United States. Congress. House. Committee on Small.
The abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 online
. (page 13 of 20)
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they cared to ABSOLUTE SUICIDE. ERASE IT. DESTROY THE DISKv
DESTROY ANY COPIES. DON'T EVEN HAVE THESE WORDS IN YOUR MIND
WHEN YOU TALK T0_THESE PEOPLE (EVEN THOUGH THEY'RE ABSOLUTELY
T3UE ) .
According to two former TAMSCO officials involved in the award, the cotr
had provided them with a later draft of the internal memorandum to
review before he submitted it to higher-level Coast Guard officials. One of
the TAMSCO officials told us that providing TAMSCO the memorandum to
review was inappropriate; the other felt uncomfortable with receiving the
document because the Coast Guard was always careful not to release
internal documents.
According to these two former TAMSCO officials and TAMSCO's
president, while they did not think it improper for TAMSCO to provide
information on the 8(a) program and other contracting procedures to the
Coast. Guard, they agreed that the Coast Guard should have been using its
own contracting officials to obtain the information.
IDIQ Contract to TAMSCO
Was Referred to as a
"Graduation Present"
Notes that the cotr took during Coast Guard/TAMSCO discussions also
referred to suggestions that the contract be awarded to TAMSCO as a
"graduation present" before the end of TAMSCO's 8(a) program
participation. For example, one note stated, in part, "idiq: Graduation |
P[resen]t. -eligible until grad from program Sept 18, '93." In other words,
TAMSCO could get a sole source idiq contract as a graduation present
until its graduation date of September 18, 1993. (See fig. 2.)
GAO/OSI-95-15 8(a) Vulnerability to Program and Contractor Abuse
144
Figure 2: Excerpt From the COTR's Notes
In addition to the Coast Guard contract, TAMSCO obtained at least 22
other 8(a) awards within 2 weeks of its "graduation" 18 from the program
totaling at least $63 million. Thirteen of the awards were idiq contracts
from a number of government agencies, including the Coast Guard award.
Mpt hr»Hnlno*v We De 8 an our investigation by reviewing the application, eligibility, and
°J participation files for the top 25 8(a) contract award recipients for fiscal
year 1992, as compiled in our 1993 report. These records were located in
10 sba District Offices nationwide. The files for two firms were unavailable
for review. A third file did not contain eligibility documents. We looked for
indicators of potential regulatory violations and criminal misconduct.
We initially selected four of the firms for further investigation. However,
the records we compiled for one firm were destroyed in the Oklahoma
City bombing tragedy on April 19, 1995, and our investigation of another
firm was not complete at the time of this publication. We then narrowed
our investigation to two firms — I-NET, Inc. of Bethesda, Maryland, and
Technical and Management Services Corporation (TAMSCO) of Calverton,
Maryland.
We interviewed officials and reviewed documents from the sba, Office of
Inspector General; various sba district and regional offices; sba's Central
Office; U.S. Department of Transportation, Office of Inspector General;
U.S. Coast Guard; Resolution Trust Corporation, Office of Inspector
General; Defense Contract Audit Agency; Department of Justice; and the
Federal Bureau of Investigation. We also interviewed current and former
employees of the firms, subcontractors, representatives of financial
institutions, and others.
"TAMSCO completed its program term on Sept 18, 1993.
GAOrOSl 95 15 S(a) Vulnerability to Program and C
145
As requested, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies of this report
to the Administrator of sba and to others upon request If you have any
questions concerning this report, please call me at (202) 512-6722 or
Robert H. Hast, Assistant Director for Investigations, New York Regional
Office, at (212) 264-0982. Major contributors to this report are listed in
appendix III.
