SBA misapplying policy on sole-source contracts, GAO says

Auditors find implementation of justification requirement off to slow start.

The Small Business Administration lacks a process for assuring that agencies provide sufficient justification for awarding sole-source contracts to SBA-preferred contractors, the Government Accountability Office reported Wednesday.

Auditors reviewed 72 sole-source contracts worth $20 million or more in the 8(a) program designed to benefit Alaska native corporations since 2009. Under a change in the Federal Acquisition Regulation mandated by the fiscal 2010 National Defense Authorization Act, agencies are required to spell out their justification for not awarding the work to competing contractors.

Contracting preferences for Alaska native corporations have led to cases of fraud perpetrated by front companies.

The FAR Council delayed the requirement for 325 days, but auditors determined that of 14 sole-source contracts let by five agencies in 2011 after the change, only three included an 8(a) justification. “The agencies awarding the remaining 11 contracts did not comply, either because contracting officials were not aware of the justification requirement or because they were confused about what the FAR required,” GAO said. “Contracting officials were confused in one instance where another justification was already in place that covered multiple contracts.”

GAO recommended the White House Office of Federal Procurement Policy issue new guidance clarifying how SBA should monitor agencies’ compliance with justification requirements for larger 8(a) contracts, and that the General Services Administration improve accuracy of procurement data reporting.

OFPP agreed with the plan, but SBA officials expressed the view that the onus for enforcing the requirement for justification is on the contracting agencies rather than SBA.

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