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Federal Market Intelligence for Small Business |
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IG: SBA’s 2020 HUBZone, SDB rules threaten SBA’s “integrity”HUBZone residency rule said against “legislative intent”; Inability to protest SDB disadvantage a “regulatory void”In a new report, the Small Business Administration’s Inspector General Hannibal “Mike” Ware had some strong criticisms of two SBA final rules put into place in 2020 that he believes are threatening the “integrity” of SBA’s government contracting programs. He identifies the problematic rules in his Oct. 15 report on Top Management and Performance Challenges Facing the SBA in Fiscal 2022. One is a HUBZone final rule in 2020 that in some cases allows small businesses to remain eligible for HUBZone set-asides even though they have no employees who are living in the zone. “HUBZone businesses could have no employees residing in the HUBZone at all and still qualify,” he wrote. “The requirements of the rule are clearly inconsistent with legislative intent.” The second is SBA’s 2020 direct final rule in May 2020 that removed nearly all regulation of Small Disadvantaged Businesses under the claim of removing redundant or obsolete rules. That action created a “regulatory void,” Ware wrote. “SBA removed regulations allowing for protests of a firm’s disadvantaged business status in FY 2020,” the OIG report said. “While firms are still subject to protests related to their small business size, business owners’ status as a socially and economically disadvantaged individual cannot be challenged.” This lack of rules risks undermining the integrity of the government’s SDB contracting programs that rely on self-certification to validate SDB status, possibly allowing ineligible companies to be awarded SDB set-asides and the government to obtain false credits for SDB contracting, Ware added. Currently, there are more than 153,000 self-certified SDBs in the government’s database. “SBA program success and integrity could be reduced if the agency admits ineligible firms into programs intended for disadvantaged small businesses,” Ware wrote. The report lists 8 major challenges, including the most pressing need: to weed out fraud in the hundreds of billions of dollars in COVID relief in the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL). “I believe managing COVID-19 stimulus lending is the greatest overall challenge facing SBA, and it may likely continue to be for many years as the agency grapples with fraud in the programs, particularly in the COVID EIDL and the process of PPP loan forgiveness,” Ware wrote. More information: IG Report: https://bit.ly/30uE60G
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