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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

November 2008: 

Small Business Administration: 

Agency Should Assess Resources Devoted to Contracting and Improve 
Several Processes in the 8(a) Program: 

GAO-09-16: 

GAO Highlights: 

Highlights of GAO-09-16, a report to congressional requesters. 

Why GAO Did This Study: 

The Small Business Administration (SBA) helps small businesses gain 
access to federal contracting opportunities and helps socially and 
economically disadvantaged small businesses, known as 8(a) firms, by 
providing management and contracting assistance. SBA negotiates agency-
specific goals to ensure that the federal government meets the 
statutory goal of awarding 23 percent of contract dollars to small 
businesses. GAO was asked to (1) describe how SBA sets small business 
contracting goals and the extent to which federal agencies met these 
goals; (2) examine the role of SBA staff in supporting small business 
contracting at selected federal agencies; and (3) examine SBA’s overall 
administration of the 8(a) program. To address these objectives, GAO 
reviewed SBA guidance and SBA Inspector General (IG) reports, 
interviewed SBA and other federal officials, and conducted site visits 
and file reviews at four SBA locations. 

What GAO Found: 

SBA reviews prior year goal achievement and other factors to set 
individual contracting goals necessary for federal agencies to achieve 
the government-wide goal of awarding 23 percent of federal contract 
dollars to small businesses. Individual agency results varied in fiscal 
years 2000 through 2006, although the agencies collectively achieved or 
came close to the 23 percent goal. In fiscal year 2006, SBA began using 
a scorecard to help monitor agencies’ small business contracting 
efforts. Of the 24 agencies rated, half received the lowest rating (for 
failing to meet at least two contracting goals and other criteria). SBA 
later reviewed agency progress in implementing small business 
procurement plans and many agencies improved their ratings. 

SBA staff advocate, review, and monitor small business contracting at 
federal agencies, but resource constraints have limited the ability of 
staff to fulfill these responsibilities. SBA’s procurement center 
representatives (PCR) work with federal agencies by reviewing proposed 
acquisitions, recommending contract set-asides, and performing 
surveillance reviews (which monitor small business contracting at 
federal agencies). As of August 2008, SBA had 59 PCRs, with many 
responsible for multiple agencies. SBA has recognized that more PCRs 
are needed, but has not developed a formal plan to align staff 
resources with program objectives. Resource constraints also affected 
SBA’s commercial market representatives (CMR), who monitor 
subcontracting plans. For fiscal year 2006, the SBA IG reported that 
CMRs monitored less than half of the 2,200 large prime contractors. 
These resource constraints reduced assurances that SBA can monitor 
contracting effectively. 

SBA’s administration of the 8(a) business development program is 
challenged by several factors, including some participants not 
understanding the program’s purpose and requirements, its staff’s 
diminished ability to conduct business development activities, an 
inefficient process to terminate firms, and a lack of routine 
surveillance reviews specific to the program. While SBA has controls in 
place to determine if firms are eligible to enter the program, firms do 
not have to participate in an information session or complete an 
assessment that rates their suitability for the program. Thus, some 
firms may have entered the program with unrealistic expectations or not 
clearly understood program requirements. SBA officials said that an 
emphasis on completing annual reviews of 100 percent of 8(a) firms, 
which are time intensive, and an inefficient termination process for 
noncompliant 8(a) firms diminished the time its business development 
specialists had for providing business development assistance. Delays 
in terminating firms also could result in noncompliant firms obtaining 
contracts. Finally, in 2006, the SBA IG recommended that SBA regularly 
conduct surveillance reviews for the 8(a) program. However, SBA has not 
yet implemented this recommendation. As a result, SBA has reduced 
assurances that agencies have complied with monitoring requirements for 
the 8(a) program. 

What GAO Recommends: 

GAO recommends actions that include SBA reassessing the resources 
allocated to achieve program objectives; better ensuring that 
prospective 8(a) applicants are aware of program requirements; and 
conducting regular surveillance reviews for the 8(a) program. In 
responding to a draft of this report, SBA agreed with these 
recommendations and outlined steps that it has initiated or plans to 
take to address them. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/products/GAO-09-16]. For more 
information, contact William B. Shear at (202) 512-8678 or 
shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

SBA Considers Prior Goal Achievement of Agencies When Setting 
Contracting Goals, and Federal Agency Goal Achievement Has Varied in 
Recent Years: 

Resource Constraints Limit Ability of SBA Staff to Advocate for, 
Review, and Monitor Small Business Contracting at Federal Agencies: 

SBA Faces Several Challenges in Effectively Administering the 8(a) 
Program: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Small Disadvantaged Business Certification and Changes to 
Its Use over Time: 

Appendix III: Roles of Offices of Small Disadvantaged Business 
Utilization and Agency Officials in Small Business Contracts: 

Appendix IV: Number of Form 70s and Appeals Filed by SBA's Procurement 
Center Representatives, Fiscal Years 2003-2007: 

Appendix V: Comments from the Small Business Administration: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Statutory Government-wide Small Business and Socioeconomic 
Goals for Small Business Contracting: 

Table 2: Percentage of 8(a) Annual Reviews Completed, Fiscal Years 2003-
2007: 

Table 3: 8(a) Terminations, Early Graduations, and Voluntary 
Withdrawals, Fiscal Years 1999-2007: 

Table 4: OSDBU Size and Budget and Small Business Contract Dollars and 
Actions, for Commerce, DOD, DHS, and SSA: 

Table 5: Total Informal Form 70s, Formal Form 70s, and Appeals Filed, 
Fiscal Years 2003-2007: 

Figures: 

Figure 1: Example of a Small Business Procurement Scorecard, Fiscal 
Year 2006: 

Figure 2: SBA's Small Business Procurement Scorecard Results by Select 
Agency, Fiscal Year 2006: 

Figure 3: Example of SBA's Small Business Procurement Midyear 
Scorecard, Fiscal Year 2008: 

Figure 4: Overall Small Business Goal Attainment Government-wide and at 
Select Agencies, Fiscal Years 2000-2006: 

Figure 5: SDB Goal Attainment Government-wide and at Select Agencies, 
Fiscal Years 2000-2006: 

Figure 6: 8(a) Negotiated Goal Attainment Government-wide, Fiscal Years 
2000-2006: 

Figure 7: Number of 8(a) Applications Received, Approved, Declined, and 
Withdrawn or Returned, Fiscal Years 1999-2007: 

Figure 8: Number of SDB Applications Received and Number of SDB Firms 
Certified by SBA, Fiscal Years 1999-2007: 

Figure 9: Number of Designations for SDBs That Received Contracts, 
Fiscal Years 2004-2007: 

Abbreviations: 

BDS: business development specialist: 

BDMIS: Business Development Management Information System: 

CMR: commercial market representative: 

CoC: Certification of Competency: 

Commerce: Department of Commerce: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DPCE: Division of Program Certification and Eligibility: 

FPDS-NG: Federal Procurement Data System-Next Generation: 

HUBZone: Historically Underutilized Business Zone: 

IG: Inspector General: 

NASA: National Aeronautics and Space Administration: 

OFPP: Office of Federal Procurement Policy: 

OSDBU: Office of Small and Disadvantaged Business Utilization: 

PCR: procurement center representative: 

PEA: price evaluation adjustment: 

SBA: Small Business Administration: 

SBS: small business specialist: 

SDB: small disadvantaged business: 

SOP: standard operating procedure: 

SSA: Social Security Administration: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

November 21, 2008: 

The Honorable Bennie G. Thompson: 
Chairman: 
Committee on Homeland Security: 
House of Representatives: 

The Honorable Edolphus Towns: 
Chairman: 
Subcommittee on Government Management, Organization, and Procurement: 
Committee on Oversight and Government Reform: 
House of Representatives: 

In fiscal year 2006, the federal government awarded $77 billion in 
contracts to small businesses. Under the Small Business Act, the Small 
Business Administration (SBA) plays an important role in ensuring that 
small businesses gain access to federal contracting opportunities. For 
instance, SBA negotiates agency-specific goals to ensure that the 
federal government collectively meets the 23 percent statutory goal for 
contract dollars awarded to small businesses. In addition, SBA 
negotiates goals for socioeconomic programs such as small disadvantaged 
businesses (SDB), women-owned businesses, Historically Underutilized 
Business Zones (HUBZone), and service-disabled veteran-owned 
businesses.[Footnote 1] Further, under section 8(a) of the Act, SBA 
helps eligible socially and economically SDBs, known as 8(a) firms, 
compete in the economy through various business development activities. 
In the 8(a) program, SBA business development specialists (BDS) are 
required to work directly with 8(a) firms and offer assistance such as 
counseling on financial, marketing, and management practices. Until 
recently, SBA also certified small businesses as SDBs. 

In addition, procurement center representatives (PCR) and commercial 
market representatives (CMR) in SBA's Office of Government Contracting 
work to increase business opportunities for small businesses and ensure 
they receive a fair and equitable opportunity to participate in federal 
prime contracts and subcontracts. Further, all federal agencies with 
procurement authority are required to establish an Office of Small and 
Disadvantaged Business Utilization (OSDBU) to advocate for contracting 
opportunities for small businesses.[Footnote 2] Procurement staff in 
most agencies also include small business specialists (SBS), who are 
responsible for working with OSDBUs and agency contracting officers to 
advocate for small businesses. 

Concerns have been raised about the extent to which federal agencies 
have met their small business contracting goals and about SBA's efforts 
to facilitate federal contracting opportunities for small businesses, 
including those for 8(a) firms. In response to your request, this 
report (1) describes the actions SBA takes to set these goals and the 
extent to which federal agencies have achieved their small business 
contracting goals in recent years, (2) examines the role of SBA staff 
in supporting small business contracting at selected federal agencies, 
and (3) examines SBA's overall administration of the 8(a) business 
development program. In addition, appendix II describes how the use of 
the SDB certification has changed over time and appendix III provides 
information on the roles of OSDBUs and federal agency procurement 
officials. 

To address these objectives, we reviewed SBA guidance, our prior 
reports and those of the SBA Inspector General, and interviewed 
officials at SBA in the Office of Business Development, Office of 
Government Contracting, and Division of Program Certification and 
Eligibility (DPCE).[Footnote 3] To address the first objective, we 
reviewed the results of SBA's inaugural Small Business Procurement 
Scorecard for fiscal year 2006 and the midpoint scorecard for fiscal 
year 2008.[Footnote 4] We used data from fiscal years 2000 through 2006 
on SBA's negotiated small business contracting goals with agencies and 
small business goaling reports to determine what percentage of 
agencies' contracting dollars was awarded to small businesses. SBA uses 
the Federal Procurement Data System-Next Generation (FPDS-NG) to 
prepare its annual small business goaling reports, which evaluate 
agencies' performance on the various small business goals.[Footnote 5] 
To assess these data, we reviewed related documentation, including the 
methodology used to create these reports. For the purposes of this 
report, we found these data to be reliable. To further understand the 
process for establishing contracting goals and related achievements, we 
selected five agencies for our review. We first selected four agencies 
(the Departments of Commerce, Defense, and Homeland Security; and the 
Social Security Administration) based on level of contracting activity 
and SBA's assessments of their goal achievement. The four agencies 
generally obligated larger amounts of contracting dollars to small 
disadvantaged businesses and, collectively, they received the full 
range of scores on SBA's 2006 scorecard. We also included SBA because 
it sets goals and is responsible for assessing and reporting on goal 
achievement at federal agencies. To address the second and third 
objectives, we conducted four site visits at SBA district and area 
offices in Atlanta, Georgia; Chicago, Illinois; San Francisco, 
California; and Washington, D.C., and interviewed SBA officials in each 
location. We interviewed the 8 PCRs and 5 CMRs located in the four 
locations we visited (out of an agency total of 59 PCRs and 31 CMRs, 
respectively). In addition, we interviewed 19 BDSs.[Footnote 6] We 
selected these locations based on the number of 8(a) firms in each 
location and for geographic diversity. For the third objective, we also 
analyzed at each location a sample of 20 8(a) participant files and 
additional documentation that SBA provided on participants, contracts, 
and federal procurement surveillance reviews (which evaluate federal 
agency controls to ensure compliance with small business contracting 
requirements). More specifically, we randomly selected two firms (one 
that received a contract and one that did not) from each year of the 9- 
year program and also randomly selected two firms in SBA's mentor- 
protégé program.[Footnote 7] In addition, we interviewed an official 
from a trade association representing 8(a) and SDB firms and reviewed 
documents prepared by other trade associations representing 8(a) and 
SDB firms. 

We conducted this performance audit from October 2007 through November 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. Appendix I 
provides a detailed description of our objectives, scope, and 
methodology. 

Results in Brief: 

SBA reviews prior-year goal achievement and other factors to set 
individual contracting goals for federal agencies to ensure the 
government-wide goal of 23 percent is met; in fiscal years 2000 through 
2006, the agencies collectively achieved or came close to achieving the 
23 percent goal, but individual agency results varied. For the 2008- 
2009 goal-setting cycle, SBA reviewed each agency's contracting trends, 
and the effect of each agency's goals on the government-wide average. 
And, in fiscal year 2006, SBA began using a Small Business Procurement 
Scorecard to help monitor contracting efforts at agencies. The 
scorecard evaluates factors such as goals met, progress shown, agency 
strategies, and top-level commitment to meeting goals. Of the 24 
agencies rated in fiscal year 2006, 7 received the highest rating, 5 
the middle rating, and 12 the lowest. SBA subsequently reviewed 
agencies' progress in implementing procurement plans and many agencies 
improved their ratings. While officials from all four agencies we 
reviewed cited challenges with the goal-setting process, such as 
limitations in negotiating and appealing their goals, the individual 
agencies have been able to achieve the goals, albeit not consistently. 
For example, the Department of Homeland Security (DHS) consistently 
met, and the Department of Defense (DOD) came close to, but did not 
meet, the overall small business goal in each of those years. Federal 
agencies had a similarly varied record for other small business goals. 
According to SBA and OSDBU officials, many factors can influence an 
agency's ability to achieve socioeconomic goals, such as a lack of 
small business firms that can meet agencies' specialized procurement 
needs or fluctuations in an agency's procurement cycle. 

Resource constraints have limited the ability of SBA staff to carry out 
core responsibilities. For instance, SBA's PCRs work with federal 
agencies by reviewing proposed acquisitions and recommending small 
business set-asides and procurement strategies to agencies, and 
conducting surveillance reviews of federal agency administration of 
small business contracting programs. Years of SBA downsizing and budget 
reductions significantly reduced the resources available for these 
agency functions, including contracting review and monitoring. As of 
August 2008, SBA had 59 PCRs, 16 of which also had CMR 
responsibilities. Many of these PCRs were responsible for multiple 
agencies and several buying activities (divisions within agencies that 
purchase goods and services). Our review indicated that some PCRs were 
responsible for up to six agencies and an average of 5 buying 
activities, with the number of buying activities per PCR varying from 1 
to 12. SBA has recognized that more PCRs are needed, but has not 
developed a formal plan to align staff resources with program 
objectives. Some PCRs with whom we spoke stated they were not able to 
cover all responsibilities effectively because they were "stretched too 
thin," and some agency procurement officials explained that they rarely 
interacted with their assigned PCRs. The number of SBA's CMRs, who 
monitor subcontracting plans of large contractors, also has been 
reduced significantly in recent years. The CMRs with whom we spoke said 
they had been unable to carry out their multiple responsibilities, such 
as compliance reviews of contractors' plans, because of workload 
demands. SBA's Inspector General (IG) found that in fiscal year 2006, 
CMRs monitored less than half of the 2,200 large prime contractors. As 
a result of these constraints, SBA has reduced assurances that staff 
effectively are advocating for and monitoring federal contracting with 
small businesses. 

SBA's overall administration of the 8(a) business development program 
is challenged by several factors including an apparent lack of 
understanding by some participating firms of the program's purpose and 
requirements, competing demands on limited numbers of staff that 
diminish the time available to spend on business development 
activities, an inefficient removal or termination process of 8(a) 
firms, and lack of routine surveillance reviews at agencies that are 
specific to the 8(a) business development program. 

* While SBA has controls in place to determine a firm's eligibility 
prior to its admittance to the 8(a) program, participation in an 
information session that SBA provides on the program to interested 
firms is voluntary. SBA also has an online self-assessment tool that 
helps applicants determine their suitability for the program, but firms 
are not required to complete the assessment during the application 
process. As a result, some firms may have entered the 8(a) program with 
unrealistic expectations of obtaining federal contracts and may not 
have clearly understood their responsibilities for maintaining and 
reporting on their eligibility, which also has had implications for 
staff workload as noted below. 

* SBA staff reported challenges related to balancing the time necessary 
to conduct mandatory reviews with the time needed to conduct business 
development activities. Specifically, SBA is required by law to conduct 
annual reviews of participating firms to determine their continued 
eligibility in the program. For the reviews, firms must submit 
documentation on finances, taxes, and contracts, but SBA officials said 
that firms often did not submit this documentation on time, causing 
staff to expend more time contacting firms and soliciting documentation 
and making it difficult to complete the reviews in a timely fashion. 
SBA officials explained that a recent agency emphasis on ensuring the 
completion of reviews of 100 percent of participants and an inefficient 
termination process (discussed below) diminished the amount of time 
staff had to provide business development assistance to firms. Staff 
said that they made fewer site visits to firms or less frequently held 
events in which they could introduce federal contracting officials to 
small businesses. As a result of the workload constraints on staff, SBA 
is limited in its ability to provide the business development services 
that form the core of the 8(a) program. 

* SBA staff also stated that it was difficult to remove firms from the 
program that were found to be noncompliant. SBA may terminate firms 
under several conditions, including failure to follow program 
procedures and maintain eligibility for participation. For instance, 
staff stated that the termination process could take up to 120 days, in 
part because of multiple notification requirements and delays by 
headquarters in completing its review. In our review of 80 participant 
files (which included firms that did not receive contracts), we found 
instances where firms repeatedly were recommended for termination but 
remained in the program after the recommendations had been made. For 
example, one firm did not provide the required documentation for 4 of 
the 8 years it was required do so. Our review also found one instance 
of a noncompliant firm receiving a contract. As a result, firms that no 
longer met program criteria could continue participating and consume 
SBA resources that otherwise might be used to provide business 
development assistance to compliant firms. 

* Finally, SBA has not yet begun to monitor the 8(a) program at federal 
agencies through required surveillance reviews, as recommended in a 
2006 SBA IG report. Under partnership agreements for the 8(a) program, 
SBA and federal agencies with procurement authority share the 
responsibilities of contract execution and oversight, monitoring, and 
compliance with procurement laws and regulations for 8(a) contracts. 
The IG recommended that SBA regularly conduct surveillance reviews on 
8(a) contracts; however, the IG recommendation has not been 
implemented. Although SBA officials told us they planned to expand 
surveillance reviews to include the 8(a) program, SBA had not yet 
incorporated procedures for such reviews into its guidance. Because it 
has not developed guidance for 8(a) surveillance reviews, SBA has 
reduced assurance that agencies have complied with procurement laws and 
regulations for 8(a) contracts. 

