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1
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
July 22, 1994
OFFICE OF
THE INSPECTOR GENERAL
MEMORANDUM
SUBJECT: Audit Report Number E1BMF3-05-0018-4100452
EPA's 8(a) Contracting Program.
FROM:
TO:
Elissa R. Karpf _
Associate Assistant Inspector7General
for Acquisition and Assistance Audits
Jonathan Z. Cannon
Assistant Administrator for Administration
and Resources Management
Leon H. Hampton, Director
Office of Small and Disadvantaged
Business Utilization
Attached is the final audit report titled EPA's 8(a)
Contracting Program. Our objectives were to determine if EPA:
(1) complied with the applicable laws, regulations, and
directives in awarding and amending 8(a) contracts; (2) ensured
that initial contract estimates fairly represented the expected
maximum value of the contract; and (3) adequately directed
efforts to meet the Agency's 8(a) contracting goals.
This report contains findings that describe the results of
our audit of EPA's 8(a) Contract Program. This report represents
the opinion of the Office of the Inspector General (OIG). Final
determinations on matters in the report will be made by EPA
managers in accordance with established EPA audit resolution
procedures. Accordingly, the findings described in this report
do not necessarily represent the final EPA position.
The issues in this report regarding 8(a) contracts awarded
to firms just prior to their graduation from the 8(a) program
(See Chapter 3) are not matters of statutory or regulatory
compliance. EPA's current practice is within the existing legal
parameters. Our concerns are based on interpretation of
Congressional intent, appearances of favoritism, and differing
views of organizational responsibilities. None of these provide
Recycled/Recyclable
Printed with Soy/Canol* Ink on paper that
contain* at toast 50% recyded liber
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a firm foundation for resolving the differences of opinion
between the Agency and the OIG. As a result, we believe Congress
should consider (l) the appropriateness of awarding sole source
contracts to 8(a) firms immediately prior to expiration of
program eligibility and (2) the role awarding agencies have in
monitoring development of 8 (a) firms with whom they do business.
To encourage attention to these issues, we will distribute this
audit report to Congressional members and committees responsible
for overseeing and directing the Government's small and minority
business legislation.
Your responses to our draft report are included as
Appendices I and II. Based on those responses and discussions at
the,exit conference, we made appropriate changes to this final
report, including deleting and revising text and recommendations
made in the draft report.
Action Required
In accordance with EPA Order 2750, we have designated the
Assistant Administrator for Administration and Resources
Management as the Action Official for this report. The Action
Official is required to provide this office with a written
response to the audit report within 90 days of the final audit
report date. For corrective actions planned, reference to
specific milestones dates will assist this office in deciding
whether to close this report. In addition please track all
action plans and milestone dates in the Management Audit Tracking
System.
We have no objections to further release of this report to
the public. Should you or your staff have any questions
regarding this report, please contact Charles Allberry, Audit
Manager, Northern Audit Division at (312) 353-4222.
Attachment
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8(a) Contracting
EXECUTIVE SUMMARY
PURPOSE
The Environmental Protection Agency's (EPA) Office of
Inspector General (OIG) has issued audit reports during the
past two years which examined specific Agency procurement
practices. These reports questioned the appropriateness of
several awards made to small and disadvantaged firms within
the 8(a) program. As a result, we conducted an audit focused
on EPA's 8(a) contracting activities. The objectives of our
audit were to determine if EPA: (1) complied with the
applicable laws, regulations, and directives in awarding and
amending 8(a) contracts; (2) ensured that initial contract
estimates fairly represented the expected maximum value of
the contract; and (3) adequately directed efforts to meet the
Agency's 8(a) contracting goals.
BACKGROUND
The Federal Government's commitment to improving the
opportunities of small and disadvantaged businesses has
evolved through several individual pieces of legislation.
• [1958] Public Law 85-536 (Small Business Act) -
established statutory mandates for Federal assistance to
small businesses.
• [1978] Public Law 95-507 - required portions of Federal
procurements to be set-aside for small businesses;
established the Minority Capital Ownership Program
(commonly referred to as the 8(a) business development
program); and required each Federal agency to establish
an Office of Small and Disadvantaged Business
Utilization (OSDBU).
• [1988] Public Law 100-656 (Business Opportunity
Development Reform Act of 1988) - redefined period of
8(a) program participation to nine years; divided
participation period into a developmental stage (4
years) and a transitional stage (5 years); and required
competition for contracts above certain dollar limits.
The 8(a) program, as a subset of the Government's small
business strategy, is designed to assist small, disadvantaged
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8(a) Contracting
businesses in becoming financially competitive through
increased access to Government contracts. In general,
contracts awarded under the 8(a) program are exempt from the
requirements for full and open competition. Therefore,
within the 8(a) program, EPA can award sole source contracts
to eligible firms.
The Small Business Administration (SBA) is responsible for
determining the eligibility of firms to participate in the
8(a) program. In 8(a) contracts, SBA serves as the prime
contractor to EPA and, in turn, subcontracts the work to
firms in the program. For non-competitive contracts, SBA
usually delegates the responsibility for negotiating with the
8(a) firm directly to EPA.
In 1979, EPA established its OSDBU under the Office of the
Administrator. OSDBU is responsible for: (I) establishing
small business program priorities, (2) setting and monitoring
EPA goals for preferential programs, and (3) analyzing the
extent of small and disadvantaged business participation in
EPA acquisition activities.
Each Federal agency has an annual goal to provide a specific
percentage of its contract dollars to 8(a) firms. In fiscal
1992 and 1993, EPA's goal was 8 percent. During each of
these fiscal years, EPA awarded about 5 percent of its total
contract dollars to 8(a) firms.
RESULTS-IN-BRIEF
EPA complied with applicable laws and regulations in awarding
and amending 8(a) contracts during fiscal 1993. The Agency's
8(a) contract awards during fiscal 1993 showed an increased
emphasis on detecting and correcting contracting problems
reported in past OIG audits, including developing appropriate
contract estimates. These improvements helped EPA's 8(a)
program assist small disadvantaged businesses in a more
equitable manner. However, the practice of awarding
contracts to 8(a) firms just days before the firms' program
eligibility expired was not consistent with the program's
legislative intent and did not serve the overall objectives
of the 8(a) program.