Sincerely yours,
Richard C. Stiener
Director
GAO/OSIS515 8(a) Vulnerability to Program and Conti
146
GAO/OSI-9515 8(a) Vulnerability to Pro, ram and Contractor Adds
147
Contents
Letter l
Appendix I 20
The 8(a) Program
Appendix II 22
Top 25 8(a) Firms
Matrix
Appendix EI 23
Major Contributors to
This Report
FifilireS Figure 1: Draft E-mail Memorandum Between the COTR and a 14
Coast Guard Official
Figure 2: Excerpt From the COTR's Notes 1 5
Abbreviations
aa Associate of Arts
cotr Contracting Officer's Technical Representative
e-mail electronic mail
gao General Accounting Office
idiq Indefinite Delivery Indefinite Quantity
OIG Office of Inspector General
osi Office of Special Investigations
rced Resources, Community, and Economic Development
Division
sba Small Business Administration
sic Standard Industrial Classification
GAO/OS1-95-15 8(a) Vulnerability to Program and Contractor Abu
148
GAO/OS1-95-15 8(a) Vulnerability to Program and Contractor Abuse
149
Appendix I
The 8(a) Program
Section 8(a) of the Small Business Act, as amended, established the
Minority Small Business and Capital Ownership Development Program, or
8(a) program, to promote the development of small businesses owned by
socially and economically disadvantaged individuals so that they could
develop into viable competitors in the commercial marketplace. To be
eligible for the program, a small business must be 51 percent
unconditionally owned and controlled by one or more socially and
economically disadvantaged individuals. The company must also meet the
small business size standards established by sba for the firm's industry as
defined in the classification categories prescribed by the Standard
Industrial Classification (sic) Manual . 19 sba approves applicable sic codes
for participating firms. Participating 8(a) firms may have one or more sics
assigned to them by SBA. To be considered a small business and remain
eligible for the program, participating firms must not have outgrown all
their SBA-approved sic codes. Size standards for each sic code are generally
defined by the firm's number of employees or its average annual gross
sales. 20
Under the program, sba acts as a prime contractor, entering into contracts
with other federal agencies and then subcontracting work to firms in the
8(a) program. Firms in the program are also eligible for financial,
technical, and management assistance from sba to aid their development.
Participating firms can stay in the program for up to 9 years.
The Small Business Act, as amended, and federal regulations define
"socially disadvantaged" as those persons who have been subjected to
racial, ethnic, or cultural bias because of their identities as members of
groups, without regard to their individual qualities. Certain racial and
ethnic groups such as Black Americans, Hispanic Americans,
Subcontinental Asian Americans, and Native Americans are presumed to
be socially disadvantaged. However, individuals in groups not cited in the
act, who can demonstrate that they are socially disadvantaged, may also
be eligible, sba regulations define "economically disadvantaged" as socially
disadvantaged individuals who are unable to compete in the free
enterprise system because their opportunities to obtain credit and capital
have been more limited than those of others in similar businesses. Further,
program applicants must demonstrate a personal net worth that does not
exceed certain limits so as to meet and maintain the criteria for an
economic disadvantage.
'*This manual is published by the Office of Management and Budget and assigns a numerical identifier
for each industry
"I3CF.R § 121.601 (1995).
GAO/OSI 95 15 (K«) Vulnerability to Program and Contractor Abuse
150
Appendix I
The 8(a) Program
Each 8(a) firm under sba's regulations is subject to a program term of 9
years. 21 However, sba may also, under its regulations, "graduate" an 8(a)
firm prior to the expiration of its 9-year program term if that 8(a) firm
substantially achieves the target objectives and goals set forth in its
business plan. To date, according to sba, no 8(a) firm has graduated.
''The 1988 Amendments to [he act created this limit 13CFR § 124 303(1)) (1995) grandfathered firms
that participated prior to 1988 so that firms with fewer than 5 years' participation would obtain 5 more
GAO/OSI-95-15 S(a) Vulnerability to Program and Contractor Abuse
151
Appendix n
Top 25 8(a) Firms Matrix
8(a) Contracts
Company Name
Fiscal Year 92
Total Value of
8(a) Contracts
Awarded
1
Colsa Inc.
