Recommendation: To improve SBA's administration and oversight of the HUBZone program and reduce the risk that firms that no longer meet program eligibility criteria receive HUBZone contracts, the Administrator of SBA should establish a mechanism to better ensure that firms are notified of changes to HUBZone designations that may affect their participation in the program, such as ensuring that all certified firms and newly certified firms are signed up for the broadcast e-mail system or including more specific information in certification letters about how location in a redesignated area can affect their participation in the program
Agency: Small Business Administration
Status: Open
Comments: In response to this recommendation, SBA improved its notifications to newly certified firms but not to other certified firms. For example, SBA's certification letter to firms with principal offices in a redesignated area specifically states that the firm is in a redesignated area, explains the implications of the designation, and notes when the redesignated status will expire. However, we found in March 2016 that SBA had not yet implemented changes to better ensure that all currently certified firms would be notified of changes that could affect their program eligibility. It is important that all certified firms potentially affected by such changes receive information about the changes or are made aware in a timely fashion of any effects on their program eligibility. As of February 2017, SBA had begun to improve its notifications to all firms. According to SBA officials, the agency has started sending program notices to all the firms in its portfolio. They told us that for its most recent notice in February 2017, the agency copied all the e-mail addresses in its HUBZone database and placed them in the e-mail distribution system. In March 2018, SBA officials informed us that they obtain monthly lists of certified firms generated by an Oracle system process and that analysts compare the new list to the prior list and add any new firms to the list. In July 2019, SBA officials told us that they informed HUBZone firms of their responsibility to stay up to date on HUBZone geographical designations and program eligibility, through updated language in its HUBZone certification letters and two notices issued to HUBZone firms. While it is helpful that SBA now includes language in its certification letters notifying firms located in a redesignated area of the implications of that designation, SBA's current process does not inform firms when their status may change.
Recommendation: To improve SBA's administration and oversight of the HUBZone program and reduce the risk that firms that no longer meet program eligibility criteria receive HUBZone contracts, the Administrator of SBA should conduct an assessment of the recertification process and implement additional controls, such as developing criteria and guidance on using a risk-based approach to requesting and verifying firm information, allowing firms to initiate the recertification process, and ensuring that sufficient staff will be dedicated to the effort so that a significant backlog in recertifications does not recur.
Agency: Small Business Administration
Status: Open
Comments: In response to this recommendation, SBA officials told us that they began automating the process to notify firms that were due for recertification. According to the officials, since September 2015, notification e-mails have been sent daily (compared with the former cycle of two times a year). Each firm due for recertification within the next 30 days would receive the notice. SBA sends a second e-mail to firms that have not responded within 45 days of the first notification. According to SBA officials, as of February 2017, this change has not yet eliminated the backlog. SBA officials informed GAO in May 2017 that they have developed risk-based guidance for conducting recertification reviews and requesting supporting documentation. According to SBA, any certified HUBZone small business concern that has received $1 million or more in HUBZone contract dollars since its initial certification (or its most recent recertification) must submit the following: (a) a list of all current employees, identifying the name of the employee, the employee's address, the number of hours worked per month, and the location where the employee performs his/her work; and (b) payroll documentation. While SBA officials stated that they had completed a risk assessment of their HUBZone recertification process, SBA had not provided GAO with documentation on when SBA performed the risk assessment, which risks were identified and considered, or what analysis established the $1 million threshold as of August 2018. In July 2019, SBA provided a rationale for its risk-based approach to recertification, but the analysis for establishing the $1 million threshold remained unclear. SBA officials told us that the agency plans to conduct a risk assessment in accordance with GAO guidance for all government contracting and business development programs, including the HUBZone program. GAO continues to believe that such a risk assessment of the recertification process would help inform a risk-based approach to reviewing and verifying information from firms that appear to pose the most risk to the program.
