Contract Management: Increased Use of Alaska Native Corporations' Special 8(a) Provisions Calls for Tailored Oversight
GAO-06-399
Published: Apr 27, 2006. Publicly Released: Apr 27, 2006.
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Highlights
Alaska Native corporations (ANC) were created to settle land claims with Alaska Natives and foster economic development. In 1986, legislation passed that allowed ANCs to participate in the Small Business Administration's (SBA) 8(a) program. Since then, Congress has extended special procurement advantages to 8(a) ANC firms, such as the ability to win sole-source contracts for any dollar amount. This report identifies (1) trends in the government's 8(a) contracting with ANC firms, (2) the reasons agencies have awarded 8(a) sole-source contracts to ANC firms and the facts and circumstances behind some of these contracts, and (3) how ANCs are using the 8(a) program. GAO also evaluated SBA's oversight of 8(a) ANC firms.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Small Business Administration | When revising relevant regulations and policies, the Administrator of SBA should ascertain and then clearly articulate in regulation how SBA will comply with existing law to determine whether and when one or more ANC firms are obtaining, or are likely to obtain, a substantial unfair competitive advantage in an industry. |
In our most recent report on tribal participation in the 8(a) program (GAO-12-84, issued January 31, 2012), we determined that SBA still was not complying with the law to determine whether one or more ANC firms are obtaining, or are likely to obtain, a substantial unfair competitive advantage in an industry. SBA officials told us that they are in the early stages of drafting a policy that will outline the process for making determinations of unfair competitive advantage. As a result, in our 2012 report, we recommended that SBA establish and communicate to Congress a timeframe for developing and implementing SBA's new, planned policy on this issue. Because we made this new recommendation to SBA, we are closing this recommendation as not implemented. However we will continue to track SBA's progress on implementing the new policy in response to our 2012 recommendation.
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| Small Business Administration | When revising relevant regulations and policies, the Administrator of SBA should in regulation, specifically address SBA's role in monitoring ownership of ANC holding companies that manage 8(a) operations to ensure that the companies are wholly owned by the ANC and that any changes in ownership are reported to SBA. |
SBA issued a Procedural Notice (8000-633) on 11/18/08, entitled, "Oversight of 8(a) Program Participants." The Notice reiterated and emphasized the District Office's responsibility, in conjunction with conducting a Participant's Annual Review, to identify whether any changes (and ensuring that these changes are properly reported to SBA) have been made by the 8(a) Participant to management agreements or other corporate documents, that may affect the Participant's continued eligibility. Further, the Participation Agreement signed by the 8(a) participant upon 8(a) Program admission outlines the requirement that 8(a) participants inform SBA of any changes in the firm's business structure. After review of the procedural notice and participation agreement, we agree that the recommendation has been adequately addressed.
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| Small Business Administration | When revising relevant regulations and policies, the Administrator of SBA should collect information on ANCs' 8(a) participation as part of required overall 8(a) monitoring, to include tracking the primary revenue generators for 8(a) ANC firms to ensure that multiple subsidiaries under one ANC are not generating their revenue in the same primary industry. |
The recommendation is being closed as not implemented. In our recent report on tribal participation in the 8(a) program (GAO-12-84) we recommended that the Small Business Administration develop a system to track primary and secondary revenue generators to ensure that that subsidiaries under the same parent company are not generating the majority of their revenue from the same primary industry. As a result, we are closing this recommendation as not implemented.
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| Small Business Administration | When revising relevant regulations and policies, the Administrator of SBA should revisit regulation that requires agencies to notify SBA of all contract modifications and consider establishing thresholds for notification, such as when new North American Industry Classification System codes are added to the contract or there is a certain percentage increase in the dollar value of the contract. Once notification criteria are determined, the Administrator of SBA should provide guidance to the agencies on when to notify SBA of contract modifications and scope changes. |
Although we recommended that SBA re-visit whether notification of all modifications and scope changes was necessary and then, once criteria were determined, that it provide guidance to agencies on when to notify SBA, SBA says that they have implemented the recommendation because they reiterated the previously existing requirement in the revised partnership agreements that federal agencies notify SBA of all contract modifications and scope changes. They also noted that this requirement was discussed in the partnership agreement training conducted with federal agencies. We do not consider this recommendation implemented because they have not re-visited this regulation requirement, but simply reiterated the pre-existing requirement to provide everything, including administrative modifications, to SBA. Further, although reiterating it in the partnership agreement is a step toward reminding agencies of this requirement, it does not ensure that agencies are going to comply with this requirement, which was the situation we found in the contracts we reviewed. Based on this, we are closing this recommendation as not implemented.