$91,593,712
$497.821 .732
2
Yancy Minerals Inc
81,931,200
210,750.390
3
l-NET Inc
65,338.088
508.284.206
4
Metiers Industries Inc
43.921,758
156.314.914
5
Weeminuche Construction
Authority
39.611.263
65.706.219
6
NYMAInc
37,526.951
234.569.348
7
Systems Engineering &
Management Co
35,182.607
185,816,251
8
R J O Enterprise Inc
30.532.192
385,034.793
9
TAMSCO
30.369.392
356,439.719
10
National Systems and Research
Corp
29,175.097
291.198.853
11
Sherikon Inc
29.166.605
77.431.185
12
Advance Sciences Inc"
28,279.092
54,479,536
13
Turtle Mountain Manufacturing Co
27,894.845
200,786,724
14
Systematic Management Services
Inc
25.669,502
145.241.079
15
Modern Technologies Corp
24,146.726
225,118.715
16
Tresp Associates lnc b
23.555.918
93.907.403
17
Frontier Engineering Inc
20.989.268
275.253.836
18
Maden Tech Consulting
20.775.446
78,951.336
19
Piquniq Management Corp
19.775,820
128,934,788
20
Galaxy Scientific Corp
18,876.444
118.071,790
21
Metricalnc
18.826.263
82.476,450
22
Shadrock Petroleum Products
18.502.664
48.405.291
23
Hernandez Engineering Inc
18.265.616
106,104,461
24
Washington Consulting Group 3
17,972.076
140,839.773
25
Applied Technology Associates
Inc
17,901,795
278,756,205
TOTAL 8(a) AWARDS
$815,780,340
34,946,694,997
â– SBA was unable to provide the files for these firms
"The eligibility documents were missing from this firm's file
GAO/OSI-95-15 8(a) Vulnerability to Program and Contractor Abuse
152
Appendix III
Major Contributors to This Report
Office of Special
Investigations,
Washington, D.C.
Boston/New York
Field Office
Donald J. Wheeler, Deputy Director for Investigations
M. Jane Hunt, Senior Communications Analyst
Barbara W. Alsip, Communications Analyst
Robert H. Hast, Assistant Director for Investigations
William D. Hamel, Special Agent
Anne Kornblum, Senior Evaluator
Dallas Regional Office Jeannie B Davis ' Senior Evaluator
Denver Regional
Office
Atlanta Regional
Office
San Francisco
Regional Office
Jennifer L. Duncan, Senior Evaluator
Octavia Parks, Senior Evaluator
Johnnie E. Barnes, Senior Evaluator
Steve Myerson, Assistant Director for Investigations
Kansas City Regional ■£-££££ **""
Office
Steve Pruitt, Evaluator
Cincinnati Regional Daniel L McCaffert y> Senior EvaIuator
Office
Office of the General f "7 h K smito A s â„¢
DESTROY ANY COPIES. DON'T EVEN HAVE THESE WORDS IN YOUR MIND
WHEN YOU TALK T0_THESE PEOPLE (EVEN THOUGH THEY'RE ABSOLUTELY
T3UE ) .
According to two former TAMSCO officials involved in the award, the cotr
had provided them with a later draft of the internal memorandum to
review before he submitted it to higher-level Coast Guard officials. One of
the TAMSCO officials told us that providing TAMSCO the memorandum to
review was inappropriate; the other felt uncomfortable with receiving the
document because the Coast Guard was always careful not to release
internal documents.
According to these two former TAMSCO officials and TAMSCO's
president, while they did not think it improper for TAMSCO to provide
information on the 8(a) program and other contracting procedures to the
Coast. Guard, they agreed that the Coast Guard should have been using its
own contracting officials to obtain the information.
IDIQ Contract to TAMSCO
Was Referred to as a
"Graduation Present"
Notes that the cotr took during Coast Guard/TAMSCO discussions also
referred to suggestions that the contract be awarded to TAMSCO as a
"graduation present" before the end of TAMSCO's 8(a) program
participation. For example, one note stated, in part, "idiq: Graduation |
P[resen]t. -eligible until grad from program Sept 18, '93." In other words,
TAMSCO could get a sole source idiq contract as a graduation present
until its graduation date of September 18, 1993. (See fig. 2.)
GAO/OSI-95-15 8(a) Vulnerability to Program and Contractor Abuse
144
Figure 2: Excerpt From the COTR's Notes
In addition to the Coast Guard contract, TAMSCO obtained at least 22
other 8(a) awards within 2 weeks of its "graduation" 18 from the program
totaling at least $63 million. Thirteen of the awards were idiq contracts
from a number of government agencies, including the Coast Guard award.
Mpt hr»Hnlno*v We De 8 an our investigation by reviewing the application, eligibility, and
°J participation files for the top 25 8(a) contract award recipients for fiscal
year 1992, as compiled in our 1993 report. These records were located in
10 sba District Offices nationwide. The files for two firms were unavailable
for review. A third file did not contain eligibility documents. We looked for
indicators of potential regulatory violations and criminal misconduct.