EPA did not meet its fiscal 1992 or 1993 goals for levels of
8(a) contracting. OSDBU, the Agency's advocate for 8(a)
contractors, was hindered in its efforts to meet these annual
goals by (1) insufficient and untimely contract information,
(2) a lack of Agency-wide accountability for meeting 8(a)
ii
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8(a) Contracting
contracting goals, and (3) an inefficient organizational
structure.
PRINCIPAL FINDINGS
Increased Attention To Contracting Procedures Improves Recent
8(a) Awards
EPA's 8(a) contract awards during fiscal 1993 showed (1) a
broader distribution of 8(a) contract awards among eligible
contractors and (2) an increased emphasis on detecting and
correcting contracting problems reported in past DIG audits.
These improvements helped EPA's 8(a) program assist small
disadvantaged businesses in an equitable manner.
The General Accounting Office has consistently reported on
the problem of Federal agencies awarding a large portion of
their 8(a) contract dollars to a relatively small number of
firms. Although contract data showed that EPA's 8(a) awards
had followed this pattern in the past, fiscal 1992 and 1993
awards evidenced a significantly improved distribution of
awards.
In addition, several 8(a) contracts awarded during fiscal
1991 and 1992 contained examples of contract splitting,
under-valuation, or conflicts of interest. Each of these
problem areas was addressed in past OIG reports. In
reviewing fiscal 1993 8(a) awards, we found examples in which
contracting officials identified potential problems in these
areas and took steps to correct them prior to finalizing the
procurements.
Awards Made In Anticipation Of A^Firrn* s 8 (a) Graduation
Hinder Program Goals
EPA and other Federal agencies have often awarded contracts
to 8(a) firms just days before expiration of the firms'
program eligibility. SBA has encouraged this practice.
Although such awards meet the legal requirements of the 8(a)
program, the practice: (1) permits firms to benefit from
sole-source awards for several years after the conclusion of
their statutory 8(a) program eligibility, (2) does not
encourage 8(a) firms to compete in the open marketplace, and
(3) creates a perception that EPA favors selected
contractors. Thus, while legal, awarding sole source
contracts to 8(a) firms near the completion of their program
111
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8(a) Contracting
eligibility does not serve the overall objectives of the 8(a)
program.
EPA Must Strengthen OSDBU'sAdvocacy Role If The Agency Is To
AcjiieyeIts 8 (a) Contracting Goal
OSDBU has battled several obstacles in its role as the
Agency's advocate for 8(a) contractors. These include: (1)
insufficient and untimely contract information, (2) a lack of
Agency-wide accountability for meeting 8(a) contracting
goals, and (3) an inefficient organizational structure. As a
result, EPA did not meet its goal for 8(a) contracting in
either fiscal 1992 or 1993. If EPA is to meet its
established goals in future fiscal years, it needs to: (!)
gather more timely and comprehensive information on current
and future 8(a) contracting opportunities, (2) increase
management accountability for 8(a) goals at all levels, and
(3) improve coordination between OSDBU and the Office of
Administration and Resources Management (OARM) in directing
and supervising the Small and Disadvantaged Business
Specialists (SDBSs).
RECOMMENDATIONS
We recommend that:
l. The Assistant Administrator, OARM, and the Director,
OSDBU, establish a policy requiring their offices to
concur and provide a written justification for awarding
8(a) contracts whose base or option periods extend
beyond the established Program Term of the recipient
8(a) firm.
2. OSDBU review the mix of 8(a) and non-8(a) revenues of
transitional firms while evaluating potential
contractors or remove this standard from its existing
guidance.
3. OSDBU develop a multi-year plan which identifies current
8(a) contract levels and presents a strategy for
obtaining sufficient future contracts to meet the
Agency's projected goals.
4. The Assistant Administrator, OARM, and the Director,
OSDBU, develop a method of setting 8(a) program goals
for Assistant Administrators, Regional Administrators,
and Office and Division Directors, as appropriate.
IV
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8(a) Contracting
Also, a mechanism for timely tracking of actual
achievements needs to be developed and implemented.
5. The Assistant Administrator, OARM, and the Director,
OSDBU, implement procedures that improve the
coordination between OSDBU and 0AM in directing and
supervising the SDBSs. This should, at a minimum,
include input from the OSDBU Director to the SDBSs
annual performance standards and evaluation.
AGENCY COMMENTS
The Agency generally agreed with the findings and
recommendations related to (!) improved planning and
information gathering within OSDBU, (2) increased
accountability within program offices, and (3) improved
coordination in directing and supervising SDBSs. The Agency
did not agree with our finding or recommendations concerning
sole source contracts awarded to 8(a) firms near the
completion of their program eligibility.