This report contains recommendations for SBA to (1) assess resources 
allocated to PCRs and CMRs and develop a plan to better ensure they can 
effectively meet their mission responsibilities; (2) take steps to 
better ensure that prospective applicants to the 8(a) program are aware 
of program requirements; (3) assess the workload of BDSs and improve 
processes for providing business development assistance and carrying 
out terminations from the 8(a) program in a timely manner; and (4) 
increase the effectiveness of surveillance reviews for the 8(a) 
program. We provided SBA with a draft of this report for its review and 
comment. SBA agreed with our recommendations and outlined steps that it 
has initiated or plans to take to address each of them. For example, 
SBA stated it will work with the Office of Human Capital Management to 
assess the workload of the BDSs and their knowledge levels and stated 
this analysis would be completed by the end of the 2009 fiscal year 
(i.e., September 2009). In addition, SBA expects to implement its 
proposed plan for creating tools that would assist in the provision of 
business development assistance for 8(a) firms by March 2009. Further, 
SBA stated that planned changes to its guidance on streamlining the 
termination process are expected to be issued by December 2008. SBA's 
comments are reprinted in appendix V. 

Background: 

Two offices within SBA are primarily responsible for the contracting 
assistance and business development programs discussed in this report. 
SBA's Office of Government Contracting administers the prime 
contracting and subcontracting assistance programs through SBA 
headquarters and six area offices located across the country. A goal of 
these programs is to increase business opportunities for small 
businesses and ensure that small businesses receive a fair and 
equitable opportunity to participate in federal prime contracts and 
subcontracts. Area office directors are responsible for supervising 
these programs in the field; the Office of Government Contracting staff 
in the area offices that conduct contracting program activities are 
PCRs and CMRs. PCRs help increase the small business share of federal 
procurement awards by initiating small business set-aside contracts 
(set-asides); reserving procurements for competition among small 
businesses; and identifying federal agencies with small business 
sources for goods and services. PCRs also conduct surveillance reviews, 
which are used to assess federal agencies' management of their small 
business programs and compliance with regulations and published 
policies and procedures. CMRs conduct compliance reviews of prime 
contractors, counsel small businesses on how to obtain subcontracts, 
conduct and participate in "matchmaking" activities to facilitate 
subcontracting with small businesses, and provide orientation and 
training on the subcontracting assistance program for both large and 
small businesses. 

SBA's Office of Business Development administers the 8(a) program. 
BDSs, who work directly with 8(a) firms, are located in SBA's 68 
district offices.[Footnote 8] They are required to assist firms with 
preparing a business plan, conduct annual reviews of the firms' 
progress in implementing these plans, provide technical assistance, 
analyze year-end financial statements for certain compliance 
requirements, and coordinate additional assistance and training for 
firms through another SBA program.[Footnote 9] Additionally, BDSs may 
have responsibilities related to other SBA programs such as 
coordinating with resource partners that provide counseling, training, 
and other assistance to small businesses. 

Furthermore, SBA enters into partnership agreements with government 
agencies to award contracts to qualified 8(a) firms. In order to do so, 
SBA developed partnership agreements with 39 federal agencies, which 
delegate SBA's contract execution authority to the agencies. According 
to SBA, the purpose of the partnership agreement is to streamline the 
contract execution process so that 8(a) firms may have more procurement 
opportunities. Without the partnership agreements, all federal agencies 
would be required to involve SBA from start to finish in the 
procurement process when 8(a) firms were the providers of goods and 
services. The partnership agreement requires that both SBA and the 
partner agency share the responsibilities of contract execution and 
oversight, monitoring, and compliance with procurement laws and 
regulations governing 8(a) contracts. In 2007, the partnership 
agreements were revised to clarify each agency's role. SBA also plans 
to revise the agreements in 2009 to make further clarifications on 
subcontracting requirements. 

To qualify for the 8(a) program, a firm must be at least 51 percent 
owned and controlled by an individual who meets SBA's criteria of 
socially and economically disadvantaged. Socially disadvantaged 
individuals include certain members of designated groups, such as Black 
Americans or Hispanic Americans and individuals who are not members of 
designated groups.[Footnote 10] Economically disadvantaged firms 
include those whose primary owner(s) has $250,000 or less in personal 
net worth, adjusted to exclude personal residence and business assets. 
In addition, a firm must demonstrate its potential for success by being 
in business for 2 years or meet waiver provisions (a waiver requires 
the applicant to present copies of contracts or invoices demonstrating 
performance of work in the industry for which the applicant seeks 8(a) 
certification).[Footnote 11] The 8(a) program lasts 9 years and once 
completed, a firm cannot reapply.[Footnote 12] However, all 8(a) firms 
automatically are certified as SDBs and SDB firms can reapply for 
certification every 3 years.[Footnote 13] 

Firms in the 8(a) program are eligible to receive competitive and sole- 
source set-asides. Competitive contracts can be awarded to 8(a) firms 
if there is a reasonable expectation that at least two 8(a) firms will 
submit offers and the award can be made at a fair price. Sole-source 
contracts can be awarded when the dollar thresholds are $5.5 million or 
less for acquisitions involving manufacturing and $3.5 million or less 
for all other acquisitions.[Footnote 14] 

SBA Considers Prior Goal Achievement of Agencies When Setting 
Contracting Goals, and Federal Agency Goal Achievement Has Varied in 
Recent Years: 

SBA considers such factors as prior-year goal achievement when setting 
contracting goals for federal agencies; goal achievement among federal 
agencies varied from 2000 through 2006. Currently, SBA emphasizes 
quantitative measures for goal setting. For the 2008-2009 goal-setting 
cycle, SBA reviewed contracting trends at agencies, prior-year goal 
achievement, and the impact of each agency's goals on the government- 
wide average. In fiscal year 2006, SBA began using a scorecard to 
evaluate contracting efforts at 24 agencies; 7 agencies received the 
highest rating, 5 received the middle rating, and 12 received the 
lowest rating. In a subsequent review, agency ratings showed 
improvement, with four agencies receiving the lowest rating. While 
officials from all agencies we reviewed cited challenges with the goal- 
setting process, such as limitations in negotiating and appealing their 
goals, federal agencies collectively have achieved or come close to 
achieving the government-wide goal of 23 percent, but individual agency 
performance varied. Federal agencies had a similarly varied record for 
other small business goals such as the SDB goal and 8(a) negotiated 
goal. According to SBA and OSDBU officials, many factors can influence 
an agency's ability to achieve socioeconomic goals, such as a lack of 
small business firms that can meet specialized procurement needs or 
fluctuations in an agency's procurement cycle. 

SBA Analyzes Such Factors as Prior-Year Goal Achievement of Agencies 
and Potential Impacts on Meeting Government-wide Goals to Set Agencies' 
Contracting Goals: 

SBA is required to report on contracting goal achievements of federal 
agencies in an effort to meet the statutory government-wide goal of 
awarding 23 percent of contracting dollars to small businesses and 
goals established for four socioeconomic categories (see table 1). 
[Footnote 15] 

Table 1: Statutory Government-wide Small Business and Socioeconomic 
Goals for Small Business Contracting: 

Categories: Small Business; 
Percentage of prime contracting dollars: 23%. 

Socioeconomic Categories: Small Disadvantaged Business; 
Percentage of prime contracting dollars: 5%. 

Socioeconomic Categories: Women-Owned Small Business; 
Percentage of prime contracting dollars: 5%. 

Socioeconomic Categories: HUBZone Business; 
Percentage of prime contracting dollars: 3%. 

Socioeconomic Categories: Service-Disabled Veteran-Owned Small 
Business; 
Percentage of prime contracting dollars: 3%. 

Source: Small Business Act, as amended. 

Note: A prime contract is awarded directly to a contractor by the 
federal government. 

[End of table] 

In previous years, SBA negotiated annual procurement goals with each 
federal agency so that, cumulatively, the government-wide goal was met 
or exceeded. Each agency submitted proposed goals to SBA; SBA then 
adjusted the goals to meet, in aggregate, the statutorily assigned 
levels.[Footnote 16] For fiscal years 2008 and 2009, agencies did not 
submit proposed goals to SBA. Instead, SBA set goals based on trend 
analysis, prior-year goal achievement, and the impact of each agency's 
goals on the national average. 

Officials from four of the agencies we reviewed cited challenges with 
the goal-setting process such as limitations in negotiating and 
appealing their goals. Two agencies said that the goal-setting process 
was not a negotiation and that SBA did not factor in changes in the 
agencies' contracting priorities in its goal setting. For example, one 
agency saw significant increases in information technology spending, 
which typically involves large contracts for which small businesses 
might not be competitive, but the small business goal did not reflect 
this change. Agency officials explained that efforts to appeal the 
goals were lengthy, resource-intensive, and unsuccessful. 

SBA officials explained that they were constrained in their ability to 
negotiate anything less than full government-wide compliance with the 
statutory 23 percent goal. They said that in some cases, SBA has 
reconsidered an agency's request to lower its annual goals but requires 
the reconsideration to be both unique and compelling. For example, SBA 
officials said they adjusted the goal for the Department of Health and 
Human Services in the middle of a fiscal year because the department's 
contracting priorities shifted to accommodate the purchase of vaccines, 
which generally are produced by large businesses. However, SBA 
officials explained that other agencies would need to provide more 
small business contracting opportunities to compensate. Agencies may 
appeal to SBA if they disagree on the established goals; if they do not 
reach agreement, they can submit their case to the Office of Federal 
Procurement Policy (OFPP) for a final determination.[Footnote 17] The 
agencies we reviewed did not have experience disputing their goals 
through OFPP. In addition, according to SBA officials, in October 2007 
the agency established an executive subcommittee within the Small 
Business Procurement Advisory Council to review the current goal- 
setting process and provide more transparency on the process.[Footnote 
18] 

SBA Developed a Scorecard to Evaluate Small Business Contracting 
Efforts of Agencies: 

For fiscal year 2006, SBA began using a Small Business Procurement 
Scorecard to help monitor agencies' small business contracting efforts, 
including plans and progress in meeting the goals, and to bring greater 
attention to goal achievement (see fig. 1). SBA officials explained 
that SBA has limited statutory authority to enforce the goals or impose 
corrective action on agencies that fail to meet the negotiated small 
business contracting goals. 

Figure 1: Example of a Small Business Procurement Scorecard, Fiscal 
Year 2006: 

[Refer to PDF for image] 

This figure is an example of a Small Business Procurement scorecard, as 
follows: 

Initiative: Small Business Procurement; 

Agency Lead: Director, OSBDU; 

Current Status (As of July 25, 2007): Green; 
Green Standards: 
* Meets the small business goal, at least 3 socio-economic goals, and 
shows improvement in the remaining 1 goal. 
* Meet all Yellow standards: 
1. Meets the small business goal, at least 2 additional socio-economic 
goals, and improves in at least one of the unmet goals. Credit can also 
be given for meeting 4 goals, regardless of which they are. 
2. Has implemented a strategy to increase the number of competitively 
awarded contracts to small businesses. 
3. Has demonstrated high-level Agency commitment to small business 
contracting. 
4. Has a comprehensive small business program that includes written 
policies and procedures focused on improving the competitive 
environment and increasing small business participation in the 
procurement process. 
5. Has small business goal achievement as a rating element for 
acquisition personnel. 
6. Works cooperatively with SBA on outreach and targeting initiatives. 
7. Meets deadlines for all strategic plans and annual reports due to 
SBA. 
8. Has a process to ensure small business data is accurately reported 
in FPDS-NG. 
9. Enforces small business subcontracting plans and meets 
subcontracting goals. 

Progress (As of July 25, 2007): Green; 
Actions taken this quarter: 
1. The agency has met its small business gaol, 2 additional socio-
economic goals, and improved in at least one of its unmet goals. 
2. The agency has implemented an aggressive strategy to increase the 
number of competitively awarded contracted to small businesses. 
3. The agency shows top-level agency commitment to small business 
contracting through internal scorecards, set-aside strategies, goal 
performance, and top executive meeting on a monthly basis. 
4. The agency has a comprehensive and active small business plan that 
is documented and regularly updated. 
5. The agency has built-in goal achievement requirements in their 
executive management's performance to ensure increased accountability. 
6. The agency's OSDBU coordinates with SBA in 8(a) orientation and 
match-making events to further outreach and marketing initiatives. 
7. The agency submitted all plans and reports by the required 
deadlines. 
8. The agency regularly verifies its small business data in FPDS-NG for 
accuracy. The agency also uses internal/external reports as a tool to 
rectify discrepancies found in the FPDS-NG system. 
9. The agency does have a system in place to enforce small business 
subcontracting plans and goal expectations. 

Comments: 
Did not meet its SDVO goal; however exceeded in all others in progress. 

Source: SBA. 

[End of figure] 

SBA's 2006 scorecard consisted of three color ratings. To receive the 
highest (green) rating, an agency had to have met its overall 
contracting goal for small business and at least three of the 
socioeconomic goals, shown progress in meeting the remaining two 
socioeconomic goals, and met the requirements for the middle (yellow) 
rating. To meet the yellow rating, the agency had to have met two 
socioeconomic goals, improved in one other goal, and met other criteria 
that included top-level commitment by agency officials for small 
business contracting, cooperation with SBA, and timely and accurate 
reporting.[Footnote 19] An agency received a low (red) rating if it 
failed to meet the requirements for the middle (yellow) standards. 
Although the scorecard reviewed activity in fiscal year 2006, SBA said 
it did not publish the scorecard until August 2007.[Footnote 20] At 
that time, SBA also published ratings on the scorecard for the progress 
the agencies made on their small business procurement plans through 
July 25, 2007. 

Of the 24 agencies SBA rated in the 2006 scorecard, 7 received the 
highest rating, 5 received the middle rating, and 12 received the 
lowest rating. For instance, DHS received the highest (green) rating 
because it met three out of four socioeconomic goals, had an agency 
strategy to increase the number of competitively awarded contracts to 
small businesses, and demonstrated commitment to small business 
contracting at the higher levels of the agency. The Department of 
Commerce (Commerce) did not meet two of its socioeconomic goals and 
therefore received a yellow rating. DOD did not meet its small business 
goal or socioeconomic goals and received a red rating. The Social 
Security Administration (SSA) also received a red rating for not 
meeting its goals and several other criteria, including not having an 
evaluation factor for acquisition professionals on goal achievement, 
enforcing subcontracting plans, and meeting subcontracting goals. 

However, many agencies showed improvement on the portion of the 
scorecard that assessed the agencies' progress through July 25, 2007. 
For instance, of the 12 agencies with a low score for fiscal year 2006, 
8 moved up to the middle score. All five agencies that previously 
received a middle score received the highest rating in terms of 
progress in implementing their small business procurement plans. Of the 
agencies we reviewed, DHS and SBA maintained the highest score, 
Commerce and DOD showed improvement, and SSA continued to receive a low 
rating (see fig. 2). 

Figure 2: SBA's Small Business Procurement Scorecard Results by Select 
Agency, Fiscal Year 2006: 

[Refer to PDF for image] 

This figure is an illustration of SBA's Small Business Procurement 
Scorecard Results by Select Agency, Fiscal Year 2006, as follows: 

Department/Agency: Department of Homeland Security; 
Fiscal year 2006 scorecard results, Results (fiscal year end): green; 
Fiscal year 2006 scorecard results, Progress (through 7/25/07): green. 

Department/Agency: Small Business Administration; 
Fiscal year 2006 scorecard results, Results (fiscal year end): green; 
Fiscal year 2006 scorecard results, Progress (through 7/25/07): green. 

Department/Agency: Department of Commerce; 
Fiscal year 2006 scorecard results, Results (fiscal year end): yellow; 
Fiscal year 2006 scorecard results, Progress (through 7/25/07): green. 

Department/Agency: Department of Defense; 
Fiscal year 2006 scorecard results, Results (fiscal year end): red; 
Fiscal year 2006 scorecard results, Progress (through 7/25/07): yellow. 

Department/Agency: Social Security Administration; 
Fiscal year 2006 scorecard results, Results (fiscal year end): red; 
Fiscal year 2006 scorecard results, Progress (through 7/25/07): red. 
 
Green: 
Results criteria: The agency must meet its small business goal, 3 socio-
economic goals, progress in 1 goal, and meet all yellow standards; 
Progress criteria: The agency’s current status must be at least a 
“yellow” with all yellow standards met. 

Yellow: 
Results criteria: Small business goal, 2 socio-economic goals, progress 
in 1 goal, must meet all yellow standards; 
Progress criteria: The agency can miss no more than 2 yellow standards 
regardless of its current status grade. 

Red: 
Results criteria: Does not meet either of the above conditions; 
Progress criteria: Does not meet either of the above conditions. 

Source: SBA. 

[End of figure] 

Some agency officials we interviewed expressed dissatisfaction with the 
fiscal 2006 scorecard. For example, senior officials from three of the 
four agencies we selected suggested that SBA did not adequately take 
into account factors that affected their goal achievements, since an 
agency could receive the lowest category for barely missing its goals. 
One official suggested that the scorecard could be improved by focusing 
on outcome-oriented criteria rather than activity-oriented criteria. 
For example, the official suggested that rather than looking at the 
number of outreach events in which an agency participated, SBA could 
assess the agency based on how many firms received a contract as a 
result of attending the event. Yet, they acknowledged that the 
scorecard promoted transparency. 

SBA officials regarded the scorecard as a useful tool. They suggested 
that the inaugural 2006 scorecard had the effect SBA intended--bringing 
greater transparency to agencies' current and future small business 
contracting efforts. Moreover, agency officials have been incorporating 
the results of the scorecard into their performance plans. For example, 
according to SBA officials, some agencies have factored the results of 
the scorecard into the performance evaluations of procurement 
officials. SBA said that they had plans to improve the scorecard by 
providing agencies the opportunity to present their procurement plan 
for small businesses, progress made toward their plan, and mitigating 
factors affecting their ability to implement their plan. SBA also is 
working to better align scorecard reporting time frames toward the 
earlier part of the fiscal year rather than the end of the fiscal year. 
In addition, SBA has provided opportunities for agency officials to 
comment on the scorecard and propose revisions. 

In July 2008, SBA issued a midyear scorecard that assessed the progress 
that agencies made on their fiscal year 2008 small business procurement 
plans. SBA officials explained that as a result of feedback from other 
federal agencies, SBA included some different elements on this 
scorecard than on the 2006 scorecard. For example, SBA assessed whether 
the agency: 

* planned significant events to encourage small business participation, 

* planned training for contracting staff and managers, and: 

* planned to collaborate on formulating policy. 

SBA reviewed submissions from the agencies to determine if their plans 
were "acceptable" or "needed work." In addition, SBA identified best 
practices at 16 of the agencies (see fig. 3). 

Figure 3: Example of SBA's Small Business Procurement Midyear 
Scorecard, Fiscal Year 2008: 

[Refer to PDF for image] 

This figure is an example of SBA's Small Business Procurement Midyear 
Scorecard, Fiscal Year 2008, as follows: 

First Scorecard: 
Initiative: Small Business Procurement; Agency Lead: OSDBU Director. 

