By SCOTT AMEY
Presidents Obama and Bush have stressed that the economy with turn around when small businesses get rolling again. They both laid out a small business agenda hoping to provide incentives that would keep small businesses afloat and get citizens back to work. Small businesses are considered vital to restoring the economy, but, despite the efforts of the last two administrations, the government still isn?t meeting its small business contracting goal.
The government?s failure to meet the goal isn?t surprising?large contractors receive the majority of contract award dollars. However, if the government only considered small businesses toward the small business goal, you might be amazed at how far the government is from reaching that goal. The faux small business numbers are also propped up by a program that has been subject to waste, fraud, and abuse for years.
According to a Government Accountability Office (GAO) report released this week:
The federal government obligates hundreds of billions of dollars in contracts for goods and services each year?about $537 billion in fiscal year 2010. That year, about $18.5 billion was obligated to firms participating in the Small Business Administration?s (SBA) 8(a) program. The 8(a) program is one of the federal government?s primary means for developing small businesses owned by socially and economically disadvantaged individuals.
The 8(a) program provides benefits to disadvantaged companies as well as tribal firms, including Alaska Native Corporations (ANCs) and Native Hawaiian Organizations (NHOs). One benefit is that tribal firms can receive sole source contracts for any amount. The result, however, is a lack of competition and tribal firms operating as a small business in name only. In fact, some of these contractors have grown into very large and profitable top 100 contactors (# 88 NANA Regional Corporation and #99 Afognak Native Corporation), especially in the IT industry.
There lies the problem and many criticisms of the 8(a) program. In 2006, GAO found that ANC privileges required ?improved SBA oversight.? Three years later, the SBA IG found that ANCs had an advantage over other 8(a) firms and reconfirmed the lack of proper oversight of the program. ?
In 2011, SBA revised the 8(a) regulations and new regulations were proposed requiring that sole source 8(a) awards above $20 million have written approval. GAO, however, still points to problems with ANC and NHO contracts, including deals that might not be at the best prices or rates and lack of SBA oversight to ensure the program is operating as intended.
There are many arguments for and against the 8(a) privileges for tribal firms, especially as some ANCs have been involved in questionable actions and questions have been raised about the benefits that are returned to the tribes and their members. Senator Claire McCaskill (D-MO) has taken up many of these issues (Part I and II). She has held hearings, proposed legislation eliminating ANC contracting privileges, and requested more information about Defense Department 8(a) sole source awards.
This is a great example of government inefficiency?a government program not operating as it was originally intended, multiple findings of inadequate program management and oversight, and little effort by policymakers to fix the system. There is ample evidence that the tribal 8(a) privileges are prone to abuse, there is legislation on the table, but the problem will likely continue for many years. If the tribal programs, especially the ANC program, are not working as intended, and competitive contracting procedures are being routinely evaded, it might be time for Congress to reconsider them.
Scott Amey is POGO?s General Counsel.
Image via Flickr user?dalechumbley.
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