Federal Contracting:

Slow Start to Implementation of Justifications for 8(a) Sole-Source Contracts

GAO-13-118: Published: Dec 12, 2012. Publicly Released: Dec 12, 2012.

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What GAO Found

The National Defense Authorization Act (NDAA) for Fiscal Year 2010 required that the Federal Acquisition Regulation (FAR) be amended within 180 days after enactment to require justifications for 8(a) sole-source contracts over $20 million. These justifications bring more attention to large 8(a) sole source contracts. The FAR Council, which updates the FAR, missed this mandatory deadline by almost 325 days. During this delay, based on data in the Federal Procurement Data System-Next Generation (FPDS-NG), 42 sole-source 8(a) contracts with reported values over $20 million, totaling over $2.3 billion, were awarded without being subject to a justification. Office of Federal Procurement Policy (OFPP) representatives involved with the FAR Council's implementation of this rule attributed the delay primarily to the time required to establish a process for consulting with Indian Tribes and Alaska Native Corporations.

From October 28, 2009, through March 31, 2012, agencies reported awarding 72 sole-source 8(a) contracts over $20 million. GAO also analyzed trend information in FPDS-NG from fiscal year 2008 through fiscal year 2011 (the most current available information), which showed that the number and value of these contracts declined significantly in 2011. While GAO determined that FPDS-NG data was sufficiently reliable for the purposes of this review, GAO found errors, such as contracts with an implausible reported value of zero.

GAO found a slow start to implementation of the new justification requirement. Of the 14 sole-source 8(a) contracts awarded since the FAR was revised, only three included an 8(a) justification. The agencies awarding the remaining 11 contracts did not comply, either because contracting officials were not aware of the justification requirement or because they were confused about what the FAR required. For example, contracting officials were confused in one instance where another justification was already in place that covered multiple contracts. Further, the Small Business Administration (SBA) cannot accept a contract over $20 million for negotiation under the 8(a) program unless the procuring agency has completed a justification, but GAO found that SBA did not have a process in place to confirm the presence of a justification.

Why GAO Did This Study

SBA's 8(a) program is the government's primary means of developing small businesses owned by socially and economically disadvantaged individuals, including firms owned by Alaska Native Corporations and Indian tribes. The NDAA for Fiscal Year 2010, enacted on October 28, 2009, called for revisions to the FAR to provide for a written justification for sole-source 8(a) contracts over $20 million, where previously justifications were not required. GAO determined (1) the timeliness with which this new justification requirement was incorporated in the FAR; (2) the number of 8(a) sole-source contracts valued over $20 million that have been awarded since October 2009 and trends over time; and (3) the extent to which agencies have implemented this new justification requirement. GAO analyzed federal procurement data, reviewed the 14 contracts subject to the requirement across five federal agencies, and interviewed officials from OFPP, SBA, the Department of Defense, and other agencies.

What GAO Recommends

GAO recommends that OFPP issue guidance to clarify the circumstances in which an 8(a) justification is required. GAO also recommends that the General Services Administration--which operates FPDS-NG--implement controls in FPDS-NG to help ensure that contract values are accurately recorded, and that SBA take steps to ensure that its staff confirm the presence of justifications. OFPP and GSA generally agreed with the recommendations. SBA indicated it would take some actions but did not fully address the recommendations.

For more information, contact Michele Mackin at (202) 512-4841 or mackinm@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The FAR Council opened a FAR case (2013-018) to address the recommendations from this report by clarifying the requirement for sole source 8(a) justifications. As of September 2014, the draft proposed FAR rule was being reviewed by the Office of Federal Procurement Policy. We will continue to monitor the progress of this proposed FAR rule.

    Recommendation: To help mitigate future confusion regarding justifications for 8(a) sole-source contracts over $20 million, the Administrator of the Office of Federal Procurement Policy, in consultation with the FAR Council, should promulgate guidance to clarify whether an 8(a) justification is required for 8(a) contracts that are subject to a pre-existing Competition in Contracting Act (CICA) class justification.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  2. Status: Open

    Comments: The FAR Council opened a FAR case (2013-018) to address the recommendations from this report by clarifying the requirement for sole source 8(a) justifications. As of September 2014, the draft proposed FAR rule was being reviewed by the Office of Federal Procurement Policy. We will continue to monitor the progress of this proposed FAR rule.

    Recommendation: To help mitigate future confusion regarding justifications for 8(a) sole-source contracts over $20 million, the Administrator of the Office of Federal Procurement Policy, in consultation with the FAR Council, should promulgate guidance to provide additional information on actions contracting officers should take to comply with the justification requirement when the contract value rises above or falls below $20 million between SBA's acceptance of the contract for negotiation under the 8(a) program and the contract award.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  3. Status: Open

    Comments: The FAR Council opened a FAR case (2013-018) to address the recommendations from this report by clarifying the requirement for sole source 8(a) justifications. As of September 2014, the draft proposed FAR rule was being reviewed by the Office of Federal Procurement Policy. We will continue to monitor the progress of this proposed FAR rule.

    Recommendation: To help mitigate future confusion regarding justifications for 8(a) sole-source contracts over $20 million, the Administrator of the Office of Federal Procurement Policy, in consultation with the FAR Council, should promulgate guidance to clarify whether and under what circumstances a separate sole-source justification is necessary for out-of-scope modifications to 8(a) sole-source contracts.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  4. Status: Open

    Comments: In August, 2014, Small Business Administration (SBA) officials stated that the Office of Business Development conducted training in February 2012, and as needed since, on the Federal Acquisition Regulation requirements for the SBA's Business Opportunity Specialists and the Small Business Procurement Advisory Council. SBA officials also stated that the agency is revising its 8(a) Standard Operating Procedure and expects to release it before the end of calendar year 2014. We will continue to follow up with SBA to confirm the content of the training and the revision of the Standard Operating Procedure once it is released.

    Recommendation: To help ensure that Small Business Administration officials meet FAR requirements for sole source contracts over $20 million, the Administrator of the Small Business Administration should, when revising operating procedures and training curricula, include instructions to business opportunity specialists on the steps they are to take to confirm whether agencies have met the justification requirement, such as obtaining a copy of the justification from the agency.

    Agency Affected: Small Business Administration

  5. Status: Open

    Comments: In August, 2014, Small Business Administration (SBA) officials stated that the SBA incorporated the requirements for 8(a) sole source contracts exceeding $20 million in its Partnerships Agreements and training with federal agencies in October 2012. Additionally, SBA noted that appropriate guidance will be included in the revision of the 8(a) BD Program Standard Operating Procedures manual, which SBA plans to release by the end of calendar year 2014. We will continue to follow up with SBA to determine when the guidance will be included in the Standard Operating Procedures.

    Recommendation: To help ensure that Small Business Administration officials meet FAR requirements for sole source contracts over $20 million, the Administrator of the Small Business Administration should, when revising operating procedures and training curricula, include instructions to confirm that procuring agencies have prepared an 8(a) justification rather than a CICA justification.

    Agency Affected: Small Business Administration

  6. Status: Closed - Implemented

    Comments: February 2013, GSA implemented a change to the Federal Procurement Data System-Next Generation, and the system will no longer accept a value of zero dollars for an initial contract award.

    Recommendation: To help ensure that federal procurement data provides accurate and complete information, the Administrator of the General Services Administration should implement controls in FPDS-NG to preclude agency officials from entering a value of zero dollars for the Base and All Options data element when the initial award of a contract is entered into the database.

    Agency Affected: General Services Administration

 

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