Request for Reconsideration Concerning SBA Proposed Award

A firm requested reconsideration of a prior decision concerning the Small Business Administration's (SBA) proposed award of a subcontract to another company under the 8(a) program. GAO dismissed the protester's contention that the proposed awardee was ineligible for award under the 8(a) program without requesting an agency report on the basis that GAO will not question SBA eligibility determinations absent a showing of fraud or bad faith. The basis for the protest was that the proposed awardee did not meet the statutory criterion that an eligible 8(a) firm's management and daily operations be controlled by socially and economically disadvantaged individuals. The protester noted that the top management officials of the proposed awardee had been obtained from a large corporation through a management agreement. Consequently, the protester believed that the SBA inclusion of the proposed awardee in the 8(a) program was inconsistent with the law and, therefore, amounted to bad faith and suggested fraud. SBA reported that in 1974 it had determined the proposed awardee to be eligible for the 8(a) program and had approved the management agreement that it had with the large corporation. At the time, the 8(a) program eligibility requirements stated that firms must be owned and controlled by a disadvantaged person. SBA stated that it was reviewing all its 8(a) program firms approved prior to the change in eligibility criteria to determine whether they meet the new stricter requirements and that it had not yet completed its review of the proposed awardee. GAO recommended that SBA determine as quickly as possible the proposed awardee's eligibility to participate in the 8(a) program under the new regulations so that it would not run the risk of going beyond the mandate of the law should it make an award to the proposed awardee.