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8(a) Contracting
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VI
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8(a) Contracting
TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
CHAPTERS
1 INTRODUCTION 1
PURPOSE 1
BACKGROUND 1
SCOPE AND METHODOLOGY 3
PRIOR AUDIT REPORTS 4
2 INCREASED ATTENTION TO CONTRACTING PROCEDURES
IMPROVES RECENT 8(A) AWARDS 7
IMPROVED DISTRIBUTION OF 8(A) CONTRACT AWARDS 7
POTENTIAL CONTRACT UNDERESTIMATION DETECTED
AND CORRECTED 9
TIMELY IDENTIFICATION AND RESOLUTION OF
POTENTIAL CONFLICTS OF INTEREST 11
CONCLUSION 11
AGENCY COMMENTS - 12
3 AWARDS MADE IN ANTICIPATION OF A FIRM'S 8(A)
GRADUATION HINDER PROGRAM GOALS 13
LEGISLATIVE HISTORY 13
AWARDS AVOIDED LEGISLATIVE INTENT AND DID NOT
ENCOURAGE OPEN MARKET COMPETITION 15
PERCEPTIONS OF FAVORITISM TOWARD INCUMBENT 8(A)
CONTRACTORS 19
CONCLUSION 19
RECOMMENDATIONS 20
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8(a) Contracting
TABLE OF CONTENTS (Continued)
Page
AGENCY COMMENTS 20
OIG EVALUATION OF AGENCY COMMENTS 21
MATTERS FOR CONGRESSIONAL CONSIDERATION 22
4 EPA MUST STRENGTHEN OSDBU'S ADVOCACY ROLE IF THE
AGENCY IS TO ACHIEVE ITS 8(A) CONTRACTING GOALS 23
CURRENT OSDBU ADVOCACY ACTIVITIES 24
ADDITIONAL ADVOCACY ACTIVITIES NEEDED TO
INCREASE 8 £A) CONTRACTING OPPORTUNITIES 25
LACK OF MANAGEMENT ACCOUNTABILITY FOR MEETING
AGENCY 8(A) CONTRACTING GOALS 27
EPA'S 8(A) ADVOCACY STAFF ARE NOT CENTRALLY
ORGANIZED 27
CONCLUSION 28
RECOMMENDATIONS 28
AGENCY COMMENTS 29
OIG EVALUATION OF AGENCY COMMENTS 29
APPENDICES
APPENDIX I: OSDBU'S RESPONSE TO OIG DRAFT REPORT 31
APPENDIX II: OARM'S RESPONSE TO OIG DRAFT REPORT 33
APPENDIX III: OIG REVISIONS TO THE FINAL REPORT IN
RESPONSE TO OARM'S COMMENTS TO THE
DRAFT REPORT 41
APPENDIX IV: ABBREVIATIONS 43
APPENDIX V: RELATED REPORTS 45
APPENDIX VI: DISTRIBUTION 47
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8(a) Contracting
CHAPTER 1
INTRODUCTION
PURPOSE
The Environmental Protection Agency's (EPA) Office of
Inspector General (OIG) has issued audit reports during the
past two years which examined specific Agency procurement
practices.1 These reports questioned the appropriateness
of several awards made to small and disadvantaged firms
within the 8(a) program. As a result, we conducted an audit
focused on EPA's 8(a) contracting activities. The objectives
of our audit were to determine if EPA: (1) complied with the
applicable laws, regulations, and directives "in awarding and
amending 8(a) contracts; (2) ensured that initial contract
estimates fairly represented the expected maximum value of
the contract; and (3) adequately directed efforts to meet the
Agency's 8(a) contracting goals.
BACKGROUND
The Federal Government has been committed to improving the
opportunities of small and disadvantaged. businesses for many
years. The methods of meeting this objective have evolved
through several individual pieces of legislation.
• [1958] Public Law 85-536 (Small Business Act) -
established statutory mandates for Federal assistance to
small businesses.
• [1978] Public Law 95-507 - required portions of Federal
procurements to be set-aside for small businesses;
established the Minority Capital Ownership Program
(commonly referred to as the 8(a) business development
program); and required each Federal agency to establish
an Office of Small and Disadvantaged Business
Utilization (OSDBU).
• [1980] Public Law 96-481 - required the establishment of
program completion dates for all 8(a) firms
1 Contracting Activities at Environmental Research
Laboratory - Duluth. MN Report No. 2100443 (July 7, 1992)
Contracting Activities at Environmental Research
Laboratory - Athens. GA Report No. 3100156 (March 31, 1993,
revised)
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8(a) Contracting
(implementing regulations limited a firm's participation
to a maximum of seven years).
• [1988] Public Law 100-656 (Business Opportunity
Development Reform Act of 1988) - redefined period of
8(a) program participation to nine years; divided
participation period into a developmental stage (4
years) and a transitional stage (5 years); and required
competition for contracts above certain dollar limits.
The 8(a) program is a subset of the Government's small
business strategy. The 8(a) program is designed to assist
small, disadvantaged businesses in becoming financially
competitive in the open market. This assistance is provided
through increased access to Government contracts. In
general, contracts awarded under the 8(a) program are exempt
from the full and open competition requirement of the
Competition in Contracting Act (Public Law 98-369, July 18,
1984).2 Therefore, within the 8(a) program, EPA can award
sole source contracts to eligible firms.
The Small Business Administration (SBA) is responsible for
determining the eligibility of firms to participate in the
8(a) program. When EPA awards an 8(a) contract, SBA acts as
the prime contractor and enters into a contract with EPA.
SBA, in turn, subcontracts the work to firms in the program.
If the proposed contract is below the threshold for
competition, SBA can, and usually does, delegate the
responsibility for negotiating with the 8(a) firm directly to
SPA.
In 1979, EPA established its OSDBU under the Office of the
Administrator. OSDBU is responsible for: (1) establishing
small business program priorities, (2) setting and monitoring
EPA goals for preferential programs, and (3) analyzing the
extent of small and disadvantaged business participation in
EPA acquisition activities.
Each Federal agency has an annual goal to provide a specific
percentage of its contract dollars to 8(a) firms. In fiscal
1992 and 1993, EPA's goal was 8 percent. During each of
these fiscal years, EPA awarded about 5 percent of its total
contract dollars to 8(a) firms.
2 8(a) contracts for manufacturing services valued at more
than $5 million and other services valued at more than $3 million
must be competed among eligible 8(a) firms.
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8(a) Contracting
In 1992 the DIG issued a report (Report No. 2100443) critical
of EPA's contracting practices related to awards made to an
8(a) contractor at an Office of Research and Development
laboratory. In response to this audit report, EPA's Office
of Acquisition Management (OAM)3 conducted a review of EPA's
8(a) contracts. The resulting report explored three areas of
concern: (1) awards to former EPA employees during fiscal
1988 to 1992, (2) sole source contracts which were
underestimated or split to avoid competition, and (3) the
appropriateness of all contracts awarded to the 8(a) firm
cited in the OIG audit report. OAM's report concluded that
other than the contracts awarded to one firm, EPA did not
appear to be vulnerable in the selection and award of its
8(a) contracts.
