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Federal Market Intelligence for Small Business |
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OIG posts update on SBA’s 8(a), SDB, PPP-EIDL top challengesCleaning up the mess of $100 billion in suspected small business fraud from pandemic loan programs continues to be the most significant concern for the Small Business Administration, and is likely to be the main concern for several more years, according to a new report from the SBA’s Inspector General. Nonetheless, SBA is making progress on addressing its major challenges with its small business federal contracting programs, the IG report added. Inspector General Hannibal “Mike” Ware described the issues in his Top Management and Performance Challenges Facing the Small Business Administration in Fiscal Year 2023, issued on Oct. 14. The report listed 8 major challenges. Those relating to contracting programs and fraudulent pandemic loans were raised in previous years. PPP-EIDL loans The IG previously identified $85 billion in Economic Injury Disaster Loan (EIDL) suspected fraud and approximately $4.5 billion in Paycheck Protection Program suspected fraud (see Set-Aside Alert’s edition of Nov. 5, 2021). In this report, the IG raised the EIDL fraud estimate to $89 billion and the PPP fraud estimate to $11 billion, bringing the total to $100 billion. The report said the IG’s PPP-EIDL oversight has resulted in 303 convictions and recovery of $1 billion. Another $20 billion was returned by borrowers. Small Biz Contracting As the IG has reported for several years in a row, the SBA continues to have difficulties in collecting accurate federal data on procurement from small businesses and in making sure that companies receiving set-asides are eligible for those set-asides. Specific problems include:
Small Disadvantaged (SDBs) The IG regards self-certification of Small Disadvantaged Businesses (SDBs) as “inherently risky.” Adding to the risk is that SBA in fiscal 2020 removed regulations allowing for protests of SDB status, while at the same time the White House raised the government’s goal for procurements from SDBs. With 149,326 firms self-certified as SDBs, there was more than $12 billion awarded to SDBs who are only self-certified and do not participate in other SBA contracting programs such as 8(a), HUBZone or WOSB. The risks of fraud are significant without the ability to protest disadvantaged status, the IG wrote. The IG supports a provision in the SBA’s recent broad-ranging proposed rule of Sept. 9 authorizing reviews and protests of SDB status in connection with federal prime contracts and subcontracts. Comments are due by Nov. 8. Allowing protests of SDB disadvantaged status is especially important since President Joe Biden has raised the SDB procurement goal to 12% in fiscal 2023, up from 5% two years ago, the IG added. 8(a) Business Development Program The SBA has made progress on three challenges related to its 8(a) program, resulting in the removal of those three issues from its report:
“We believe the agency’s commitment to monitoring the effects of the net worth threshold changes mitigate this risk and the issue is no longer a top management challenge for the agency,” the report indicated.
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