Award of Contracts to Arcata Associates, Inc.

GAO reviewed the award of a Section 8(a) contract to Arcata Associates, Inc. by the Small Business Administration (SBA). Under its Pilot Program Authority, SBA reserved the Army's Combat Development Experimentation Command (CDEC) requirement for Arcata. BDM Services Company (BDM) complained that the CDEC reservation should be withdrawn because the proposed award would be contrary to statutory and regulatory competency requirements and SBA eligibility standards and business plan requirements. GAO found that a number of specific BDM contentions have merit in that SBA awarded the Army CDEC contract to a firm which: (1) will provide a service unrelated to its capabilities as identified in its business plan; (2) was not evaluated for its technical capability to perform the contract; (3) has not maintained its status as a small business; (4) received 8(a) support in 1980 that is almost four times the approved amount; (5) was allowed to select contract requirements and then change its business plan to reflect the capabilities required by the selected contract; and (6) has not maintained a reasonable balance between 8(a) and non-8(a) sales. GAO believes that SBA management of Arcata's participation in the 8(a) program has been deficient. GAO recommends that the Administrator of SBA thoroughly review the Arcata case and determine whether Arcata's status and performance of the contract are consistent with established criteria and, if not, whether termination of the contract or removal from the program is warranted.