Casey Calls for End to Pass-Throughs that Hurt Small Businesses

WASHINGTON, DC — U.S. Senator Bob Casey (D-PA) today called on Small Business Administration (SBA) Administrator Karen Mills to take steps to end the practice of pass-throughs whereby large businesses set up shell companies to compete for small business contracts.

“Ending this fraudulent practice will ensure that small business set-aside contracts truly go to small businesses,” Senator Casey stated in the letter. “In this difficult economic climate, it is imperative that we support small businesses in their efforts to grow revenue, create jobs, and further drive our economic recovery.”

A copy of the letter is below:

May 26, 2011

Dear Administrator Mills:

I write today to call your attention to an issue detrimentally affecting small businesses across the Nation. It has come to my attention that the Small Business Administration (SBA) has continually fallen short of its small business procurement benchmark. Furthermore, I have been informed that in 2009 over half of the top 100 small business contract recipients were actually large companies. These large businesses were able to successfully take dollars away from small businesses by establishing shell companies—commonly referred to as pass-throughs—to compete for small business contracts. When a pass-through is awarded a federal contract, it then uses the resources of the large business to carry out the contract.

I have been informed that pass-through companies have hurt small businesses in my home state of Pennsylvania by eliminating opportunities for revenue growth and job creation. I am concerned that the prevalence of pass-throughs is forcing small businesses to compete head-to-head against large businesses for contracts intended for small firms. This inflates the government’s achievement of its small business procurement goals and deprives legitimate small businesses of millions of dollars in federal contracts.

It is my understanding that the SBA’s Inspector General has identified this fraudulent practice as a top challenge facing the agency. To address this subversive practice, I urge you to initiate a regulatory analysis that studies the need for an SBA rule to identify and bar pass-throughs and subsequently implement a rule that bars pass-throughs from accessing small business contracts.

Ending this fraudulent practice will ensure that small business set-aside contracts truly go to small businesses. In this difficult economic climate, it is imperative that we support small businesses in their efforts to grow revenue, create jobs, and further drive our economic recovery.

Thank you for your consideration of my views.

Sincerely,

Robert P. Casey, Jr.
United States Senator

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