Status Report on Small and Small Minority Business Subcontracting and Waiver of Surety Bonding for 8(a) Firms

CED-80-130: Published: Aug 20, 1980. Publicly Released: Aug 20, 1980.

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The Small Business Act was amended to emphasize the use of subcontracting as a method of promoting the long-term viability of small and minority businesses. The Small Business Administration (SBA) is authorized to provide financial assistance to large businesses for the purpose of training and upgrading potential small and small minority contractors. This authority generally has not been used. The Act was also amended to provide small and small minority businesses with a maximum practicable opportunity to participate in the performance of contracts let by federal agencies. The amendments required an implementing clause to be included in all contracts exceeding $10,000, and required that construction contracts in excess of $1 million and other contracts in excess of $500,000 contain subcontracting plans for SBA review for the purpose of determining whether maximum practicable opportunity has been afforded to small and minority businesses. These reviews must be reported annually to the House and Senate Small Business Committees.

The subcontracting program of the SBA functions with the assistance of a Presidentially appointed advisory committee. Delays in establishing the advisory committee, lack of specific committee functions and goals, and the exclusive focus of the committee on federal subcontracting have impeded progress in implementing the program. A clear understanding of the committee's role and relationship with SBA has yet to be resolved. A major problem has been the lack of a clear definition of the intent of the amendments. The primary objective is to encourage large businesses in the private sector, as a general and voluntary subcontracting practice, to make greater use of small and minority businesses. GAO believes the relationship between SBA and the committee in the future should focus primarily on exploring ways to promote subcontracting opportunities for small and minority businesses outside of federal procurements. The Procurement Automated Sources System seems to have considerable potential for marketing the goods and services of a large number of small and minority firms in the private sector. A major cause for the delay in implementing the surety bond waiver provision appears to be misunderstanding between two SBA offices, the Office for Minority Small Business and Capital Ownership Development (OMSB) and the Office of Special Guarantees. The OMSB priorities have also contributed to the delay in implementing the surety bond waiver program. Since the Office of Special Guarantees has some surety bonding expertise, OMSB will have to closely coordinate with it.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Administrator of SBA together with the Advisory Committee should develop a specific plan for promoting private sector procurements from small and small minority businesses. This plan should include specific functional responsibilities of both SBA and the Advisory Committee, specific short-range goals, and a monitoring and evaluating component, so that problems impeding its implementation can be identified and resolved. In developing the plan, SBA and the Advisory Committee should consider expanding those activities already initiated by SBA, such as seminars, personal contacts with chief executive officers of major corporations, and private sector use of the Procurement Automated Sources System. The feasibility of enlisting the support of outside organizations concerned with developing small and small minority businesses should be assessed. The SBA Administrator should clearly define the roles of the Office for Minority Small Business and Capital Ownership Development and the Office of Special Guarantees in order to prevent any additional delays in the surety bond waiver program. When SBA issues instructions for the waiver program, they should spell out the process for identifying and referring potential waiver candidates to the appropriate office for consideration.

    Agency Affected:


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