Audit Report 14-15: Opportunities Exist for the SBA to Improve the Monitoring of Non-Manufacturer Rule Waivers and Determine the Impact on Small Businesses

On August 14, 2014, the OIG issued Audit Report 14-15, Opportunities Exist for the SBA to Improve the Monitoring of Non-Manufacturer Rule Waivers and Determine the Impact on Small Businesses.  This report presents the results of our review of the Small Business Administration’s waivers to the non-manufacturer rule.

The OIG was unable to determine if the SBA appropriately issued waivers to the non-manufacturer rule because of a lack of established procedures, missing files, and other deficiencies.  The OIG found that between FY 2010 and FY 2013, the SBA received 214 individual waiver requests and of the requests received, the SBA approved 81 percent of those waivers.  However, the SBA has recently begun to deny or close more waivers due to incomplete requests or insufficient market research, and that, since the beginning of FY 2014, SBA officials have identified areas of improvement and have begun to make changes to improve the guidance and operating structure of this function.  Implementations of steps identified by the program staff, as well as additional actions, need to occur to improve the efficiency and effectiveness of the program.

Further, the OIG found that the SBA has not evaluated the impact of non-manufacturer rule waivers on small businesses, and that the SBA currently lacks the processes to make such an evaluation.  Non‑manufacturer rule waivers affect a significant amount of federal contracting dollars.  From FY 2010 to FY 2013, the SBA approved waivers with an estimated total of approximately $10.6 billion federal contracting dollars associated with set‑aside contracts for small businesses.

The OIG recommended five actions directed to the Associate Administrator for Government Contracting and Business Development to improve the efficiency and oversight of the non‑manufacturer waivers as well as provide greater insight into the impact of non-manufacturer rule waivers on small businesses.