On February 24, 2005, the OIG issued Evaluation Report 5-14, SBA Small Business Procurement Awards are Not Always Going to Small Businesses. This evaluation was conducted at the request of the US Senate Committee on Small Business and Entrepreneurship. The purpose of this evaluation was to: (1) determine whether small business procurement awards reported by the SBA in FY 2001 and FY 2002 were awarded to companies that were small at the time of the award, and (2) evaluate issues related to small business government contracting.
The OIG found that large business contract actions were reported as small business awards. Specifically, the SBA awarded four of the six high-dollar procurements reviewed in this evaluation as small business procurement. This occurred because the SBA utilized multiple award contracts that do not require agencies to obtain current size certifications. At the time of the procurements, a firm’s size certification remained valid for the life of the contract unless a procuring agency requested an updated certification. Because contracts can be active for many years, companies may become large, and an agency can still obtain credit for small business procurement.
In conducting this review, the OIG noted a variety of problems with small business procurement practices, including: (1) confusion about small business contracting regulations due to inconsistencies between the FAR and the Small Business Act, such as the definition of Life of the Contract and inconsistent regulations; (2) purchases made through GSA schedules, which cause concern with regard to size self-certification, avoidance of small business set-asides and other rules, and data quality; and (3) source list difficulties related to end-user searches of databases containing information on small, disadvantages, 8(a), and women-owned businesses.
The OIG made five recommendations, including:
(1) finalize the proposed SBA rule under which a firm that receives a multiple award contract must certify annually, on the anniversary date of the contract award, that it continues to be a small business for all relevant size standards;
(2) coordinate with the FAR council to resolve the set-aside exception inconsistency in the regulations so that the language in the Small Business Act is implemented in the FAR;
(3) work with GSA to ensure that small business representations in response to GSA Schedules contract solicitations are following size eligibility requirements for government procurement, specifically that “if a procurement calls for two or more specific end items or types of services with different size standards and the offeror may submit an offer on any or all end items or types of services, the offeror must meet the size standard for each end item or service item for which it submits and offer;
(4) work with the FAR Council to require compliance with set-aside regulations on multiple award vehicle purchases when agencies limit their requests for quotations to small businesses, and
(5) continue working with DOD and GSA to modify CCR so that the small business and preference program self-certify buttons are removed and contracting officers are clearly advised that small businesses can only be found through the “Dynamic Small Business Search.”
The Agency generally agreed with the findings but disagreed with Recommendation #4 stating that, “on unrestricted contracts and orders against an unrestricted contract, set-aside provisions do not apply.”