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

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Unfulfilled (Chapter Report)

15. GAO/CED-81-22 (1/23/81) The 8(a) Pilot Program for Disadvantaged Small
Businesses Has Not Been Effective (Chapter Report)



163

Summary of SBA 8(a) Program-related GAO Documents



1. TITLE: Small Business Administration: Case Studies Illustrate 8(a) Program

and Contractor Abuse

ACCESSION NUMBER 155786 RPTNO: T-OSI-96-1

DOCUMENT DATE: 12/13/95 DOCUMENT TYPE Testimony

BACKGROUND:

GAO discussed program and contractor abuses involving two firms that
participated In the Small Business Administration's (SBA) 8(a) program. GAO
noted that (1) although the firms provided questionable information
regarding their eligibility for the 8(a) program, SBA did not fully resolve
the issues before it admitted the firms to the program; (2) one of the
firm's misrepresented its qualifications to SBA, but both firms continue to
benefit from contracts they received in the 8(a) program; (3) SBA did not
recognize misleading financial statements that misrepresented the firm's
size; (4) SBA also allowed the firm to continue in the 8(a) program for
almost 2 years after it exceeded its size limit; and (5) the Coast Guard
changed one of the firm's original industrial classification code to direct
an indefinite delivery indefinite quantity contract to the firm and avoid
competition.

2. TITLE: Small Business Administration: 8(a) Is Vulnerable to Program and

Contractor Abuse

ACCESSION NUMBER: 155357 RPTNO: OSI-95-15

DOCUMENT DATE: 09/07/95 DOCUMENT TYPE: Letter Report

ABSTRACT:

The Small Business Administration's (SBA) 8(a) program is intended to
develop and promote businesses that are owned and controlled by socially
and economically disadvantaged persons. Members of Congress have raised
concerns that weaknesses in program management and administration may make
the 8(a) program vulnerable to exploitation by individuals or corporations
that have used illegal or improper means to participate in and benefit from
the program. To develop case studies, GAO initially selected four firms for
investigation on the basis of indicators, or "red flags," of potential
regulatory violations and criminal misconduct Due to time constraints and
the destruction of records resulting from the Oklahoma City bombing, this
report focuses on the following two firms: I-NET, Inc. of Bethesda,
Maryland, and Technical and Management Services Corporation of Calverton,
Maryland.



164



BACKGROUND:

Pursuant to a congressional request, GAO reviewed the Small Business
Administration's (SBA) 8(a) program, focusing on whether (1) ineligible
8(a) firms have received contracts through their improper participation in
the program; (2) 8(a) firms have misrepresented themselves to enter and
stay in the program; (3) firms exceeding the size standard have
inappropriately received 8(a) awards; (4) SBA has allowed ineligible firms
to remain in the program after they exceeded the size limitations; and (5)
federal contracting authorities have improperly used indefinite delivery,
indefinite quantity (IDIQ) contracts to avoid competition.

FINDINGS:

GAO found that (1) the two firms studied were initially recommended for
nonacceptance Into the 8(a) program because of eligibility questions about
who actually controlled the firms; (2) SBA justification for accepting the
firms was questionable, since the questions about the firms' ownership were
never fully answered; (3) one firm's owner misrepresented her personal
qualifications, her equity in the firm, and ownership changes, but SBA took
no action when it found out about the misrepresentations; (4) the firm
received millions of dollars worth of 8(a) contracts after it had grown too
large to participate in the program; (5) although the firm hid its size by
excluding items from, its financial statements, understating its total
revenue, and representing itself as a company at financial risk, it had
considerable access to credit; (6) SBA allowed the firm to remain in the
program and receive new 8(a) contracts even after it had determined that
the firm had grown too large for continued program participation; (7) the
Coast Guard awarded a sole-source IDIQ contract to the second firm by
changing the contract's classification code to one for which the firm was
eligible and altering the contract's original minimum value below the
minimum threshold for mandatory 8(a) competitive procurements; and (8) the
Coast Guard believed that competitive 8(a) procurements hindered its
mission and viewed the contract as a graduation present to the firm.

