Inspector general releases report on critical risks facing the SBA

December 12, 2014 by

The Office of Inspector General of the U.S. Small Business Administration (SBA) has issued its semi-annual report focusing on the most critical risks facing the SBA, including several aspects of government procurement.

SBA - IGCovering the period April through September 2014, the OIG’s report covers key SBA programs and operations, including financial assistance, government contracting and business development, financial management and information technology, disaster assistance, management challenges, and security operations.

Of particular interest to the government contracting community are findings such as:

  • Over $400 million in federal contracts that were awarded to ineligible firms, which may have contributed to the overstatement of small business goaling dollars for the Small Disadvantaged Business and the HUBZone Business Preference Programs in FY 2013.
  • The owner of a Colorado real estate firm and 5 family members were charged in a 37-count indictment by a state grand jury in connection with a $2,323,000 SBA-guaranteed loan to refinance an office building and other existing debt.
  • Sixteen cases of contract-related bribery and/or fraud were identified in connection with contracts or subcontracts set-aside for 8(a), HUBZone, veterans, or other categories of small business.
  • The OIG was unable to determine if the SBA appropriately issued waivers to the non-manufacturer rule because of a lack of established procedures, missing files, and other deficiencies.

The OIG’s full report can be downloaded here: SBA OIG Semi-Annual Report to Congress – Fall 2014

GAO says SBA needs to monitor WOSB certifiers and improve annual eligibility examinations

November 19, 2014 by

In a November 7, 2014 report the U.S. Government Accountability Office (GAO) found that the SBA performs minimal oversight of third-party certifiers of women-owned small businesses and has yet to develop procedures that provide reasonable assurance that only eligible businesses obtain contracts set-aside for women-owned small businesses.

Background

Businesses have two options to certify their eligibility for the federal government’s women-owned small business (WOSB) program. Whether self-certifying at no cost or using the fee-based services of an approved third-party certifier, businesses must attest that they are a WOSB or an economically disadvantaged women-owned small business (EDWOSB). Businesses also must submit documents supporting their attestation to a repository the Small Business Administration (SBA) maintains (required documents vary depending on certification type), and, if they obtain a third-party certification, to the certifier.

Findings

In its examination of the certification process, the GAO found that:

  • SBA generally has not reviewed certifier performance or developed or implemented procedures for such reviews, including determining whether certifiers inform businesses of the no-cost self-certification option, a requirement in the agency’s agreement with certifiers.
  • SBA also has not completed or implemented procedures to review the monthly reports that third-party certifiers must submit.

In its report, the GAO says that without ongoing monitoring and oversight of the activities and performance of third-party certifiers, the SBA cannot reasonably assure that certifiers fulfill the requirements of the agreement.

This finding is bolstered by the fact that, in 2012 and 2013, the SBA found that more than 40 percent of businesses (that previously received contracts) it examined for program eligibility should not have attested they were WOSBs or EDWOSBs at the time of the SBA’s review. SBA officials speculated about possible reasons for the results, including businesses not providing adequate documentation or becoming ineligible after contracts were awarded, but the SBA has not assessed the results of the examinations to determine the actual reasons for the high numbers of businesses found ineligible. The SBA also has not completed or implemented procedures to conduct eligibility examinations. According to federal standards for internal control, agencies should have documented procedures, conduct monitoring, and ensure that any review findings and deficiencies are resolved promptly. As a result of inadequate monitoring and controls, potentially ineligible businesses may continue to incorrectly certify themselves as WOSBs, increasing the risk that they may receive contracts for which they are not eligible.

The GAO finds that the WOSB program has had a limited effect on federal contracting opportunities available to WOSBs. Set-aside contracts under the program represent less than 1 percent of all federal contract obligations to women-owned small businesses. The Departments of Defense and Homeland Security and the General Services Administration collectively accounted for the majority of the $228.9 million in set-aside obligations awarded under the program between April 2011 and May 2014. Contracting officers, business owners, and industry advocates with whom GAO spoke identified challenges to program use and suggested potential changes that might increase program use, including allowing sole-source contracts rather than requiring at least two businesses to compete and expanding the list of 330 industries in which WOSBs and EDWOSBs were eligible for a set-aside.