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| Small Business Administration | When revising relevant regulations and policies, the Administrator of SBA should consistently determine whether other small businesses are losing contracting opportunities when awarding contracts through the 8(a) program to ANC firms. |
In an August 2009 response, SBA states that it reviewed data from the Federal Procurement Data System that does not indicate that other small firms are losing contracting opportunities to ANC-owned 8(a) firms. It cites the data that from fiscal year 2004 to 2008, various other groups of 8(a) companies (black-owned, hispanic-owned and others) experienced an increase in 8(a) contracts. This information does not address our recommendation. First, the recommendation is to "consistently" determine whether other small businesses are losing contracting opportunities, and SBA does not have a procedure in place to consistently examine this issue. Further, the growth rate of other groups of 8(a) owners does not provide any indication that they are not losing contracting opportunities to ANC 8(a) firms--especially in light of the significant growth of contracts to ANC 8(a) firms. As a result of this, we are closing this recommendation as not implemented.
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| Small Business Administration | To improve practices pertaining to SBA's oversight, the Administrator of SBA should standardize approval letters for each 8(a) procurement to clearly assign accountability for monitoring of subcontracting and for notifying SBA of contract modifications. |
SBA issued a procedural notice, effective October 1, 2009, the purpose of which is to provide standardization and uniformity related to SBA's acceptance of requirements into the 8(a) program. The notice included a sample standardized acceptance letter, which clearly states that it is the agency's responsibility to monitor compliance with the subcontracting regulations.
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| Small Business Administration | To improve practices pertaining to SBA's oversight, the Administrator of SBA should tailor wording in approval letters to explain the basis for adverse impact determinations. |
SBA issued a procedural notice, effective October 1, 2009, that re-iterates and clearly states the purpose of an adverse impact determination.
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| Small Business Administration | To improve practices pertaining to SBA's oversight, the Administrator of SBA should clarify memorandums of understanding with procuring agencies to state that it is the agency contracting officer's responsibility to monitor compliance with the limitation on subcontracting clause. |
In August 2007, SBA provided a copy of a revised partnership agreement which has new language stating that the procuring agency is responsible for monitoring, oversight, and compliance with procurement laws and regulations governing 8(a) contracts between SBA and the agency. New provisions state that the contracting officer shall monitor compliance with applicable regulations including those in FAR Part 52, which includes the limitations on subcontracting clause.
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| Small Business Administration | To improve practices pertaining to SBA's oversight, the Administrator of SBA should evaluate staffing levels and training needed to effectively oversee ANC participation in the 8(a) program and take steps to allocate appropriate resources to the Alaska district office. |
SBA stated that it has evaluated staffing levels and as a result, hired a business development specialist in Alaska to oversee 8(a) ANC participation. Further, this person does not report to the district office chain of command, she reports to to the San Fransisco field office, which is a different chain of command. According to SBA officials, this provides additional safeguards to ensure better oversight of ANC participation in the 8(a) program.
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| Small Business Administration | To improve practices pertaining to SBA's oversight, the Administrator of SBA should provide more training to agencies on the 8(a) program, specifically including a component on ANC 8(a) participants. |
6/11/08: SBA hosted a procurement roundtable on October 31, 2007, targeting the 7 major federal agencies covered in our review (DOD, NASA, DOE, Interior, State, Transportation, and Homeland Security. On Dec. 7, 2007, SBA held two one-on-one procurement roundtable with DOD and NASA. On Feb. 7, 2008, SBA conducted nationwide training for procurement officials at DOD and on March 26, 2008, conducted training (which focused on 8(a) ANC-owned firms) for procurement officials at the Defense Contract Management Agency. On May 14, SBA held one-on-one procurement roundtables with Homeland Security and Energy, and plans to hold roundtables with State and Interior on June 26, 2008.
