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As federal agencies count every penny, massive companies scoop up contracts meant for entrepreneurs.

Is Medtronic a tiny company? How about General Dynamics? The federal government seems to think so. Each companies are amongst the corporate giants that have been awarded federal contracts particularly set aside for tiny businesses.

Federal regulations mandate that any contracts valued between $ three,000 and $ 150,000 be reserved for tiny organizations, normally defined as businesses with fewer than 500 personnel and much less than $ 7 million in annual revenues. But of the nearly $ 11 billion in contracts that fell inside that range in fiscal 2011, practically $ five billion, or 45%, went to significant firms, Bloomberg reports. That’s up from 38% in 2006.

Significant companies have found many approaches to get close to these regulations. In some cases, they use little organizations they’ve acquired to bid on contracts. And federal agencies can exempt themselves for the rules by claiming they had been unable to locate little businesses capable of supplying the merchandise or services needed.

What&rsquos far more, specific agencies, which includes the Basic Services Administration, are entirely exempt from set-aside regulations, says Brian Reeder, a spokesman for the American Small Company League. The GSA accounts for about $ 40 billion of all federal contracts, according to Reeder.

“Simply removing that exemption and putting a set-aside rule in place for all government contract vehicles would considerably improve the pool of contracts available to tiny firms,” Reeder says.

But with Congress staring down the fiscal cliff and budgets facing intense scrutiny, agencies are seeking to cut fees wherever they can, government contractors say.

“There is main uncertainty in the industry and federal agencies are not confident till the spending budget is passed and sequestration is resolved that they will continue, and they have really reduced the scale of perform,” says Zia Islam, founder of Zantech IT Services, a McLean, Virginia-based company that has worked for NASA, the U.S. Division of Housing and Urban Development, and other federal agencies. (Zantech was quantity 225 on the 2012 Inc. 500.)

Zantech has observed its operate from HUD fall some 20 percent and that with NASA disappear totally. Islam speculates that contracts for which Zantech when competed are flowing to significant companies, which have higher name recognition and economies of scale and can do the operate for less money.

The Tiny Enterprise Administration sets objectives for the total percentage of federal contract funds that agencies should award to small business, which contains for disadvantaged and females-owned firms. But there is small oversight, particularly when it comes to smaller contracts, experts say.

In 2011, 21.7% of contract cash went to little businesses, slightly short of the SBA’s aim of obtaining 23% of contracts go to entrepreneurs. Women-owned businesses received less than 4% of all federal contracts, less than the SBA’s objective of five%.

In a survey carried out by the U.S. Ladies&rsquos Chamber of Commerce in the initial half of fiscal 2012, which began October 1, 2011, 71 contracts worth $ three million were awarded to ladies-owned firms, says Margot Dorfman, the group&rsquos chief executive. “There is a great disconnect right here, and women-owned companies are not finding their fair share,” Dorfman says.


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