Wednesday, December 15, 2010

Government Increasing Oversight on Awards to "Small Businesses"

The Administrator of the Office of Federal Procurement Policy said recently that the current administration supports set-asides for small businesses as long as there is sufficient oversight. “The days of ‘No one is checking’ are over. For too long, there was inadequate oversight.” Inadequate oversight could mean any number of things but based on recent events, it certainly includes the increasing use of ANCs (Alaska Native Corporations), the propriety of the “small business” self-certification, and the concerns that some small businesses are merely “fronts” for traditional businesses. We don’t think the concern extends to contract performance and cost allowability issues, but it might. For contract administration and audit coverage, small businesses are treated like any other Government contractor. So if there are concerns here, those concerns would apply equally to small and large businesses. Consider these recent events.
  • Last October, the SBA suspended a large company from all government business when it found that the company had used two small firms to illegally get contracts. 
  • The Department of Homeland Security has begun a review to examine whether small businesses are performing the proper amount of work themselves and not handing it off to subcontractors. 
  • The Defense and Interior Departments are investigating a $250 million Army contract given to an inexperienced Alaska native corporation subsidiary after the Washington Post reported that the company received the contract without award and could not do the work itself. 
  • The SBA Inspector General's Office also is investigating contractors that SBA officials said "entered in a relationship with a subcontractor in order to defraud the government."  
  • Senator McCaskill introduced legislation that, if passed, will take away significant preferential treatment privileges from ANCs.

There is widespread concern that the programs designed to assist small business are being significantly abused. Whether the anecdotal evidence that has been reported is indicative of a much larger problem remains to be seen. Stay tuned.




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