FY 2008 Goals: 
SB: 31.90%; 
SDB: 5%; 
WOSB: 5%; 
HUBZone: 3%; 
SDVOB: 3%. 

FY 2008 Plan: Acceptable; Actions taken: 
Meets all Plan Requirements: 
1. Implemented strategic plan to increase the value of competitively	
awarded contracts to small businesses during the period. 
		
2. Demonstrated top-level Agency commitment to small business 
contracting during the period. 

3. Planned significant events to increase small business participation 
in the procurement process during the period. 

4. Demonstrates that small business data is accurately reported in FPDS-
NG during the period. 

5. Demonstrates that policies and procedures are into ensure compliance 
with subcontracting plans and attainment of subcontracting goals during 
the period. 
	
6. Demonstrated no unjustified bundling has taken place during the 
period.	 

7. Planned training to contracting staff/managers in executing small 
business/socioeconomic procurements during the period. 

8. Planned to collaborate on formulation of small business procurement 
policy initiatives during the period. 

9. Agency submits all strategic plans and reports that become due to 
SBA during the reporting period. 

Comments For Agency: 
SBA Recognizes The Agency For Their Outstanding Achievement. 
Best Practices: 
has a comprehensive small business program supported by its directive 
and outreach activities. The directive has many elements that would be 
useful for other Federal agencies to adopt, if they do not currently 
have a separate SB directive. 

Source: SBA. 

[End of figure] 

The majority of the agencies had plans that SBA considered acceptable, 
and SBA identified best practices at three of the four agencies we 
reviewed. For instance, Commerce's OSDBU director was a member of the 
Federal Acquisition Regulatory Council and SBA suggested that other 
agencies could benefit by having their OSDBU director join the council 
as a way to influence policy initiatives. DOD was cited as having a 
unique plan that set goals and objectives for small business 
procurement down to the major department level. SBA noted that DHS had 
a comprehensive small business program and supported it through 
outreach activities and a directive that was issued by its top-level 
management. SBA suggested that SSA could improve its scorecard by 
demonstrating top-level commitment for small business contracting and 
developing a plan to submit all strategic plans and reports to SBA. 
SBA's small business plan also was cited as needing work because it did 
not demonstrate that a policy or procedure was in place for 
subcontracting goals. SBA said it planned to release the second results 
and progress scorecard, which would be comparable to its inaugural 
scorecard, by the end of fiscal year 2008.[Footnote 21] 

Government-wide and Small Disadvantaged Business Goal Achievement 
Varied in Fiscal Years 2000-2006: 

For most fiscal years from 2000 through 2006, federal agencies 
collectively achieved or came close to achieving the government-wide 
goal for overall small business contracting.[Footnote 22] However, 
government-wide, the federal agencies did not meet or exceed the 
overall contracting goal of 23 percent in 4 of the 7 years (see fig. 
4).[Footnote 23] At the select agencies we reviewed, goal achievement 
varied. For instance, DHS consistently has met its SBA-negotiated (SBA- 
set) goal since 2004.[Footnote 24] DOD did not meet its goal in any 
year from 2000 through 2006; however, the agency generally came close 
each year. DOD's small business goal was 23 percent each year; its goal 
achievement ranged from a low in 2001 of 20.5 percent to a high in 2005 
of 22.6 percent. Other agencies had mixed outcomes in their goal 
achievement. For example, Commerce and SSA did not meet their SBA-set 
small business goals in 1 of the 7 years we reviewed. However, in the 
years these agencies met their goals, they generally exceeded the goals 
by large margins. SBA did not meet its goals in 3 years (2002 through 
2004), but exceeded its goals in 4 years (2000, 2001, 2005, and 2006). 

Figure 4: Overall Small Business Goal Attainment Government-wide and at 
Select Agencies, Fiscal Years 2000-2006: 

[Refer to PDF for image] 

This figure is a vertical bar graph depicting the following data: 

Overall Small Business Goal Attainment Government-wide and at Select 
Agencies, Fiscal Years 2000-2006: 

Goals exceeded indicated by positive percentage; 
Goals missed indicated by a negative percentage. 

Government-wide:	
FY 2000: -0.74%; 
FY 2001: -0.19%; 
FY 2002: -0.7%; 
FY 2003: 0.29%; 
FY 2004: 0.09%; 
FY 2005: 0.41%; 
FY 2006: -0.17%. 
	
DOC:	
FY 2000: -6.39%; 
FY 2001: 9.2%; 
FY 2002: 16.56%; 
FY 2003: 18.34%; 
FY 2004: 8.46%; 
FY 2005: 4.66%; 
FY 2006: 1.65%. 
	
DOD:
FY 2000: -1.59%; 
FY 2001: -2.47%; 
FY 2002: -1.83%; 
FY 2003: -0.65%; 
FY 2004: -0.73%; 
FY 2005: -0.4%; 
FY 2006: -1.16%. 
	
DHS:
FY 2000: N/A; 
FY 2001: N/A; 
FY 2002: N/A; 
FY 2003: N/A; 
FY 2004: 15.46%; 
FY 2005: 16.6%; 
FY 2006: 1.6%. 
	
SSA:
FY 2000: 3.16%; 
FY 2001: 2.31%; 
FY 2002: 8.59%; 
FY 2003: 8.61%; 
FY 2004: 10.4%; 
FY 2005: 11.31%; 
FY 2006: -2.06%. 

SBA:	
FY 2000: 7.69%; 
FY 2001: 17.18%; 
FY 2002: -4.51%; 
FY 2003: -11.92%; 
FY 2004: -0.87%; 
FY 2005: 11.99%; 
FY 2006: 7.05%. 

Source: GAO analysis of Small Business Goaling Reports and FPDS-NG 
Reports on Annual Procurement Preference Goaling Achievements. 

[End of figure] 

Government-wide, federal agencies exceeded the 5 percent statutory goal 
for SDBs from 2000 through 2006. However, SBA also set goals above this 
standard in the years we reviewed (the SBA-set goals, both government- 
wide and for the selected agencies, are shown in fig. 5). In the years 
that federal agencies did not meet their goals (2004 and 2005), the SBA-
set goal was 8 percent. For the select agencies we reviewed, goal 
achievement varied. For instance, DHS met its goal in all years we 
reviewed. DOD also met its SDB goal each year. Other agencies had mixed 
outcomes. For example, Commerce did not meet its goal in 3 of 7 years; 
however, in 2006 it missed its goal by a slight margin. SSA met its SDB 
goal in 2002 and 2003. SBA met its goal in 3 out of 7 years. For more 
information on contracts awarded to firms with SDB certifications, see 
appendix II. 

Figure 5: SDB Goal Attainment Government-wide and at Select Agencies, 
Fiscal Years 2000-2006: 

[Refer to PDF for image] 

This figure is a vertical bar graph depicting the following data: 

SDB Goal Attainment Government-wide and at Select Agencies, Fiscal 
Years 2000-2006: 

Goals exceeded indicated by positive percentage; 
Goals missed indicated by a negative percentage. 

Government-wide:	
FY 2000: 0.79%; 
FY 2001: 1.42%; 
FY 2002: 0.49%; 
FY 2003: 0.75%; 
FY 2004: -1.82%; 
FY 2005: -1.45%; 
FY 2006: 1.76%. 
	
DOC: 
FY 2000: -4.87%; 
FY 2001: 0.76%; 
FY 2002: 4.35%; 
FY 2003: 4.57%; 
FY 2004: 2.12%; 
FY 2005: -1.43%; 
FY 2006: -0.26%. 
	
DOD: 
FY 2000: 0.56%; 
FY 2001: 0.54%; 
FY 2002: 0.96%; 
FY 2003: 1.28%; 
FY 2004: -0.04%; 
FY 2005: 0.62%; 
FY 2006: 0.45%. 
	
DHS: 
FY 2000: N/A; 
FY 2001: N/A; 
FY 2002: N/A; 
FY 2003: N/A; 
FY 2004: 4.55%; 
FY 2005: 2.18%; 
FY 2006: 2.73%. 
	
SSA: 
FY 2000: -4.76%; 
FY 2001: -2.57%; 
FY 2002: 3.13%; 
FY 2003: 2.32%; 
FY 2004: -1.65%; 
FY 2005: -4.35%; 
FY 2006: -11.80%. 

SBA: 	
FY 2000: -3.48%; 
FY 2001: -27.94%; 
FY 2002: -4.18%; 
FY 2003: -14.08%; 
FY 2004: 2.62%; 
FY 2005: 16.57%; 
FY 2006: 14.65%. 

Source: GAO analysis of Small Business Goaling Reports and FPDS-NG 
Reports on Annual Procurement Preference Goaling Achievements. 

[End of figure] 

Although the statutory provision for setting goals for small business 
participation in federal procurement contains no contracting goal for 
the 8(a) program, SBA negotiated an annual goal with agencies until 
2007.[Footnote 25] The government-wide goal was met in most years we 
reviewed, except for 2002 and 2004 (see fig. 6). For the select 
agencies we reviewed, goal achievement varied. For instance, DHS met 
its goal in all years we reviewed, but the degree by which it exceeded 
the goal declined. DOD met SBA's 8(a) goal in each year except 2002. 
Commerce met or exceeded its goal in recent years but mostly missed its 
goal from 2000 through 2004. SSA and SBA also had mixed results and 
missed their goal in 4 of the 7 years. 

Figure 6: 8(a) Negotiated Goal Attainment Government-wide, Fiscal Years 
2000-2006: 

[Refer to PDF for image] 

This figure is a vertical bar graph depicting the following data: 

8(a) Negotiated Goal Attainment Government-wide, Fiscal Years 2000-
2006: 

Goals exceeded indicated by positive percentage; 
Goals missed indicated by a negative percentage. 

Government-wide:	
FY 2000: 1.48%; 
FY 2001: 1.46%; 
FY 2002: -0.65%; 
FY 2003: 0.6%; 
FY 2004: -0.19%; 
FY 2005: 0.68%; 
FY 2006: 1.17%. 
	
DOC: 
FY 2000: -8.52%; 
FY 2001: -5.03%; 
FY 2002: 1.31%; 
FY 2003: -4.62%; 
FY 2004: -1.35%; 
FY 2005: 1.09%; 
FY 2006: 2.95%. 
	
DOD: 
FY 2000: 2.64%; 
FY 2001: 2.21%; 
FY 2002: -1.06%; 
FY 2003: 0.77%; 
FY 2004: 0.11%; 
FY 2005: 0.78%; 
FY 2006: 0.66%. 
	
DHS: 
FY 2000: N/A; 
FY 2001: N/A; 
FY 2002: N/A; 
FY 2003: N/A; 
FY 2004: 2.60%; 
FY 2005: 1.22%; 
FY 2006: 2.19%. 
	
SSA: 
FY 2000: -5.46%; 
FY 2001: -3%; 
FY 2002: 3.51%; 
FY 2003: 4.77%; 
FY 2004: 3.24%; 
FY 2005: -1.21%; 
FY 2006: -1.42%. 

SBA: 	
FY 2000: -27.37%; 
FY 2001: -21.5%; 
FY 2002: 8.87%; 
FY 2003: -0.31%; 
FY 2004: -6.21%; 
FY 2005: 9.89%; 
FY 2006: 7.27%. 

Source: GAO analysis of Small Business Goaling Reports and FPDS-NG 
Reports on Annual Procurement Preference Goaling Achievements. 

[End of figure] 

According to SBA officials and OSDBU directors, many factors can 
influence an agency's ability to achieve socioeconomic goals, such as 
the focus of the agency's business plan (that is, the type of contracts 
required), a lack of small business firms that can meet specialized 
procurement needs, or fluctuations in an agency's procurement cycle. 
For example, the Department of Energy relies on a business model that 
emphasizes large contracts, which can make achievement of small 
business goals difficult. SBA and DOD officials explained that small 
businesses do not provide many of the goods and services that DOD 
purchases, such as airplanes, tanks, and weapons. Commerce officials 
explained that SBA's goal-setting process did not adequately take into 
account the significant increase in spending associated with the 
decennial census, which generally relies on larger contracts that are 
not as conducive for small business contracting opportunities. In 
contrast, SBA officials explained that other agencies might have fewer 
contract dollars to spend but require more types of services amenable 
to small business contracting. Finally, SBA officials stated that 
changes in an agency's mission and the types of goods and services 
purchased could present barriers to goal achievement. 

Resource Constraints Limit Ability of SBA Staff to Advocate for, 
Review, and Monitor Small Business Contracting at Federal Agencies: 

Resource constraints limit the ability of SBA staff to carry out some 
of their core responsibilities. SBA staff have advocacy, review, and 
monitoring roles to facilitate small business contracting at federal 
agencies. PCRs are procurement analysts who implement SBA's prime 
contracting program. They can be located where agencies conduct 
procurements or off-site at SBA's offices. More specifically, PCRs: 

* review federal agency acquisitions and recommend small business set- 
asides; 

* can dispute a procurement through informal or formal means with the 
agency's procurement officials in instances where an agency does not 
accept the recommended set-aside; 

* conduct surveillance reviews, which monitor small business 
contracting at federal agencies; 

* recommend procurement strategies to federal agencies to maximize 
small business participation in federal contracts; and: 

* counsel and train small businesses on obtaining federal contracts. 

However, PCRs have operated under resource constraints as a consequence 
of overall agency downsizing and budget reductions. As we previously 
reported, budget reductions in the 1990s resulted in SBA streamlining 
its field structure and shifting its workload to district or 
headquarters offices.[Footnote 26] During this time, SBA's workforce 
declined significantly, from 3,800 to about 3,100 employees (about 19 
percent). From 2000 to 2007, SBA restructured its organization and the 
workforce further decreased by 26 percent. As of September 2007, SBA 
had 2,166 employees.[Footnote 27] 

From our review of SBA's August 2008 area office directory, most PCRs 
covered multiple agencies and "buying activities" within 
agencies.[Footnote 28] As of August 2008, SBA had 59 PCRs--16 of which 
also had CMR responsibilities--but expected to increase the number to 
66 through additional hiring.[Footnote 29] Some PCRs were responsible 
for up to six agencies. Almost all the PCRs (55 out of 59) had 
responsibilities for buying activities at DOD. Twenty-two were assigned 
exclusively to DOD and 33 were responsible for overseeing DOD and other 
agencies. DHS and Commerce were assigned 4 and 2 PCRs, respectively, 
while SSA and SBA were assigned 1. Our review of the number of buying 
activities for which a PCR was responsible showed an average of 5 
activities per PCR, with the number of buying activities per PCR 
varying from 1 to 12. SBA officials explained that the amount of work 
also can vary by agency, partly because some agencies had automated 
contracting processes while others did not. 

The reduced staff numbers, multiagency assignments, and other available 
evidence suggest that PCRs are limited in the extent to which they can 
carry out some of their responsibilities. According to SBA officials, 
in 2007, PCRs reviewed about 47,000 new procurement actions of 5.5 
million total procurement actions throughout the federal government. 
[Footnote 30] In 2002, we also reported that the number of set-aside 
recommendations that PCRs were making annually decreased by about half, 
from 529 in fiscal year 1991 to 281 in fiscal year 2001.[Footnote 31] 
Reasons for the decline during this period included downsizing (which 
decreased the number of PCRs), the reassignment of some PCRs to other 
roles, and the increased size of federal procurements that contributed 
to fewer set-aside opportunities for small businesses. We had planned 
to update our 2002 report data on the number of PCR-recommended set-
asides for this report, but because SBA no longer collected this 
information electronically, the most recent data are from 2001. 
[Footnote 32] We were able to update information about the number of 
Form 70s that PCRs issued; the Form 70 reflects some level of 
discussion or disagreement between agencies and SBA about recommended 
set-asides. When agency officials reject a set-aside recommendation, 
PCRs can dispute the procurement through informal or formal means (Form 
70s) with the agency's procurement officials. From fiscal years 2003 
through 2007, PCRs generally increased the number of informal Form 70s, 
except for 2007, and decreased the number of formal Form 70s filed 
annually. [Footnote 33] Finally, PCRs participated in 94 surveillance 
reviews from 2003 to 2007, 59 of which were within one agency (DOD). 
However, SBA did not conduct any surveillance reviews from 1994 through 
2002 because of budget constraints. 

SBA has recognized that more PCRs are needed and has begun some efforts 
to streamline some of the PCRs' responsibilities. For instance, at a 
congressional hearing in September 2007, SBA's deputy administrator 
cited the importance of the PCRs and mentioned SBA's plan to fund 
additional PCR positions and fill vacant positions in a timely manner. 
[Footnote 34] Further, in February 2008, SBA's former administrator 
testified on efforts to refocus the responsibilities of PCRs from 
working directly with small businesses to directing contracts to small 
businesses.[Footnote 35] The BDSs would assume full responsibility for 
working directly with small businesses. SBA headquarters officials 
explained efforts were underway for PCRs to coordinate with BDSs when 
opportunities for small business were identified at federal agencies. 
In our interviews with PCRs, some mentioned changes in their 
responsibilities--to interact more with federal agencies to identify 
small business contracting opportunities and less with small businesses 
to provide outreach and training on federal contracts--but noted they 
were still transitioning to their new roles. 

However, SBA officials also explained that SBA currently has no formal 
guidance or plan in place to review the workload of PCRs and they made 
PCR assignments by considering the contracting volume of the buying 
activities and the level of automation of the contract process at the 
buying activities. The officials explained that in the future, SBA 
plans to undertake a business re-engineering process to develop a 
resource allocation system that incorporates the above factors. 

According to PCRs and others we interviewed, workload and resource 
issues have affected their ability to conduct their current work. 
Officials in three of the four area offices we visited explained PCRs 
were stretched too thin and were not able to cover all contracting 
activities effectively.[Footnote 36] More specifically, five of the 
eight PCRs we interviewed were finding it difficult to provide adequate 
coverage to one agency, much less several. Our analysis of the field 
directory indicated that 17 (29 percent) of 59 PCRs were responsible 
for six or more buying activities. Further, many PCRs explained they 
had better results in advocating for small business when they were 
involved with buying activities on an ongoing basis and available to 
make informal recommendations and answer questions than when they were 
not. At two of the four agencies we reviewed, OSDBU officials explained 
that they rarely interacted with PCRs. In addition, an official from 
another agency explained they do not rely as much on PCRs for guidance 
and support since the PCRs appear to be overextended in covering all 
their responsibilities. Therefore, these agencies may have missed 
opportunities to identify or advocate small businesses for certain 
contract opportunities. In addition, an OSDBU official explained that 
because PCRs were responsible for several agencies they generally had 
to focus on agencies that were most challenged to reach their small 
business goals. Moreover, all the area office directors we interviewed 
explained that a wave of PCR retirements was expected in the near 
future and it would be difficult to replace the knowledge and 
relationships of the current PCRs. 