3. TITLE: Small Business: Status of SBA's 8(a) Minority Business Development
Program

ACCESSION NUMBER: 153914 RPTNO: T-RCED-95-149

DOCUMENT DATE: 04/04/95 DOCUMENT TYPE: Testimony

ABSTRACT:

The 8(a) business development program undoubtedly has helped some firms
owned by socially and economically disadvantaged persons to compete in the
commercial marketplace. This testimony focuses on several program
weaknesses that are preventing firms from obtaining experiences essential
to their development The total dollar value of new contracts awarded



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competitively grew during fiscal year 1994, but federal procuring agencies
limit firms' opportunities for competition under the 8(a) program. The
concentration of contract dollars in a few firms continued in 1994,
limiting the developmental opportunities available to many firms. And
although the Small Business Administration has approved business plans for
most firms, it has not devoted to same attention to annually reviewing
these plans to ensure that they accurately reflect the firms' development
goals and contract needs. Moreover, many firms nearing the end of their
program terms still depend on 8(a) contracts, raising doubts about their
chances for success in the commercial marketplace.
BACKGROUND:

GAO discussed the status of the Small Business Administration's (SBA) 8(a)
business development program and the Department of Defense's (DOD) small
disadvantaged business program, focusing on key changes designed to make
the 8(a) program more effective. GAO noted that (1) although the total
dollar value of new contracts awarded competitively grew during fiscal year
1994, federal procuring agencies limited firms' competition under the 8(a)
program; (2) the concentration of contract dollars in a few firms continued
in 1994, limiting many firms' opportunities for development; (3) although
SBA has given adequate attention to ensuring that firms have new or revised
business plans, it has not annually reviewed these plans to ensure that
they accurately reflect the firms' goals and needs; (4) many firms nearing
the end of their program terms are still dependent on 8(a) contracts,
limiting their chance for future Livelihood in the commercial marketplace;
and (5) while concentration under the DOD small business program is similar
to the 8(a) program, contract dollars awarded through price preference are
much more concentrated.

4. TITLE: Small Business: Status of SBA's 8(a) Minority Business Development
Program

ACCESSION NUMBER: 153665 RPTNO: T-RCED-95-122

DOCUMENT DATE: 03/06/95 DOCUMENT TYPE: Testimony

ABSTRACT:

Although the Small Business Administration (SBA) has improved some aspects
of the 8(a) business development program, which provides federal contracts
to small businesses owned by socially and economically disadvantaged
persons, it has not yet achieved key changes mandated by Congress.
Although the total dollar value of new contracts awarded competitively grew
during fiscal year 1994, federal procuring agencies limit firms'
opportunities for competition under the 8(a) program. The concentration of
contract dollars in a few firms continued in 1994, limiting the
developmental opportunities of many firms. And although SBA has approved



166



business plans for most firms, it has not given the same attention to
annually reviewing these plans to guarantee that they accurately reflect
the firms' developmental goals and contract needs. Moreover, many firms
nearing the end of their program terms still depend on 8(a) contracts,
raising doubts about the firms' ability to succeed in the commercial
marketplace.
BACKGROUND:

Pursuant to a congressional request, GAO discussed the Small Business
Administration's (SBA) 8(a) business development program and the Department
of Defense's (DOD) small disadvantaged business program. GAO noted that
(1) while SBA has improved certain aspects of the 8(a) program and
increased the total value of new 8(a) contracts awarded, it has not yet
implemented key changes mandated by Congress; (2) SBA contract dollars are
still concentrated among a small percentage of firms; (3) of the 5,165
firms in the SBA program at the end of fiscal year (FY) 1994, about 56
percent did not receive any contracts during the year; (4) federal agencies
direct sole-source contracts to firms they are familiar with to avoid
competition thresholds; (5) SBA is requiring each of its district offices
to develop specific initiatives to increase contracting opportunities for
more 8(a) firms; and (6) SBA field offices are not conducting annual
business plan reviews to ensure that they accurately reflect the firms'
business development goals and non-8(a) contract needs. GAO also noted that
DOD: (1) awarded $6.1 billion In prime contracts to small disadvantaged
businesses in FY 1994 and about 18 percent of these contract dollars
through small business set-asides; and (2) contracting officials prefer the
8(a) program because it allows them to select contractors they are familiar
with.