SCOPS AND METHODOLOGY
Our audit focused on EPA's 8(a) contracting activities
between October 1, 1990, and September 30, 1993. We were
specifically interested in whether contracting problems which
had been reported in previous OIG audits were common and
continuing within the 8(a) program. To test EPA's compliance
with applicable 8(a) laws and regulations, we obtained,
reviewed, and analyzed data on current and past 8(a) contract
awards from EPA's Contract Information System (CIS). We also
reviewed contract files for a judgmental sample of 8(a)
contract awards made by OAM during our audit period. We
examined procurement requests, contractor proposals, award
documents, and related correspondence.
To ensure that initial contract estimates fairly represented
the expected maximum value of the contract, we calculated the
maximum potential contract value and compared it to the
initial Government estimate.
To determine whether EPA adequately directed efforts to meet
8(a) contracting goals, we reviewed the process for awarding
8(a) contracts, including OSDBU's procedures to monitor and
attain the Agency's 8(a) program goal. We interviewed EPA
employees involved in the development of specific procurement
requests and the subsequent procurement actions, OSDBU staff,
and small business specialists in the contracting offices.
We also reviewed SEA reports regarding OSDBU's monitoring of
the small business program.
3 Formerly the Procurement and Contracts Management Division
v
3
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8(a) Contracting
We reviewed OSDBU and OAM Annual Reports on Management
Controls. OSDBU's report did not identify any material
weaknesses in the 8(a) program. In 1992, OAM reported that
procurement and contract management was a material weakness.
OAM also reported that during fiscal 1992 its personnel had
spent many hours supporting the efforts of the Standing
Committee on Contracts Management in analyzing contract
management shortcomings.
We performed our audit in accordance with the Government
Auditing Standards issued by the Comptroller General (1988
Revision). We obtained our statistical data from EPA's CIS,
but the data were not an integral part of this audit and its
reliability was not crucial to accomplishing the objectives
of the audit. Accordingly, we did not test or evaluate the
adequacy of manual or automated controls for CIS or the
validity of the data maintained in the system. Therefore, we
cannot and do not attest to the accuracy or integrity of CIS
data used in this report.
We conducted our audit between July 1, 1993, and April 18,
1994. We discussed our position papers with OSDBU and OAM
officials in Washington on April 6, 1994, and April 7, 1994,
respectively. On May 12, 1994, we issued our draft report to
the Assistant Administrator, Office of Acquisition and
Resources Management (OARM), and the Director, OSDBU. OSDBU
responded on May 31, 1994, and OARM on June 23, 1994, (see
Appendices I and II). We held an exit conference with OSDBU
and OAM officials on July 6, 1994. Based on their responses
and discussions at the exit conference, we made appropriate
changes for this final report, including deleting and
revising text and recommendations made in the draft report
(see Appendix III).
PRIOR AUDIT REPORTS
Over the past three years, the OIG has issued reports
regarding EPA's contract procurement practices related to
various Office of Research and Development laboratories.
Several of the reports identified similar problems in
awarding and managing 8(a) contracts. For example, in 1992
the OIG reported (Report No. 2100143) that an 8(a) contract.
was inappropriately split to avoid the competitive
requirements of the Business Opportunity Development Reform
Act of 1988. In 1993, the OIG reported (Report Nos. 31000156
and 3100236) similar problems at other EPA facilities.
4
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8(a) Contracting
In 1992, the General Accounting Office (GAO) issued a report
to SBA addressing problems in restructuring the Minority
Business Development Program, including the 8(a) program.
The report showed that distribution of 8(a) contract awards
has been a long-standing problem in the program. GAO
reported that 2 percent of the firms in the program received
40 percent of the contracts awarded in fiscal 1990.
5
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CHAPTER 2
INCREASED ATTENTION TO CONTRACTING PROCEDURES
IMPROVES RECENT 8(A) AWARDS
EPA's 8(a) contract awards during fiscal 1993 showed (1) a
broader distribution of 8(a) contract awards among eligible
contractors and (2) an increased emphasis on detecting and
correcting contracting problems reported in past OIG audits.
These improvements helped EPA's 8(a) program assist small
disadvantaged businesses in an equitable manner.
GAO has consistently reported on the problem of Federal
agencies awarding a large portion of their 8(a) contract
dollars to a relatively small number of firms. Although
contract data showed that EPA's 8(a) awards had followed this
pattern in the past, fiscal 1992 and 1993 awards evidenced a
significantly improved distribution of awards.
In addition, several 8(a) contracts awarded during fiscal
1991 and 1992 contained examples of contract splitting,
under-valuation, or conflicts of interest. Each of these
problem areas was addressed in past OIG reports. In
reviewing fiscal 1993 8(a) awards, we found examples in which
contracting officials identified potential problems in these
areas and took steps to correct them prior to finalizing the
procurements.
IMPROVED DISTRIBUTION OF 8(A) CONTRACT AWARDS
In fiscal 1992 and 1993, EPA showed a significant improvement
in distributing its 8(a) awards to a large number of eligible
contractors. This trend furthered the 8(a) program goal of
providing the maximum number of eligible contractors with
access to Agency contracts.
One of the primary goals of the 8(a) program is to develop a
large number of small disadvantaged businesses.
Historically, however, the Federal Government has focused its
8(a) contract awards in a small group of firms. GAO has
described this practice as "a long standing phenomenon."
According to a 1981 GAO report, on average, the top 50 8(a)
firms annually received about 31 percent of all contract
awards over a previous 12-year period. In 1987, the top 50
firms received about $1.1 billion, or about 35 percent of the
8(a) contract awards. In 1990, the top 50 firms received
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8(a) Contracting
$1.5 billion, or about 40 percent of the total 8(a) contracts
awarded.
EPA's 8(a) program showed the same historical pattern as
other Federal agencies. From fiscal 1986 through 1990, EPA
awarded 267 8(a) contracts to a total of 138 contractors.
However, 109 of these awards, or almost 41 percent, were
awarded to only 12 contractors. These 12 contractors
received $333,193,878, or 45 percent, of the total contract
value awarded during this 5-year period. Each of these
contractors received from 5 to 19 separate 8(a) contracts
during this five year period.
Over each of the last three fiscal years, EPA has steadily
increased the portion of its 8(a) contract dollars awarded to
first time recipients and reduced the percentage of contract
dollars awarded to companies with prior 8(a) awards.