In addition to PCRs, who review agency acquisitions and recommend 
contracting opportunities for small businesses, SBA's CMRs: 

* conduct compliance reviews of prime contractors, 

* counsel small businesses on how to obtain subcontracts, 

* conduct and participate in "matchmaking" activities to facilitate 
subcontracting with small business, and: 

* provide orientation and training on the subcontracting assistance 
program for both large and small businesses. 

However, the number of staff performing CMR duties has decreased 
substantially in recent years, as has the number of staff dedicated to 
performing those duties full time. A 2007 SBA IG report found a 
significant decrease in the number of full-time CMRs from 24 in 1992 to 
3 in 2006 and an increase in the number of part-time CMRs from 3 to 35 
over the same period.[Footnote 37] As of August 2008, SBA had 31 CMRs, 
16 of whom had additional job functions such as PCR duties, conducting 
small business size determinations, and issuing certificates of 
competency.[Footnote 38] These additional roles often take higher 
priority and reduce the amount of time CMRs are able to spend on 
subcontracting assistance activities. Moreover, the CMRs with whom we 
spoke had large portfolios, ranging from approximately 90 to 200 prime 
contractors. The IG recommended that SBA develop a performance plan 
that addresses how CMRs would be allocated. Although SBA agreed with 
this recommendation and stated more resources were needed, SBA still 
does not formally monitor the workload allocations of the CMRs. SBA 
officials stated that the agency plans to evaluate CMR workloads and 
possibly centralize some job functions. 

Furthermore, resource constraints have limited the ability of CMRs to 
perform a key monitoring function. All of the CMRs we interviewed 
explained that their increased workload diminished their ability to 
monitor prime contractors through compliance reviews. For instance, one 
CMR with whom we spoke had not completed a formal compliance review of 
a prime contractor in 5 years. Some CMRs also noted that the number of 
on-site reviews they conducted was limited because of budget 
constraints. Furthermore, the SBA IG found in fiscal year 2006 that 
less than half of the 2,200 large prime contractors were monitored and 
only 24 percent of those monitored had been reviewed on-site. CMRs are 
responsible for reviewing subcontracting plans of prime contractors 
once a contract has been issued. CMRs review the plans to see if prime 
contractors are meeting their subcontracting goals, whether they have a 
program in place to achieve their goals, and how well the program is 
being implemented. SBA guidance also states that conducting compliance 
reviews is one of the CMR's most important responsibilities. The 
guidance further states these reviews often are the only formal 
evaluation of a contractor's compliance with its subcontracting plan 
and that CMRs should conduct desk audits and on-site reviews of prime 
contractors to ensure they are upholding their subcontracting plans. 

Resource constraints that contributed to extensive workloads and 
responsibilities encompassing several agencies and activities have 
hindered the ability of SBA staff to carry out core activities related 
to monitoring of federal contracting. As a result, SBA has reduced 
assurance that PCRs and CMRs are ensuring that federal agencies 
increase their share of federal contracts for small business or are 
effectively monitoring contracting activity at the federal agencies. 

SBA Faces Several Challenges in Effectively Administering the 8(a) 
Program: 

SBA faces several challenges in its overall administration of the 8(a) 
business development program. First, SBA offers voluntary seminars and 
an assessment tool to help educate applicants on the 8(a) program, but 
according to SBA officials some applicants still may not understand the 
program's purpose and reporting requirements. Second, SBA staff said 
that the recent emphasis on meeting the long-standing statutory 
requirement to complete annual reviews of 100 percent of 8(a) firms-- 
which are time-and resource-intensive--has diminished their ability to 
conduct business development activities. Third, an inefficient 
termination process may result in noncompliant firms remaining in the 
program and consuming limited SBA resources that otherwise might be 
used to provide business development assistance to compliant 
participants. Finally, a 2006 IG recommendation that SBA regularly 
conduct surveillance reviews of agency oversight of 8(a) contracting 
has not been implemented. As a result of SBA not conducting such 
reviews, it has reduced assurance that agencies met their 
responsibilities under partnership agreements, including oversight of 
contracting, for the 8(a) program. 

The Purpose of the 8(a) Program Is Business Development and 
Participants Must Meet Annual Reporting and Other Requirements: 

The purpose of SBA's 8(a) program is to help eligible SDBs compete in 
the economy through business development.[Footnote 39] Over the course 
of their 9-year term, 8(a) participants can receive (1) business 
training, (2) financial assistance, and (3) assistance with forming 
joint ventures and other strategic agreements. As noted, firms in the 
8(a) program also are eligible to receive competitive and sole-source 
set-aside federal contracts. Because the 8(a) program does not 
guarantee that participants will receive these contracts, firms in the 
program have some responsibility for their own success. For example, in 
all of the locations we visited, district office officials told us that 
firms with marketing experience and that did significant self-marketing 
with federal agencies were most successful. 

Any firm has the right to apply for 8(a) program participation, but 
8(a) eligibility requires a firm to have a minimum of 2 years of 
business experience or meet waiver provisions. Specifically, 
prospective 8(a) firms must be in business for 2 full years immediately 
prior to the date of application and present supporting documentation 
for SBA's analysis or apply for a waiver to the 2-year rule and 
demonstrate they meet certain other conditions, including (1) business 
management experience, (2) technical expertise, (3) adequate capital, 
(4) a record of successful contract performance, and (5) the ability to 
obtain the resources necessary to perform contracts. Applicants also 
must provide documentation on the firm's business and its owners, 
including business and personal financial statements and business and 
personal tax returns. According to SBA, firms were able to submit their 
applications electronically through its Business Development Management 
Information System (BDMIS) in 2005, but the system was implemented 
fully as of July 28, 2008.[Footnote 40] The system is intended to 
significantly decrease processing times for 8(a) certifications. SBA's 
goal is to complete 8(a) certifications within 90 days. 

Once approved for the program, participant firms must continue to meet 
all eligibility criteria (including those for ownership and social and 
economic disadvantage) and submit documentation that SBA requires to 
complete mandatory annual reviews. For instance, each year, as part of 
the annual review, participants must provide SBA with a certification 
that they continue to meet eligibility requirements as well as 
financial statements, income tax returns, and a report on all non-8(a) 
contracts.[Footnote 41] In conjunction with SBA, each participant also 
must review its business plan annually and modify the plan as 
appropriate based on future contract targets and business development 
needs. Since SBA approves the business plan upon admission, it reviews 
the plan annually to assess each firm's growth and progress toward 
attaining the ability to compete in the open market without SBA 
assistance. Most annual review documents and the updated business plan 
are due within 30 days after the close of each firm's program year and 
financial statements are due within 90 to 120 days of the close of the 
reporting period. Participants sign an agreement upon entry to the 
program that they will submit all required documentation to SBA on time 
or face termination. 

SBA Uses Voluntary Means to Educate Applicants on 8(a), but Some 
Applicants Still May Not Understand Program Purpose and Reporting 
Requirements: 

The number of applications to the 8(a) program increased sharply in 
2002, and remained relatively constant through 2007 (see fig. 7). SBA 
noted that the numbers could increase during economic downturns or when 
unexpected events like Hurricane Katrina affected business operations 
and the applications might be the result of applicants not having a 
clear understanding of the primary purpose of the 8(a) program as a 
business development program. That is, firms may have applied to the 
program because they focused on the contracting preferences they could 
receive as 8(a) firms and not on the program's requirements for 
business development. According to SBA officials, a majority of 
applications were returned because the firms applying submitted 
incomplete applications. Figure 7 also illustrates that for each year 
from 2002 through 2007, the number of applications that were either 
returned or withdrawn exceeded the numbers of approved applications and 
declined applications. Some SBA officials also noted that often 
applicants were not prepared or well-suited for the program. 

Figure 7: Number of 8(a) Applications Received, Approved, Declined, and 
Withdrawn or Returned, Fiscal Years 1999-2007: 

[Refer to PDF for image] 

This figure is a multiple vertical bar graph depicting the following 
data: 

Fiscal year: 1999; 
Total applications: 2,521; 
Declined: 291; 
Approved: 918; 
Returned/Withdrawn: 1,152. 

Fiscal year: 2000; 
Total applications: 2,443; 
Declined: 363; 
Approved: 819; 
Returned/Withdrawn: 1,100. 

Fiscal year: 2001; 
Total applications: 2,338; 
Declined: 386; 
Approved: 992; 
Returned/Withdrawn: 1,092. 

Fiscal year: 2002; 
Total applications: 3,741; 
Declined: 381; 
Approved: 1,112; 
Returned/Withdrawn: 2,017. 

Fiscal year: 2003; 
Total applications: 3,783; 
Declined: 4043; 
Approved: 1,217; 
Returned/Withdrawn: 2,292. 

Fiscal year: 2004; 
Total applications:3,924; 
Declined: 316; 
Approved: 1,203; 
Returned/Withdrawn: 2,488. 

Fiscal year: 2005; 
Total applications: 3,881; 
Declined: 309; 
Approved: 1,415; 
Returned/Withdrawn: 2,178. 

Fiscal year: 2006; 
Total applications: 4,487; 
Declined: 165; 
Approved: 853; 
Returned/Withdrawn: 2,860. 

Fiscal year: 2007; 
Total applications: 4,325; 
Declined: 173; 
Approved: 621; 
Returned/Withdrawn: 3,173. 

Source: GAO analysis of SBA data. 

Note: Total applications received in each fiscal year do not equal the 
sum of all other categories because some decisions can be reconsidered 
in the following year or carried over from prior fiscal years. 

[End of figure] 

SBA has used several means to educate applicants about the purpose of 
the 8(a) program and its eligibility and reporting requirements, but 
none are a prerequisite for program application. SBA offers an 
information session for firms interested in applying to the 8(a) 
program, but participation in the session is voluntary. SBA markets 
these sessions through its resource partners (such as Small Business 
Development Centers and SCORE) and its Web site, and 8(a) program 
guidance states that district offices are expected to encourage 
potential applicants to attend the sessions, which the district offices 
or resource partners conduct.[Footnote 42] The purpose of the 
information session is to educate potential applicants about 
eligibility and the application process and to assist them in making a 
determination about participation. For example, topics covered in the 
session include (1) program background, (2) eligibility requirements, 
(3) application forms, (4) requirements for participation and 
continuing eligibility such as annual reviews, and (5) available 
program resources. According to SBA guidance, information sessions may 
be conducted as workshops with multiple firms or a one-on-one interview 
with a single firm. At the four district offices that we visited, the 
BDSs said that their offices conducted workshops for potential 
applicants. According to SBA, its district offices held 1,912 8(a) 
workshops in fiscal year 2008 that were attended by more than 42,000 
participants. Forty-seven of the 68 district offices, including the 4 
we visited, reported that they held workshops monthly or conducted at 
least 12 workshops in 2008. 

SBA officials also explained that in 2007, they developed an online 
self-assessment tool that firms could use to determine their readiness 
for the program before they applied. According to the officials, as of 
October 2008, over 26,000 firms had completed the assessment tool since 
its inception. The tool includes an audio-visual presentation that 
provides basic information on the 8(a) program and consists of 23 
questions that have accompanying explanations of their relevance to 
program requirements. For example, SBA asks whether the potential 
applicant has a current business plan and explains, "Sound business 
management is core to the success of participating 8(a) certified 
firms. A key aspect of good management is business planning. 
Prospective 8(a) firms should have a current, well thought out business 
plan before applying to the program." Users' responses are scored and 
they receive an assessment profile, which places them in one of seven 
tracks such as a new business or business with at least 2 years of 
experience. The assessment results also suggest whether the firm might 
be a good fit for the program. In addition to the assessment tool, SBA 
provides a separate informational course, "INSIGHT-Guide to the 8(a) 
Business Development Program," to better educate firms about the 
program. The course is on SBA's Web site and firms must register basic 
demographic and business status data prior to taking the course. 
According to SBA officials, as of October 2008, approximately 30,000 
firms had taken the course. 

As with the information session, the 8(a) assessment tool is voluntary 
and not a prerequisite to completing an application, although SBA 
officials said they "highly suggested" that firms use the tool prior to 
application. In addition, some SBA officials felt it was necessary that 
firms interested in applying to the program be required to participate 
in a seminar that--like the voluntary information session--explains the 
purpose of the program and its reporting requirements. They also hoped 
that current efforts to educate firms prior to applying for 
certification might help to reduce the number of applications from 
unprepared firms or firms not well-suited for the program. As 
illustrated earlier, 73 percent of applications were returned or 
withdrawn in 2007. Moreover, certification officials told us that in 
tracking the results of the assessment tool since inception, they found 
that approximately 60 percent of firms completing the assessment 
appeared that they did not qualify for the 8(a) program. 

Applicants that do not receive adequate information about the program 
may not be fully aware of their responsibilities for maintaining 
eligibility and achieving success in the program. Moreover, the lack of 
a mandatory assessment tool or required educational sessions may have 
implications for use of SBA resources during a participant's tenure in 
the program. That is, firms that do not clearly understand 8(a) 
eligibility and reporting requirements may increase SBA's expenditure 
of resources and staff time. For instance, as discussed in the 
following sections, firms that did not adhere to (as a result of not 
understanding) the program requirements may increase SBA's expenditure 
of resources and staff time for conducting annual reviews and diminish 
the time available for other program activities. 

SBA Staff Are Required to Review All 8(a) Firms Annually, but Workload 
Constraints and Firms Not Submitting Required Documentation Challenge 
Staff to Complete Timely Reviews: 

The purpose of annual reviews is to determine if a firm should be 
retained, terminated, or graduated early from the 8(a) program. SBA 
staff (BDSs in district offices) review documentation that participants 
submit on financial and tax information, contracting activity, and 
continued eligibility. For example, BDSs review 8(a) firms to determine 
if they still qualify as economically disadvantaged according to the 
8(a) limits on net worth. Annual review documents are due each year, 30 
days after a firm's certification date, and BDSs are required to 
complete the review 30 days after receiving all required documentation. 
If, at that time, SBA has not received the required documentation, the 
firm has two additional opportunities to supply the information. 

Staff workloads relating to the annual reviews appeared to be heavy. 
Among the 19 BDSs with whom we spoke during our visits to district 
offices in Atlanta, Chicago, San Francisco, and Washington, D.C., the 
number of firms for which they were responsible ranged from 36 to 162, 
with the majority of BDSs responsible for 90 or more firms. However, 
portfolio size varies by district office because the concentration of 
8(a) firms varies by district office, with the Washington Metropolitan 
Area district office having the highest number.[Footnote 43] In 2006, 
that office covered more than 1,000 firms (of a total of 9,667 firms in 
the program).[Footnote 44] 

SBA has long been required by statute to complete annual reviews of all 
firms.[Footnote 45] SBA officials with whom we spoke acknowledged that 
in past years not all district offices completed all required annual 
reviews (see table 2). However, meeting statutory requirements such as 
8(a) annual reviews became a priority for SBA under the "reform agenda" 
developed by SBA's former administrator in 2006.[Footnote 46] In fiscal 
year 2007, SBA added this measure to the performance scorecards of 
district offices as part of the agency's new emphasis on meeting all of 
its compliance requirements. District office scorecards outline key 
annual compliance requirements and loan volume goals. Consequently, to 
achieve the 100 percent statutory goal, BDSs have devoted significantly 
more time and resources to this activity. 

Table 2: Percentage of 8(a) Annual Reviews Completed, Fiscal Years 2003-
2007: 

Statutory mandate is 100% annually: %8(a) annual reviews completed; 
FY 2003: 55; 
FY 2004: 60; 
FY 2005: 77; 
FY 2006: 56; 
FY 2007: 100. 

Source: SBA. 

[End of table] 

However, SBA also has recognized that staff constraints affected its 
ability to perform annual reviews. According to its 2006 Performance 
and Accountability Report, a main contributing factor in the agency's 
inability to complete annual reviews of all 8(a) firms was a lack of 
staff resources in the district offices. In 2006, when the agency began 
to emphasize meeting all compliance requirements, it also planned to 
consider reallocating resources to help ensure that staff could comply 
with the review requirement. However, given the size of some BDS 
portfolios in the district offices that we visited, we did not see 
evidence that SBA had begun this effort. 

Additionally, applicants not submitting required documentation 
contributed to increasing the time and resources needed to complete 
annual reviews. SBA officials said that a major challenge with 
conducting and completing annual reviews was that participants had not 
submitted the required documentation on time, even though participants 
signed an agreement upon entry to the program that they would do so. 
Some officials said they were aware that reporting requirements 
presented a burden for some firms, particularly those that were smaller 
or did not have contracts and therefore had less incentive to maintain 
eligibility. In one location, a BDS provided an example of a firm that 
withdrew from the program prior to its first annual review because the 
owner was overwhelmed by the amount of documentation that needed to be 
submitted. Several SBA officials also said that annual reviews were 
resource-intensive since they required BDSs to type a significant 
amount of information into the 8(a) database and to repeatedly attempt 
to obtain required documentation from noncompliant firms. In our review 
of 80 files, we saw evidence that some annual reviews had taken several 
months to complete because of missing documentation. SBA officials said 
that they anticipate that greater automation, through BDMIS, would 
reduce the time associated with data input for BDSs and allow more time 
for the BDSs to provide business development assistance. 

Delays in completing annual reviews also could result in potentially 
noncompliant firms receiving contracts. Results from the annual reviews 
help SBA to fulfill its role in partnership agreements with federal 
agencies. For instance, SBA must verify that a firm is in compliance 
before SBA can accept a proposed 8(a) contract from a federal procuring 
agency. This process is referred to as the "offer and acceptance 
letter"--an offer letter from the federal agency and an acceptance 
letter from SBA. Some federal agency contracting officials reported 
frequent delays in receiving SBA's acceptance letter.[Footnote 47] 
However, SBA officials explained one reason for the delay may be a 
result of the agency not providing complete information on the offer 
letter. SBA officials said that if a firm identified in a federal 
agency's offer letter had compliance issues, such as missing 
documentation required for the annual review, they attempted to get the 
firm back into compliance to accept the offer if the issues were minor 
and could be resolved within a reasonable time frame. Additionally, SBA 
headquarters officials explained that in cases where a termination or 
early graduation was pending, the firm could still receive contracts. 
In the case of a termination, the firm could still receive contracts 
during its 45-day appeal period unless SBA had issued a suspension 
(temporary disqualification) to protect the government's interests. 

Competing Demands Have Diminished the Ability of Limited Numbers of SBA 
Staff to Conduct Business Development Activities and SBA Still Lacks 
Plan to Improve Service Delivery: 

SBA officials said that the current emphasis on 100 percent compliance 
for annual reviews combined with limited district office resources 
diminished the amount of time spent on business development activities. 
SBA guidance requires business development specialists to be the 
primary providers in helping firms develop business plans, seek loans, 
and receive counseling on finances, marketing, and management 
practices. More specifically, SBA guidance requires that each district 
office nurture a relationship with its assigned agencies and buying 
activities to increase the number of 8(a) contracts. In addition, each 
district office is required to develop an outreach plan that identifies 
the groups of people, businesses, agencies, and other organizations 
that will be targeted for outreach during the year. 

