On September 8, 2006, the OIG issued Management Advisory Report 6-27, Concerns Related to Compliance with 8(a) Business Development Program Requirements. During February 2006, the OIG initiated this audit to review two sole source 8(a) set-aside contracts awarded by the Department of the Army Corps of Engineers. The overall objective of the audit was to determine whether the contracts were awarded and performed in compliance with 8(a) Business Development Program laws and regulations.
The OIG determined that firms did not complete their contracts in accordance with applicable SBA requirements. Specifically, employees did not perform the percentage of work specified by SBA requirements, and one firm did not meet the applicable size standard in that it did not meet requirements mandated by the contract’s size standard. Further, the second firm inaccurately certified that it was small when offering its proposal to the procuring agency.
Discussions with officials at the SBA district office and the Army Corps of Engineers revealed that the firms might have been unclear about acceptable ways to meet the 40-percent equipment requirement. Specifically, in the months prior to receiving the contract, the two firms formed a Mentor/Protégé relationship under SBA’s Mentor/Protégé Program. According to the SBA, one firm could have used the other firm’s equipment to meet the 40-percent requirement if the mentor and protégé were awarded the contract as a joint venture. However, as stated in the Notice of Award and the contractor’s certification in the contract, this contract was awarded solely to one firm and was not a joint venture. The OIG recommended that the District Director initiate termination proceedings and immediately suspend the firm from the 8(a) program.