness of government programs used to target economic development. The latest example is the push to allocate more government contracts to small businesses. Sounds good on the surface, but putting it into practice is another matter as seen in a report issued by the Office of Advocacy of the SBA.
"Some large federal contractors have been miscoded as small businesses, resulting in skewed procurement statistics according to a report issued today by the Office of Advocacy of the U.S. Small Business Administration. The report found that in Fiscal Year 2002 $2 billion in federal contracts were miscoded as going to small rather than large businesses."
That's right, there errors in coding amounted to $2 billion! Many reasons have been cited for these "errors" ranging from miscoding of data to outright deception.
But, there are two larger lessons here. First, governments rarely do well, especially over the long run, picking economic winners of any kind. In the past, government procurement favored big companies with big unions behind them. It was mostly politics and it kept out the little guy from the procurement process. Big business and big unions were viewed as the engine of our economy, and government officials viewed their job to be feeding that engine. Now they view entrepreneurship as the engine and are trying to feed it. But when big government contracts are on the line, can graft and misappropriation be far behind?
This leads to the second fundamental issue. Government officials and politicians believe that spending money is good and spending more money is better. The reach and scope of our government continues to grow every year -- no matter who is in power. Democrats want to take us toward socialism at a dead sprint. But sadly, most Republicans are taking us down the same road, just at more leisurely pace. And now they are trying to draw small business into this mess.
My advice to small businesses? Run away from such programs as fast as you can. You may gain some value in the short run, but will find that government as customer over the long run is nothing but a nightmare. Red tape and bureaucracy are the least of your problems. For example, try collecting late accounts receivable from any government agency for starters. In the health care industry, we found that the only thing slower than insurance company A/R (which often averaged 90-120 days) was government customers. We measured our A/R from them in months, not days.
The full report from the SBA can be found here.
Posted January 3, 2005 07:11 AM
Trackback Pings
TrackBack URL for this entry:
http://forum.belmont.edu/mt/mt-tb.cgi/909
at Belmont University in Nashville, Tennessee. He consults with a variety of businesses on start-up and growth related issues, and with larger corporations on re-establishing entrepreneurial cultures within their organizations. Dr. Cornwall's current research interests include entrepreneurial finance and entrepreneurial ethics. He has authored or co-authored four books.