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| Department of Energy | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
The Department of Energy (DOE) did not specifically comment on the recommendation in agency comments but an audit history report later provided by DOE showed management's concurrence. According to DOE, since May 2006 it has taken various actions in response to the recommendation--issuing guidance to contracting officers on oversight of ANC contracts, conducting in-house training on the 8(a) program, and reaching out to SBA regarding joint participation in training. Specifically, on May 24, 2006, DOE revised DOE Acquisition Letter AL-2005-08, regarding small business programs to remind contracting officers to use care in awarding and administering ANC contracts--to include notifying SBA of contract modifications and monitoring the limits on subcontracting. In July 2006--and in preparation for in-house training on the 8(a) program including contracting with ANC firms--DOE's Office of Procurement and Assistance Policy reached out to SBA regarding the status of the training recommendation directed to SBA. At that time, SBA stated it was in the process of developing an 8(a) training program for contracting officers and small businesses, but expressed interest in participating in the DOE in-house training. DOE's Office of Procurement and Assistance Policy later provided training on December 13, 2006.
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| Department of Transportation | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
Transportation agreed with the recommendation on October 31, 2007, transportation officials participated in a procurement roundtable forum on 8(a) ANC corporations specifically to discuss the key issues raised in our report and to create a list of follow up actions to help address those issues. SBA agreed to provide more training, and the agencies involved in the roundtable discussion agreed to share procedures in place and best practices to monitor compliance with the limits on subcontracting and other issues identified in our report.
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| Department of the Interior | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
Interior agreed with the recommendation and on October 31, 2007, an Interior official participated in a procurement roundtable forum on 8(a) ANC corporations specifically to discuss the key issues raised in our report and to create a list of follow up actions to help address those issues. SBA agreed to provide more training, and the agencies involved in the roundtable discussion agreed to share procedures in place and best practices to monitor compliance with the limits on subcontracting and other issues identified in our report. Further, SBA reported a follow-up meeting to the roundtable discussion on June 26, 2008.
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| Department of Defense | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
DOD worked with SBA through participation in a roundtable discussion and by having DOD procurement officials receive SBA training on the 8(a) program. On October 31, 2007, a DOD official attended a procurement roundtable forum on 8(a) ANC corporations specifically to discuss the key issues raised in our report and to create a list of follow up actions to help address those issues. SBA agreed to provide more training, and the agencies involved in the roundtable discussion agreed to share procedures in place and best practices to monitor compliance with the limits on subcontracting and other issues identified in our report. Further, SBA reported providing training to procurement officials at DOD on 2/7/08 as part of the follow-up.
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| Department of Homeland Security | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
DHS agreed with the recommendation and said it would partner with the Small Business Administration to ensure its contracting officers understand the 8(a) regulations. DHS has taken action in response to the recommendation. DHS issued "DHS Acquisition Alert 07/15," which issues guidance to contracting offices on proper use and issuance of ANC contracts. First, to ensure that an ANC-owned firm is in compliance with the FAR's limitations on subcontracting, the guidance instructs DHS contracting officers to require ANC-owned firms to report on the percentage of work that they are performing. Second, the guidance directs DHS contracting officers to coordinate with DHS small business offices and SBA, as appropriate. Third, the guidance requires that contracting offices receive the appropriate training, as required in the DHS/SBA partnering agreement.
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| Department of State | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
State agreed with the recommendation and on October 31, 2007, a state official participated in a procurement roundtable forum on 8(a) ANC corporations specifically to discuss the key issues raised in our report and to create a list of follow up actions to help address those issues. SBA agreed to provide more training, and the agencies involved in the roundtable discussion agreed to share procedures in place and best practices to monitor compliance with the limits on subcontracting and other issues identified in our report. Further, SBA reported a follow-up meeting to the roundtable discussion on June 26, 2008.
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| National Aeronautics and Space Administration | To ensure that agencies are properly overseeing ANC 8(a) contracts, the Secretaries of the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation and the Administrator of the National Aeronautics and Space Administration should work with SBA to develop guidance to agency contracting officers on how to comply with requirements of the 8(a) program such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. |
On March 27, 2006, NASA provided us with a new SBA Partnership agreement and an analysis from an SBA attorney that shows how the new partnership agreement addresses this recommendation. Specifically, the new partnership agreement clearly states the responsibilities of SBA and NASA in overseeing the contracts. NASA agrees to inform its contracting officers and other warranted officials of their responsibilities concerning the partnership agreement and agrees to report all 8(a) contract awards, modifications, and options to SBA. Further, NASA agrees to ensure that all its contracting officers and small business specialists participate in 8(a) program contract training by SBA, which will include the limitations on subcontracting requirement and SBA's regulations as they pertain to 8(a) participants, including ANC 8(a) participants.
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