Analysis of Sole Source 8(a) Contract Recipients
Grouped by # of Prior EPA 8(a) Contracts Received
Within Fiscal Year
Contacts
Received
by
Recipient
in Prior
FYs
0
1
2
3
4 or mote
FY91
%of
H of Tool Value Total
Contractors of Contracts Value
19 $15,984,019 32%
8 16,006,820 32%
0 00%
0 00%
4 18,261.344 36%
31 $50,252,183 100%
Mote: Competitive 8^a) awards were excl
over the selection of an award red
FY92
%of
H of Tola! Value Total
Contractors of Contracts Value
9 $14,684,203 54%
7 5,546,836 20%
1 2,097,268 8%
0 00%
3 4.917.365 18%
20 $27,245,672 100%
FY93
%of
# of Total Value Total
Contractors of Contracts Value
21 $28,571,813 63%
4 7,820,866 17%
1 143,856 0%
2 3,702,347 8%
2 5.041.882 11%
30 $45,280,764 99%
uded from this analysis since EPA does not exert direct influence
pient.
In fiscal 1991, EPA awarded 36 percent of its 8(a) contract
dollars to contractors who already had received four or more
8(a) awards from EPA. This figure improved to 18 percent in
fiscal 1992 and to 11 percent in fiscal 1993. At the same
time, EPA has increased the value of 8(a) awards it has made
to contractors with-no prior EPA 8(a) contracts from 32
percent in fiscal 1991 to 54 percent in fiscal 1992 and to 61
percent in fiscal 1993.
OSDBU recently stressed the importance of continuing this
improvement. The OSDBU Director wrote, in a memorandum to
8
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8(a) Contracting
the Director of the Contract Management Division (CMD) at
Research Triangle Park (RTF),
...we must accelerate our efforts to ensure that
the maximum number of prospective small
disadvantaged firms...have equal access to business
opportunities in the Agency...the Agency is fully
committed to expanding the number of 8(a) firms to
receive contract work from the Agency.
This broader distribution of 8(a) contractor dollars was in
line with the program's objective of assisting the maximum
number of eligible firms. In addition, it reduced the
possibility that EPA would be perceived as favoring selected
contractors.
POTENTIAL CONTRACT UNDERESTIMATION
DETECTED AND CORRECTED
In fiscal 1993, EPA contracting officials examined and, when
appropriate, challenged the program office's contract
valuation. This ensured that the competitive requirements of
the 8(a) program were not improperly avoided.
Public Law 100-656, The Business Opportunity Development
Reform Act of 1988, established a dollar threshold for
competition within 8(a) procurements. When the estimated
value for service contracts exceeds $3 million, the
procurement must be competed among qualified 8(a) firms.
Contracts valued at less than the statutory threshold can be
awarded on a sole source basis to 8(a) program participants.
In the past, EPA had side-stepped the competitive provisions
of the 8(a) program by inappropriately valuing procurements
below the $3 million competitive limit. Recent OIG audits of
EPA laboratory facilities reported this problem on contracts
awarded for the Office of Research and Development.4 Our
review of a sample of 8(a) awards during fiscal 1991 and 1992
4 Contracting Activities at Environmental Research
Laboratory - Duluth. MN. Report No. 2100443 (July 7, 1992)
Management of Extramural Resources at the Environmental Research
Laboratory - Athens. GA. Report No. 3100156 (March 31, 1993)
Management of Extramural Resources at the Environmental Research
Laboratory - Narragansett. RI. Report No, 3100236 (June 16, 1993)
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8(a) Contracting
found examples of this practice across other EPA program
offices as well. For example, in 1991 EPA asked an 8(a)
company to submit a proposal for services required by the
Office of Pesticide Programs (RFP No. D100392L1). The
resulting cost proposal totalled $3,151,458, thus exceeding
the competitive limit. According to EPA's pre-negotiation
plan,
The total amount proposed...is greater than the
amount which requires that an 8(a) action be
competed...In order to reduce the amount of the
contract below the $3,000,000 limit, the
prenegotiation position is to reduce the total
level of effort by 1,000 hours each year...
Our review of several fiscal 1993 8(a) awards showed that
contracting officials were more vigilant in reviewing and
questioning the contract valuations provided by program
offices. For example, in one case at EPA's CMD at RTP, a
contracting official questioned a program office's initial
Government estimate because it was "exactly" $3 million. The
contracting official questioned the labor rates used by the
program office in computing the estimate as being
unreasonably, low. The official also observed that the "odd
number of hours" projected for this level of effort contract
appeared to be computed by dividing the labor rate into the
competitive ceiling of $3 million rather than being based on
an analysis of actual need. Using a more appropriate cost
factor for labor and the program office's projected hours,
the contracting officer concluded that the procurement should
be valued between $3.5 million and $3.8 million. Program
officials were instructed to revise or justify the labor rate
used and the number of hours required.
Program officials concurred with the contracting office's
assessment. As a result, program officials adjusted the
hourly rate and re-estimated the requirements based on the
statement of work. The revised procurement request was
valued at $2.75 million. The contracting office accepted
this estimate. In September 1993, EPA negotiated and awarded
a sole source contract (68-D3-0087) to an 8(a) company for
$2.6 million.
As shown in this example, the contracting office provides a
critical independent control over the valuation of
procurement requests. This control, in turn, helps ensure
that competitive requirements of the 8(a) program are not
inappropriately avoided.
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TIMELY IDENTIFICATION AND RESOLUTION
OF POTENTIAL CONFLICTS OF INTEREST
In an 8(a) contract awarded during fiscal 1993, EPA timely
investigated and resolved a reported conflict of interest
between the proposed contractor and an EPA employee. In a
prior OIG audit5, we reported that contracting officials did
not resolve potential conflict of interest issues raised
prior to awarding a sole-source contract to an 8(a) firm. In
response to the audit, EPA provided additional training to
contract staff emphasizing conflict of interest issues.
