Small Business

The Small Business Administration's 8(a) program--the federal government's primary vehicle for developing small businesses owned by socially and economically disadvantaged persons--is not meeting client expectations. First, SBA's efforts are not aligned with the needs or expectations of 8(a) firms. Firms want SBA to provide more assistance that will help them obtain contracts. SBA has stressed business management skills, even though most firms joined the program to obtain 8(a) contracts. This misalignment of SBA efforts and 8(a) firms' needs has been further compounded by the fact that most 8(a) contract dollars go to a small number of firms. Second, SBA has no way to tell how well the 8(a) program is working or know the full extent of business development assistance provided to firms. SBA is unable to measure the 8(a) program's performance in such basic areas as the level of training provided, whether such training matched firms' needs, or even the amount of 8(a) contracts the firms obtained. GAO summarized these two reports in testimony before Congress; see: Small Business: Expectations of Firms in SBA's 8(a) Program Are Not Being Met, by Stanley J. Czerwinski, Associate Director for Housing and Community Development Issues, before the Senate Committee on Small Business. GAO/T-RCED-00-261, July 20 (15 pages).

GAO noted that: (1) access by firms to 8(a) contracts remains a problem; (2) a long-standing concern cited in GAO's previous reports and those of the SBA Inspector General is that a few firms receive most of the 8(a) contracts, effectively limiting the developmental opportunities available to other firms in the program; (3) SBA has made some changes in the program to address this problem, but SBA officials said that because of differences in firms' skills and experience and other factors, it is reasonable that not all 8(a) firms will receive contracts from the program; (4) in addition, SBA relies on other federal agencies to make the contract awards, and federal procuring officials are confronted with the competing objectives of accomplishing their agencies' missions at a reasonable cost and achieving the 8(a) program's business development goals; (5) SBA remains unable to track the training and assistance it provides to 8(a) firms; (6) the lack of a system to track the training and assistance firms receive impairs SBA's ability to measure the program's performance and to determine what assistance firms need; (7) SBA piloted a Business Assessment Tool in 1999 that would evaluate firms' business development needs, but at the time of GAO's review, SBA had not completed its review of the pilot; (8) according to GAO's survey results, almost all firms joined the program to obtain 8(a) contracts, wanted SBA to provide contracting assistance, and were more satisfied with the program if they had received a contract; (9) 86 percent of the firms surveyed joined the program to obtain 8(a) contracts; (10) however, only about one-fifth of the firms joined the program to learn more about how to manage a business; (11) one reason for these firms' not placing a higher priority on learning to manage a business is that a large majority of the firms had owners with over 10 years' experience managing a business; (12) in addition, the firms themselves were not new--over half the firms GAO surveyed had been in business 5 years or more before joining the program; and (13) overall satisfaction with the program was mixed, but firms that received 8(a) contracts were more satisfied than those that did not.

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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