A summary of the GAO’s report can be downloaded at: http://www.gao.gov/assets/670/666430.pdf

The full report can be downloaded at: http://www.gao.gov/assets/670/666431.pdf 

An interview with the Pentagon’s small-business director

November 14, 2014 by

Andre Gudger has heard the argument many times that, as he puts it, “small businesses don’t build planes and ships and nuclear weapons.”

It’s his job — or at least part of it — to change that perception.

A Maryland native, Gudger has been the director of the Defense Department’s Office of Small Business Programs since 2011. During the three years prior to his arrival, the share of the agency’s contracts awarded to small companies had shrunk every year. Moreover, in the more than three decades since federal small-business contracting goals had been put in place, the agency had never once accomplished them.

In the three years since, even amid budgetary constraints, small-business participation in Defense Department projects has expanded each year. In fact, this past year, the agency for the first time eclipsed not only its small-business goal, but also the federal government’s target, awarding roughly 23.4 percent of defense contracting dollars, representing about $53 billion, to small employers.

Keep reading this article at: http://www.washingtonpost.com/business/on-small-business/operation-small-business-an-interview-with-the-pentagons-small-business-director/2014/10/23/216d4cc8-5a12-11e4-b812-38518ae74c67_story.html

 

IG reports continued weaknesses in small business reporting and 8(a) program

November 13, 2014 by

The Office of the Inspector General (IG) of the U.S. Small Business Administration reports on 11 weaknesses in a range of SBA programs.  Two of the “challenges” identified in the Oct. 17, 2014 report pertain directly to small business participation in federal contracting:

  • Procurement flaws allow large firms to obtain small business awards, and allow agencies to count contracts performed by large firms towards their small business goals.
  • The SBA needs to modify the Section 8(a) Business Development  Program so more firms receive business development assistance, standards for  determining economic disadvantage are justifiable, and the SBA ensures that firms follow 8(a) regulations when completing contracts.

SBA - IGThe IG’s full document, entitled “Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration In Fiscal Year 2015″ can be downloaded here, but the text of the IG’s finding on the two point just cited appears below.

Procurement Reporting

The Small Business Act established a Government-wide goal that 23 percent of the total value of all prime contracts be awarded to small businesses each fiscal year. As the advocate for small business, the SBA should strive to ensure that only small firms obtain and perform small business awards. Further, the SBA should ensure that procuring agencies accurately report contracts awarded to small businesses when representing their progress in meeting small business contracting goals.

In September 2014, we issued a report that identified over $400 million in FY 2013 contract actions that may
have been awarded to ineligible firms. We also identified over $1.5 billion dollars in contract actions for
which the firms were in the 8(a) or HUBZone programs at the time of contract award, but were no longer in
these programs in FY 2013. Previous OIG audits and other Government studies have shown widespread
misreporting by procuring agencies, since many contract awards that were reported as having gone to small
firms have actually been performed by larger companies. While some contractors may misrepresent or
erroneously calculate their size, most of the incorrect reporting results from errors made by Government
contracting personnel, including misapplication of small business contracting rules. In addition, contracting
officers do not always review the on-line certifications that contractors enter into Government databases
prior to awarding contracts. The SBA should ensure that procuring agencies accurately report contracts
awarded to small businesses when representing their progress in meeting small business contracting goals,
and that contracting personnel are reviewing on-line certifications prior to awarding contracts.

The SBA revised its regulations to require firms to meet the size standard for each specific order to address a
loophole within General Services Administration Multiple Awards Schedule (MAS) contracts, which contain
multiple industrial codes that determine the size of the company. Previously, a company awarded an MAS
contract could identify itself as a small business on individual task orders awarded under that contract, even
though it did not meet the size criteria for the applicable task. Thus, agencies received small business credit
for using a firm classified as small, when the firm was not small for specific orders under the MAS contract. In
addition, the SBA submitted a final rule to the Federal Acquisition Regulations (FAR) Council to implement the
changes made to its regulations in the FAR. The SBA also updated its standard operating procedure (SOP) to
ensure consistency in conducting its surveillance reviews to assess Federal agencies’ management of their
small business programs and compliance with regulations and applicable procedures.