In April 1993, an EPA Contracting Specialist at RTP received
information that the project officer for a proposed 8(a)
contract (68-D3-0088) had a potential conflict of interest
with the selected firm. A memorandum to the file stated that
the project officer had selected the 8(a) firm and would
administer the resultant contract. According to the firm's
Vice-President, the project officer had previously been an
employee of his firm.
Contracting officials followed-up on the information
regarding this potential conflict of interest. They notified
the OIG and obtained information from the program office
before finalizing the contract award. The subsequent
investigation determined that no conflict existed, and the
contract award was finalized as planned. EPA's actions to
resolve this issue ensures the integrity of the contracting
process.
CONCLUSION
EPA's 8(a) contract awards in fiscal 1992 and 1993
demonstrated an effort to distribute contracting
opportunities to a broader spectrum of eligible firms. This
reduced EPA's reliance on a small number of 8(a) contractors
and contributed to the program's goal of maximizing the
number of contractors receiving developmental assistance.
In addition, our review of fiscal 1993 8(a) awards
demonstrated a positive change from previous contracting
practices. The pattern of contracting problems which existed
in 8(a) awards during fiscal 1991 and 1992 was not in
5 Contracting Activities at Environmental Research
Laboratory - Duluth. MN. Report No. 2100443 (July 7, 1992)
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8(a) Contracting
evidence in fiscal 1993 awards. EPA contracting officials
were more alert in fiscal 1993 to potential problems
regarding splitting contracts, underestimating the value of
8(a) contracts, and situations involving potential conflicts
of interest. Contracting officials actions helped safeguard
the integrity of the 8(a) selection process.
AGENCY COMMENTS
OARM expressed appreciation that our report acknowledged (1)
the broader distribution of EPA's 8(a) contract awards during
recent fiscal years and (2) an increased emphasis on
detecting and correcting the contracting problems reported in
past OIG audits.
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8(a) Contracting
CHAPTER 3
AWARDS MADE IN ANTICIPATION OF A FIRM'S 8(A)
GRADUATION HINDER PROGRAM GOALS
EPA and other Federal agencies have often awarded contracts
to 8 (a) firms just days before expiration of the firms'
program eligibility. SBA has encouraged this practice.
Although such awards meet the legal requirements of the 8(a)
program, the practice: (1) permits firms to benefit from
sole-source awards for several years after the conclusion of
their statutory 8(a) program eligibility, (2) does not
encourage 8(a) firms to compete in the open marketplace, and
(3) creates a perception that EPA favors selected
contractors. Thus, while legal, awarding sole source
contracts to 8(a) firms near the completion of their program
eligibility does not serve the overall objectives of the 8(a)
program.
In May 1988, GAO reported6 that this practice
...can result in the removal of future contracts
for goods and services from the 8(a) program for
several years...It could also impact upon the
program's capacity for meeting the developmental
needs of other firms in the program...
The GAO suggested that if companies develop non-8(a) business
in accordance with the program's objectives, then a policy to
not award contracts with options to graduating firms is
appropriate.
LEGISLATIVE HISTORY
Congress has amended the Small Business Act several times
since its original enactment in 1953. The original focus of
the 8(a) program was to award as many contracts as possible
to eligible firms. However, SBA's data showed that between
1968 and 1978, only four percent {149 of 3,726) of
participating firms had ever "graduated" into the free
enterprise system to compete for non-8(a) business.
6 Status. Operations, and Views on the 8(a) Procurement
Program (GAO/RCED-88-148BR, May 1988)
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Public Law 95-507 (October 24, 1978) shifted the intent of
the 8(a) program's focus from that of contract assistance to
business development. Underlying this change was a premise
that after a period of assistance firms would "graduate" from
the program. The law did not establish a fixed period of
program eligibility. However, it was expected that firms
leaving the program would have developed enough independence
to survive in the private marketplace.
In 1980, Public Law 96-481 required SBA to define a specific
period of program participation for all 8(a) firms. SBA
instituted regulations which established a Fixed Program
Participation Term (Program Term). Under these regulations,
each eligible firm was allowed to participate in the 8(a)
program for a term of five years. SBA could grant a one time
extension of two years. Thus, the maximum period of
participation was seven years.
In June 1988, Congress expressed continued concerns that the
8(a) program was mainly a contracts program and not a
business development vehicle. A Congressional survey showed
that 8(a) firms often felt they did not have enough time in
the 8(a) program. Many survey respondents also stated that
they were "dropped" from the program at the conclusion of
their eligibility without adequate transitional assistance to
enter the competitive marketplace.
As a result, in 1988, Public Law 100-656: (1) redefined the
Program Term to nine years, (2) prohibited SBA from extending
the Program Term beyond the established expiration date, and
(3) divided the nine year Program Term into a developmental
stage (first four years) and a transitional stage (last five
years). The developmental stage allows 8(a) firms to access
markets and learn management skills. The transitional stage
is designed to gradually reduce a firm's reliance on the 8(a)
program for its revenue and survival.
In 1990, SBA established specific targets for "non-8(a)
business activity" for firms in the transitional stage of
their Program Term7. These targets require a firm to
demonstrate that as it progresses through the transitional
stage of the 8(a) program, an increasing percentage of its
total revenues come from non-8(a) sources. Firms scheduled
to graduate on or before August 15, 1992, were not subject to
these specific targets. They were, however, expected to
7 Minority Small Business and Capital Ownership Development
Program. SOP 80 05 2, pp. 196-197.
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8(a) Contracting
"make substantial and sustained efforts to attain the
targeted dollar levels of non-8(a) revenue approved in its
business plan." If a firm did not meet these target levels,
it could lose sole source contract support.
EPA's guidance, Preferential Procurement Program Handbook For
Pro-ject Officers. Contract Officers, and Small Business
Specialists (August 1992} , acknowledges that
During this [transitional stage], firms are
permitted to continue to receive sole source and
competitive 8(a) contract support, however,
concerns must achieve certain non 8(a) business
activity targets.
This same document states that the measure of success in the
8(a) program is "the number of competitive firms that exit
the program without being unreasonably reliant on Section
8(a) contracts..."
