Government Operations:

Proposals for Minimizing the Impact of the 8(a) Program on Defense Procurement

PLRD-83-4: Published: Oct 12, 1982. Publicly Released: Oct 12, 1982.

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GAO evaluated the impact of the Small Business Administration (SBA) 8(a) program on the Department of Defense (DOD), which is the program's largest participant, to: (1) determine whether procurement activities received fair market prices, acceptable quality, and timely delivery of goods and services procured through the 8(a) program; (2) identify any negative impacts and their causes; and (3) develop program improvements which would minimize negative impacts while allowing SBA to accomplish the program's mission.

GAO found that adequate information was not available to determine the full cost of the 8(a) program, because of the difficulty that procurement activities face in arriving at fair market prices in the absence of competition and a well-documented procurement history. Because of impediments to matching agency requirements with appropriate contractors, some participants fail to meet delivery schedules or to perform required work. Although GAO could not measure the full impact of the 8(a) program on DOD procurement, GAO found that it can result in higher contract prices, lost progress payments, unproductive use of supply center procurement funds, supply shortages, and/or extensive administrative efforts.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: No action has been taken to date. The Grace Commission reiterated the belief that direct contracting is preferable to the existing tripartite arrangement between the agency, SBA, and the 8(a) firm (see recommendation USAF 18-1.) Again, this may renew interest in the issue.

    Matter: Congress should consider altering the 8(a) program to permit a direct contracting approach between DOD and the 8(a) firm.

  2. Status: Closed - Not Implemented

    Comments: This issue will not be addressed until Congress decides that the 8(a) program should be changed to introduce competition and direct contracting.

    Matter: Congress should consider providing authority to the executive branch, permitting the President to designate one or more agencies (including at least one service branch of DOD), to implement the option(s) of competitive set-asides and direct contracting on a trial basis.

  3. Status: Closed - Not Implemented

    Comments: No action has been taken to date. The Grace Commission recommended that Congress introduce competition into the 8(a) program, (See USAF 18-2) and perhaps this will revive the issue. However, GAO notes that attempts to include 8(a) firms in the Competition in Contracting Act were successfully nullified by the Small Business Committees.

    Matter: Congress should consider a modified 8(a) set-aside program to introduce the competitive bidding process missing from the present 8(a) program.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: SBA has revised SOP 80-05 to incorporate the recommendation. However, the revised SOP 80-05 has not been issued yet because new SBA rules and regulations must be issued first. These require OMB approval, and the agency and OMB have been working on this for more than a year. Approval is expected shortly according to SBA.

    Recommendation: The Administrator, SBA, should revise Standard Operating Procedure 80-05 to require that SBA: (1) commit itself to providing necessary assistance before it enters into a contract with DOD; and (2) if adequate assistance cannot be located expeditiously, immediately return the requirement to the procurement activity.

    Agency Affected: Small Business Administration

  2. Status: Closed - Implemented

    Comments: DOD intended to revise the DAR. In lieu thereof, changes were made to the Federal Acquisition Regulation (FAR). However, the language in the FAR does not implement the recommendation. The DOD program office has "given up" trying to convince the FAR proponents to adopt the changes.

    Recommendation: The Secretary of Defense should revise Defense Acquisition Regulation (DAR) 1-705.5 to state that fair market price determinations, properly computed, are the responsibility of the procurement activity and are not to be negotiated with SBA.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD intended to revise the DAR. In lieu thereof, changes were made to the FAR. However, the language in the FAR does not implement the recommendation. The DOD program office has "given up" trying to convince the FAR proponents to adopt the changes.

    Recommendation: The Secretary of Defense should revise DAR 1-705.5 to state that, when a fair market price cannot be determined, the contracting officer will document the circumstances which prevent such a determination. The contracting officer will then perform a cost analysis of the contractor's proposal, identifying any excessive costs which should be reimbursed by SBA.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD intended to revise the DAR. In lieu thereof, changes were made to the FAR. However, the language in the FAR does not implement the recommendation. The DOD program office has "given up" trying to convince the FAR proponents to adopt the changes.

    Recommendation: The Secretary of Defense should revise DAR 1-705.5 to state that, in determining a fair market price, a contracting officer may consider the lowest price received on previous procurements, unsolicited proposals, and competitive bids.

    Agency Affected: Department of Defense

  5. 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 Secretary of Defense should revise the DOD regulations on preawards so they are stated in positive terms; that is, if a contracting officer believes a preaward survey is desirable, he/she should request one.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: Action taken should have the same effect as the action recommended. The FAR now deletes any reference to the SBA certification of competency and this should reduce the confusion referred to in the report.

    Recommendation: The Secretary of Defense should instruct procurement officials not to rely on the SBA competency certification for 8(a) contracts as evidence of a contractor's suitability to perform. Procurement activities should evaluate prospective 8(a) firms to ensure that all parties are aware of any contractor deficiencies and corrective actions are taken by SBA prior to award.

    Agency Affected: Department of Defense

  7. Status: Closed - Implemented

    Comments: DOD intended to revise the DAR. In lieu thereof, changes were made to the FAR. However, the language in the FAR does not implement the recommendation. The DOD program office has "given up" trying to convince the FAR proponents to adopt the changes.

    Recommendation: The Secretary of Defense should revise DAR 1-707.5 to specify the steps and timeframes that DOD contracting officers should follow in resolving performance problems.

    Agency Affected: Department of Defense

 

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