Watchdogs flag billions in small-business award problems as SBA weighs eligibility expansion

Federal oversight reports have found billions of dollars in federal contracts tied to small-business programs were misreported or weakly verified, even as the Small Business Administration proposes broader eligibility standards. The findings raise new concerns that expanding the pool of qualifying firms could further dilute opportunities for genuinely small businesses.

Why it matters: - Federal small-business contracting programs are meant to steer taxpayer-funded awards to firms that meet size rules. - The oversight findings suggest those safeguards have not consistently worked. - The SBA’s proposed eligibility expansion could make the problem harder to police if verification does not improve first. - The issue affects access to federal work in the government’s largest purchasing market.

What happened: - Federal reports from the Government Accountability Office, the SBA Office of Inspector General, and the General Services Administration Inspector General identified billions of dollars in contracts tied to reporting or enforcement failures. - A March 2025 GAO report found about $1.1 billion in federal contracts reported as small-business awards actually went to companies that did not meet SBA size standards. - The same GAO report said another $1.9 billion could not be verified. - A 2020 GSA Inspector General report identified $89 million in procurements incorrectly recorded as small-business awards. - That GSA report also found about $120 million in large-business performance that was not adequately captured in reporting. - An April 2022 SBA Inspector General report found serious oversight failures on an $850 million small-business set-aside contract largely performed by an affiliate of a major mortgage lender. - The 2022 investigation found about $13 million in payments that exceeded subcontracting limits. - A September 2026 SBA Inspector General report found continuing deficiencies across federal agencies in monitoring and enforcing subcontracting limits on small-business set-aside contracts.

The details: - SBA is proposing to consolidate 978 industry-specific size standards into 338 broader categories. - The change could make about 114,541 additional businesses eligible for small-business contracting programs. - About 37,002 of those companies already hold federal contracts worth more than $71 billion. - The Don’t Cheat Women Project says expanding eligibility before fixing oversight problems could hurt genuinely small businesses. - Laura Cherry, director of the Don’t Cheat Women Project, said the success of federal small-business programs should be judged by whether small businesses are actually receiving opportunities and taxpayer-funded contracts. - The Don’t Cheat Women Project is urging SBA to reconsider the proposed changes, strengthen eligibility verification, improve transparency in federal contracting data, and prove existing safeguards work before expanding eligibility. - The article points readers to the government report library for links to the GAO reports.

Between the lines: - The core dispute is not just about program size standards. - It is about whether the federal government can accurately identify which firms deserve set-aside awards before it broadens access further. - The reports point to a recurring gap between program rules and actual contract oversight. - That gap gives critics a stronger case that eligibility expansion could increase misclassification unless enforcement improves.

What’s next: - SBA will need to decide whether to move ahead with the proposed consolidation of size standards. - Watchdogs and advocacy groups are likely to press for tighter eligibility checks and better contract-data transparency. - The debate is likely to focus on whether SBA can show current safeguards are working before broadening the number of firms that qualify. - The Don’t Cheat Women Project says it wants SBA to demonstrate those controls first, then expand only if the system can protect intended recipients.

The bottom line: - Federal small-business contracting rules are under pressure from weak oversight and a proposed eligibility expansion at the same time. - Until verification improves, critics say broader standards could make it even easier for large or misclassified firms to capture awards meant for smaller ones.