The Government Accountability Office (GAO) recently issued a report on March 21, 2016 that examined the Small Business Administration’s (SBA) ability to oversee 8(a) contracts specifically awarded to Alaska Native Corporations (ANCs).
In the past, GAO has reported that the SBA’s ability to impose regulations prohibiting the award of follow-on, sole-source contracts to 8(a) subsidiary firms of the same ANC relies on contract information from other federal agencies that may be incomplete.
SBA’s regulations restrict program participants from receiving an 8(a) sole-source contract that immediately follows another 8(a) contract with the same requirements performed by another participant owned by the same ANC.
When a federal agency wants to do a directed sole source to an 8(a) contractor, they have to submit offer letters to the regional SBA office to get approval. These letters include information about the contracts procurement history and the name of any prior small business contractors. SBA uses this information to determine whether a firm is entitled to receive a particular 8(a), follow-on, sole-source contract.
GAO’s analysis of a sampling of contracts for this review found that agencies are not required to directly identify whether a sole-source contract is also a follow-on contract in these letters. It would be easier for SBA to make determinations on follow-on, sole-source contracts by ANC-owned subsidiaries if it required that other federal agencies state whether contracts are follow-ons in offer letters.
As GAO reported in the past, SBA’s staffing for these data collection and program guidance activities led to poor program oversight and monitoring of 8(a) ANC-owned firms. SBA took some recent actions to enhance oversight by establishing an office to improve compliance with 8(a) rules by verifying self-reported information. SBA does not have anything in place that detail the office’s roles and responsibilities for its activities. With the continued oversight weaknesses identified in this review, GAO believes SBA should take this chance to enhance its oversight by finalizing plans for this office.
GAO ultimately provided six recommendations to the SBA (See summary table at the end of this blog). The SBA agreed with two of the recommendations, agreed to implement two more in the future, and determined the last two were not needed. However, the GAO still strongly believes that all six recommendations still need to be implemented.
Almost all the socio-economic categories are getting added scrutiny under today’s tougher rules and regulations. Now thankfully, the 8(a) ANC is finally coming under the scrutiny it has lacked in the past.
| GAO RECOMMENDATIONS TO SBA TO IMPROVE OVERSIGHT/ENFORCEMENT OF ANC FOLLOW-ON SOLE SOURCE CONTRACTS | |
| Intended Improvement | Recommendation |
| SBA’s ability to prohibit follow-on, sole-source contracts from being awarded to ANC-owned sister subsidiaries participating in the program | (1) requesting that procuring agencies specifically state whether a contract is a follow-on in its offer letter,
(2) providing additional training to SBA staff that specifically address how to monitor for follow-on, sole source contracts, and (3) providing additional guidance to SBA officials on the enforcement of related policies; |
| Supervisory review of ANC- owned firm transactions and related documentation; | Enhance internal controls and oversight of ANC-owned firms in the 8(a) program serviced in the Alaska District Office by enforcing policies regarding the separation of duties and supervisor or Administrator approval |
| SBA’s capacity to keep pace with oversight activities.
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Develop a comprehensive approach to staffing its Alaska District Office to include succession planning and managing attrition and retirements |
| Ensure that all ANC-owned firm files contain all relevant documents in accordance with SBA program requirements
Finalize the agency’s plans to fully launch a new continuing eligibility review unit |
Enhance internal controls and oversight of ANC-owned firms in the 8(a) program |