While the SBA has made substantial progress on this challenge, we are working with the Agency to verify that
the surveillance reviews were conducted in a thorough and consistent manner.

                                                                                               ***

8(a) Program

The SBA’s 8(a) Business Development (BD) Program was created to assist eligible small disadvantaged
business concerns to compete in the American economy through business development. Previously, the
SBA did not place adequate emphasis on business development to enhance the ability of 8(a) firms to
compete, and did not adequately ensure that only 8(a) firms with economically disadvantaged owners in
need of business development remained in the program. Companies that were “business successes”
were allowed to remain in the program and continue to receive 8(a) contracts, causing fewer companies
to receive most of the 8(a) contract dollars and many to receive none.

The SBA has made progress towards addressing issues that hinder its ability to deliver an effective 8(a)
BD Program. For example, the SBA expanded its ability to provide assistance to program participants
through its resource partners—small business development centers, service corps of retired executives,
and procurement technical assistance centers. In addition, the SBA has taken steps to ensure business
opportunity specialists assess program participants’ business development needs during site visits. The
SBA also revised its regulations, effective March 2011, to ensure that companies deemed “business
successes” graduate from the program. These regulations also establish additional standards to address
the definition of “economic disadvantage.” Agency officials stated that the rule-making process served
as an adequate proxy to objectively and reasonably determine effective measures for economic
disadvantage, and were not aware of any reliable sources of data to determine economic disadvantage.

However, for the second consecutive year, the SBA has not completed updating its SOP for the 8(a) BD
Program to reflect the March 2011 regulatory changes. In addition, we continue to maintain that the
SBA’s standards for determining economic disadvantage are not justified or objective based on the
absence of economic analysis. In December 2011, the SBA awarded a contract to develop and deploy a
new IT system by December 2012 to assist the SBA in monitoring 8(a) program participants. However,
the new system has not been deployed, and its delivery date and capabilities are undetermined at this
time.

SBA’s inspector general says agencies are overstating 8(a) and HUBZone contracting achievements

September 29, 2014 by

On September 24, 2014, the Small Business Administration’s Office of Inspector General (OIG) issued Evaluation Report 14-18, Agencies are Overstating Small Disadvantaged Business and HUBZone Goaling Credit by Including Contracts Performed by Eligible FirmsThis report presents the results of an evaluation of select Section 8(a) Business Development Program and Historically Underutilized Business Zones (HUBZone) contract awards.

The OIG identified over $400 million in contract actions that were awarded to ineligible firms, which may have contributed to the overstatement of small business goaling dollars for the Small Disadvantaged Business and the HUBZone Business preference programs in FY 2013.  Besides reporting inaccurate information in Federal Procurement Data System-Next Generation (FPDS-NG), procuring agencies may have limited contracting opportunities for firms currently participating in the 8(a) or HUBZone programs.

Further, the OIG found that HUBZone and 8(a) certification information is not consistently transmitted to the Dynamic Small Business Search (DSBS) and the System for Award Management (SAM).  As a result, the affected small businesses are not getting the visibility in the DSBS database, especially the HUBZone firms, and as a result, may impact federal agencies in meeting their HUBZone procurement goals.

Additionally, the OIG also identified over $1.5 billion dollars in contract actions for which the firms were in the programs at the time of contract award, but in FY 2013 were no longer in the 8(a) or HUBZone programs.  Specifically, SBA regulations permit procuring agencies to claim Small Disadvantaged Business and HUBZone goaling credit on certain contract actions even after firms have left the program.  In the opinion of the OIG, the amount of dollars the SBA reports to Congress and the public as being performed by 8(a) and HUBZone firms in the Small Business Goaling Report is significantly impacted by the inclusion of contract actions performed by former program participants.

