By Cromwell Schubarth

There seems to be some confusion about what qualifies as a small business when it comes to federal contracts.

"Am I a small business is the most frequently asked question I get," says Arvind Patel, a commercial market representative at Hanscom Air Force Base for the Small Business Administration.

It's not just business owners who are confused, though, according to a recent report by the General Accounting Office.

The basic definition that Patel gives for small businesses qualified to compete for government work set aside for such firms is that they must have less than $ 5 million in annual revenue or fewer than 500 workers.

"There are some exceptions, such as some information technology companies with as many as 1,500 employees qualify," he says. "But generally, the rule is under $ 5 million or 500 employees."

The GAO report, however, said that 5,341 large companies were among the 49,366 firms identified in the Federal Procurement Data System as receiving small-business contracts in fiscal 2001.

Five large firms, whom the GAO didn't name, got $ 460 million in small-business contracts.

Some of the firms getting the contracts were even owned by big foreign multinationals.

Part of the problem is that firms can keep contracts that they won when they were small for as long as 20 years, even if they have been acquired by a large company or have grown too big themselves.

Despite such widespread misclassification, the federal government has fallen short of its goal of awarding 23 percent of all contracts to small businesses every year since 2000.

House and Senate small business panelists were highly critical of the situation.

"Politicians love to say they want to help small businesses," said Sen. John F. Kerry, the leading Democrat on the Senate panel. "But how can any politician make that claim with a straight face when contracts that should be going to these hard-working small businesses are being turned into giveaways to large multinational companies?"

Maine Republican Sen. Olympia J. Snowe, who chairs the panel, called for improvements to the SBA's Procurement Marketing and Access Network (PRO-Net) and the Defense Department's Central Contractor Registration, the two main lists of small businesses eligible for government work.

The SBA says it may in the future require small businesses in its PRO-Net system to recertify annually that they still qualify.

While this may help reduce the problem, it's probably not going to cheer small owners.

Who but the government, after all, would try to fix a hole in the system by papering it over?