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Federal Market Intelligence for Small Business |
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OIG: SBA lax on 8(a) oversight, goaling accuracy, WOSB certsThe Small Business Administration was downgraded for its performance in managing its flagship set-aside program for disadvantaged small business owners in fiscal 2019, according to a new report from the Office of Inspector General (OIG). The SBA slipped on two benchmarks regarding the 8(a) Business Development Program, OIG wrote in its Report on the Most Serious Management and Performance Challenges Facing the SBA in Fiscal Year 2020. The SBA got a slightly better review on the other government contracting programs it manages, showing the same two areas of deficiency as in last year’s report, and no downgrades. The report identifies 8 major ongoing challenges, including small business contracting and the 8(a) program. Both of those areas have been listed among the major concerns for several years in a row. While the auditors said SBA had shown improvement in fiscal 2019 in managing loans, IT, disaster assistance and human capital, they said the 8(a) and government contracting programs are falling short. 8(a) shortcomings The 8(a) program, while improving in some areas, still has several areas of deficiency, including two areas of limited improvement that brought down its ratings. One of the serious problems is that the SBA has not established objective and reasonable criteria for determining economic disadvantage, for the purpose of certifying eligible firms for 8(a), the OIG report said. While SBA hired a contractor to help determine an appropriate limit on net worth, and SBA subsequently proposed a standard of $375,000 net worth for initial eligibility for 8(a), that standard should not be implemented because it has not been justified properly, the OIG advised. “OIG contends that the agency should develop objective and reasonable criteria for determining what constitutes ‘economic disadvantage,’” the report said, adding that there was “limited progress” on meeting that goal in fiscal 2019. The second major deficiency in the 8(a) program concerns the lack of an IT system to monitor firms’ progress in the program. The SBA got a “limited progress” score on that issue in fiscal 2019. While the SBA planned to use certify.SBA.gov to monitor 8(a) firms’ progress, and spent $27 million on that system to date, sometime during fiscal 2019 the strategy changed. Due to the limited functionality of certify.SBA.gov, SBA decided to use that system only to certify 8(a) firms, while developing a separate system to monitor the firms’ business development. However, the OIG reported that little progress was made in creating the separate system. Instead, SBA created a manual “workaround” for its specialists to prepare reports on Excel spreadsheets. “Currently, SBA has no system to assist program officials in monitoring 8(a) participants’ business development to assess the effectiveness of the program,” the OIG concluded. The SBA named a team to develop a solution in fiscal 2020, the report said. Other areas of concern, detailed in previous OIG reports in fiscal 2019, included:
Inaccuracy of small biz goaling The SBA’s management of other small business government contracting programs, including those for HUBZone firms, service-disabled veterans and women-owned firms, continue to have the same two deficiencies as they have for several years in a row. Therefore, the overall rating in this category was unchanged in comparison to a year ago. One ongoing problem area for several years is the accuracy of the government’s annual small business goaling report. The OIG asserted that the SBA needs to strengthen its controls so that it can identify ineligible firms in a timely manner so that the annual goaling report can be more accurate. The OIG identified two problematic regulations. One allows agencies to receive small business credit for longterm contracts of up to five years for an 8(a) firm, based on the firm’s size at the time of the offer, even if the firm outgrows its size status or leaves the 8(a) program during that time. A similar rule is in place that allows credit for HUBZone firms for five years, based on the size status at the time of the application and award, even if the firm outgrows the size status or leaves the program during that time. The OIG contends that such regulations are contributing to inaccuracy in the annual small business goaling report and should be revised to capture a more accurate picture of small business procurement. The OIG also objects to various exclusions from the pool of eligible federal contracts used to compete the percentage of small business procurement. Lack of WOSB certification program A second problem area is the slow progress on implementing a certification process for the Women-Owned Small Business (WOSB) program. With the final rule for the certification program published in May 2019, SBA is considering utilizing contractors to conduct pre-screening before the rule is implemented in June 2020. SBA intended to use certify.SBA.gov for the WOSB certification program, but was unsuccessful because the functionality of certify.SBA.gov was too limited, the OIG report said. Without a certification program, the government relies on self-certification, which exposes the program to fraud and abuse. A previous report found $52 million awarded to potentially ineligible WOSBs. SBA officials were not immediately available for comment. More information: SBA IG report: https://www.sba.gov/node/1650016
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