Last week, the SBA’s Office of Inspector General (OIG) issued a report, entitled “SBA’s Business Development Assistance to 8(a) Program Participants.” The report detailed the OIG’s recent audit of the SBA’s 8(a) Business Development Program to “determine to what extent SBA measures and monitors an 8(a) firm’s progress toward achieving individual business development goals” and “to ensure 8(a) firms receive the help needed to meet their goals and if the program adapted during the Coronavirus Disease 2019 pandemic.” Let’s take a closer look at the details and findings.

For those who don’t know, the Inspector General is a Presidentially-appointed and Senate-confirmed officer responsible for keeping the SBA Administrator and Congress briefed on any problems, recommending any corrective actions, and monitoring the progress in implementing any such actions. As the SBA explains, the OIG’s “mission is to provide independent, objective oversight to improve the integrity, accountability, and performance of the SBA.”

Here, the OIG turned its eye to the SBA’s 8(a) Business Development Program to ensure the program is serving its intended purposes. As SBA’s 8(a) rules establish, the 8(a) Program serves “to assist eligible small disadvantaged business concerns [to] compete in the American economy through business development.” In the OIG’s words:

The 8(a) Business Development Program helps small businesses owned by socially and economically disadvantaged individuals gain business skills and access to federal contracting opportunities so that they can better compete in the open marketplace. Congress authorized the 8(a) program for a business development purpose and approved special 8(a) contracting benefits limiting competition for this purpose.

To determine whether the 8(a) Program is successfully furthering these goals, the OIG reviewed the details of the business development assistance the SBA provided to 8(a) Program participants from the years 2011 to 2020. This review included selecting a judgmental sample of 40 active 8(a) participant firms (assigned to five different SBA district offices) to test “how SBA monitored progress in achieving individual development goals outlined in their approved business plans.” The OIG also reviewed those five (of the 68) SBA district offices to determine what level of business development assistance the offices provided to the 8(a) participants. This review included interviews with various 8(a) Program officials and an examination of the applicable public laws, regulations, policies, and procedures.

The OIG found that the “SBA did not have consistent practices in place to ensure program officials assessed the 8(a) firms’ development needs, counseled participants, or conducted field visits.” In the OIG’s words:

SBA’s approach to monitoring 8(a) firms is more focused on reviewing for program eligibility
rather than the progression of the 8(a) firm’s business development. Without processes in place to
objectively monitor an 8(a) firm’s progress and measure program performance, stakeholders
cannot determine success of the program.

Specifically, the OIG found that 15 of the 40 firms it reviewed did not have approved business plans, making them ineligible for a whopping $93 million in 8(a) Program contract awards. The OIG also found

SBA did not consistently document that its staff assessed the needs, counseled, or conducted field visits with 8(a) firms to ensure they received the assistance needed to be prepared to compete for contracts without further 8(a) assistance.

But on a more positive note, the OIG did find that the SBA had adapted its business development assistance model in response to the COVID-19 global pandemic and had offered flexibility to all 40 of the 8(a) firms the OIG reviewed based on the impact of the pandemic.

Based on its findings, the OIG made eight total recommendations for the SBA 8(a) Program officials “to measure, monitor, and better deliver training and other business development assistance to 8(a) firms.” First, the OIG recommended that the Administrator direct the Associate Administrator of the Office of Government Contracting and Business Development, in collaboration with the Associate Administrator of the Office of Field Operations, to carry out the following six recommendations:

1. Implement a standard process to approve initial business plans and monitor to ensure that
business plans are reviewed annually, to include appropriate updates for specific targets,
objectives, and goals for the business development of program participants, in accordance
with 13 CFR 124.403(a) and section 7(j)(10)(D) of the Small Business Act.

2. Implement a standard process to capture, track, and recognize substantial achievement of
the specific targets, objectives, and goals for the areas of finance, marketing, and
management on 8(a) program participant business plans, in accordance with 13 CFR
124.112(f) and section 7(j)(10)(A) of the Small Business Act.

3. Establish outcome-based performance goals and measurements to assess whether the
program achieved business development objectives, including the number of graduated
8(a) firms in accordance with the measure of success in section 101(b)(2) of the Business
Opportunity Development Reform Act of 1988.

4. Implement a process that uses outcome-based performance goals for regular data-driven
reviews and align program leaders’ personal performance plans with the goals so program
office leaders are held accountable for improving program data quality, identifying effective
practices, and validating promising initiatives, that aligns with OMB Circular A-11 Part 6 –
The Federal Performance Framework for Improving Program and Service Delivery
guidance.

5. Implement a process to ensure the systematic collection of accurate and complete data on
program results and operations to make sure all program reporting requirements are met,
in accordance with section 7(j)(16)(A) of the Small Business Act and Standards for Internal
Control in the Federal Government Principles for Information and Communication.

6. Implement requirements for management to monitor that Business Opportunity Specialists consistently assess program participant’s development needs, counsel participants, conduct annual field visits, and maintain required documentation, as required by standard operating
procedures.

Of note is the need for BOS to “counsel participants” regarding business development issues. In our experience, we’ve heard of a wide range of levels of interaction and counseling between various BOS offices and it could be good for this to be more standard among different regions.

Next, the OIG also recommended that the Administrator direct the Associate Administrator of the Office of Field Operations, in collaboration with the Associate Administrator of the Office of Government Contracting and Business Development, to carry out the final two recommendations, which follow:

7. Ensure all employees performing Business Opportunity Specialist duties maintain a current
Federal Acquisition Certification in Contracting Level 1 Certification within a year of
appointment in accordance with section 4(g) of the Small Business Act.

8. Use lessons learned from servicing 8(a) firms in an entirely virtual environment to
coordinate district office resources and share best practices in order to equitably serve all
8(a) program participants. Align assigned Business Opportunity Specialist staffing levels
accordingly to be consistent with ideal workload ratios as determined by the program
office.

When confronted with the OIG’s recommendations, SBA management fully agreed with five of them (#3 and #5-8), partially agreed with two of them (#1 and #2), and disagreed with one recommendation (#4).

In the OIG’s opinion, the SBA Management’s planned actions in response to the recommendations successfully resolved three of the recommendations (#3, #7, and #8). Specifically, the OIG approved of the SBA’s “plans to identify program-level goals that align with the agency’s strategic plan[,]” and “plans to assess the staffing and resources allocated for SBA district offices to consistently provide business development assistance and improve 8(a) program participants’ customer experience.”

But the OIG did not reach resolution with SBA Management on five of the recommendations (#1, #2, #4, #5, and #6). Even though the SBA Management agreed (or at least partially agreed) with four of these five recommendations, according to the OIG, SBA Management’s proposed did not fully address these five recommendations. Thus, the OIG report concluded that the OIG would “seek resolution of those recommendations in accordance with [its] audit resolution policies and procedures.”

Only time will tell if and how the SBA’s 8(a) Program Management will address the OIG’s remaining concerns. But regardless, the OIG certainly provided some insightful considerations and suggestions for improving this incredibly valuable contracting program for small disadvantaged businesses.

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The post SBA’s Approach to Monitoring 8(a) Firms is Focused on Eligibility Rather than Business Development, Says SBA’s OIG first appeared on SmallGovCon - Government Contracts Law Blog.