Agency for International Development

The Minority Shipping Program Is Constrained by Program Requirements Gao ID: NSIAD-92-304 September 1, 1992

Section 8(a) of the Small Business Act encourages federal agencies to procure goods and services from small and disadvantaged businesses as much as possible. In reviewing how the Agency for International Development (AID) awarded contracts to ship food aid, GAO found that AID's criteria restricted the type of shipping contracts available to 8(a) firms. However, in 1990, out of 29 cases GAO reviewed, nine were offered to 8(a) firms but, for reasons beyond AID's control, only one resulted in a contract. A tenth contract was unnecessarily excluded because a U.S.-flag vessel was unavailable, but AID has changed its requirements to allow 8(a) firms to use foreign-flag vessels under certain conditions. AID's 8(a) shipping program has not produced any viable entities nor is it likely to because shipments are made on short notice with little opportunity to enter into any long-term commitments. Since 1986, only five firms have participated, and only two firms have remained in the shipping business. AID's revised procedures have added two required calculations--fair market price and the percentage of contract personnel costs that must be paid to employees of 8(a) firms. Although these requirements comply with applicable laws and regulations, they will be hard for 8(a) firms to meet.

GAO found that: (1) AID 8(a) shipping program criteria restricted contract opportunities for 8(a) firms, and some of the criteria were unreasonable; (2) because of the great variability in the type and timing of shipments that AID handles, it cannot make long-term commitments to 8(a) firms, and therefore cannot promote the competitive viability of the firms; and (3) because AID guidelines did not comply with the applicable laws and regulations, AID has added two requirements that bring its program into compliance.

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