We initially selected four of the firms for further investigation. However,
the records we compiled for one firm were destroyed in the Oklahoma
City bombing tragedy on April 19, 1995, and our investigation of another
firm was not complete at the time of this publication. We then narrowed
our investigation to two firms — I-NET, Inc. of Bethesda, Maryland, and
Technical and Management Services Corporation (TAMSCO) of Calverton,
Maryland.
We interviewed officials and reviewed documents from the sba, Office of
Inspector General; various sba district and regional offices; sba's Central
Office; U.S. Department of Transportation, Office of Inspector General;
U.S. Coast Guard; Resolution Trust Corporation, Office of Inspector
General; Defense Contract Audit Agency; Department of Justice; and the
Federal Bureau of Investigation. We also interviewed current and former
employees of the firms, subcontractors, representatives of financial
institutions, and others.
"TAMSCO completed its program term on Sept 18, 1993.
GAOrOSl 95 15 S(a) Vulnerability to Program and C
145
As requested, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies of this report
to the Administrator of sba and to others upon request If you have any
questions concerning this report, please call me at (202) 512-6722 or
Robert H. Hast, Assistant Director for Investigations, New York Regional
Office, at (212) 264-0982. Major contributors to this report are listed in
appendix III.
Sincerely yours,
Richard C. Stiener
Director
GAO/OSIS515 8(a) Vulnerability to Program and Conti
146
GAO/OSI-9515 8(a) Vulnerability to Pro, ram and Contractor Adds
147
Contents
Letter l
Appendix I 20
The 8(a) Program
Appendix II 22
Top 25 8(a) Firms
Matrix
Appendix EI 23
Major Contributors to
This Report
FifilireS Figure 1: Draft E-mail Memorandum Between the COTR and a 14
Coast Guard Official
Figure 2: Excerpt From the COTR's Notes 1 5
Abbreviations
aa Associate of Arts
cotr Contracting Officer's Technical Representative
e-mail electronic mail
gao General Accounting Office
idiq Indefinite Delivery Indefinite Quantity
OIG Office of Inspector General
osi Office of Special Investigations
rced Resources, Community, and Economic Development
Division
sba Small Business Administration
sic Standard Industrial Classification
GAO/OS1-95-15 8(a) Vulnerability to Program and Contractor Abu
148
GAO/OS1-95-15 8(a) Vulnerability to Program and Contractor Abuse
149
Appendix I
The 8(a) Program
Section 8(a) of the Small Business Act, as amended, established the
Minority Small Business and Capital Ownership Development Program, or
8(a) program, to promote the development of small businesses owned by
socially and economically disadvantaged individuals so that they could
develop into viable competitors in the commercial marketplace. To be
eligible for the program, a small business must be 51 percent
unconditionally owned and controlled by one or more socially and
economically disadvantaged individuals. The company must also meet the
small business size standards established by sba for the firm's industry as
defined in the classification categories prescribed by the Standard
Industrial Classification (sic) Manual . 19 sba approves applicable sic codes
for participating firms. Participating 8(a) firms may have one or more sics
assigned to them by SBA. To be considered a small business and remain
eligible for the program, participating firms must not have outgrown all
their SBA-approved sic codes. Size standards for each sic code are generally
defined by the firm's number of employees or its average annual gross
sales. 20
Under the program, sba acts as a prime contractor, entering into contracts
with other federal agencies and then subcontracting work to firms in the
8(a) program. Firms in the program are also eligible for financial,
technical, and management assistance from sba to aid their development.
Participating firms can stay in the program for up to 9 years.
The Small Business Act, as amended, and federal regulations define
"socially disadvantaged" as those persons who have been subjected to
racial, ethnic, or cultural bias because of their identities as members of
groups, without regard to their individual qualities. Certain racial and
ethnic groups such as Black Americans, Hispanic Americans,
Subcontinental Asian Americans, and Native Americans are presumed to
be socially disadvantaged. However, individuals in groups not cited in the
act, who can demonstrate that they are socially disadvantaged, may also
be eligible, sba regulations define "economically disadvantaged" as socially
disadvantaged individuals who are unable to compete in the free
enterprise system because their opportunities to obtain credit and capital
have been more limited than those of others in similar businesses. Further,
program applicants must demonstrate a personal net worth that does not
exceed certain limits so as to meet and maintain the criteria for an
economic disadvantage.