The OIG made two recommendations to SBA’s Associate Administrator for Government Contracting and Business Development intended to strengthen controls between SBA databases on certification data of 8(a) and HUBZone firms and information reported in FPDS-NG. The recommendations are:

  1. In coordination with the Office of Federal Procurement Policy and the General Services Administration, the SBA should strengthen controls between the SBA’s Dynamic Small Business Search Database and the System for Award Management to ensure accuracy of 8(a) and HUBZone certification data in FPDS-NG.
  2. The SBA should modify DSBS so that a firm’s profile and certification information for HUBZone and 8(a) status remains visible and accurate to agency contracting officers, or develop an alternate list to verify a firm’s status.

The OIG reports that SBA’s management has agreed to pursue both recommendations.

How many big contractors are actually posing as small businesses?

August 25, 2014 by

In the sixth of its annual studies, a small business advocacy group has again blasted the government for allegedly awarding contracts to major corporations when policy intends for them to go to legitimate small businesses. The Small Business Administration offered other possible explanations for the apparent discrepancies.

The Petaluma, Calif.-based American Small Business League’s new study of fiscal 2013 procurement data concluded that of the top 100 companies receiving the highest-valued small business federal contracts, “79 were large companies that exceeded the SBA’s small business size standards, five were anomalous and 16 were legitimate small businesses.”

The group’s annual studies also show that the number of top-100 contracting companies that are large firms has risen steadily, from 60 in fiscal 2009 to 84 in fiscal 2013.

The large corporations that received the contracts in question in fiscal 2013 included Lockheed Martin Corp., General Dynamics Corp., Boeing Co., General Electric, Oracle Corp., Apple Inc., Verizon, Bank of America Corp., Citigroup Inc., PepsiCo, Comcast Corp., Intel Corp., John Deere Co. and many more, said the league, which published brief company-by-company profiles.

Keep reading this article at: http://www.govexec.com/contracting/2014/08/how-many-big-contractors-are-actually-posing-small-businesses/91694 

Large business’s unmet subcontracting goals result In “marginal” score

August 11, 2014 by

A large business was appropriately awarded a “Marginal” score for small business participation based on the large business’s history of failing to meet its small business subcontracting goals.

In a recent bid protest decision, the GAO held that the procuring agency properly assigned the large business a low score based on the large business’s history of unmet subcontracting goals, even though the large business apparently pledged to subcontract a significant amount of work to small businesses under the solicitation in question.

The GAO’s decision in Cajun Constructors, Inc., B-409685 (July 15, 2014) involved an Army Corps of Engineers solicitation for the construction of a concrete-covered canal in Louisiana.  The solicitation was issued in an unrestricted basis.  Award was to be made to the offeror presenting the best value to the government, considering price and four non-price factors: past performance, technical approach, key personnel and project management plan, and small business participation plan.

Keep reading this article at: http://smallgovcon.com/gaobidprotests/large-businesss-unmet-subcontracting-goals-result-in-marginal-score/ 

SBA announces federal government met its small business goal in FY13

August 4, 2014 by

The U.S. Small Business Administration (SBA) announced on August 1, 2014 that the federal government reached its small business federal contracting goal for the first time in eight years, awarding 23.39% in federal contracts to small businesses totaling $83.1 billion of eligible contracting dollars.  The government’s annual small business contracting goal is 23%.

The SBA’s report is for FY13, or the 12-month period ending September 30, 2013.

“When we hit our small business procurement target, it’s a win.  Small businesses get the revenue they need to grow and create jobs, and the federal government gets the chance to work with some of the most responsive, innovative and nimble companies in the U.S. while the economy grows,” said SBA Administrator Maria Contreras-Sweet.

Performance in four out of five of the small business prime contracting categories showed significant improvement, with increases in performance against statutory goals. While contract dollars have gone down in all categories as a result of overall reduced federal spending, small businesses still secured a greater percentage of the contracting dollars.

