NASA sued for failing to disclose contracting information

In a bid to hold NASA accountable to meeting federally mandated goals for small business contracting, advocates demanded for the third time that the agency release contracting information for its space operations.

The American Small Business League filed a lawsuit on June 8 asking the U.S. District Court for the Northern District of California to require NASA to release subcontracting reports involving United Space Alliance LLC, a spaceflight operations company co-owned by defense giants Lockheed Martin Corp. and Boeing Co., and NASA's primary industry partner in managing the space shuttle and the International Space Station programs.

The advocacy group wants to know if United Space Alliance has complied with small business subcontracting goals under those contracts. The organization alleges that NASA violated the Freedom of Information Act by withholding agency records, while NASA claims the data was exempt from disclosure as "commercial or financial information obtained from a person which is privileged or confidential."

The suit is the latest in a series of legal actions the small business group has taken since 2004 against various federal agencies -- including the Army and the Energy Department -- to make them account for any large corporations listed as small businesses in government awards. ASBL has won about half the cases.

ASBL suspects NASA is withholding data that will prove it is allowing major prime contractors to falsify compliance with small business subcontracting goals, as well as inflating fulfillment of small business targets by counting "clearly large" firms as small, according to Lloyd Chapman, the group's president.

The federal government sets out to award 23 percent of the total value of all prime contracts to small businesses annually. The Small Business Administration negotiates individual objectives for each agency, ensuring that when combined they meet the overall statutory goals.

In 2007, SBA instituted requirements for long-term federal contracts to be recertified every five years and at every option point going forward. This would take into consideration the possibility of growth and ensure agencies receive credit for making contract awards to small businesses only as long as the firms remain small. But advocates say instances of large corporations being listed as small businesses in federal contracting awards keep cropping up.

ASBL spokesman Christopher Gunn said large companies that showed up in data on small business awards in 2008 included Lockheed Martin, Boeing, Raytheon Co. and Northrop Grumman Corp.

Corporations that raked in billions of dollars in federal contracts and did not meet the criteria for being small were labeled as such in Washington Technology's top 2010 government contractors, a list compiled from government procurement data, said Guy Timberlake, chief executive officer of The American Small Business Coalition, which helps small businesses win federal contracts and strengthens their partnerships with the government.

Whether these cases resulted from mistakes in data entry or fraud remains a point of contention between the federal government and advocacy groups.

Timberlake said because federal contracting programs are such complicated bureaucratic exercises, some corporations exploit the loopholes and lack of oversight. They go "code shopping," seeking out industry codes that will identify them as a small business, even if the definitions do not apply to their actual operations, he said.

Whether a corporation meets the criteria of being coded as a small business depends on a host of factors, including its subsidiaries, affiliations, primary industry, number of employees and annual revenues.

"Some out there may say, 'Uncle Sam is really bogged down right now, so they'll never notice me.' " Timberlake said. "In addition to deliberate efforts to scam the system, just as many corporations are simply not getting good information from various expert resources."

He added, "There is a level of enforcement with teeth that is needed" in a more competitive climate, but "additional scrutiny entails process, which entails costs." It is difficult to come up with extra money for oversight at a time when the government is tightening its belt, he said.

United Space Alliance, which received $1.5 billion in contracts from NASA in fiscal 2009, according to ASBL, said it has both large and small businesses as subcontractors. "Small businesses play a vital role in our efforts to support the nation's space program," said spokeswoman Tracy Yates, "and USA is absolutely committed to working with as many small companies as possible to meet that goal."

SBA declined to be quoted for this story. A NASA spokeswoman said the agency is looking into the matter, but has no further information to provide at this point.

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