Summary: The Small Business Administration (SBA) has the authority to enter into procurement contracts with federal agencies for the purpose of subcontracting to small businesses to help them achieve a competitive position in the marketplace. A special pilot contracting program between the Army and SBA was created. In the regular 8(a) program, agencies volunteer these contracts. In the pilot program, SBA has the exclusive authority to demand procurement requirements for firms. SBA has awarded nine contracts under the pilot program. Two of the contracts reviewed received business development expense funds. One received funds to pay the difference between the fair market value and the price at which the 8(a) contractor was willing to perform, and funds to purchase equipment needed to perform the contract. The other received funds for capital equipment only. The pilot program has not been effective. SBA did not adequately assess the reviewed firms' capabilities to perform and made a poor choice of firms. It made little use of its field offices to select and award contracts, and it did not meet its objective of seeking procurement opportunities which are not currently offered by the agency under the regular 8(a) program. Some of the procurements represented work far beyond the capabilities of the firms selected for the contracts. Better program controls are needed. SBA did not consider the performance history of the firms on prior contracts, nor did it use all available sources of information on the firms. A firm was awarded a contract at the same time it was being recommended for termination for poor management in the program. Another firm was awarded a contract to support a capability that was outside its current line of business. A third firm was awarded a contract on which a non-8(a) firm and subcontractor will do most of the work. An independent evaluation needs to be made to determine the effectiveness of the firms' performance. The Administrator of SBA should demand contracts only when the Army is reluctant to offer them under the regular 8(a) program and when a qualified firm is available. Congress should amend the legislation to allow for further testing of the pilot program in an additional agency that has yet to demonstrate its complete support for the 8(a) program.