AWARDS AVOIDED LEGISLATIVE INTENT AND
DID NOT ENCOURAGE OPEN MARKET COMPETITION
Awarding contracts to 8(a) firms immediately prior to the
expiration of their eligible Program Term was not consistent
with the program's legislative intent and did not encourage
firms to compete in the open market. Instead, the practice
primarily benefitted EPA by permitting selection of a
specific contractor and reducing the time and effort required
to award a contract.
We identified several examples in which EPA awarded large,
multi-year contracts or extended existing contracts to 8(a)
firms immediately prior to the expiration of the firms'
Program Term. We found no evidence that EPA evaluated the
non-8(a) revenues of transitional firms or obtained such an
evaluation from SBA prior to awarding these contracts.
Viking Systems International
In October 1990, EPA awarded two sole source contracts to
Viking Systems International (VSI) just days before the
firm's graduation from the 8(a) program. The two contracts
had a combined value of $5.6 million. Each contract became
effective on October 21, 1990, the same date that VSI
graduated from the 8(a) program. EPA documents related to
each of these contracts express the importance of making
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8(a) Contracting
final awards prior to VSI's scheduled graduation from the
8(a) program.
On the first contract (68-W1-0001), EPA reasoned that if it
did not award a contract prior to VSI's graduation date it
would "lose its ability to use Viking Systems" and "would
expend additional resources in starting the procurement
process over." On the second contract (68-W1-0002), an EPA
project manager's memorandum stated that it was desirable to
contract with VSI to "help assure continuity in the project."
VSI was the contractor on a prior phase of the project. The
project officer also stated in the memorandum that VSI was
graduating from the 8(a) program soon and "we are most
interested in completing this contract before this crucial
deadline." We found no evidence that EPA evaluated VSI's mix
of 8(a) and non-8(a) revenues at the time of these sole
source awards. These contracts provided VSI with revenues
through the 8(a) program for almost five years beyond its
statutory Program Term.
Mitchell Systems
On June 8, 1992, EPA awarded a significant sole source
modification to an existing 8(a) contract (68-D9-0040) with
Mitchell Systems. This was six days prior to Mitchell
Systems graduating from the 8(a) program. The modification
increased the available labor hours in each of option periods
III and IV by 9,152 hours or 59 percent (9,152/15,600).
EPA also modified contract 68-D1-0124, another Mitchell
Systems contract, just two days before the firm's graduation.
EPA signed the original contract in August 1991. The
contract provided for a three year term that expired in
September 1994. Nine months after the initial award, and
immediately before Mitchell Systems' 8(a) Program Term
expired, EPA extended the period of performance by two years
to September 1996. Documents in the contract file cited (1)
unanticipated austerity of funds and (2) a need to balance
work requirements with the availability of funds as reasons
for the extension.
We found no evidence that EPA considered Mitchell Systems'
mix of 8(a) and non-8(a) revenues at the time of either of
these modifications.
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Labat -Anderson Int.ernat ional
EPA curtailed the final year of an existing contract with
Labat-Anderson International (LAI) and issued a new, long-
term, sole source contract to LAI in order to retain its
services beyond completion of its Program Term. LAI was the
incumbent on EPA's contract (68-01-7352) for library services
and records management. The dollar ceiling in this initial
three year contract was exhausted several months before its
scheduled expiration on September 30, 1989. To prevent a
lapse in service and to retain LAI as the contractor for
these services, EPA awarded LAI a 5 year, $82 million
contract in May 1989 (68-W9-0052) under provisions of the
8(a) program. LAI's 8(a) Program Term was to expire in
October 1989.
The Acquisition Plan for this contract stated:
The Program Office wishes to take advantage of the
8(a) program by contracting with LAI for the
maximum period allowable prior to their
graduation...[the requirement] will have to be
transitioned to another contractor once LAI
graduates. At the end of this new contract, the
EPA will no longer be able to utilize this company
or their expertise for any future effort in this
area.
EPA's Office of General Counsel completed a pre-award review
of this procurement. The reviewing attorney questioned
awarding LAI the 5 year contract just prior to the firm's
exit from the 8(a) program. In review notes documented in
the contract file, the attorney stated:
I am not convinced that a 5 year POP [period of
performance] is needed. It seems that the reason is to
keep LAI as the contractor.
The attorney also raised concerns about EPA exercising
contract options after LAI had graduated from the 8(a)
program. The attorney stated:
[It] seems strange to award an 8(a) contract for a
total possible 5 years just 4 months before [the]
firm graduates from the 8(a) program.
Despite these concerns, EPA awarded the sole source contract
to LAI for a base year plus four option years.
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8(a) Contracting
Vigyan Inc
Since 1988, EPA has awarded Vigyan eleven sole source 8(a)
contracts valued at $17 million. In August 1993, EPA awarded
two of these contracts (68-D3-0061 and 68-D3-0063) to Vigyan
within days of the firm's graduation from the 8(a) program.
The two contracts combined had a potential maximum value of
$2.9 million.
In March 1993, Office of Prevention, Pesticides and Toxic
Substances officials interviewed five 8(a) firms, including
Vigyan, about performing work for its 33/50 program (68-D3-
0063). These officials determined that Vigyan would be the
most effective in performing the tasks required. EPA
officials were aware that Vigyan would graduate the 8(a)
program near the end of August 1993. Therefore, EPA
accelerated its original award date (September 30, 1993) for
this contract to satisfy the SBA requirement that the
contract be signed before the firm's graduation date. EPA's
project officer-explained that if EPA missed Vigyan's 8(a)
graduation date, the program would be left without contract
support. This, in turn, would adversely affect the program's
ability to meet its highly visible national goals. On August
25, 1993, just 4 days before the end of the firm's 8(a)
program eligibility, EPA awarded Vigyan a sole source, three
year contract with a potential value of $2.3 million.
On August 18, 1993, 11 days before Vigyan's graduation from
the 8(a) program, EPA awarded it another sole source, five
year contract valued at $576,000 (68-D3-0061). This contract
was a follow-on to a prior 3 year contract also held by
Vigyan. Again, we found no evidence that EPA evaluated
Vigyan's mix of 8(a) and non-8(a) revenues before awarding
these contracts.
