Status Report on Small and Small Minority Business Subcontracting and Waiver of Surety Bonding for 8(a) Firms

The Small Business Act was amended to emphasize the use of subcontracting as a method of promoting the long-term viability of small and minority businesses. The Small Business Administration (SBA) is authorized to provide financial assistance to large businesses for the purpose of training and upgrading potential small and small minority contractors. This authority generally has not been used. The Act was also amended to provide small and small minority businesses with a maximum practicable opportunity to participate in the performance of contracts let by federal agencies. The amendments required an implementing clause to be included in all contracts exceeding $10,000, and required that construction contracts in excess of $1 million and other contracts in excess of $500,000 contain subcontracting plans for SBA review for the purpose of determining whether maximum practicable opportunity has been afforded to small and minority businesses. These reviews must be reported annually to the House and Senate Small Business Committees.

The subcontracting program of the SBA functions with the assistance of a Presidentially appointed advisory committee. Delays in establishing the advisory committee, lack of specific committee functions and goals, and the exclusive focus of the committee on federal subcontracting have impeded progress in implementing the program. A clear understanding of the committee's role and relationship with SBA has yet to be resolved. A major problem has been the lack of a clear definition of the intent of the amendments. The primary objective is to encourage large businesses in the private sector, as a general and voluntary subcontracting practice, to make greater use of small and minority businesses. GAO believes the relationship between SBA and the committee in the future should focus primarily on exploring ways to promote subcontracting opportunities for small and minority businesses outside of federal procurements. The Procurement Automated Sources System seems to have considerable potential for marketing the goods and services of a large number of small and minority firms in the private sector. A major cause for the delay in implementing the surety bond waiver provision appears to be misunderstanding between two SBA offices, the Office for Minority Small Business and Capital Ownership Development (OMSB) and the Office of Special Guarantees. The OMSB priorities have also contributed to the delay in implementing the surety bond waiver program. Since the Office of Special Guarantees has some surety bonding expertise, OMSB will have to closely coordinate with it.

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.

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