However, some BDSs told us that conducting annual reviews consumed most 
of their time. In three of the four offices that we visited, the BDSs 
said they previously conducted more site visits with their firms but 
resource constraints and the time devoted to annual reviews had limited 
these visits. Some officials also said that their offices previously 
held marketing and other events to introduce federal agency contracting 
officials to small businesses and 8(a) and other small businesses to 
each other, but that they had discontinued or reduced the number of 
these events. They said that such events provided opportunities for 
firms to market their services and "interview" with federal agencies, 
connect with other firms, and potentially pursue mentor-protégé 
relationships or joint ventures. The officials also felt that BDSs had 
fewer opportunities to develop relationships with their firms.[Footnote 
48] Moreover, prior to the efforts to meet the annual review 
requirements, a 2004 SBA IG audit also found that SBA had not developed 
program-wide policy and guidance on how it would deliver business 
development services to 8(a) firms or tracked the services it was 
providing to firms.[Footnote 49] 

Subsequently, SBA began some efforts to create tools or strategies to 
increase and improve the delivery of business development assistance. 
In its 2006 Performance and Accountability Report, SBA identified 
improvements in providing individualized business development 
assistance as one of several program actions that it would carry out 
for fiscal year 2007. SBA's 2007 Annual Performance Report discussed an 
8(a) business development plan that includes (1) creating a business 
development assessment tool that identifies the individual needs of 
program participants, (2) using SBA's resource partners to assist in 
delivering business development, and (3) developing a tracking 
mechanism to assess firms' progress in meeting their business 
development needs.[Footnote 50] Although these initiatives may help SBA 
staff to develop and prepare small disadvantaged firms for procurement 
and other business opportunities in the future, SBA has not completed 
or implemented the plan. SBA officials explained they were in the 
process of soliciting feedback on the plan from the resource partners 
and would then vet the plan within SBA. However, they have not yet 
established a timetable to complete this process. As a result, BDSs 
lack some tools that could help them offset existing resource 
constraints and better provide business development assistance. 

SBA Has Not Completed Revisions to an Inefficient Termination Process, 
Which May Keep Noncompliant Firms in the 8(a) Program and Consume 
Resources That Could Be Used for Business Development Assistance: 

Participants in the 8(a) program can leave the program in several ways, 
including voluntary withdrawal and early graduation, prior to 
completing the 9-year term.[Footnote 51] SBA also may terminate firms 
under several conditions, including failure to follow program 
procedures; maintain eligibility for participation; maintain ownership, 
management, and control by disadvantaged individuals; or maintain 
licenses or charters.[Footnote 52] Although participants can be 
terminated for several reasons, SBA officials told us that most firms 
were terminated for not providing required documentation. Table 3 shows 
the volume of voluntary withdrawals, early graduations, and 
terminations over time. The BDSs with whom we spoke said that only a 
small percentage of 8(a) firms graduated early and none of the 19 BDSs 
with whom we spoke had experience in graduating firms early. According 
to SBA's report to Congress, approximately 80 to 150 firms were 
terminated annually from 1999 through 2007, with the exception of 2006 
when the number was more than 300. In one district office that we 
visited, officials pointed out that the number of firms terminated had 
increased since SBA had added the goal of completing annual reviews of 
all 8(a) firms to district office scorecards. 

Table 3: 8(a) Terminations, Early Graduations, and Voluntary 
Withdrawals, Fiscal Years 1999-2007: 

Voluntary withdrawals: 
Fiscal Year: 1999: 64; 
Fiscal Year: 2000: 67; 
Fiscal Year: 2001: 49; 
Fiscal Year: 2002: 57; 
Fiscal Year: 2003: 56; 
Fiscal Year: 2004: 75; 
Fiscal Year: 2005: 98; 
Fiscal Year: 2006: 95; 
Fiscal Year: 2007: 149. 

Early graduations: 
Fiscal Year: 1999: 1; 
Fiscal Year: 2000: 2; 
Fiscal Year: 2001: 1; 
Fiscal Year: 2002: 0; 
Fiscal Year: 2003: 0; 
Fiscal Year: 2004: 11; 
Fiscal Year: 2005: 18; 
Fiscal Year: 2006: 12; 
Fiscal Year: 2007: 12. 

Terminations: 
Fiscal Year: 1999: 83; 
Fiscal Year: 2000: 126; 
Fiscal Year: 2001: 147; 
Fiscal Year: 2002: 123; 
Fiscal Year: 2003: 92; 
Fiscal Year: 2004: 148; 
Fiscal Year: 2005: 130; 
Fiscal Year: 2006: 318; 
Fiscal Year: 2007: 143. 

Totals: 
Fiscal Year: 1999: 148; 
Fiscal Year: 2000: 195; 
Fiscal Year: 2001: 197; 
Fiscal Year: 2002: 180; 
Fiscal Year: 2003: 148; 
Fiscal Year: 2004: 234; 
Fiscal Year: 2005: 246; 
Fiscal Year: 2006: 425; 
Fiscal Year: 2007: 304. 

Source: SBA. 

[End of table] 

Prior to terminating a participant, SBA headquarters requires proof 
that the participant has received two notifications from the district 
office about the agency's intent to terminate. SBA then issues a letter 
of intent to terminate and provides the participant with an opportunity 
to respond in writing to justify retention and provide any pertinent 
documentation. If, following the participant's response or lack of 
response, SBA headquarters makes a final determination to terminate the 
firm, it then issues the participant a notice of termination. The 
participant has 45 days to appeal the decision. During the appeal 
period, SBA headquarters also can rescind the decision if the 
participant provides adequate supporting information. 

However, because of the lengthy and inefficient termination process, 
noncompliant firms have remained in the 8(a) program. Results from our 
review of 80 files provided seven examples of firms that were 
repeatedly out of compliance at the time of their annual reviews but 
were not removed from the program. For example, one firm did not 
provide the required documentation for 5 of the 7 years it was in the 
program. A total of 25 firms (31 percent of the files we reviewed) were 
found to be out of compliance. SBA has guidance in place to terminate 
firms from the program, but SBA officials noted the process could take 
up to 120 days after a firm was notified of SBA's intent to terminate. 
In addition, challenges arose when procedures in place did not apply to 
certain scenarios and when headquarters delayed completing its own 
assessment of the termination decision. One BDS told us of an instance 
where he initiated termination of a newly certified firm that was 
unresponsive after repeated attempts by the district office to 
communicate. The BDS conducted a field visit and found no facility at 
the location the firm provided on its application. However, since the 
BDS was unable to contact the applicant and was unable to provide the 
required proof-of-notification to headquarters, headquarters was 
reluctant to proceed with terminating the firm. Our file review showed 
a total of three instances where BDSs had difficulties in terminating 
firms because they were unable to locate the firms with the information 
they provided to SBA. In such cases, district office staff were limited 
in their ability to carry out timely terminations and remained 
responsible for completing an annual review until the firm was formally 
removed from the program. 

SBA officials also told us they were revising the 8(a) termination 
process and that they expect the new process to reduce the time to 
complete terminations from 120 to 45 days. The officials said that 
delays under the current process resulted from having to notify firms 
multiple times--twice by the district office and twice by headquarters. 
Under the revised process, SBA headquarters would send one notification 
of SBA's intent to terminate, rather than two, which could reduce the 
time to complete the terminations. As part of recent efforts to improve 
agency performance and ensure that all its programs operate efficiently 
and effectively, SBA has been revising several of its standard 
operating procedures (SOP), including the sections of the 8(a) SOP on 
annual reviews and terminations. However, at the time of our review, 
SBA had not yet completed changes to the termination process in the 
8(a) SOP. 

As a result of lengthy and sometimes uncompleted terminations, 
noncompliant firms may continue to participate in the 8(a) program and 
receive federal contracts. Our file review showed one instance where a 
noncompliant firm received a contract; however, our sample was not 
limited to firms that received contracts. The termination process also 
has consumed scarce SBA resources and may have affected business 
development activities. For instance, firms that repeatedly were 
noncompliant would add to the annual review burden of the staff and 
reduce the time that could be spent on assisting firms that are in 
compliance. Finally, SBA's delay in completing revisions that it 
expects will expedite the termination process limits the ability of 
district office staff to carry out timely terminations. 

SBA Has Not Implemented Recommendations to Routinely Monitor 8(a) 
Partnership Agreements through Surveillance Reviews: 

SBA uses surveillance reviews to monitor small business contracting at 
federal agencies, but the surveillance reviews have not assessed how 
agencies administered and oversaw 8(a) contracting. Under partnership 
agreements, SBA and federal agencies with procurement authority share 
the responsibilities of contract execution and oversight, monitoring, 
and compliance with procurement laws and regulations for 8(a) 
contracts. According to SBA's current SOP, the scope of a surveillance 
review includes assessing (1) management of the small business 
programs, (2) compliance with regulations and published policies and 
procedures, (3) outreach programs focusing on small businesses, and (4) 
procurement documentation. However, the SOP does not address 
specifically the 8(a) program at the federal agencies and does not 
include procedures to evaluate the program. SBA's six area offices 
coordinate with headquarters to determine which contracting activities 
within agencies will be selected for review during the last quarter of 
the fiscal year. Criteria used in selecting contracting activities 
included, among other things, the mission and the workload of the 
contracting activity, the small business goal achievement and overall 
level of small business participation over the prior 2 fiscal years, 
and experience or known problems with the contracting activity. 
[Footnote 53] 

SBA staff conduct surveillance reviews by reviewing contract files and 
interviewing agency officials.[Footnote 54] In some instances, the 
Office of Government Contracting (in which the PCRs and CMRs work) and 
the Office of Business Development (in which the BDSs work) informally 
have shared responsibility for conducting surveillance reviews. More 
specifically, BDSs accompanied PCRs and CMRs on surveillance reviews to 
provide assistance in reviewing 8(a) contract files and were supposed 
to report their findings on 8(a) separately. PCRs were primarily 
responsible for reporting on all other surveillance review findings. 

However, as identified in a 2006 SBA IG report, SBA's surveillance 
reviews did not monitor agencies' compliance with 8(a) partnership 
agreements. The IG report also noted that SBA was not aware that the 23 
major procuring agencies failed to monitor 8(a) compliance on the 
contracts they administered and had no requirements for such 
monitoring. Further, SBA officials could not explain why reviews for 
the 8(a) program had not been conducted. Our review of reports for 32 
surveillance reviews conducted in fiscal years 2006 and 2007 found that 
10 assessed 8(a) contract files and that BDSs participated in 8 
surveillance reviews. But the BDSs did not report on their findings. 
The IG report recommended that SBA conduct surveillance reviews on a 
regular basis to ensure that procuring agencies effectively were 
monitoring for and enforcing compliance with 8(a) regulations on the 
contracts they administered.[Footnote 55] 

Although SBA agreed with the IG's recommendations, it has not yet made 
changes to its guidance for surveillance reviews (that is, the SOP) 
that would direct these reviews to regularly assess 8(a) contracting 
activities. As noted, SBA has been revising several of its SOPs and 
some officials explained that this usually was a lengthy process. But 
SBA has made some changes as a result of the IG report. According to 
SBA officials, in 2006, monitoring 8(a) contracting activities during 
surveillance reviews became the sole responsibility of the Office of 
Government Contracting. SBA officials said that PCRs and other 
Government Contracting staff were to complete the reviews, which would 
increase their efficiency and comprehensiveness because PCRs already 
conduct (and are experienced in) these reviews. SBA officials explained 
that by the end of fiscal year 2008, the Office of Government 
Contracting would begin incorporating the 8(a) program in its 
surveillance reviews. 

Since SBA has not updated its guidance in a timely manner to 
incorporate the 8(a) program into surveillance reviews, SBA does not 
have procedures to monitor--and has not been monitoring regularly--how 
agencies with which it has partnership agreements ensure compliance 
with 8(a) program requirements. As suggested by the SBA IG in 2006, the 
integrity of the 8(a) program could be undermined if government 
officials were unaware of firms violating its regulations. As a result, 
SBA has reduced assurance that agencies have complied with procurement 
laws and regulations for 8(a) contracts. 

Conclusions: 

SBA plays an important role in ensuring that federal agencies achieve 
small business contracting goals, small businesses gain access to 
federal contracting opportunities, and eligible socially and 
economically disadvantaged small businesses can compete in the economy. 
Although federal agencies have OSDBUs and their own offices in place to 
assist small businesses in finding contracting opportunities, SBA's 
role is to advocate for and review prime and subcontracting 
opportunities for small businesses through its PCRs and CMRs, 
respectively. Their multiple responsibilities include recommending 
contract set-asides, resolving disputed recommendations, conducting 
surveillance reviews, and reviewing prime contractor plans for 
subcontracting. However, resource constraints and increased workload 
have impaired the ability of PCRs and CMRs to carry out these 
activities. For example, while SBA has recognized that more PCRs are 
needed to effectively fulfill their responsibilities, which include 
making set-aside recommendations, SBA has neither tracked such 
recommendations since 2001 nor developed other measures that could be 
used to develop a formal plan to better ensure that PCRs can carry out 
their responsibilities. Further, years of downsizing at SBA have 
significantly reduced the number of CMRs, with half of the CMRs 
performing other functions as well. In view of the continuing 
difficulties that federal agencies can have in consistently meeting 
goals for small business contracting, SBA has the opportunity to 
consider ways in which to maximize the effectiveness of its support to 
agencies for small business contracting. By assessing the workloads of 
PCRs and CMRs and the extent to which core responsibilities are being 
fulfilled and developing a strategy to effectively allocate limited 
resources, SBA could help ensure that the people and the resources 
necessary to identify and review federal contracting opportunities, and 
ultimately achieve small business goals, are in place. 

In addition to reviewing staff responsibilities, SBA also has 
opportunities to improve some tools and processes that could realize 
efficiencies that would allow staff to devote more time to core 
activities such as business development in the 8(a) program. For 
instance, the 8(a) program does not have a mandatory education 
requirement such as a seminar or assessment tool for applicants. 
Consequently, some participants that are not adequately informed about 
the program's purpose and requirements may have unrealistic 
expectations of the program and be unprepared to fulfill their 
responsibilities, such as providing documentation for annual reviews. 
SBA currently must complete annual reviews of 100 percent of program 
participants, but staff cited lengthy, resource-intensive efforts to 
elicit documents from firms as a major reason for delays in completing 
the reviews. Better education at the front end of the 8(a) program and 
management of participant expectations could help reduce problems 
during program tenure, and thus free SBA staff resources for assisting 
firms with development activities. 

As noted above, SBA's resource limitations have affected the ability of 
its staff to provide key services to small businesses. In the case of 
BDSs in the 8(a) program, the recent emphasis on completing required 
annual reviews has diminished the time and resources they have to 
provide 8(a) firms with business development support and conduct 
outreach activities that may increase contracting opportunities for 
them. While acknowledging the resource constraints that SBA faces and 
the necessity to comply fully with its statutory obligations, we note 
that the mission of the 8(a) program is business development. 
Additionally, SBA guidance requires BDSs to be the primary providers in 
helping firms develop business plans, seek loans, and receive 
counseling on finances, marketing, and management practices. Although 
SBA has recognized some organizational challenges and begun to 
reallocate resources in some district offices, we did not see evidence 
of these changes during our site visits. SBA has proposed a plan to 
provide more business development assistance through the creation of 
electronic tools to identify individual firms' needs and greater 
utilization of SBA's resource partners in providing assistance to 
businesses. However, the success of these proposed changes as they 
relate to the priorities and workload of staff such as the BDSs (and 
PCRs and CMRs) largely will depend on the timely development and 
implementation of these improvements. Furthermore, a lengthy and 
resource-intensive process for terminating noncompliant participants 
from the program has resulted in inefficient use of SBA's limited 
program resources. SBA currently is revising the termination process, 
but has not developed a timeline for its completion and implementation. 
Prompt attention to these technological and procedural revisions could 
allow SBA staff to concentrate more on providing services to eligible 
firms and help ensure that program funds are targeted to deserving 
small businesses. 

Finally, SBA could improve the utility and effectiveness of its 
surveillance reviews, which monitor small business contracting at 
federal agencies. However, SBA has not yet implemented changes that its 
IG recommended for the review process in 2006; notably, that the agency 
regularly conduct surveillance reviews at the federal agencies with 
which it has partnership agreements to ensure compliance with 
regulations for 8(a) contracting. Without information on compliance 
with small business contracting requirements that such a review 
provides, SBA and federal agencies could be unaware of violations 
within 8(a), a key small business program. SBA indicated that it 
planned to include 8(a) contracting in the surveillance reviews by the 
end of fiscal year 2008. By revising its guidance to address the IG 
recommendation, SBA could improve its oversight of contracting activity 
in the 8(a) program and overall small business contracting. Such 
monitoring helps to maintain the integrity of the program and 
contributes to the achievement of small business and socioeconomic 
contracting goals. 

Recommendations for Executive Action: 

To improve its administration of the prime contracting, subcontracting, 
and 8(a) business development programs, we recommend that the 
Administrator of SBA take the following four actions: 

* SBA should assess resources allocated for procurement center 
representative and commercial market representative functions and 
develop a plan to better ensure that these staff can carry out their 
responsibilities. 

* To better educate prospective applicants for the 8(a) program and 
maximize limited SBA resources during program tenure of participants, 
SBA should take additional steps to ensure that firms applying for the 
program understand its requirements, and have realistic expectations 
for: 

* participation. Such steps could include an education requirement, 
such as a seminar or assessment tool. 

* In acknowledgment of the competing demands for business development 
specialists to complete required annual reviews of 8(a) firms and 
support the mission of the 8(a) program--that is, develop and prepare 
small disadvantaged firms for procurement and other business 
opportunities--SBA should: 

- assess the workload of business development specialists to ensure 
they can carry out their responsibilities. As part of such an 
assessment, SBA could review the size of the 8(a) portfolio for all 
business development specialists and determine what mechanisms can be 
used to prioritize or redistribute their workload; 

- in a timely manner, develop and implement its proposed plan for 
creating tools that would assist in the provision of business 
development assistance for 8(a) firms; and: 

- develop a timetable for planned changes to the termination process to 
ensure that staff monitoring 8(a) participants can carry out 
terminations from the program in a timely manner. 

* To increase the usefulness of surveillance reviews for the 8(a) 
program, SBA should update its guidance to incorporate regular reviews 
of 8(a) contracting in the scope of the reviews. 

Agency Comments and Our Evaluation: 

We requested SBA's comments on a draft of this report, and the Deputy 
Associate Administrator for Government Contracting and Business 
Development provided written comments that are presented in appendix V. 
SBA agreed with our recommendations and outlined steps that it has 
initiated or plans to take to address each recommendation. 

First, SBA stated that it is assessing statutory requirements and 
resources for procurement center representatives and commercial market 
representatives in order to develop a plan that effectively and 
efficiently fulfills those requirements. 

