Resources to monitor small business contracts found lacking

The Small Business Administration is having trouble fulfilling core contracting responsibilities such as reviewing proposed acquisitions and recommending procurements that might be suitable for small business set-asides, according to a new audit report.

"Years of SBA downsizing and budget reductions significantly reduced the resources available for these agency functions," the Government Accountability Office concluded in a report issued on Friday to the House Homeland Security Committee.

As of August, SBA employed 59 procurement center representatives, many of whom were assigned to as many as six agencies. Some procurement representatives -- who initiate small business set-aside contracts, recommend procurement strategies and assess agencies' compliance with small business programs -- told auditors they were stretched too thin. Meanwhile, agency contracting officials told investigators they rarely interacted with their assigned representatives.

The constraints were even more pronounced for SBA's commercial market representatives, who monitor the subcontracting plans of large contractors.

As of August, the agency had 31 such representatives, but 16 of them had additional job responsibilities such as conducting small business size determinations, issuing certificates of competency or doubling up as procurement center representatives. In 1992, SBA employed only 24 market representatives, but they all worked full-time in that role.

The subcontracting oversight officials have been unable to achieve their mission, according to the report. One prime contractor has not had a formal compliance review in five years while several commercial market representatives told auditors that they could not conduct a sufficient number of onsite reviews because of workload demands.

In fiscal 2006, commercial market representatives monitored less than half of the government's 2,200 large prime contractors, and only 24 percent of the reviews occurred on site, the SBA inspector general reported in September 2007.

"As a result of these constraints, SBA has reduced assurances that staff effectively are advocating for and monitoring federal contracting with small businesses," GAO investigators said.

SBA agreed that it must develop a plan to align its staff resources with its program objectives. In a written response to the report, Calvin Jenkins, deputy associate administrator in SBA's Office of Business Development and Government Contracting, said officials would assess statutory requirements and resources and establish such a strategy.

GAO also found that SBA's oversight and administration of the 8(a) business development program was lacking. Potential 8(a) firms are not required to participate in SBA information sessions or complete an online self-assessment that determines their suitability for the program, which helps socially and economically disadvantaged small businesses.

"As a result, some firms may have entered the 8(a) program with unrealistic expectations of obtaining federal contracts and may not have clearly understood their responsibilities for maintaining and reporting on their eligibility, which also has had implications for staff workload," the report stated.

The problems continue once companies are accepted into the 8(a) program, auditors found. SBA is required to conduct an annual review of participating firms to determine their continued eligibility. The companies must submit documentation on their finances, taxes and contracts, but agency officials said the information is often late and staff must waste time tracking it down.

Consequently, staff members have made fewer site visits to 8(a) firms and haven't held as many events in which they could introduce federal contracting officials to small businesses.

In addition, agency officials told GAO that it is difficult to remove firms that are found to be noncompliant. The termination process can take up to 120 days because of multiple notification requirements and delays by headquarters, staff said.

GAO reviewed files from 80 8(a) businesses and found several instances where companies were repeatedly recommended for termination but, because of bureaucratic delays, remained in the program for months. One company secured a contract after it was recommended for termination.

The watchdog agency found seven companies that were repeatedly out of compliance at the time of their annual reviews, including one that did not provide required documentation for five of the seven years it was in the program. In total, more than 30 percent of the 8(a) companies reviewed by the GAO were found to be noncompliant.

SBA's Jenkins said the agency has developed a comprehensive business development plan to assist and better monitor 8(a) participants.