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OIG Reports

Audit Report 4-22: Business Development Provided by the 8(a) Business Development Program

Date Issued: 
Wednesday, June 2, 2004
Report Number: 
4-22

On June 2, 2004, the OIG issued Audit Report 4-22, Business Development Provided by the 8(a) Business Development Program.  The purpose of the 8(a) program is to assist small businesses owned and controlled by socially and economically disadvantaged individuals and economically disadvantaged Indian tribes, Native Hawaiian Organizations and Community Development Corporations compete in the mainstream of the American economy through business development. The Small Business Act lists various types of business development that SBA is expected to provide to 8(a) firms.

 

In the past, the OIG and the General Accounting Office (GAO) issued audit reports that criticized the 8(a) program for various weaknesses including (1) a lack of meaningful performance indicators to assess the effectiveness of the program and (2) the large number of contract awards gained by a relatively few number of firms. In order to comply with the Government Performance and Results Act (GPRA), the SBA is required to submit annual reports to Congress detailing the success of the program. As a result, the SBA established performance indicators to identify and define the program’s achievements. However, previous audit work completed by the OIG and GAO revealed that the indicators did not accurately measure success, as defined by public law. Additionally, GAO has criticized the SBA for its failures to develop data necessary to track its business development efforts. Without a centralized system to track this information, it is difficult to assess the effectiveness of the program.

Contracting assistance is an important aspect of the 8(a) program. The goal is to help 8(a) firms receive sole source and competitive 8(a) contracts from participating federal agencies. However, in the past, a large percentage of the dollar value of 8(a) contracts went to only a few companies, which leads to questions about the effectiveness and fairness of the program. To address this issue, the SBA developed several programs, including the mentor-protégé and joint venture projects, in an effort to include more firms in the contracting process.  The objectives of this limited scope survey were to (1) determine the nature and extent of business development services being provided to program participants and (2) follow up on past audit recommendations related to the 8(a) program.

 

The OIG determined that SBA’s district offices and resource partners provided various types of business development assistance to 8(a) firms, but the effort was neither tracked nor strategically managed.  Also, the SBA did not address five previous audit recommendations in a timely manner.  The OIG issued one finding and two recommendations, specifically:  (1) ensure that the draft SOP is finalized and that it includes a list of specific business development activities the SBA is to provide and details the processes for delivering these services, and (2) ensure that the SBA collects sufficient data to allow the agency to analyze and report on the amount of business development provided to 8(a) firms and more effectively measure achievements of the program’s expected results.

 

Other Matter

At the beginning of the audit survey, the OIG noted that the SBA failed to fully address audit recommendations from several prior audit reports on the 8(a) program. These included OIG’s March 2001 report, Results Act Performance Measurement for the Minority Small Business and Capital Ownership Development Program and two GAO’s reports from July 2000 reports, SBA Could Better Focus Its 8(a) Program to Help Firms Obtain Contracts  and, SBA’s 8(a) Information System is Flawed and Does Not Support the Program’s Mission.  According to OMB Circular A-123, managers are required to promptly evaluate and determine proper actions in response to known deficiencies, reported audit and other findings, and related recommendations. Managers are also required to complete, within established timeframes, all actions that correct or otherwise resolve the appropriate matters brought to their attention. Further, the Inspector General Act and OMB Circular A-50 require management decision or resolution regarding audit recommendations within a six-month period and implementation of management’s decision within one year to the extent practicable.

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