Misuse of SBA's 8(a) Program Increased Cost for Many ADP Equipment Acquisitions

GAO reviewed the use of contracts under Section 8(a) of the Small Business Act by various federal agencies as a means of acquiring automatic data processing (ADP) equipment. GAO sought to determine whether government computer acquisition opportunities are being made available to as many small and disadvantaged businesses as possible under the 8(a) program and if federal procurement policies and regulations are being violated by the Small Business Administration (SBA), federal agencies, or contractors when ADP equipment is acquired under Section 8(a) contracts.

GAO believes that SBA management of the ADP resource acquisition portion of the 8(a) program has been deficient. GAO found that: (1) only a limited number of minority-owned firms capable of supplying ADP equipment had been recruited into the 8(a) program; (2) the 8(a) firms supplying ADP equipment were functioning as brokers, not as regular dealers; (3) SBA failed to follow its own procedures, which contributed to the brokering and increased the cost of the ADP equipment; (4) federal agencies were able to acquire specific items of ADP equipment through the 8(a) program which they had not justified for acquisition without competition; (5) requirements concerning cost and pricing data and preaward audits were not met; and (6) SBA frequently ignored the small business regulations and SBA procedures concerning size requirements. GAO believes that awarding these contracts is not achieving the program goals of helping firms to gain the experience and financial viability necessary to prosper in the competitive market place. Agencies and SBA are paying the firms to perform a function for which there is no competitive market, and this has unnecessarily cost the government substantial sums of money. GAO believes that the program objectives would best be served if individual 8(a) contract opportunities in computer sciences were limited to annual awards not exceeding 50 percent of an appropriately defined size standard for such services. Such a limitation would allow 8(a) firms to acquire ADP contracts while minimizing the impact on other small and minority businesses.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Allen Li Team: General Accounting Office: Accounting and Financial Management Division Phone: (202) 512-3600