Application of Walsh-Healey Act to SBA Program

B-195118: May 22, 1981

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The Small Business Administration (SBA) requested an advance decision as to whether the Walsh-Healey Act, which limits Government contracting with firms which are brokers or are not regular dealers in goods being procured, applies to the SBA section 8(a) program. Section 8(a) empowers SBA to enter into contracts with any Government agency having procurement powers and to arrange for the performance of such contracts by negotiating or otherwise letting subcontracts to socially and economically disadvantaged small business concerns. SBA, in consultation and cooperation with other Government departments, selects proposed procurements suitable for performance by section 8(a) concerns. The Walsh-Healey Act requires that all contracts by U.S. agencies for the manufacture or furnishing of supplies in any amount exceeding $10,000 include representations and other stipulations that the contractor will comply with established minimum wage, maximum hour, child labor, and convict labor standards and safe and sanitary working conditions. SBA contends that the Act applies only to prime contracts awarded by Government agencies and does not extend to subcontractors. It asserts that the same principle should apply to the statute's anti-brokering provision. SBA argues that the contracts awarded to SBA are prime contracts and that the 8(a) concerns to which SBA subcontracts the performance of the work are subcontractors. Therefore, those firms are not subject to the terms of the Walsh-Healey Act. The Department of Labor stated that 8(a) firms are subject to all the requirements of the Walsh-Healey Act in performing the work that would normally be done by the prime contractor. SBA is a conduit for what amounts to a contract between the procuring activity and the 8(a) concern for purposes of the Act. GAO agreed with Labor that SBA contracts with 8(a) concerns are covered by the Walsh-Healey Act.