5. TITLE: Small Business: SBA Cannot Assess the Success of Its Minority
Business Development Program

ACCESSION NUMBER: 152212 RPTNO: T-RCED-94-278

DOCUMENT DATE 07/27/94 DOCUMENT TYPE: Testimony

ABSTRACT:

Although the Small Business Administration (SBA) has improved some aspects
of its 8(a) business development program, which provides federal contracts
to small businesses owned by social and economically disadvantaged persons,
SBA Is still not in a position to evaluate the program's overall success in
enabling minority businesses to compete in the commercial marketplace after
they leave the program. The value of 8(a) contracts awarded competitively
during fiscal year 1992 was higher than the value of contracts awarded
during the preceding year, but the distribution of contracts continued to
be concentrated among a very small percentage of firms. Also, SBA could not



167



say whether its revised business plans for 8(a) firms are being reviewed
annually, as required by law, or whether the firms are meeting the non-8(a)
contract goals to reduce the firms' reliance on program contracts. Finally,
the information SBA provided GAO shows that its failure to properly plan
the redesign of the program's management information system continues to
hamper the implementation of a system of providing SBA managers with basic
8(a) program information.
BACKGROUND:

GAO discussed the Small Business Administration's (SBA) progress in
implementing changes to its 8(a) business development program as required
by the Business Opportunity Development Reform Act of 1988. GAO noted that

(1) SBA cannot evaluate the program's overall success in developing
competitive minority businesses because of the lack of program information;

(2) although SBA awarded more 8(a) contracts competitively during fiscal
year (FY) 1992, the awards continue to be concentrated among a few 8(a)
firms; (3) about one-half of the 8(a) firms have not received contract
awards since FY 1990; (4) SBA cannot determine if the 8(a) firms' new or
revised business plans are being reviewed annually or if the firms are
achieving their non-8(a) contracting goals; and (5) SBA has not properly
planned the redesign of the program's management information system which
delays its ability to provide Congress and program managers with
fundamental 8(a) program information.



6. TITLE: Energy Management DOE Can Improve Distribution of Dollars Awarded
Under SBA's 8(a) Program

ACCESSION NUMBER 151129 RPTNO RCED-94-28

DOCUMENT DATE: 02/23/94 DOCUMENT TYPE Letter Report

ABSTRACT:

Contract dollars awarded by the Energy Department (DOE) under the Small
Business Administration's 8(a) program are concentrated among a small
number of firms. Nearly 60 percent of DOE's $1 billion worth of active
contracts in April 1992 went to 13 firms. This concentration is due, in
part, to the fact that DOE, like other federal agencies, is authorized to
direct noncompetitive 8(a) awards to firms that it specifies. In addition,
DOE's Oak Ridge office has contributed to the concentration of awards by
combining several procurements into a single larger procurement, resulting
in the award of only one contract rather than several. Although these
practices are not prohibited, DOE is missing an opportunity to have a
positive impact on a large number of firms. Agencies are required to award
8(a) contracts competitively if the estimated prices of the contracts
exceed certain thresholds. DOE, however, has kept price estimates for
contracts artificially low and structured contracts so that their estimated



168



prices fall below the thresholds specified for competition. This practice
has further contributed to the concentration of 8(a) contract dollars among
a small number of firms.

BACKGROUND:

Pursuant to a congressional request, GAO reviewed the distribution of
Department of Energy (DOE) contract awards to firms participating in the
Small Business Administration's 8(a) program, focusing on whether DOE: (1)
distributes its 8(a) contract funding equitably; and (2) has complied with
noncompetitive contract award requirements.

FINDINGS:

GAO found that (1) DOE awarded 58 percent of its 8(a) contracts to 13
firms and 42 percent of its remaining contracts to 112 firms as of April
1992; (2) DOE has concentrated its 8(a) awards among a small number of
firms by combining several smaller contracts into single larger contracts;
(3) DOE and other federal agencies have awarded over 90 percent of their
8(a) contracts noncompetltlvely, (4) DOE could increase its small business
assistance by better distribution of its noncompetitive awards; (5)
although DOE is required to award competitive contracts if the estimated
contract cost exceeds certain thresholds, DOE has structured its
procurements so that estimated prices fall below the competition
thresholds; (6) DOE has avoided the competition requirements to facilitate
the procurement process; and (7) DOE should discontinue its avoidance of
the competition requirements to demonstrate its commitment to the 8(a)
program and to further assist small businesses



