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Small Business: HUBZone Program Suffers From Reporting and Implementation Difficulties

GAO-02-57 Published: Oct 26, 2001. Publicly Released: Nov 27, 2001.
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Congress created the Historically Underutilized Business Zone (HUBZone) program to stimulate economic development and create jobs in distressed urban and rural areas. To achieve these goals, the HUBZone program provides small businesses with greater access to federal contracting opportunities. Reported HUBZone program achievements for fiscal year 2000 were inaccurate because of data entry errors and insufficient guidance on how to report agency data. Federal agencies are having difficulty implementing the HUBZone program. The primary reasons that federal contracting personnel gave for not using the HUBZone program to award contracts were (1) the small number of Small Business Administration (SBA) certified HUBZone firms, (2) difficulty identifying certified firms with the capabilities needed by federal agencies, (3) SBA's guidance that emphasizes the 8(a) program over the HUBZone program, and (4) easier and quicker procedures to award contracts under the 8(a) program.


Recommendations for Executive Action

Agency Affected Recommendation Status
Office of Federal Procurement Policy To improve the accuracy of the data reported by federal agencies, the Administrator of the Office of Federal Procurement Policy, in consultation with SBA when appropriate, should strengthen the guidance for all federal agencies about reporting small business program contracting activities to the Federal Procurement Data Center (FPDC). At a minimum, this guidance should address how the forms should be completed and verified, and clarify how to report which small business preference program was used to award the contract.
Closed – Implemented
On June 24, 2002, OFPP issued guidance to federal agencies on reporting HUBZone contracts to the FPDS. This guidance was issued to help agencies identify which contract actions to report to the FPDS that meet the HUBZone criteria. The instruction for completing the form can be found in the FPDS Reporting Manual, which is updated regularly. According to Ms. Julie Basile, Procurement Policy Analyst from OFPP, on October 1, 2003, a new generation system became operational for data entry that addresses the majority of data accuracy and reliability errors experienced in FPDS. Agencies started entering data in the new system on October 1, 2003.
Small Business Administration To improve the accuracy of data at an agencywide level, the Administrator of SBA should develop guidance for all federal agencies about identifying contracts to be reported to the FPDC that meet the HUBZone Act criteria.
Closed – Implemented
On June 24, 2002, the Administrator, Office of Federal Procurement Policy, in conjunction with the Small Business Administration, issued guidance to Federal Senior Procurement Executives that specifically identified contract actions that should be reported to the Federal Procurement Data System as HUBZone Program achievements. The procurement executives were requested to implement the guidance immediately.
Office of Federal Procurement Policy To help ensure that FPDC does not perpetuate data inaccuracies, the Administrator of the Office of Federal Procurement Policy should develop follow-up review procedures to emphasize to federal agencies their responsibility in providing accurate data and promptly correcting inaccurate data.
Closed – Implemented
Effective October 1, 2003, the Federal Procurement Data System new generation (FPDS-NG) system became operational. On August 25, 2004, OMB issued instructions to the agencies requesting their plans and schedule for ensuring the timely and accurate reporting of procurement data to FPDS-NG. This next generation system employs technology that allows the departments and agencies to electronically submit procurement information. This is a significant change to the previous reporting process and will ensure the availability of timely procurement information. The instructions specifically required a description of the program for training data entry personnel as well as documentation of a quality assurance process. The GSA program management office has received certification from the 24 Chief Financial Officer agencies as to the completeness of its data in 2004, 2005, and it is in the process of certifying the data accuracy for 2006. Reports are being generated in text, XML, and can be downloaded into any spreadsheet. GAO reviewed the instructions and concluded that the actions taken by the agency are appropriate for meeting this recommendation. Therefore, this recommendation should be closed.
Small Business Administration To help contracting officers identify firms with the appropriate capabilities, the Administrator of SBA should inform small businesses listed in the PRO-Net database about the importance of entering and maintaining timely, complete, and accurate data.
Closed – Implemented
The Small Business Administration now notifies small businesses when they are approved for participation in the HUBZone Program of the importance of providing timely and complete information about their firm to the PRO-Net database of small businesses. Also, SBA has developed an automated system that notifies all firms listed in PRO-Net of the need to periodically update the information in the PRO-Net database.

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