To Revive Economy, Place a Better Bet on Smalls versus Too-Big-to-Fail CompaniesThe raw truth is that Politicians and Government are Major Barriers to Solving Unemployment due to Limiting Small Business Contracts while Supporting Corporations that Pay Millions to CEOs. Whats not so clear is just how the American people (that would be me and you) are being robbed. But much evidence points to businesses being routinely excluded from governmental opportunities that could significantly improve the economy. This is relevant because research shows most new jobs evolve from entrepreneurial activity (small business), while large enterprises struggle with manageability, generally do not grow organically, or remain stagnant except when they buy existing small companies. Politicians, both in the Republican and Democratic parties, send mixed messages about priorities and shift blame. I know about these situations because they have impacted my company a micro, small business operating since 2005 directly. While giving lip service to supporting economic renewal, the Federal Government (primarily through ineffective and inefficient policies and staff) creates numerous barriers that prevent qualified small businesses from obtaining contracts that could help pave the way for shared prosperity among diverse individuals and communities across the nation. Compare the examples above to contracts awarded to larger businesses, based on recent announcements by the U.S. Department of Defense: These two contracts are cited from a longer daily listing of multi-million contracts routinely given to large businesses, and specifically because they involve professional services normally performed just as well by small businesses. In other words, the services provided do not require rocket-science levels of knowledge as specialized engineering or other technical expertise contracts would. Small businesses know their limits and would never attempt to compete with companies far more experienced in highly-technical professions such as making weaponry for the U.S. Armed Services. We already know the results when large businesses grow too big to manage effectively, as a searing article in Rolling Stone by Matt Taibbi explores various scams that imploded with institutions deemed too big to fail (June 21, 2012, Learned From the Mafia: How Americas biggest banks took part in a nationwide bid-rigging conspiracy until they were caught on tape. (Source) Politicians out of Touch with Average Americans As Republican Governor and Presidential Candidate Mitt Romney recently said in his speech to a group of supporters at a private fundraiser in Minnesota, big businesses are doing fine. Romney said big businesses get timely loans, can deal with all the regulation, and get tax breaks. But small business is getting crushed and Weve got to make it easier for small businesses, Romney was quoted as saying (in an article by Emily Friedman, ABC OTUS News, 8/23/2012). Yet, after listening to the Republicans speeches in the week of their national convention, many have raised the question of who really matters to them. As a recent email titled, Do they Care?, from the Democratic Governors organization asked, does anyone matter to the Republicans other than corporate special interests and billionaire donors who power their campaigns? Just as Romney has given lip service to supporting small business, President Barack Obama also said in recent months that the status of the private sector is in good shape. But both Romney and Obama failed to report one reason larger companies are stable is because of government. Indeed, despite obstructionist Republicans who have indicated interest in seeing Obama fail and backed their intentions by countless distractions that have little to do with the economy, Democrats also share blame for the current status quo to some extent. President Obama needs to take a closer look at the Federal Contracting and Procurement area since some Federal staff are not facilitating contractual processes in an above-board manner, yet also not being held accountable. Yet, it is clear Romney is as out of touch with the realities of struggling Americans as he accused Obama of being. In an August 28 article, The Secret Weapon: All of Us, New York Times Op-Ed Columnist Nicholas D. Kristof makes the point well that Romney himself, while apparently hardworking, cannot simply claim to be a self-made businessman in building his Bain company partly because tax loopholes helped him build his fortune, and other loopholes gave him the low tax rates to retain it. Kristof further provides an example of a presenter at the Republican National Convention, Sher Valenzuela, who along with her husband built an upholstery business that currently employs dozens of workers, citing Media Matters for Americas documentation of Valenzuelas company having received Small Business Administration loans of $2 million, in addition to $15 million in mostly noncompetitive government contracts. And, apparently, Valenzuela has been previously quoted as describing government assistance as an entrepreneurs biggest secret weapon. Limited Accountability and Executive Privileges Heres the crux of the matter: Due to little accountability with large government contracts given to large companies, executives of these companies benefit far more than workers. They get larger salaries and bonuses, yet often fail to add new jobs or provide subcontracts that could boost small businesses. Imagine how 20 small businesses could benefit far more than one large company and many people could be employed from divvying up $2 million salary for a single CEO obtained from a government contract. While large corporations are not the enemy per se and they provide many advantages and benefits, the issue of accountability is important. Do only a few benefit from a corporation due to who the decision-makers are (some are more selfish than others)? The size of a company, particularly when too large, can affect how effective a company is, whether corporate values are easily manipulated or compromised, and how resources, including profits, are allocated. Given the hierarchal leadership paradigm of most large companies, it doesnt take a stretch of the imagination to understand why accountability should not be taken lightly. Weve witnessed many executives obtain unfair advantages from their positions of power, including some like the jailed former Tyco Co. chief, Dennis Kozlowski, who used company money as if it were his piggy-bank and spent outrageous sums for parties, home decorating and other personal expenses. In an article, Should CEOs Worry About Too Big to Succeed?, published August 1, 