7. TTTLE Small Business: The Small Business Administration's Progress in
Restructuring Its Business Development Program
ACCESSION NUMBER 149968 RPTNO. T-RCED-93-56

DOCUMENT DATE: 09/22/93 DOCUMENT TYPE: Testimony

ABSTRACT:

Concerned that gaining access to the 8(a) business development program was
a lengthy and burdensome process, that the program's administration was
inefficient, and that few firms were able to compete successfully in the
open market, Congress mandated wholesale changes to the program in 1988.
Although the Small Business Administration (SBA) has made some changes to
the program, which promotes the development of small businesses owned by
socially and economically disadvantaged persons, the program still falls
short in several areas. SBA's latest estimate for completing the redesign
work is late 1995, five years later than originally projected. The program
lacks a management information system, developed in accordance with federal
guidelines, that yields complete and accurate information. As a result,
Congress and program managers are in the dark about what assistance is



169



being provided to 8(a) Anns and whether the program is effective. In
addition, access to the program still needs improving. Although SBA must
provide 8(a) program applicants with timely feedback on their eligibiliiity
to participate in the program, it continues to operate without an
application-tracking system that provides timely information on where and
why application-processing problems are occurring. Finally, SBA needs to
periodically review the business plan of each 8(a) firm. Without such a
review, SBA cannot be sure that each plan is up-to-date, that the 8(a)
firms' business development goals are realistic, and that the firms are
making progress toward these goals
BACKGROUND:

GAO discussed the Small Business Administration's (SBA) progress in
implementing legislatively-mandated changes to its 8(a) business
development program. GAO found that (1) SBA has made limited progress in
implementing some 8(a) program changes; (2) SBA redesign of its 8(a)
program management information system is behind schedule, and does not meet
federal regulations and guidelines; (3) SBA has not developed an estimate
of the system's total redesign cost; (4) without a management information
system, Congress and SBA program managers cannot determine the amount of
assistance being provided to 8(a) firms and assess its effectiveness in
developing 8(a) firms; (5) in 1992, SBA certification of 8(a) program
participants averaged 170 days, which exceeds the 90-day legislative
requirement; (6) although most 8(a) firms have new or revised SBA approved
business plans, SBA does not annually review each approved business plan as
required; (7) SBA needs to continue to improve its tracking of management
and technical assistance and develop criteria to measure the effectiveness
of 8(a) assistance; and (8) although SBA tracks the principal programs that
provide 8(a) financial assistance, it does not know the full extent of 8(a)
financial assistance being provided by all SBA programs.



170



8. TITLE: Small Business: Problems Continue With SBA's Minority Business
Development Program

ACCESSION NUMBER 149988 RPTNO: RCED-93-145

DOCUMENT DATE: 09/17/93 DOCUMENT TYPE: Letter Report

ABSTRACT:

Concerned that gaining access to the 8(a) business development program was
a lengthy and burdensome process, that the program's administration was
inefficient, and that few firms were able to compete successfully in the
open market, Congress mandated wholesale changes to the program In 1988.
Although the Small Business Administration (SBA) has made some changes to
the program, which promotes the development of small businesses owned by
socially and economically disadvantaged persons, the program still falls
short in several areas. SBA's latest estimate for completing the redesign
work is late 1996, 5 years later than originally projected. The program
lacks a management information system, developed in accordance with federal
guidelines, that yields complete and accurate information. As a result,
Congress and program managers are in the dark about what assistance is
being provided to 8(a) firms and whether the program is effective. In
addition, access to the program still needs improving. Although SBA must
provide 8(a) program applicants with timely feedback on their eligibility
to participate in the program, it continues to operate without an
application-tracking system that provides timely information on where and
why application-processing problems are occurring. Finally, SBA needs to
periodically review the business plan of each 8(a) firm. Without such a
review, SBA cannot be sure that each plan is up-to-date, that the 8(a)
firms' business development goals are realistic, and that the firms are
making progress toward these goals. GAO summarized this report in
testimony before Congress; see: Small Business. The Small Business
Administration's Progress in Restructuring Its Business Development
Program.

