Reservation and Award of Section 8(a) Small Business Act Contracts to Arcata Associates

AFMD-81-33: Published: Mar 23, 1981. Publicly Released: Apr 7, 1981.

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GAO reviewed the reservation and award of Section 8(a) Small Business Act contracts to a firm to determine whether allegations made by a competing firm are valid and to what extent the management by the Small Business Administration (SBA) of the 8(a) program was deficient in this situation. GAO reviewed contract and 8(a) program files and conducted interviews to identify the process and procedures followed in qualifying the firm for the 8(a) and Pilot Programs and in reserving and awarding contracts involving the firm. GAO also reviewed applicable SBA rules and regulations and coordinated its efforts with the SBA Inspector General.

GAO believed that some of the allegations concerning the SBA reservation and award of contracts to the firm had merit. GAO found that the management by SBA of the firm's participation in the 8(a) program was deficient. Using its Pilot Program authority, SBA formally reserved an agency's requirement for the firm and in doing so halted the agency's attempt to procure its requirements through open competition. The contract was awarded to SBA, and the related subcontract was awarded by SBA to the firm. The protesting firm had won two prior contracts to perform the work. The protester argued that the award would be contrary to the statutory and regulatory competency requirements, the intent of the Pilot Program, and SBA eligibility standards and business plan requirements. GAO found that SBA awarded the contract to a firm that: (1) would provide a service unrelated to its capabilities as identified in its business plan or the experience of its principal or professionals; (2) was not evaluated for technical capability to perform as required by SBA procedures; (3) has not maintained its status as a small business because of the 8(a) awards it has received; (4) has received 8(a) support that is almost four times the approved amount under SBA procedures; (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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Administrator of SBA should take appropriate action to ensure that all assistance to 8(a) firms complies with applicable statutory and regulatory authority and agrees with established SBA procedures.

    Agency Affected: Small Business Administration

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Administrator of SBA should actively pursue the effort, promised in 1979, to ensure that better and more specific economic eligibility criteria are produced at the earliest possible date.

    Agency Affected: Small Business Administration

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Administrator of SBA should thoroughly review the Arcata case with his Inspector General and determine whether Arcata's status and performance of this contract are consistent with established criteria and if not, whether termination of the contract and/or removal from the program are warranted.

    Agency Affected: Small Business Administration

 

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