'*This manual is published by the Office of Management and Budget and assigns a numerical identifier
for each industry
"I3CF.R § 121.601 (1995).
GAO/OSI 95 15 (K«) Vulnerability to Program and Contractor Abuse
150
Appendix I
The 8(a) Program
Each 8(a) firm under sba's regulations is subject to a program term of 9
years. 21 However, sba may also, under its regulations, "graduate" an 8(a)
firm prior to the expiration of its 9-year program term if that 8(a) firm
substantially achieves the target objectives and goals set forth in its
business plan. To date, according to sba, no 8(a) firm has graduated.
''The 1988 Amendments to [he act created this limit 13CFR § 124 303(1)) (1995) grandfathered firms
that participated prior to 1988 so that firms with fewer than 5 years' participation would obtain 5 more
GAO/OSI-95-15 S(a) Vulnerability to Program and Contractor Abuse
151
Appendix n
Top 25 8(a) Firms Matrix
8(a) Contracts
Company Name
Fiscal Year 92
Total Value of
8(a) Contracts
Awarded
1
Colsa Inc.
$91,593,712
$497.821 .732
2
Yancy Minerals Inc
81,931,200
210,750.390
3
l-NET Inc
65,338.088
508.284.206
4
Metiers Industries Inc
43.921,758
156.314.914
5
Weeminuche Construction
Authority
39.611.263
65.706.219
6
NYMAInc
37,526.951
234.569.348
7
Systems Engineering &
Management Co
35,182.607
185,816,251
8
R J O Enterprise Inc
30.532.192
385,034.793
9
TAMSCO
30.369.392
356,439.719
10
National Systems and Research
Corp
29,175.097
291.198.853
11
Sherikon Inc
29.166.605
77.431.185
12
Advance Sciences Inc"
28,279.092
54,479,536
13
Turtle Mountain Manufacturing Co
27,894.845
200,786,724
14
Systematic Management Services
Inc
25.669,502
145.241.079
15
Modern Technologies Corp
24,146.726
225,118.715
16
Tresp Associates lnc b
23.555.918
93.907.403
17
Frontier Engineering Inc
20.989.268
275.253.836
18
Maden Tech Consulting
20.775.446
78,951.336
19
Piquniq Management Corp
19.775,820
128,934,788
20
Galaxy Scientific Corp
18,876.444
118.071,790
21
Metricalnc
18.826.263
82.476,450
22
Shadrock Petroleum Products
18.502.664
48.405.291
23
Hernandez Engineering Inc
18.265.616
106,104,461
24
Washington Consulting Group 3
17,972.076
140,839.773
25
Applied Technology Associates
Inc
17,901,795
278,756,205
TOTAL 8(a) AWARDS
$815,780,340
34,946,694,997
â– SBA was unable to provide the files for these firms
"The eligibility documents were missing from this firm's file
GAO/OSI-95-15 8(a) Vulnerability to Program and Contractor Abuse
152
Appendix III
Major Contributors to This Report
Office of Special
Investigations,
Washington, D.C.
Boston/New York
Field Office
Donald J. Wheeler, Deputy Director for Investigations
M. Jane Hunt, Senior Communications Analyst
Barbara W. Alsip, Communications Analyst
Robert H. Hast, Assistant Director for Investigations
William D. Hamel, Special Agent
Anne Kornblum, Senior Evaluator
Dallas Regional Office Jeannie B Davis ' Senior Evaluator
Denver Regional
Office
Atlanta Regional
Office
San Francisco
Regional Office
Jennifer L. Duncan, Senior Evaluator
Octavia Parks, Senior Evaluator
Johnnie E. Barnes, Senior Evaluator
Steve Myerson, Assistant Director for Investigations
Kansas City Regional ■£-££££ **""
Office
Steve Pruitt, Evaluator
Cincinnati Regional Daniel L McCaffert y> Senior EvaIuator
Office
Office of the General f "7 h K smito A s â„¢
Online Library → United States. Congress. House. Committee on Small → The abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 13 of 20)
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