Second, with regard to better educating prospective applicants for its 
8(a) program and maximizing limited resources, SBA noted its continuing 
efforts in developing a plan that assesses individual business 
development needs of 8(a) participants and proposes a tool that tracks 
and manages 8(a) firms during their 9 years in the program. SBA also 
discussed its previous efforts in providing an informational course on 
the 8(a) program and a self-assessment tool for potential 8(a) firms 
online. In addition, SBA stated that it has assembled a focus group, 
composed of offices within SBA and its resource partners, to review the 
plan and provide feedback. While these actions are consistent with our 
recommendations, we encourage SBA to take additional steps to ensure 
that firms applying for the program understand the 8(a) program 
requirements and have realistic expectations for participation. Such 
steps could include an education requirement, such as a seminar or 
assessment tool, that must be completed by the prospective applicant. 

Third, SBA stated it would work with the Office of Human Capital 
Management to assess the workload of the business development 
specialists and their knowledge levels and stated this analysis would 
be completed by the end of the 2009 fiscal year (i.e. September 2009). 
Once completed, SBA plans to explore the possibility of redistributing 
certain portfolios. In addition, SBA expects to implement its proposed 
plan for creating tools that would assist in the provision of business 
development assistance for 8(a) firms by March 2009. Further, SBA 
stated that planned changes to its guidance on streamlining the 
termination process are expected to be issued by December 2008. 

Finally, SBA noted that its guidance for surveillance reviews was 
updated on September 26, 2008, to incorporate regular reviews of 8(a) 
contracting in the scope of the reviews. However, SBA did not disclose 
how it will monitor the 8(a) program and its partnership agreements 
with federal agencies. SBA also provided technical comments that we 
incorporated as appropriate. 

We also provided copies of the draft report to Commerce, DOD, DHS, and 
SSA. All four agencies responded that they had no comments on the draft 
report. 

We are sending copies of this report to the Ranking Member of the House 
Subcommittee on Government Management, Organization and Procurement, 
House Committee on Oversight and Government Reform, as well as the 
Ranking Member, House Committee on Homeland Security, other interested 
congressional committees and the Acting Administrator of the Small 
Business Administration. We are also sending copies to the Secretaries 
of the Department of Commerce, Defense, and Homeland Security and the 
Commissioner of the Social Security Administration. The report also is 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your offices have any questions about this report, please 
contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report are 
listed in appendix VI. 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Scope and Methodology: 

To describe the actions the Small Business Administration (SBA) takes 
to set small business contracting goals and the extent to which federal 
agencies have achieved their small business goals in recent years, we 
reviewed pertinent legislation, guidance issued by SBA, our prior 
reports, and SBA's Small Business Procurement Scorecard for fiscal 
years 2006 and 2008. In addition, we used data from fiscal years 2000 
through 2006 on SBA's negotiated goals with agencies and small business 
goaling reports to compare the goals of five agencies--the Departments 
of Commerce (Commerce), Defense (DOD), and Homeland Security (DHS); the 
Social Security Administration (SSA); and SBA--with the actual dollars 
awarded for prime contracts and to determine what percentage of their 
contracting dollars was awarded to small businesses. SBA uses the 
Federal Procurement Data System-Next Generation (FPDS-NG) to prepare 
its annual Small Business Goaling Reports, which are used to evaluate 
the performance of federal agencies in achieving their small business 
and socioeconomic procurement preference goals. To assess these data, 
we reviewed related documentation, including the methodology used to 
create these reports. For the purposes of this report, we found these 
data to be reliable. We selected the first four agencies--a 
nongeneralizable sample--based on level of contracting activity and 
SBA's assessments of their goal achievement. The four agencies 
generally obligated larger amounts of contracting dollars to small 
disadvantaged businesses and, collectively, they received the full 
range of scores on SBA's 2006 scorecard. We also included SBA because 
it sets goals and is responsible for assessing and reporting on goal 
achievement at federal agencies. We also interviewed officials at SBA, 
Commerce, DOD, DHS, and SSA. 

To examine SBA's role in supporting small business contracting at 
select agencies, we reviewed our previous reports, relevant policies, 
procedures, and regulations; obtained information on SBA resources 
devoted to such activities; interviewed officials from SBA headquarters 
and from four of its six area offices; and interviewed officials at 
four selected federal agencies (see above). We also analyzed the SBA 
field office directory for the six area offices and identified the 
number of procurement center representatives (PCR) and commercial 
market representatives (CMR) in the agency as of August 2008. Area 
offices have responsibility for SBA's prime contracting and 
subcontracting assistance programs and their staff can include PCRs and 
CMRs. We interviewed the 8 PCRs and 5 CMRs who were located in the four 
area offices we visited (out of an agency total of 59 PCRs and 31 CMRs, 
respectively).[Footnote 56] We also reviewed the number of agencies and 
buying activities assigned to each PCR. Buying activities are agencies 
or divisions within agencies that purchase goods and services. In 
addition, we analyzed SBA data on the number of formal and informal 
Form 70s issued to federal agencies by PCRs. Form 70s are used by PCRs 
to stop a contract action due to a disagreement between the PCR and 
contracting officer on a set-aside recommendation for small business. 
We had planned to update our 2002 report data on the number of PCR- 
recommended set-asides for this report, but because SBA no longer 
collects this information electronically, the most recent data are from 
2001.[Footnote 57] For more information, see appendix IV. Further, we 
interviewed Office of Small and Disadvantaged Business Utilization 
(OSDBU) directors, acquisition officials, small business specialists, 
and contracting officers at our selected agencies. OSDBUs were 
established to advocate for contracting opportunities for small 
businesses.[Footnote 58] Small business specialists are responsible for 
working with OSDBUs and agency contracting officers to advocate for 
small businesses. 

To examine SBA's overall administration of the 8(a) business 
development program, we reviewed and analyzed 8(a) program regulations, 
SBA's procedures for administering the program, and previous SBA 
Inspector General (IG) reports. We interviewed SBA officials in 
headquarters program offices, 4 of 6 area offices, 4 of 68 district 
offices, and 1 of 2 Division of Program Certification and Eligibility 
(DPCE) offices to obtain their perspectives on certification, 
monitoring activities, and other aspects of the program.[Footnote 59] 
More specifically, we interviewed 19 business development specialists 
(BDS).[Footnote 60] We also conducted site visits to SBA offices in 
Atlanta, Georgia; Chicago, Illinois; San Francisco, California; and 
Washington, D.C. We selected these locations based on the number of 
SBA's total 8(a) firms in each location and for geographic diversity. 
For each of the district offices that we visited, we reviewed and 
analyzed a sample of 20 8(a) participant files and additional 
documentation that SBA provided on the 8(a) program. To select these 
files, we obtained a list of 8(a) firms within each district office's 
portfolio that included information on the year the firm was scheduled 
to graduate, whether the firm had received a contract, and if the firm 
was part of SBA's mentor-protégé program. For each district office, we 
randomly selected two firms (one that received a contract and one that 
did not) from each year of the 9-year program and also randomly 
selected two firms in SBA's mentor-protégé program.[Footnote 61] We 
reviewed the number of 8(a) applications received, approved, declined, 
and returned or withdrawn from fiscal years 1999 through 2007. We 
reviewed and assessed the reliability of SBA's reports to Congress on 
the 8(a) program from 2001 through 2006. More specifically, we 
interviewed SBA officials about the data system used and reviewed 
related documentation. We determined this information was reliable for 
the purposes of this report. In addition, we reviewed 32 surveillance 
reviews conducted by the four selected area offices in 2006 and 2007. 
SBA uses surveillance reviews to assess federal agencies' management of 
small business programs and compliance with regulations and published 
policies and procedures. Furthermore, we interviewed business 
development specialists and business opportunity specialists about 
their work and processes related to 8(a) applications, annual reviews, 
and participant terminations at the district offices we visited. We 
also interviewed an official from a trade association representing 8(a) 
and small disadvantaged business (SDB) firms and reviewed documents 
prepared by other trade associations representing 8(a) and SDB firms. 

To describe how the use of SDB certification has changed, we reviewed 
pertinent legislation and regulations, our previous reports, and SBA's 
IG report on SDB certification. We also interviewed officials at SBA, 
Commerce, DOD, DHS, and SSA. In addition, we analyzed data from SBA's 
Dynamic Small Business Search and FPDS-NG from fiscal years 2004 
through 2007 to determine the number of SDB firms during this time 
period and the number of socioeconomic designations each SDB firm had. 

We conducted this performance audit from October 2007 through November 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Small Disadvantaged Business Certification and Changes to 
Its Use over Time: 

This appendix describes how the use of the small disadvantaged business 
(SDB) certification has changed. The certification's purpose was to 
assist participating businesses in obtaining federal contracts and 
subcontracts. The Small Business Administration's (SBA) Office of 
Business Development performed SDB certifications for the federal 
government, but suspended its certification program on October 3, 2008. 
To qualify for the SDB program, a firm had to be at least 51 percent 
owned and controlled by one or more individuals who met SBA's criteria 
of socially and economically disadvantaged. Socially disadvantaged 
individuals include certain members of designated groups, such as Black 
Americans or Hispanic Americans and individuals who are not members of 
designated groups. Economically disadvantaged firms included those 
whose primary owner(s) have $750,000 or less in personal net worth, 
adjusted to exclude personal residence and business assets. Unlike the 
8(a) program, firms were not required to demonstrate potential for 
success (for example, by having been in business at least for 2 years). 
In contrast to the single 9-year term of the 8(a) program, SDB 
certifications were valid for 3 years and firms had the option to 
recertify every 3 years. Benefits of the program originally included 
contract set-asides. In addition, all 8(a) firms automatically were 
certified as SDBs. 

SDB Program Expanded from DOD to Civilian Agencies, but Judicial 
Decision Limited Implementation: 

The SDB program was established by the National Defense Authorization 
Act of 1987 for the Department of Defense (DOD).[Footnote 62] From 1987 
to 1995, SDBs (which were then self-certified) were eligible to receive 
two main benefits--a 10 percent price evaluation adjustment (PEA) in 
certain DOD acquisitions, and the ability to compete for contracts set 
aside for SDBs for certain DOD acquisitions--as well as an evaluation 
factor or subfactor to credit contractors for the use of SDBs as 
subcontractors in certain acquisitions. The program was extended to 
civilian agencies in 1994, but implementation was delayed in the 
aftermath of a 1995 Supreme Court decision.[Footnote 63] The decision 
resulted in changes to the SDB program. Notably, the SDB set-aside was 
suspended although agencies could still use the PEA and evaluation 
credits. SBA also began certifying firms as SDBs in 1998, but on 
October 3, 2008, SBA published an interim final rule stating it would 
no longer certify SDB firms. For more details, see the following 
section. 

The authority of most civilian agencies to use the PEA expired in 
December 2004. After that time, only DOD, the Coast Guard, and the 
National Aeronautics and Space Administration (NASA) could use PEA 
authority in awarding contracts; however, DOD has not used it in recent 
years. DOD is statutorily required to suspend its use of the PEA for 1 
year after any fiscal year in which DOD awards more than 5 percent of 
its eligible contract dollars to SDBs. Since 1999, DOD has determined 
that it met this requirement and suspended PEA use. At the 
subcontracting level, agencies could give credit to prime contractors 
that use SDBs as subcontractors on certain government contracts. 

According to Federal Agencies, SDB Certification Was of Limited 
Benefit: 

In our January 2001 report on the SDB certification, we reported that 
several officials cited limitations with the SDB certification because 
the set-asides or price preferences were not being used.[Footnote 64] 
In our recent interviews with SBA and agency officials, officials from 
all the agencies indicated that the certification was not useful at the 
prime contract level, and they attributed this to the absence of 
mechanisms, other than full and open competition, to award contracts to 
SDBs.[Footnote 65] 

* According to DOD officials, the SDB certification did not fill a 
legitimate departmental need and was not useful to the agency. As 
discussed above, DOD has not used the PEA since 1999. 

* DHS officials we interviewed indicated that the Coast Guard rarely 
used PEAs to award prime contracts to SDB-certified firms because the 
agency could reach its 5 percent SDB goal through other small business 
set-aside programs. The Coast Guard also is proposing to ask for a 
waiver from Congress on using PEAs because of their limited value to 
the agency. 

* From the civilian agency perspective, Commerce and SSA officials 
agreed the SDB certification had limited benefit as a prime contracting 
tool because their authority to use the PEA expired and due to the 
absence of a SDB set-aside. They suggested its main benefit was to help 
firms identify subcontractors. 

* Most agency officials with whom we spoke stated they relied on 8(a) 
firms to meet their SDB goals. (All 8(a) firms automatically qualify 
for SDB certification.) 

SBA officials explained that agencies tended to concentrate on sole- 
source and set-aside mechanisms in the 8(a), Historically Underutilized 
Business Zone (HUBZone), and service-disabled veteran-owned business 
programs, since these provisions make it easier to award contracts to 
small businesses.[Footnote 66] SBA officials suggested some firms might 
continue to pursue the SDB certification not for federal contracts but 
because of state and local contracting programs that offer reciprocity 
to firms that are already SDB-or 8(a)-certified. They also noted that 
many firms had not sought the SDB certification because it was not 
worthwhile to them. Finally, in its interim final rule, SBA recognized 
the benefits of the SDB certification had greatly diminished over the 
past years. 

The Number of SDB Firms Certified by SBA Decreased in Recent Years, Few 
SDB-only Firms Received Contracts, and Most SDB Firms Had Additional 
Certifications: 

SBA has conducted fewer SDB certifications in recent years and we found 
that few firms that obtained federal contracts had only an SDB 
certification. Further, as noted above, SBA has stated it will no 
longer certify SDB firms.[Footnote 67] To conduct the SDB 
certifications prior to issuing its interim rule, SBA headquarters 
reviewed firms' applications, which had to include evidence 
demonstrating that the firm was owned and controlled by one or more 
individuals claiming disadvantaged status, along with certifications or 
narratives regarding the individuals' disadvantaged status. The firm 
also had to submit information necessary for a size determination. 
[Footnote 68] According to its implementing regulations, SBA had to 
tell each applicant whether the application was complete and suitable 
for evaluation, and, if not, what additional information or 
clarification was required within 15 days of receipt. If the 
application was complete, SBA had 30 days (if practicable) to determine 
whether the applicant met the SDB eligibility criteria. Applicants 
could appeal SBA's determinations. 

The number of SDB firms that SBA certified decreased from fiscal years 
1999 through 2007. For example, in fiscal year 2007, SBA certified 436 
small businesses as SDBs, down substantially from 734 certified in 2006 
and 1,045 in 2005. In general, SBA admitted fewer firms as SDBs than 
applied, with the majority of applications returned or withdrawn (see 
fig. 8). SBA officials explained that the decrease could be a result of 
the expiration of the authority to use the PEA for most civilian 
agencies in 2004. 

Figure 8: Number of SDB Applications Received and Number of SDB Firms 
Certified by SBA, Fiscal Years 1999-2007: 

[Refer to PDF for image] 

This figure is a multiple vertical bar graph depicting the following 
data: 

Fiscal year: 1999; 
Total applications: 3,312; 
Declined: 96; 
Approved: 1,235; 
Returned/Withdrawn: 1,981. 

Fiscal year: 2000; 
Total applications: 2,419; 
Declined: 140; 
Approved: 1,450; 
Returned/Withdrawn: 829. 

Fiscal year: 2001; 
Total applications: 1,871; 
Declined: 24; 
Approved: 769; 
Returned/Withdrawn: 1,078. 

Fiscal year: 2002; 
Total applications: 2,311; 
Declined: 50; 
Approved: 608; 
Returned/Withdrawn: 1,653. 

Fiscal year: 2003; 
Total applications: 2,138; 
Declined: 42; 
Approved: 1,039; 
Returned/Withdrawn: 1,057. 

Fiscal year: 2004; 
Total applications: 2,139; 
Declined: 146; 
Approved: 919; 
Returned/Withdrawn: 1,074. 

Fiscal year: 2005; 
Total applications: 1,623; 
Declined: 379; 
Approved: 1,045; 
Returned/Withdrawn: 402 

Fiscal year: 2006; 
Total applications: 1,975; 
Declined: 109; 
Approved: 734; 
Returned/Withdrawn: 1,426. 

Fiscal year: 2007; 
Total applications: 1,697; 
Declined: 55; 
Approved: 436; 
Returned/Withdrawn: 747. 

Source: GAO analysis of SBA data. 

[End of figure] 

In our review of Federal Procurement Data System-Next Generation (FPDS- 
NG) data from fiscal years 2004 through 2007, SDB firms with more than 
one designation were more successful in receiving federal contracts 
than firms with only one designation.[Footnote 69] The majority of SDBs 
had either one or two additional designations. Fifteen percent (2,416) 
of the 15,950 SDB-certified firms in that period had only the SDB 
certification. Of SDBs that received contracts, 8.5 percent were SDB- 
only firms (meaning they did not have additional certifications). The 
majority of those firms that received contracts had at least one or two 
other designations, such as 8(a), HUBZone, or service-disabled veteran- 
owned (see fig. 9). However, of the 3,546 SDB firms with one other 
designation that received contracts, 85.9 percent also were designated 
as 8(a) firms. The results of this analysis suggest few firms relied 
solely on the SDB certification to obtain federal contracts. 

Figure 9: Number of Designations for SDBs That Received Contracts, 
Fiscal Years 2004-2007: 

[Refer to PDF for image] 

This figure is a pie-chart depicting the following data: 

Number of Designations for SDBs That Received Contracts, Fiscal Years 
2004-2007: 
* SDB and 1 other designation: 45.3%; 
- SDB and 1 designation [8(a)]: 38.9%; 
- SDB and 1 designation [non-8(a)]: 6.4%; 
* SDB and 2 other designations: 37.7%; 
* SDB only: 8.5%; 
* SDB and 3 other designations: 8.3%; 
* SDB and 4 other designations: 0.2%. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

[End of section] 

Appendix III: Roles of Offices of Small Disadvantaged Business 
Utilization and Agency Officials in Small Business Contracts: 

In addition to the role of the Small Business Administration (SBA), the 
Offices of Small Disadvantaged Business Utilization (OSDBU) and federal 
agency staff have advocacy, review, and liaison roles to facilitate 
small business contracting at federal agencies. For example, OSDBU 
officials we interviewed set policy within their agency and functioned 
as a liaison between small businesses and agency contracting officials. 
However, the level of involvement the OSDBU directors had in reviewing 
procurements and acquisition planning differed in the agencies selected 
for our review, partly reflecting the differing levels of procurement 
activity in the agencies. For example, the Department of Homeland 
Security (DHS) and Department of Commerce (Commerce) OSDBU directors 
were involved in the acquisition planning process with procurement 
officials, while the Department of Defense (DOD) and Social Security 
Administration (SSA) OSDBU directors were not. The roles of small 
business specialists, who report directly to procurement officials at 
their agencies, also may include being the liaison with SBA and the 
small business community. 

