GAO said it has identified $325 million in set-aside and sole-source contracts given to firms not eligible for the Small Business Administration’s 8(a) program, which is designed to give economically disadvantaged small businesses access to federal contracting opportunities.
To participate, firms must be at least 51 percent owned and controlled by an individual who meets SBA’s criteria as disadvantaged and the firm must also qualify as a small business.
Most of the ineligible firms got their contracts via fraud, GAO said. In the 14 cases GAO investigated, numerous instances were found where 8(a) firm presidents made false statements, such as underreporting income or assets, to either qualify for the program or retain certification, according to GAO-10-425.
While the program did deter some applicants via cross checking with third-party credit bureaus and an “excluded parties list system,” GAO found that in some cases when SBA identified ineligible contractors it failed to take action.
The lack of a consistent enforcement strategy or any real consequences for fraud and abuse is a further weakness in SBA’s fraud prevention program, said GAO.
It called on SBA to assess the workload of business development specialists, make it harder for firms to participate if an immediate family member is, or has been, an 8(a) participant in the same line of work, and to develop a more consistent means of suspending or debarring contractors who try to game the program.