FY13 Government-Wide Small Business Contracting - Goals and Actual

Alongside the announcement, the SBA released its FY 2013 Small Business Procurement Scorecard, which provides an assessment of each federal agency’s yearly small business contracting achievement against its goal.   Overall, the federal government received an “A” on SBA’s government-wide Scorecard.   Twenty individual agencies receiving an A or A+.   Three agencies were given a B.  One agency, the Department of Energy, received a failing grade, awarding only 7% of its contracts to small businesses in FY13.

The individual agency scorecards released by the SBA, as well as a detailed explanation of the scorecard methodology, is available online at http://go.usa.gov/Nxxd.

Revenue-based small business size standards to increase on July 14

July 8, 2014 by

You probably know that the federal government’s definition of a small business is based on either the number of people that a company employs or the amount of revenue it earns annually.  The number-of-employees or the gross-revenue standards are applied to individual North American Industrial Classification System (NAICS) codes.  One or more NAICS codes apply to every business.

Thus, in order to determine whether a company is a small business in the eyes of the government, one must first determine which NAICS code or codes apply to the business, and then see what size standard (employees or revenue) applies to each NAICS code.  If a business has fewer employees or earns less annual revenue (averaged over the past three years) than the standard, then that business can represent itself to the federal government as a small business.  This is an important determination to make since the federal government sets an annual goal of awarding 23 percent of its contract dollars to small businesses.

It’s been more than five years since the Small Business Administration (SBA) updated the revenue size standards for small businesses.  Therefore, as of July 14, 2014, the SBA is adjusting virtually all of its size standards that are based upon revenue, to account for the years of inflation since the last adjustment. 

The forthcoming adjustment affects almost half of all NAICS code categories.    In all,  476  industrial categories will be affected by the update,  including most service, construction, retail, agricultural and transportation industries. 

With these increases, the new small business size standards range between $5.5 million and $38.5 million.

Using the Gross Domestic Product price index to obtain the most comprehensive measure of inflation, the SBA determined that the amount of inflation that occurred between the first quarter of 2008 and the last quarter of 2013 was 8.73 percent.   The SBA then calculated the new size standards by multiplying the current size standards by 1.0873 and then rounding that total to the nearest $500,000.  After these adjustments,

This latest adjustment of the revenue-based size standards for inflation is separate from the comprehensive review of all size standards that the SBA is supposed to perform at least every five years.

The new size standards can be found at: http://www.regulations.gov/#!documentDetail;D=SBA-2014-0009-0001.  Busineeses have until August 11, 2014 to submit any comments on these rules which technically are “interim final rules” at this point.

Because these new size standards will apply to certificates of small business size status signed on or after July 14, 2014, small (and near-small) businesses should review the new size standards to determine whether they now qualify as a small business concern.   Businesses also should visit the System for Award Management (SAM) and verify that their profile and certifications are up to date based on the revised size standards.

See more details on the SBA’s website at: http://www.sba.gov/content/what%27s-new-with-size-standards.

Federal government again falls short of its small business goals

July 1, 2014 by

The federal government is falling short of its goals for awarding contracts to small businesses in some industries where it spends the most money, according to the Small Business Administration.

The government has an overall goal of giving 23 percent of its contracting dollars to small businesses. It has routinely missed that goal in recent years.

An analysis of federal spending by the SBA’s Office of Advocacy shows small businesses got less than 12 percent of contracting dollars spent at manufacturers during the 2012 fiscal year. The government spent nearly $200 billion on manufacturing contracts, the most in a single industry.

One problem is not the number of contracts going to small businesses, but the amount of those contracts, the analysis says. And in industries like manufacturing, a high amount of contract dollars go to a small number of companies — for example, defense contractors like Lockheed Martin Corp. or Boeing Co. that each get billions of dollars annually.

One concern continually raised by lawmakers is that some large companies with federal contracts don’t live up to agreements to give subcontracts to small businesses.

Small businesses, meanwhile, got 22.5 percent of the $141 billion spent at companies providing professional, scientific and technical services. They received 21.3 percent of the $43 billion spent at companies providing administrative and support, waste management and restoration services.

Keep reading this article at: http://www.inc.com/associated-press/small-businesses-contracts-fall-short.html