Small Business

The 8(a) program was created to improve the viability of small businesses owned by socially and economically disadvantaged individuals. Under the program, the Small Business Administration (SBA) enters into contracts with other federal agencies and subcontracts the work to firms in the program. Firms in the program are also eligible for financial, technical, and management assistance from SBA to aid their development. Concerned that obtaining access to the program was lengthy and burdensome, program administration was inefficient, and few firms were able to compete upon leaving the program, Congress passed the Business Opportunity Development Reform Act of 1988. This legislation requires that (1) applications be processed within 90 days, (2) 8(a) firms submit revised business plans so SBA can better monitor the firms' development, and (3) firms compete for certain contracts. SBA has had problems implementing many of these changes, and its lack of valid data on program activities has hindered effective program management. GAO summarized this report in testimony before Congress; see: Small Business: The Small Business Administration's Progress in Restructuring Its 8(a) Business Development Program, by Judy A. England-Joseph, Director of Housing and Community Development Issues, before the House Committee on Small Business. GAO/T- RCED-92-35, Mar. 4, 1992 (17 pages).

GAO held that: (1) during the first 11 months of fiscal year (FY) 1990, about 76 percent of all new applications that SBA approved or declined did not meet the act's requirement to process applications within 90 days, and the average processing time for those applications was 117 days; (2) as of October 1, 1991, SBA had approved or revised the required business plans of about 57 percent of the 3,922 firms in the program; (3) SBA has limited control over the equitable geographical distribution of 8(a) contracts because the act also directs SBA to award contracts to 8(a) firms recommended by procuring agencies, and such recommendations occur for about 95 percent of the 8(a) contracts offered; (4) of approximately 8,300 new 8(a) contracts awarded in FY 1990 and FY 1991, SBA awarded only 67 competitively; (5) missing and inaccurate data render the SBA Financial Information System inadequate, but SBA has been in the process of developing specific plans for correcting system weaknesses; (6) since SBA did not track the various forms of assistance provided by contractors and others, SBA did not know the full extent of management and technical assistance provided to 8(a) firms; (7) due to higher-priority work and the turnover of key staff, SBA did not issue until more than 2 years after the requirement took effect an approved form for 8(a) firms to report their use of paid consultants to obtain contracts; (8) SBA did not know the amount of financial assistance it provided to 8(a) firms, since it did not collect such information; and (9) SBA did not routinely gather information on contract or bid protests involving 8(a) firms or challenges of firms' eligibility to continue participating in the 8(a) program, since there appeared to be few such protests or challenges.

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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