The American Small Business League said it was being squeezed both by administration officials' ways of working and by tough competition from larger companies, including many of those enjoying pre-eminence as members of the hallowed Fortune 500 list.
The League, a non-partisan organization, said the way a blacklist was contemplated ensured that very few people would come to know about its existence.
It saw the move as "yet another move by the federal government to exclude small businesses from the federal government's contracting processes."
There was no immediate comment from any of the federal agents in response to the League's comments.
In December, Congress is expected to consider legislation that may allow senior Department of Defense officials to create a secret "blacklist," authorizing the exclusion of any business from federal contracting programs.
If passed, the American Small Business League warned, the bill could lead to "de facto" debarment of small businesses across Department of Defense contracting programs. The lobbying body said a debarment carried the potential for the "de facto" debarments to touch every corner of the government's contracting programs.
It pointed out that Section 815 of S. 3454, the National Defense Authorization Act for Fiscal Year 2011, would allow a small coalition of defense agency heads to secretly "blacklist" specific contractors.
"Small business advocates are concerned that DoD's determination will be shared with each agency where the company competes as a prime contractor or subcontractor," it said. "This could lead to the broad-based exclusion of contractors from federal contracting programs without due process."
Section 815 does not require DoD to notify excluded parties, and protects DoD's secret "blacklist" from disclosure under the Freedom of Information Act, protest at the Government Accountability Office or action brought in the federal court system.
"This blatant power grab by the Pentagon puts America's 27 million small businesses directly in the line of fire," American Small Business League President Lloyd Chapman said. "We should be protecting the nation's small businesses by building more government accountability, not chipping away at it."
The government has a congressionally mandated goal of awarding 23 percent of its purchases to small businesses. The ASBL has estimated that the government is missing its goal by more than 18 percent due to the continued diversion of federal small business contracts to larger firms.
Since 2003, the League says, more than a dozen federal investigations have uncovered billions of dollars in contracts intended for small businesses actually flowing into the hands of Fortune 500 corporations and other large businesses. The ASBL estimates that every year more than $100 billion in federal small business contracts are diverted away from the nation's small business community.
The most recent information released by the Obama administration shows there were large recipients of small business contracts such as Boeing, Lockheed Martin, Northrop Grumman, Raytheon, Dell Computer, Xerox, SAIC, General Dynamics, Bechtel and John Deere.
The ASBL is the only national small business advocate fighting to stop billions of dollars in fraud and abuse in federal small business contracting programs, the League said.