Role of OSDBUs: 

The OSDBU directors we interviewed explained their roles included 
advocating for small business and other socioeconomic contracting 
programs, not just the 8(a) program.[Footnote 70] They set policy, 
participated in outreach activities, attended monthly meetings with 
other OSDBUs, provided internal training and guidance to agency 
officials, and acted as liaisons between small businesses and 
contracting officials, among other things. From our discussions with 
OSDBU directors at selected agencies, the role of the OSDBU directors 
differed in the level of involvement in reviewing procurements and 
acquisition planning. For example, Commerce and SSA have policies that 
outline when OSDBUs became involved in reviewing procurements at 
certain procurement thresholds. Commerce and DHS OSDBU directors were 
involved in the acquisition planning process with procurement 
officials, while DOD and SSA OSDBU directors were not. Of the agencies 
we reviewed, the size of the OSDBU office varied from 22 staff members 
in DOD to 1 staff member at SSA (see table 4). Except for DOD, each 
agency had only one OSDBU office. DOD has multiple offices for each of 
the military departments (Air Force, Army, and Navy) and its other 
agencies.[Footnote 71] 

Table 4: OSDBU Size and Budget and Small Business Contract Dollars and 
Actions, for Commerce, DOD, DHS, and SSA: 

Agency: Commerce; 
Staff size (2008 including director): 5; (including 2 vacancies); 
Budget (FY 2007--actual): $361,000; 
Small business dollars (FY 2006): $1,041,420,608; 
Small business actions[A](FY 2006): 15,416; 
SDB dollars (FY 2006): $347,696,162; 
SDB actions[B[(FY 2006)] 06): 3,089. 

Agency: DOD; 
Staff size (2008 including director): 22[C]; (including 2 vacancies); 
Budget (FY 2007--actual): $41,966,557[D]; 
Small business dollars (FY 2006): $51,316,934,021; 
Small business actions[A](FY 2006): 963,132; 
SDB dollars (FY 2006): $14,690,399,904; 
SDB actions[B[(FY 2006)] 06): 123,784. 

Agency: DHS; 
Staff size (2008 including director): 11; 
Budget (FY 2007--actual): $1,727,091[E]; 
Small business dollars (FY 2006): $4,410,173,942; 
Small business actions[A](FY 2006): 45,604; 
SDB dollars (FY 2006): $1,497,052,836; 
SDB actions[B[(FY 2006)] 06): 7,728. 

Agency: SSA; 
Staff size (2008 including director): 1; 
Budget (FY 2007--actual): $3,662[F]; 
Small business dollars (FY 2006): $258,708,716; 
Small business actions[A](FY 2006): 5,828; 
SDB dollars (FY 2006): $74,697,173; 
SDB actions[B[(FY 2006)] 06): 519. 

Sources: Commerce, DOD, DHS, and SSA (staff size and budget data); and 
Small Business Goaling report. 

[A] "Small business actions" include the number of small business 
contracts awarded or modified for purchase, rent, lease, or supplies of 
equipment using appropriated dollars. 

[B] "SDB actions" include the number of SDB contracts awarded or 
modified for purchase, rent, lease, or supplies of equipment using 
appropriated dollars. SBA certifies small businesses as SDBs. 8(a) 
firms automatically are certified as SDBs. 

[C] In addition, 23 departments and agencies within DOD each have an 
OSDBU director and staff. (DOD renamed its Office of Small 
Disadvantaged Business the Office of Small Business Programs.) This 
table does not include the "OSDBU" directors and staff in the 23 
entities. 

[D] The total under the budget includes funding for programs for small 
businesses that are administered through DOD's Office of Small Business 
Programs. 

[E] This number is estimated and not actual and includes salaries, 
benefits, and other expenses. 

[F] The SSA OSDBU office does not collect budget information in the 
same way as the other agencies in the table. SSA numbers reflect 
expenses used for local travel, conferences, and training. 

[End of table] 

The differences in staff size and budget may be related to the volume 
of procurement in each agency. As the table illustrates, DOD spends a 
much larger amount on small business procurement than SSA. The SSA 
OSDBU director explained the small business specialist works closely 
with the OSDBU in reviewing acquisitions. The director believed the 
staffing level supported the workload of the OSDBU office, which in 
years past, reviewed from approximately 40 to 45 procurements a year, 
but this may change based on the new procurement center representative 
(PCR) assigned to SSA in January 2008.[Footnote 72] 

In 2003, we reported on the provision in the Small Business Act that 
requires OSDBU directors to report to agency heads or deputies and how 
select agencies were complying with this provision.[Footnote 73] We 
surveyed 24 agencies and determined 11 did not comply, including 
Commerce and SSA. For instance, we found that Commerce's OSDBU director 
reported to the Chief Financial Officer and Assistant Secretary for 
Administration. We also found that the SSA OSDBU director reported 
neither to the Social Security Administration Commissioner nor the 
Deputy Commissioner.[Footnote 74] The DOD OSDBU director was exempted 
from the reporting requirement in 1988 when Congress amended the 
pertinent section of the Act. Both Commerce and SSA disagreed with our 
findings and concluded that they were in compliance. 

Although we did not conduct another evaluation of compliance with this 
requirement for our selected agencies, we did obtain information on the 
OSDBU directors' current reporting structure. The DOD OSDBU director 
continues to be exempt from the reporting requirement. The Commerce 
OSDBU director said and their organizational charts indicate that the 
position reports to the Chief Financial Officer/Assistant Secretary for 
Administration, which is the same reporting relationship we found in 
our previous report. The organizational chart for DHS illustrates that 
the OSDBU director reports to the Deputy Secretary of the agency. SSA 
officials explained that its OSDBU director reports to the Deputy 
Commissioner for Budget, Finance, and Management, which is a similar 
reporting position identified in our previous report. 

Role of Small Business Specialists: 

Small business specialists (SBS) at federal agencies also promote the 
use of small businesses and reviewed procurements. SBSs at the agencies 
we reviewed (Commerce, DOD, DHS, and SSA) did not report to OSDBUs, but 
worked with them to implement their small business procurement 
policies. SBS roles in federal procurement include: 

* making sure contracting officers take small businesses into 
consideration when awarding contracts as required by regulation; 

* maintaining a liaison with SBA and the small business community to 
ensure small businesses have access to procurement opportunities; 

* helping small businesses tailor their marketing materials for an 
agency's specific needs; 

* conducting outreach and advocacy efforts; and: 

* conducting internal and external training. 

The number of SBSs in an agency varied based on agency size; the 
differences in staff size also may be related to the volume of 
procurement in each agency. For example, DOD had approximately 500 SBSs 
and SSA had 1. Three of the four agencies we reviewed assigned SBSs to 
their bureaus and departments or divisions; however, SSA had one SBS 
for all divisions within the agency. 

In discussing their work, procurement officials cited some challenges 
they faced within their agencies to increase opportunities for small 
business procurement. For example, some officials explained that 
convincing agency program officials of the benefits of using small 
business contractors could be difficult because some program officials 
were risk-averse and perceived costs to be higher when using small 
business contractors. Some officials explained that training and 
educating program officials generally helped with this challenge, as 
did having support from top-level management. In addition, some 
officials noted that their interaction with SBA staff was limited. For 
instance, OSDBU officials we interviewed at two agencies explained that 
they rarely interacted with SBA's PCRs, whose responsibilities include 
reviewing proposed agency acquisitions and recommending small business 
set-asides. 

SBA assesses how federal agencies promote small business goal 
attainment through its procurement scorecard. The scorecard evaluates 
factors such as goals met, progress shown, agency strategies, and top- 
level commitment to meeting goals. SBA's inaugural scorecard ratings 
were based on fiscal year 2006 activities; SBA subsequently reviewed 
agencies' progress in implementing procurement plans through July 25, 
2007, and appended additional ratings to the scorecard. The scorecard 
relates to the roles of OSDBUs and SBSs through some of the elements 
reviewed, such as agency plans and internal policy setting, 
collaboration on the formation of small business procurement policy, 
and training provided to contracting staff on small business practices. 

Some of the Agencies We Reviewed Also Had Other Programs and Incentives 
in Place to Enhance Small Business Participation in Contracting: 

To meet the agency's small business goals, some federal agencies have 
developed their own programs and contracting mechanisms to promote 
small business participation in federal procurement. For example, DOD 
and DHS have mentor-protégé programs, administered through their 
OSDBUs, in which selected firms provide support and guidance for new 
firms entering the federal contracting arena. In return, at DOD, the 
mentor may receive monetary compensation or contracting incentives and 
at DHS, the mentor may receive contracting incentives. SBA also has a 
mentor-protégé program that is specific to the 8(a) program and 
administered by the Office of Business Development and SBA's district 
offices. 

To promote greater competition within small business procurement, 
several agencies explained that they created internal contracting 
mechanisms. 

* For example, DOD-Navy created the SEAPORT-e initiative, which is a 
rolling admission program in which firms compete for contracts in 22 
types of naval services within seven geographic regions. 

* DHS and Commerce developed contracting vehicles to enhance small 
business participation in information technology contracts. 

* At Commerce-Census, Census officials explained they took specific 
efforts to involve small businesses as subcontractors in the upcoming 
2010 decennial census by requiring prospective prime contractors to 
submit a subcontract participation plan. 

[End of section] 

Appendix IV: Number of Form 70s and Appeals Filed by SBA's Procurement 
Center Representatives, Fiscal Years 2003-2007: 

As stated previously in this report, the responsibilities of the Small 
Business Administration's (SBA) procurement center representatives 
(PCR) include recommending that contracts be set aside for eligible 
small businesses. In 2002, we reported that the number of set-aside 
recommendations that PCRs were making decreased by half from fiscal 
years 1991 through 2001.[Footnote 75] Reasons for the decline during 
this period included downsizing (which decreased the number of PCRs), 
the reassignment of some PCRs to other roles, and the increased size of 
federal procurements that contributed to fewer set-aside opportunities 
for small businesses.[Footnote 76] We planned to update our 2002 
report; however, SBA stated they no longer electronically collected 
information on the number of set-asides. We were able to update 
information about the number of Form 70s and appeals that PCRs filed; 
the Form 70 reflects some level of discussion or disagreement between 
agencies and SBA about recommended set-asides. 

In instances where an agency does not accept a PCR's recommendation for 
a small business set-aside, the PCR may dispute the procurement through 
informal or formal means to the agency's procurement official. A PCR 
generally will issue an informal Form 70 after discussing the set-aside 
and reaching an agreement with the contracting officer to accept the 
recommended set-aside. If the PCR and contracting officer do not reach 
an agreement, the PCR submits a formal Form 70 to the contracting 
officer, which effectively stops the contract action, pending further 
consideration. If the procurement official refuses to accept the 
recommended set aside addressed in the Form 70, SBA can appeal the 
rejection first to the head of the contracting activity (the division 
within the agency purchasing the goods or services), then to the agency 
head (known as a secretarial appeal). 

From fiscal years 2003 through 2007, the number of informal form 70s 
increased approximately 71 percent and the number of formal form 70s 
decreased approximately 60 percent (see table 5). SBA officials 
explained their goal was to promote productive relationships with 
federal agencies and using informal complaints was more conducive to 
achieving this end. 

Table 5: Total Informal Form 70s, Formal Form 70s, and Appeals Filed, 
Fiscal Years 2003-2007: 

Number of informal Form 70s issued: 
FY 2003: 197; 
FY 2004: 344; 
FY 2005: 455; 
FY 2006: 452; 
FY 2007: 337; 
Totals: 1,785. 

Number of formal Form 70s issued: 
FY 2003: 53; 
FY 2004: 55; 
FY 2005: 41; 
FY 2006: 22; 
FY 2007: 21; 
Totals: 192. 

Number of Head of Contracting Activity appeals filed: 
FY 2003: 3; 
FY 2004: 8; 
FY 2005: 10; 
FY 2006: 5; 
FY 2007: 3; 
Totals: 29. 

Number of Secretarial appeals filed: 
FY 2003: 1; 
FY 2004: 3; 
FY 2005: 5; 
FY 2006: 3; 
FY 2007: 0; 
Totals: 12. 

Totals: 
FY 2003: 254; 
FY 2004: 410; 
FY 2005: 511; 
FY 2006: 482; 
FY 2007: 361. 

Source: SBA. 

[End of table] 

[End of section] 

Appendix V: Comments from the Small Business Administration: 

U.S. Small Business Administration: 
Washington, D.C. 20416: 

November 7, 2008: 

Mr. William B. Shear: 
Director: 
Financial Markets and Community Investment Team: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Shear: 

Thank you for allowing the U.S. Small Business Administration (SBA) the 
opportunity to comment on your Draft Government Accountability Office 
(GAO) Report Number: GAO-09-16, entitled, "Agency Should Assess 
Resources Devoted to Contracting and Improve Several Processes in the 
8(a) Program." 

SBA has reviewed your recommendations and the following response 
indicates the actions already taken or planned to address the issues 
outlined in the Report: 

Recommendation #1: 

SBA should assess resources allocated for Procurement Center 
Representative and Commercial Market Representative functions and 
develop a plan to better ensure that the staff can carry out their 
responsibilities. 

Response: SBA agrees with the recommendation. SBA is assessing 
statutory requirements and resources for developing of a plan to most 
effectively and efficiently fulfill those requirements. 

Recommendation #2: 

To better educate prospective applicants for the 8(a) program and 
maximize limited SBA resources during program tenure of participants, 
SBA should take additional steps to ensure that firms applying for the 
program understand its requirements, and have realistic expectations 
for participation. Such steps could include an education requirement, 
such as a seminar or assessment tool. 

Response: SBA agrees with the recommendation. In an effort to refocus 
the 8(a) Business Development Program to emphasize "business 
development" the Office of Business Development developed a "Plan to 
Provide Individualized Business Development Assistance to 8(a) Program 
Participants." This Plan outlines a methodology for: 1) assessing the 
individual business development needs of each 8(a) Participant and 2) 
provides an 8(a) Assessment Tool - which utilizes a comprehensive 
online approach to assess and provide ongoing tracking and follow up 
management, technical, financial, and procurement assistance to each 
8(a) Participant during its nine-year term. The plan includes the 
following components: 

* A Focus Group (comprised of representatives from SBA's Office of 
Business Development, Office of Entrepreneurial Development and Office 
of Field Operations, (OFO), along with representatives from the Small 
Business Development Centers - SBA's resource partners, and Business 
Development Specialists) has been assembled to review and provide 
feedback on the draft Plan and 8(a) Assessment Tool. 

* Secondly, in an effort to ensure that firms that are applying for 
8(a) Program certification understand its requirements and have 
realistic expectations, the Office of Business Development developed an 
online tool entitled: "Insight: Guide to the 8(a) Business Development 
Program." This online web based tutorial has been linked to the 8(a) 
application package in an effort to ensure that prospective applicants 
access and complete this tool prior to submitting an application for 
the 8(a) Program. In addition, the Office of Business Development 
developed an 8(a) Business Development Suitability Tool which is linked 
to the 8(a) application. This tool is available by visiting: 
[hyperlink, 
http://www.sba.gov/aboutsbalsbaprograms/8abd/application/index.html]. 

* This online course describes the 8(a) Program in detail and 
culminates with an eligibility self-assessment test. The test consists 
of a series of simple "yes/no" type questions that evaluate the degree 
to which the firm meets the basic eligibility criteria. If the firm 
meets the basic eligibility criteria, the firm can then apply to the 
8(a) Program via the electronic online system. If key criteria are not 
met, the prospective applicant is directed to the SBA resource deemed 
most appropriate to assist them in their business growth. The firms are 
still allowed to apply however, due to the statutory and regulatory 
requirements of the 8(a) Program. 

Recommendation #3: 

In acknowledgment of the competing demands for business development 
specialists to complete required annual reviews of 8(a) firms and 
support the mission of the 8(a) program - that is, develop and prepare 
small disadvantaged firms for procurement and other business 
opportunities, SBA should: 

3(a) assess the workload of business development specialists (BDS) to 
ensure that they can carry out their responsibilities. As part of such 
an assessment, SBA could review the size of the 8(a) portfolio for each 
BDS and determine what mechanisms can be used to prioritize or 
redistribute their workload; 

Response: SBA agrees with the recommendation. OFO will work with the 
Office of Human Capital Management (OHCM) to assess the workload of the 
BDS and their knowledge levels. This workforce analysis will be 
completed by the end of Fiscal Year 2009. Based upon this workforce 
analysis, OFO will work with the regional administrators and district 
directors to examine workloads and explore possible scenarios for the 
redistribution of certain portfolios. 

3(b) in a timely manner, develop and implement its proposed plan for 
creating tools that would assist in the provision of business 
development assistance for 8(a) firms; 

Response: The SBA agrees with this recommendation. The Office of 
Business Development anticipates that the "Plan to Provide 
Individualized Business Development Assistance to 8(a) Firms" will be 
implemented by March 2009. 

3(c) develop a timetable for planned changes to the termination process 
to ensure that staff monitoring 8(a) participants can carry out 
terminations from the program in a timely manner 

Response: The SBA agrees with this recommendation. The Office of 
Business Development revised Chapter 10 of its 8(a) Standard Operating 
Procedure (SOP) to ensure that actions to terminate a firm's 8(a) 
Program participation are processed in a timely manner. The guidance 
that is outlined in the revised Chapter 10 of the 8(a) SOP will reduce 
the processing timeframe by streamlining the termination process and 
utilizing resources of both the district office and the Office of 
Business Development. The Office of Business Development anticipates 
that Chapter 10 of the 8(a) SOP will be issued by December 2008. 
Concurrent with the release, the Office of Business Development will 
issue a Procedural Notice. 

Recommendation #4: 

To increase the usefulness of surveillance reviews for the 8(a) 
program, SBA should update its guidance to incorporate regular reviews 
of 8(a) contracting in the scope of the reviews. 

Response: The SBA agrees with this recommendation. The Standard 
Operating Procedures for surveillance reviews have been updated in line 
with the recommendation and were issued on September 26, 2008. 

Again, thank you for the opportunity to comment. If you have additional 
questions or comments, please contact Tiffani Cooper, GAO Liaison at 
(202) 205-6700. 

Sincerely, 

Signed by: 
Calvin Jenkins: 
Deputy Associate Administrator: 
Office of Business Development and Government Contracting: 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear, (202)-512-8678 or shearw@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Paul Schmidt (Assistant 
Director), Bernice Benta, Paula Braun, Tania Calhoun, Nadine Garrick, 
Fred Jimenez, Julia Kennon, Amanda Miller, Marc Molino, Barbara 
Roesmann, and William Woods made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Congress first enacted requirements for specific procurement goals 
for federal contracting for small businesses in 1988. Since then, these 
specific goals have been increased and extended to firms participating 
in various small business programs. The 8(a) program has no statutory 
goal, but 8(a) firms also are certified as SDBs. The current government-
wide goal for awarding prime contracts to SDBs and women-owned 
businesses is 5 percent, and HUBZones and service-disabled veteran-
owned businesses each have a goal of 3 percent. For instance, under the 
HUBZone program, certain small businesses located in economically 
distressed communities may be eligible for set-aside and "sole-source" 
contracts. Women-owned businesses must be at least 51 percent owned and 
controlled by women. Currently, there are no set-aside contracts for 
women-owned businesses. Service-disabled veteran-owned businesses must 
be at least 51 percent owned and controlled by service-disabled 
veterans and can be eligible for certain set-aside and sole-source 
contracts. 

