Small Business:

Problems in Restructuring SBA's Minority Business Development Program

RCED-92-68: Published: Jan 31, 1992. Publicly Released: Mar 4, 1992.

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Pursuant to a legislative requirement, GAO provided information on the Small Business Administration's (SBA) progress in implementing provisions of the Business Opportunity Development Reform Act of 1988, designed to remedy the problems which prevented the SBA 8(a) Program from developing firms owned by socially and economically disadvantaged individuals into viable businesses.

GAO held that: (1) during the first 11 months of fiscal year (FY) 1990, about 76 percent of all new applications that SBA approved or declined did not meet the act's requirement to process applications within 90 days, and the average processing time for those applications was 117 days; (2) as of October 1, 1991, SBA had approved or revised the required business plans of about 57 percent of the 3,922 firms in the program; (3) SBA has limited control over the equitable geographical distribution of 8(a) contracts because the act also directs SBA to award contracts to 8(a) firms recommended by procuring agencies, and such recommendations occur for about 95 percent of the 8(a) contracts offered; (4) of approximately 8,300 new 8(a) contracts awarded in FY 1990 and FY 1991, SBA awarded only 67 competitively; (5) missing and inaccurate data render the SBA Financial Information System inadequate, but SBA has been in the process of developing specific plans for correcting system weaknesses; (6) since SBA did not track the various forms of assistance provided by contractors and others, SBA did not know the full extent of management and technical assistance provided to 8(a) firms; (7) due to higher-priority work and the turnover of key staff, SBA did not issue until more than 2 years after the requirement took effect an approved form for 8(a) firms to report their use of paid consultants to obtain contracts; (8) SBA did not know the amount of financial assistance it provided to 8(a) firms, since it did not collect such information; and (9) SBA did not routinely gather information on contract or bid protests involving 8(a) firms or challenges of firms' eligibility to continue participating in the 8(a) program, since there appeared to be few such protests or challenges.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: While the Business Opportunity Development Reform Act of 1988 encourages the equitable geographical distribution of 8(a) contracts, SBA has limited control over such distribution because the act also directs the agency to award contracts to 8(a) firms recommended by procuring agencies. Because these two provisions appear to work against each other, Congress may wish to consider: (1) clarifying its intent in directing SBA to equitably distribute contracts; or (2) eliminating the directive from the act.

    Status: Closed - Not Implemented

    Comments: According to the House and Senate Small Business Committee, no legislation is pending and none is planned on this issue. So, there is no need to keep this recommendation open.

    Matter: Should Congress decide to keep this directive, it may wish to revise the act's provision that requires SBA to award contracts to the firms recommended by procuring agencies, in order to give SBA greater control over the distribution of the contracts.

    Status: Closed - Not Implemented

    Comments: According to the House and Senate Small Business Committee, no legislation is pending and none is planned on this issue. So, there is no need to keep this recommendation open.

    Recommendations for Executive Action

    Recommendation: In order to ensure that the 8(a) program achieves its objective of promoting the development of small businesses, the Administrator, SBA, should direct the Associate Administrator, MSB&COD, to determine the amount of loans and other forms of financial assistance provided to 8(a) firms by all SBA programs and use this information to determine the future financial needs of 8(a) firms.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: SBA added a data field to the Loan Accounting System in June 1992 to track financial assistance provided to 8(a) firms through 7(a) loan program. However, follow-on review (code 385325) will show that SBA still is not tracking other sources of financial assistance, and GAO will make a new recommendation to correct this deficiency. So, there is no need to keep this recommendation open.

    Recommendation: In order to ensure that the 8(a) program achieves its objective of promoting the development of small businesses, the Administrator, SBA, should direct the Associate Administrator, Office of Minority Small Business and Capital Ownership Development (MSB&COD), to determine the type and amount of management and technical assistance required by 8(a) firms, use this information to procure such assistance in the future, and work with the Office of Advocacy to develop objective criteria for better measuring the effectiveness of assistance provided under the 7(j) program to 8(a) firms.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: Follow-on review (code 385325) will show that SBA is still not tracking 7(j) assistance by type and amount, and GAO will make a new recommendation that action be taken to correct this deficiency. So, there is no need to keep this recommendation open.

    Recommendation: In order to ensure that the 8(a) program achieves its objective of promoting the development of small businesses, the Administrator, SBA, should direct the Associate Administrator, MSB&COD, to complete the development and implementation of written plans that detail the specific tasks and time frames for actions to be taken to correct the problems with the 8(a) program's management information system.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: Follow-on review (code 385325) will show that SBA did not adequately plan the new system, and GAO will make a new recommendation that action be taken to correct planning deficiencies. So, there is no need to keep this recommendation open.

    Recommendation: In order to ensure that the 8(a) program achieves its objective of promoting the development of small businesses, the Administrator, SBA, should direct the Associate Administrator, MSB&COD, to either withhold contracts, as required by the act, from all 8(a) firms that fail to provide business plans to SBA for review and approval or request that Congress revise this provision of the act.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: MSB&COD notice, issued May 1992, directed field offices to withhold contract support and other program benefits from firms that fail to provide new business plans.

    Recommendation: In order to ensure that the 8(a) program achieves its objective of promoting the development of small businesses, the Administrator, SBA, should direct the Associate Administrator, Office of Minority Small Business and Capital Ownership Development (MSB&COD), to fully implement the new 8(a) application tracking system and use it to identify where and why delays are occurring in the application process, and work to meet the legislatively mandated 90-day processing time frame.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: According to SBA, it has completed installation of computer software to track 8(a) applications from receipt through final action. Follow-on review will assess effectiveness of new software.

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