BACKGROUND:

Pursuant to a congressional request, GAO reviewed the Small Business
Administration's (SBA) ability to implement changes to the 8(a) business
development program relating to the: (1) collection and management of 8(a)
program data; (2) certification of 8(a) program participants; (3)
development and maintenance of 8(a) firms' business plans; (4) competitive
award of 8(a) program contracts; and (5) distribution of 8(a) contracts
among 8(a) firms. GAO also reviewed SBA efforts to determine the amount and
type of financial, technical, and management assistance provided to 8(a)
firms as well as the effectiveness of such assistance.



171



FINDINGS:

GAO found that: (1) the 8(a) program still lacks a management information
system that provides complete and accurate information on all 8(a) program
aspects, including data on the type and amount of financial, management,
and technical assistance provided to 8(a) firms; (2) SBA also lacks an
application tracking system that can provide it with timely information on
processing problems; (3) SBA does not effectively review the business plan
of each 8(a) firm to ensure that it is up-to-date, the firm's business
development goals are realistic or that the firm is progressing toward
achieving its goals; (4) SBA certification time for 8(a) program
participants continues to exceed the mandated 90-day period; and (5) SBA
has made improvements in tracking management and technical assistance, but
the extent of financial assistance provided to 8(a) firms is not fully
known.

9. TITLE: Small Business: The Small Business Administration's Progress in
Restructuring Its 8(a) Business Development Program
ACCESSION NUMBER 146071 RPTNO: T-RCED-92-35

DOCUMENT DATE: 03/04/92 DOCUMENT TYPE: Testimony

BACKGROUND:

GAO discussed the Small Business Administration's (SBA) progress in
implementing legislatively required changes to its 8(a) program, intended
to promote the development of small businesses owned and controlled by
socially and economically disadvantaged individuals. GAO noted that: (1)
SBA met the 90-day maximum for determining participant eligibility for only
24 percent of the 268 applications it approved or declined between January
and November 1990; (2) many of the participating firms lack required
business plans, and SBA has not reviewed all of the plans it has received;
(3) it is difficult for SBA to promote the equitable geographic
distribution of noncompetitive 8(a) contracts, since procuring agencies
recommend specific firms for about 95 percent of the contracts offered
through the program; (4) of about 8,300 new 8(a) contracts, valued at about
$3 billion, awarded in fiscal years 1990 and 1991, only 67 contracts, with
a total value of $136 million, were competitive awards; (5) the SBA primary
8(a) management information system does not include the data necessary to
meet reporting requirements; (6) SBA did not require participating firms to
report semiannually on their use of personnel who help them to obtain
federal contracts until 28 months after the legislative mandate; (7) SBA
does not track and does not know the actual amount of 8(a) assistance
provided and lacks objective criteria for measuring the effectiveness of
assistance; and (8) SBA does not actually know but estimates that there
have been few challenges to 8(a) contract awards.



172



10. TITLE: Small Business: Problems in Restructuring SBA's Minority Business
Development Program

ACCESSION NUMBER 146010 RPTNO: RCED-92-68

DOCUMENT DATE: 01/31/92 DOCUMENT TYPE Utter Report

ABSTRACT:

The 8(a) program was created to Improve the viability of small businesses
owned by socially and economically disadvantaged individuals. Under the
program, the Small Business Administration (SBA) enters into contracts with
other federal agencies and subcontracts the work to firms in the program.
Firms in the program are also eligible for financial, technical, and
management assistance from SBA to aid their development Concerned that
obtaining access to the program was lengthy and burdensome, program
administration was inefficient, and few firms were able to compete upon
leaving the program, Congress passed the Business Opportunity Development
Reform Act of 1988. This legislation requires that (1) applications be
processed within 90 days, (2) 8(a) firms submit revised business plans so
SBA can better monitor the firms' development, and (3) firms compete for
certain contracts. SBA has had problems implementing many of these
changes, and its lack of valid data on program activities has hindered
effective program management GAO summarized this report in testimony
before Congress; see: Small Business: The Small Business Administration's
Progress in Restructuring Its 8(a) Business Development Program, by Judy A,
England-Joseph, Director of Housing and Community Development Issues,
before the House Committee on Small Business. GAO/T- RCED-92-35, Mar. 4,


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Online LibraryUnited States. Congress. House. Committee on SmallThe 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 14 of 20)