The Office of the Inspector General (“IG”) for the Small Business Administration (“SBA”) released a report last month detailing its findings from an agency-wide audit of the Women-Owned Small Business Contracting Program (“Program”). The Program provides greater access to federal contracting opportunities for women-owned small businesses (“WOSBs”) and economically disadvantaged women-owned small businesses (“EDWOSBs”) that meet Program requirements. The IG found that an astounding 81% of the audited contracts awarded on a sole-source basis (i.e., without competitive bidding) within a sixteen-month time-period from 2016 to 2017 may have been given to firms that were ineligible for the Program. The total value of the contracts awarded to potentially ineligible firms exceeds more than $52 million.
Previous audits conducted in 2015 by the SBA IG and in 2014 by the U.S. Government Accountability Office (“GAO”) warned that the Program was vulnerable to fraud without changes to its certification process. Unfortunately, the SBA failed to make those changes.
The IG found that contracting officers—the federal employees responsible for awarding contracts to firms—did not comply with federal regulations for fifty of the fifty-six set-aside contracts awarded on a sole-source basis. The contracts studied under the audit were all valued individually at equal to or greater than $250,000. Further, the fifty firms that received those contracts did not comply with the Program’s self-certification requirements, leaving no assurance that federal funds were given to eligible WOSB or EDWOSB firms.
The IG audit lists examples of other missing documentation, including WOSB and EDWOSB self-certifications, birth certificates, and mandatory financial information. Indeed, eighteen of the fifty-six contracts, valued at $11.7 million in total, were awarded on a sole-source basis to firms that uploaded no documentation to Certify.SBA.gov, the SBA’s online platform for federal contracting program applications.
The 2015 GAO report explicitly recommended better training for contracting officers because of a lack of understanding regarding SBA certifying procedures. The SBA agreed with that recommendation. However, according to the recent IG audit, one contracting officer, who awarded contracts to firms that had not uploaded any documentation in Certify.SBA.gov, told the IG that “he was not aware of the requirement to verify documents in Certify.SBA.gov.” Other contracting officers incorrectly coded contracts as sole-source contracts. These officers handle awards worth hundreds of thousands of taxpayer dollars, and the numerous mistakes show a vulnerability that the SBA knew it should have addressed.
Just as it did in 2015, the SBA agreed with the IG’s latest assessment and findings. The agency’s intended actions, however, will not rectify the deficiencies identified by the IG. For example, the SBA acknowledged it needed to initiate debarment proceedings for ineligible firms and implement a certification requirement, but it does not anticipate finishing those tasks until summer 2020. The SBA also refused to implement the IG’s recommendation that would strengthen controls to prevent contracting officers from inappropriately coding contracts, instead arguing that the “recommendation is vague and would not likely help the [P]rogram.”
In perhaps the most interesting point of dissent, the SBA argued that “the audit findings unnecessarily rely on unverified and/or refuted data.” In response, the IG pointed out the problem with the SBA’s criticism:
The [data] that we used to conduct this audit was the same data the SBA relies on to formulate the Small Business Goaling Report, which is submitted to Congress and other stakeholders. If the SBA is admitting that the data it uses is inaccurate, the SBA should immediately communicate this inaccuracy to Congress to ensure that all stakeholders understand the SBA’s use of inaccurate data when assessing the Federal Government’s achievement of small business procurement goals.
Either the SBA is knowingly using inaccurate data in its federal reports, or its criticism of the IG report is fundamentally dishonest.
The Program was designed to expand federal contracting opportunities for WOSBs and EDWOSBs. Inflating the competition pool with ineligible businesses reduces the Program’s effectiveness and diminishes the opportunity for WOSBs and EDWSOBs to succeed as the Program intended. Americans deserve an efficient and effective government. Washington bureaucrats spend our money, and they owe it to us to make sure that contracts and funds are properly awarded to eligible businesses. The SBA must fix its mistakes—its negligence is inexcusable.
Chris Klein is a Research Fellow at Cause of Action Institute