2012, author James Heskett (Harvard Business Schools Working Knowledge publication) writes: Citing various frictions and inefficiencies that accompany bigness, this excerpt from Heskett summarizes comments on the topic: Tom Dolembo, Founder of Newnorth Institute, commented: Another commenter, Phil Clark of Clark Associates, wrote in response to the Heskett article: A recent Institute for Policy Studies (IPS) report showed that CEO paychecks and bonuses take up more company profits instead of creating new jobs. The IPS report lists 26 companies that paid their CEOs more than they paid the federal government in taxes and, on average, the companies generated net income of more than $1 billion in the US, the study said. Corporate tax cuts, instead of helping the overall economy, contribute to lining the pockets exponentially for many executives and shareholders at the same time that many companies downsize or transfer positions to foreign countries and pay employees overseas even less than their American counterparts. Real income after inflation has dropped for most workers. Workers are not secure in jobs with family-supporting wages. They face pay cuts and are forced to do more work for less money. Companies are creating even more anxiety and stress for workers about potential for the next round of lay-offs, decreased benefits and higher costs for health insurance, as well as cancellation of vacation days, among other issues. A number of businesses that thrive from government support in some form have made not only workers and taxpayers but also consumers (via higher prices for goods and services) collectively pick up the tab for their mismanagement. Big Barriers and Bias against Smalls in Government Our government is not diligently paving the way for small businesses to survive and thrive through this difficult economy, and in large part due to those who run Federal contracting and procurement at various levels of government: The people who work for the government make up a large part of the problem in terms of ineffective and inefficient decision-making. Government discretion is code for contracting officers and other staff doing whatever they want, as if public dollars belong to them personally and not the people of the United States. The requests for proposals are so long and bulky, and filled with legal jargon that makes the government itself unaccountable to the public (much less to small businesses attempting to do business with the government), that no real clarity exists in many contractual opportunities. Contract opportunities are being advertised on government sites as Open Market even though some Federal Agencies already have a company in mind, but when other small businesses apply (which can be time-consuming), their efforts are inconsequential. How about stop pretending something is Open Market when a decision has already been made why ask for additional bids from small businesses? Why all the hoop-jumping and repetitive paperwork required even for relatively minor/ tiny contracts? Why ask small businesses for more than one proposal submission, then tell them the project is being canceled and no contract award happens? There are extreme hoops that small businesses jump through, unnecessarily resulting in wasted time and effort due to no intentions to award some advertised contracts. Small businesses are sometimes exploited, as if their time and effort invested does not matter such as when Federal staff do not allow Administrative costs to be included for reimbursement, when they re-post and request re-bids multiple times, only to cancel an RFP and provide no legitimate reason. Some small businesses are treated as if they should not be allowed to make profits in their cost quotes. Yet, read through daily Department of Defense new contract notices and you will see multi-million dollar contracts to large companies where some CEOs make not just huge salaries but justify bonuses, and no one has a problem with their extreme profit margins. Federal Contracting Officers can arbitrarily reduce small business access to opportunities when they hit set-aside target goals, as if there should be no flexibility to exceed a certain number. Large companies with taxpayer-funded contracts are rarely held accountable to provide Subcontracts with small businesses. The Department of Defense recently issued a notice that the U.S. Army awarded the company Noblis Inc. of Falls Church, Va., a $9,900,000 firm-fixed-price contract to provide Environmental Advisory and Assistance Support to the U.S. Army Corps of Engineers, with work to be performed in Washington, D.C., and an estimated completion date of July 31, 2017. For a contract worth more than $9 million within five years, a lot of executives at Noblis Inc. will no doubt feel quite secure with five years of guaranteed funds from the Federal Government. Yet a small business in the Midwest was stripped of a potential five-year contract through no fault of its own. The contract paid less than ten thousand dollars its first year measly in comparison to the multi-millions routinely given to large companies but was not renewed, allegedly for the purpose of saving the government money. Go figure. A Way Forward We need to reject the nonsense spouted mostly by Republicans that implies those struggling financially are at entirely fault, lack discipline to maintain employment, or want to depend too much on government for handouts. The flip side of this is that the wealthy have had no help from government or anyone else. Thats a bunch of bull. The middle class matters. It implies balance between wealth and poverty. Yet, barriers are increasing in various professions including institutions of higher education as an August 22, 2012 article by Sarah Kendzior explains: Sister Joan Chittister , a Benedictine nun, author and speaker, has been quoted as saying: Longing is a compass that guides us through life. We may never get what we really want, thats true, but every step along the way will be determined by it. In challenging the myth promoted by some who believe their wealth is entirely earned by themselves and they are completely self-made, a Massachusetts Democrat running for Senate, Elizabeth Warren, said the following last year: There is nobody in this country who got rich on his own nobody! she said. You built a factory out there? Good for you. But I want to be clear: You moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you all were safe in your factory because of police forces and fire forces that the rest of us paid for . . . You built a factory, and it turned into something terrific or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along. 