[2] 15 U.S.C.§ 644k. The Department of Defense renamed its Office of 
Small Disadvantaged Business the Office of Small Business Programs. For 
simplicity, we use the term OSDBU for all agencies in our study. 

[3] SBA's DPCE certifies 8(a) firms and is centralized in two regional 
offices (San Francisco, Calif., and Philadelphia, Pa.). 

[4] SBA released the second results and progress scorecard at the 
beginning of fiscal year 2009 on October 22, 2008. 

[5] The Federal Acquisition Regulation requires executive departments 
and agencies to collect and report procurement data to FPDS-NG. The 
government uses the reported data to measure and assess the impact of 
federal procurement on the nation's economy, the extent to which awards 
are made to businesses in the various socioeconomic categories, and the 
impact of full and open competition on the acquisition process. 

[6] As of September 2007, SBA had 340 full-time equivalent BDSs. SBA 
officials explained this number might not be a true representation of 
the number of BDSs that work within the 8(a) program because district 
offices have discretion in how they use their staff and it is not clear 
by job title which BDSs work within the 8(a) program. 

[7] SBA's mentor-protégé program is designed to encourage approved 
mentors to provide various forms of assistance to eligible protégé 
participants. The purpose of the mentor-protégé relationship is to 
enhance the capabilities of the protégés and improve their ability to 
successfully compete for federal contracts. 

[8] As of May 2008, 67 of the 68 district offices had 8(a) portfolios. 
In addition to BDSs who work with 8(a) firms, district office staff 
include BDSs who work with other SBA business assistance programs and 
staff who work primarily with lenders. 

[9] Through the 7(j) Management and Technical Assistance Program, SBA 
provides qualifying businesses with counseling and training in the 
areas of financing, business development, management, accounting, 
bookkeeping, marketing, and other small business operating concerns. 

[10] 13 C.F.R. § 124.103. 

[11] To meet the "potential for success" requirement, firms must be in 
business for 2 full years immediately prior to the date of application 
and present supporting documentation for SBA's analysis or apply for a 
waiver to the 2-year rule and demonstrate that they meet certain 
conditions, including (1) business management experience, (2) technical 
expertise, (3) adequate capital, (4) a record of successful contract 
performance, and (5) the ability to obtain the resources necessary to 
perform contracts. Firms also must provide documentation on the 
applicant's business and its owners, including business and personal 
financial statements and business and personal tax returns. 

[12] The 9-year program tenure is divided into two stages--a 
developmental stage covering years 1 through 4 and a transitional stage 
covering years 5 through 9. During the transitional years, firms are 
required to obtain certain levels of non-8(a) contracts to ensure they 
do not develop an unreasonable reliance on the program. 

[13] See app. II for more information on SDBs. 

[14] However, SBA generally may award a sole-source 8(a) contract to an 
8(a) firm owned and controlled by an Indian tribe or an Alaska Native 
Corporation where the value of the procurement exceeds the competitive 
dollar threshold. If it is DOD procurement, this exemption extends to 
Native Hawaiian Organizations. 

[15] In a prior report, we stated it can be difficult to identify how 
many contract dollars firms received based on a particular 
socioeconomic program because agencies can count contracting dollars 
awarded to small businesses under more than one socioeconomic program. 
See GAO, Small Business Administration: Additional Actions Are Needed 
to Certify and Monitor HUBZone Businesses and Assess Program Results, 
[hyperlink, http://www.gao.gov/products/GAO-08-643] (Washington, D.C.: 
June 17, 2008). 

[16] To get their goal base, agencies would estimate their total prime 
contract dollars for the next fiscal year using their prior fiscal year 
procurement budget and estimate any increases or decreases in the 
procurement budget and then exclude certain categories. Excluded 
categories not counted in the goal base include nonappropriated funds, 
internal transactions, mandatory sources, contracts for foreign 
governments or international organizations, contracts overseas, and 
contracts not subject to the Federal Acquisition Regulation. Then, the 
agency would propose goals based on the agency average achievement over 
3 years but also take into account the government-wide statutory goals 
for each of the socioeconomic categories. 

[17] In 1974, Congress established OFPP in the Office of Management and 
Budget to provide overall direction of government-wide procurement 
policies, regulations, and procedures for executive agencies and to 
promote economy, efficiency, and effectiveness in federal procurements. 

[18] Members of the advisory council include the OSDBU directors from 
the 24 agencies with procurement authority. 

[19] More specifically, the agency had to meet the following criteria-
-development of an agency strategy to increase the number of 
competitively awarded contracts to small business; demonstrated 
commitment to small business contracting at the higher levels of the 
agency (at the Secretary, Administrator, or Director level); 
cooperative work with SBA on outreach and targeting initiatives; a 
record of meeting deadlines for all required strategic plans and annual 
reports due to SBA; and a process to ensure that small business data 
are accurately reported in FPDS-NG and that small business 
subcontracting plans are enforced. 

[20] SBA officials explained the fiscal-year end results of the 
scorecard cannot be determined until all agencies certify their goaling 
data, which was certified by June 30, 2007. They are working to have 
the data certified by December 31 to ensure more timely reporting for 
future scorecards. 

[21] SBA released the second results and progress scorecard at the 
beginning of fiscal year 2009 on Oct. 22, 2008. 

[22] As mentioned earlier, SBA negotiated annual procurement goals with 
each federal agency so that, cumulatively, the government-wide goal 
could be met or exceeded. 

[23] The 23 percent goal is statutory and was raised from 20 percent 
when the HUBZone socioeconomic goal was added in 1997. The HUBZone goal 
has been 3 percent as of fiscal year 2003. 

[24] We do not have DHS data from all the years we analyzed because the 
department was formed on Mar. 1, 2003. 

[25] SBA officials explained that they have not negotiated the 8(a) 
goal since 2007 because it is not a statutory goal. 

[26] GAO, Small Business Administration: Opportunities Exist to Build 
on Leadership's Effort to Improve Agency Performance and Employee 
Morale, [hyperlink, http://www.gao.gov/products/GAO-08-995] 
(Washington, D.C.: Sept. 24, 2008). 

[27] The SBA employee numbers from the 1990s to 2007 do not include 
employees in SBA's Office of Disaster Assistance because these numbers 
fluctuate from year to year and include temporary employees, depending 
on the disaster assistance workload. These numbers also do not include 
employees in SBA's Office of the IG. 

[28] A buying activity can be a federal agency or divisions within 
federal agencies that purchase goods and services. For example, in DOD, 
the Naval Air Warfare Center represents a buying activity. 

[29] In its budget request for fiscal year 2008, SBA proposed to fund 
five additional PCRs. House Small Business Committee, Testimony of SBA 
Deputy Administrator Jovita Carranza, 110th Congress, 2nd sess., Sept. 
19, 2007. 

[30] Total procurement actions can include definitive contracts; 
purchase orders; indefinite delivery vehicles; and all calls and orders 
awarded under the indefinite delivery vehicle, over the micro-purchase 
threshold (which is generally $3,000 but there are exceptions) plus all 
modifications to these actions regardless of dollar value, which do not 
all require PCR review. 

[31] GAO, Small Business Set-Asides: Information on the Number of Small 
Business Set-Asides Issued and Successfully Challenged, [hyperlink, 
http://www.gao.gov/products/GAO-03-242R] (Washington, D.C.: Nov. 1, 
2002). 

[32] SBA officials explained the agency is looking into other ways to 
assess PCR performance and plans to develop a system to track PCR 
performance in fiscal year 2009. 

[33] See app. IV for more information on the use of Form 70s from 
fiscal years 2003 through 2007. 

[34] House Small Business Committee, Testimony of SBA Deputy 
Administrator Jovita Carranza, 110th Congress, 2nd sess., Sept. 19, 
2007. 

[35] House Committee on Small Business, Testimony by SBA Administrator 
Steve Preston, 110th Congress, 2nd sess., Feb. 7, 2008. 

[36] We visited four of the six area offices in SBA. 

[37] SBA, Review of SBA's Subcontracting Assistance Program, Audit 
Report No. 7-33 (Washington, D.C., Sept. 28, 2007). 

[38] The Office of Government Contracting conducts size determinations 
and Certifications of Competency (CoC). SBA conducts small business 
size determinations when, for example, a contracting officer or another 
interested party challenges the size of a small business in connection 
with a particular procurement. Under the CoC program, SBA conducts a 
detailed review of a small business to evaluate its responsibility to 
receive and perform a specific procurement. If SBA determines that a 
CoC is warranted, SBA notifies the contracting officer for the specific 
contract. The officer can accept the CoC for the small business and 
award the contract or may ask SBA for further review. SBA ultimately 
has conclusive authority to issue or refuse to issue a CoC for a small 
business. 

[39] 13 C.F.R. § 124.1. 

[40] That is, BDMIS was operational in all the district offices, 
allowing 8(a) applicants and participants to submit information 
electronically and BDSs to review the documentation electronically. By 
September 30, 2008, SBA stated it will convert paper applications 
currently in process and other paper files to BDMIS-compatible format. 
However, SBA stated that, by law, it must continue to accept paper 
applications. When an applicant submits a paper application (does not 
apply through BDMIS), a BDS will need to enter the data manually into 
BDMIS for it to be processed. In addition, in an effort to prevent 
fraud, SBA's Office of General Counsel and Office of IG still require 
applicants to submit signed forms and required supplemental 
documentation. 

[41] To ensure that 8(a) participants do not continue to rely on 8(a) 
contract awards following graduation from the program, SBA requires 
that they obtain certain levels of non-8(a) contracts. SBA establishes 
these non-8(a) business activity targets based on the participant's 
program year. 

[42] Currently, SBA partners with SCORE (formerly the Service Corps of 
Retired Executives), Small Business Development Centers, Women's 
Business Centers, and other organizations to provide training, 
counseling, and other assistance to small businesses. 

[43] The 8(a) firms are assigned to district offices based on their 
geographic location. However, 8(a) firms that are in the construction 
industry are assigned based on the location of the construction. 

[44] As of May 2008, 67 of 68 district offices had an 8(a) portfolio. 

[45] Pub. L. No. 100-656, § 209, 102 Stat. 3853, 3863 (1988), codified 
at 15 U.S.C. § 637(a)(6)(B). The requirement to complete annual reviews 
of all program participants, along with other provisions in the law, 
was intended to prevent firms that were not the intended beneficiaries 
of the program from participating in the program. 

[46] The agenda emphasized (1) meeting all compliance requirements, (2) 
ensuring that all SBA's programs operated efficiently and effectively, 
(3) improving communication, and (4) providing effective training. 

[47] The agreement also states that if SBA does not respond to the 
agency within that time frame, the agency can proceed with the 
procurement. 

[48] We were unable to assess the extent of business development 
assistance provided to firms because SBA has not implemented its 
tracking system to date. 

[49] SBA IG, Business Development Provided By SBA's 8(a) Business 
Development Program, Report Number 4-22, June 2, 2004. 

[50] The assessment tool will allow a firm to answer a series of 
questions on a number of management and business skills. Further, SBA 
officials stated the BDMIS will assist SBA in addressing the purpose of 
the 8(a) program, meet the needs and expectations of the firms in the 
program, and improve SBA's ability to automate and streamline various 
processing functions. GAO and SBA IG reports have cited a lack of 
tracking in place to measure the level of business development 
assistance provided. See GAO, Small Business: SBA Could Better Focus 
Its 8(a) Program to Help Firms Obtain Contracts, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-196] (Washington, D.C.: July 
20, 2000) and SBA IG, Report Number 4-22. 

[51] A firm may withdraw from the program at any time. SBA also may 
graduate a participant early if it determines that the firm has 
completed the program successfully by substantially achieving the 
targets, objectives, and goals in its business plan and has 
demonstrated the ability to compete in the marketplace without the 
program's assistance, or no longer meets the economically disadvantaged 
criteria. 

[52] SBA Office of Business Development, 2006 Report to Congress. SBA 
submits annual reports to Congress on the status of former 8(a) 
participants, including those that have completed the program as well 
as those that have exited the program through termination, early 
graduation, and voluntary withdrawal. 

[53] Between 2003 and 2007, SBA conducted 94 surveillance reviews (59 
within DOD) but did not conduct any reviews from 1994 to 2002 due to a 
suspension of the program as a result of budget constraints. 

[54] SBA Standard Operating Procedure 60 02 7, Prime Contracts Program, 
Oct. 8, 2004. 

[55] SBA, Audit of Monitoring Compliance with 8(a) Business Development 
Regulations During 8(a) Business Development Contract Performance, 
Audit Report No. 6-15 (Washington, D.C., Mar. 16, 2006). 

[56] The total agency staff numbers are as of August 2008. 

[57] GAO, Small Business Set-Asides: Information on the Number of Small 
Business Set-Asides Issued and Successfully Challenged, [hyperlink, 
http://www.gao.gov/products/GAO-03-242R] (Washington, D.C.: Nov. 1, 
2002). 

[58] P.L. 95-507, Small Business Act, section 15 as amended, 1978 
(U.S.C.§ 644). 

[59] At the end of fiscal year 2008, SBA had 68 district offices. The 
district offices are responsible primarily for administering SBA's 8(a) 
program and 67 had 8(a) portfolios as of May 2008. In addition to 
business development specialists (BDS) who work with 8(a) firms, 
district office staff include BDSs who work with other SBA business 
assistance programs and staff who work primarily with lenders. 

[60] As of September 2007, SBA had 340 full-time equivalent BDSs. SBA 
officials explained this number might not be a true representation of 
the number of BDSs that work within the 8(a) program because district 
offices have discretion in how they use their staff and it is not clear 
by job title which BDSs work within the 8(a) program. 

[61] We refined our file selection methodology after visiting the 
Atlanta District Office and did not request contract information at 
that location. We randomly selected two firms by graduation year and 
also two firms in SBA's mentor-protégé program, which is designed to 
encourage approved mentors to provide various forms of assistance to 
eligible protégé participants. The purpose of the mentor-protégé 
relationship is to enhance the capabilities of the protégés and to 
improve their ability to successfully compete for federal contracts. 

[62] The program, established by Section 1207 of the Act and codified 
at 10 U.S.C. § 2323, has been reenacted several times, most recently in 
2006. On November 4, 2008, the U.S. Court of Appeals for the Federal 
Circuit held that Section 1207, i.e., 10 U.S.C. § 2323, as reenacted in 
2006, is unconstitutional. Rothe Development Corp. v. Department of 
Defense and Department of the Air Force, C.A.F.C. No. 2008-1017 (2008 

[63] In Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995), the 
Supreme Court held that all federal affirmative action programs that 
use racial classifications are subject to strict judicial scrutiny. To 
meet this standard, a program must be shown to meet a compelling 
governmental interest and must be narrowly tailored to meet that 
interest. 

[64] GAO, Small Business: Status of Small Disadvantaged Business 
Certifications, [hyperlink, http://www.gao.gov/products/GAO-01-273] 
(Washington, D.C.: Jan. 19, 2001). 

[65] We interviewed officials at Commerce, DOD, DHS, and SSA. We 
selected these agencies--a nongeneralizable sample--based on the amount 
of contracting dollars they awarded to small disadvantaged businesses 
and the ratings they received on SBA's inaugural scorecard (for fiscal 
year 2006) that evaluated agencies' performance on the various small 
business goals. 

[66] To qualify for the 8(a) program, a firm must be at least 51 
percent owned and controlled by an individual who meets SBA's criteria 
of socially and economically disadvantaged. Firms in the 8(a) program 
are eligible to receive competitive and sole-source set-asides. Under 
the HUBZone program, certain small businesses located in economically 
distressed communities may be eligible for set-aside and "sole-source" 
contracts. Women-owned businesses must be at least 51 percent owned and 
controlled by women. Currently, there are no set-aside contracts for 
women-owned businesses. Service-disabled veteran-owned businesses must 
be at least 51 percent owned and controlled by service-disabled 
veterans and can be eligible for certain set-aside and sole-source 
contracts. 

[67] SBA's interim rule shifts the responsibility of certifying firms 
as SDBs to those limited agencies that have the authority and choose to 
use PEAs, instead of requiring the 20 agencies that had Economy Act 
agreements with SBA to fund this service. In addition, the rule allows 
SDB firms to self-represent their status for subcontracting purposes. 
The rule stated that SBA took this action because only NASA and the 
Coast Guard were able to use the SDB PEA and their use of the PEA had 
been minimal. As a result, SBA did not believe that certifying SDBs 
government-wide was effective or efficient. Further, some agencies 
notified SBA they would not reimburse SBA for this service, as required 
through Economy Act agreements. The rule also stated SBA cannot use its 
own funds to support the certification because it is not a program but 
a service SBA agreed to provide through Economy Act agreements. 

[68] SBA has established and revised numerical size standard 
definitions for all for-profit industries that are generally stated 
either as the number of employees or average annual receipts of a firm. 
In addition to establishing eligibility for SBA programs, all federal 
agencies must use SBA's size standards for the federal government 
contracts it identifies as a small business. 

[69] The Federal Acquisition Regulation requires executive departments 
and agencies to collect and report procurement data to FPDS-NG. The 
government uses the reported data to measure and assess the impact of 
federal procurement on the nation's economy, the extent to which awards 
are made to businesses in the various socioeconomic categories, and the 
impact of full and open competition on the acquisition process. 

[70] We interviewed officials at Commerce, DOD, DHS, and SSA. We 
selected these agencies--a nongeneralizable sample--based on the amount 
of contracting dollars they awarded to small disadvantaged businesses 
and the ratings they received on SBA's inaugural scorecard (for fiscal 
year 2006) that evaluated agencies' performance on the various small 
business goals. 

[71] DOD changed the name from OSDBU to the Office of Small Business 
Programs. For simplicity, we use the term OSDBU for all agencies we 
reviewed. 

[72] SSA was assigned a new PCR who worked with SSA management to 
implement changes to increase the number of contract actions eligible 
for review by the SSA OSDBU director. 

[73] 15 U.S.C. § 644(k)(3). See also GAO, Small and Disadvantaged 
Businesses: Some Agencies' Advocates Do Not Report to the Required 
Management Level, GAO-03-863 (Washington, D.C.: Sept. 4, 2003). 

[74] SBA was not included in the study. The scope of the review 
included 24 agencies that procured $200 million or more in goods and 
services in fiscal year 2001. DHS was not included in the 2003 report 
since it had not been created yet. 

[75] GAO, Small Business Set-Asides: Information on the Number of Small 
Business Set-Asides Issued and Successfully Challenged, [hyperlink, 
http://www.gao.gov/products/GAO-03-242R] (Washington, D.C.: Nov. 1, 
2002). 

[76] SBA plans to develop a PCR tracking system in fiscal year 2009. 

[End of section] 

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