Awarding new 8(a) contracts and modifying existing 8(a)
contracts immediately before the expiration of a firm's
Program Term is done primarily to benefit EPA, not to further
the competitive development of the recipient firm. Thus, the
practice does not further the objective of the 8(a) program.
EPA's existing guidance recognizes the importance of 8(a)
firms reducing their dependence on 8(a) awards over their
Program Term. EPA's practice, however, has not ensured this
objective.
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8(a) Contracting
PERCEPTIONS OF FAVORITISM TOWARD
INCUMBENT 8(A) CONTRACTORS
Awarding contracts to 8(a) firms immediately prior to the
expiration of their program eligibility creates a perception
of favoritism. Although statutes governing the 8(a) program
give contracting officers greater latitude in selecting award
recipients, the primary objective of the program is to
develop small and economically disadvantaged businesses. In
amending the Small Business Act in 1988, Congress found that
insufficient attention had been given to this business
development goal. Congress concluded that many participants
had developed an unhealthy dependency on sole source
contracts by the time they were required to leave the
program. To address these issues, Congress amended the
existing statute to (1) provide a maximum period of program
participation and (2) define a transitional period during
which a participant's reliance on sole source contracts
should steadily decrease.
In spite of these legislative changes, there is a continuing
view that new, developing 8(a) firms are excluded from the
available contracting activity because of a preference for
older, incumbent 8(a) firms. This creates an unfavorable
view of both the 8(a) program and the specific Government
agency involved. Throughout 1993, the National Aeronautics
and Space Administration (NASA) was the focus of several
articles in the Federal Computer Week criticizing its 8(a)
contracting practices. An editorial cartoon clearly
illustrated a perception that NASA favors 8(a) firms who are
close to graduating from the program. The effect of this
favoritism was that new 8(a) firms were not given
opportunities to develop. This perception, and the
unfavorable image that it creates, can be applied to EPA's
practices.
CONCLUSION
Awarding contracts to firms immediately before their 8(a)
Program Term expires is legal, but does not contribute to the
objective of developing minority and disadvantaged
businesses. Congress has amended the statutory provisions of
the 8(a) program to define a finite period of participation.
EPA's practice of awarding contracts with renewable options
during the final days of a firm's Program Term effectively
voids this provision. In addition, although EPA guidance
specifies that transitional firms must achieve certain non-
8(a) business activity levels, EPA did not evaluate
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8(a) Contracting
prospective 8(a) contractor performance in this area. These
practices foster a perception that incumbent contractors
receive preferential consideration in obtaining EPA
contracts.
RECOMMENDATIONS
We recommend that:
l. The Assistant Administrator, OARM, and the Director,
OSDBU, establish a policy requiring their offices to
concur, and provide a written justification for,
awarding 8(a) contracts whose base or option periods
extend beyond the established Program Term of the
recipient 8(a) firm.
2. OSDBU review the mix of 8(a) and non-8(a) revenues of
transitional firms while evaluating potential
contractors or remove this standard from its existing
guidance.
AGENCY COMMENTS
The Assistant Administrator, OARM, and the Director, OSDBU,
disagreed with our findings and recommendation 1. OARM's
response emphasizes that awarding contracts to 8(a) firms
anytime prior to the expiration of their program eligibility
is legal and encouraged by the SBA. OARM disagrees with our
conclusion that this practice is contrary to the legislative
intent of the 8(a) program. OARM states that to deny firms
access to these awards would unfairly deprive firms of their
complete eligibility period. In addition, OARM states that
these awards aid 8(a) firms in transitioning into the
competitive marketplace.
OARM also disagrees that EPA has a responsibility to review
or monitor the mix of 8(a) and non-8(a) revenues generated by
potential award recipients. According to OARM, this
obligation rests solely with the SBA. In addition, OARM
states that the Agency does not have the authority nor access
to this type of contractor information.
Finally, OARM states that our recommendation to create a new
documentation standard is contrary to current National
Performance Review initiatives to streamline and reduce such
requirements.
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8(a) Contracting
OSDBU states that it is presumptuous to assume that 8(a)
firms who received contracts before graduation are not
pursuing other competitive opportunities. The OSDBU response
concluded that "the rationale offered by the DIG...does not
provide a strong justification for changing the current
practice...." OSDBU proposes, as an alternative, that SBA
and OAM join it in a pilot project to orient graduating 8(a)
firms toward other EPA business opportunities through grants
and cooperative agreements with state and local governments.
PIG EVALUATION OF AGENCY COMMENTS
As stated earlier in this chapter, we recognize that EPA's
current practice is both legal and encouraged by SBA. We
accept that the practice may, on occasion, be in the best
interest of both EPA and the overall development of the 8(a)
firm. We also agree that SBA holds primary responsibility
for monitoring the eligibility and progress of firms within
the 8(a) program. However, EPA's discussion of non-8(a)
revenue levels within its internal guidance materials implies
a responsibility on the Agency's part to review a firm's
progress against this standard.
SBA's Associate Deputy Administrator for Government
Contracting and Minority Enterprise Development recently
stated that SBA wants to discourage firms from becoming
dependent on 8(a) contracts to stay afloat. EPA's guidance
supports this concept by stating that the 8(a) program's
success is measured by "the number of competitive firms that
exit the program without being unreasonably reliant on
Section 8(a) contracts". It is, therefore, fair to conclude
that EPA would routinely assess the level of contractor
reliance, particularly as a firm approaches completion of its
program eligibility. Evaluating a firm's mix of 8(a) and
non-8(a) revenue is a strong indicator of reliance. Based on
OARM's response and discussions at the exit conference, we
have added recommendation 2 which was not contained in the
draft report.
We agree that the current trend in Government operations, as
supported by the National Performance Review, is toward
reducing unnecessary controls and procedural requirements.
However, the National Performance Review does not envision
eliminating, or prohibit establishing, reasonable controls.
Given the history of Congressional concern over the use of
the 8(a) program as a contracting mechanism rather than a
business development strategy, it is reasonable to request
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8(a) Contracting
documentation of EPA's rationale in awarding contracts that
may give the appearance of contractor favoritism.
We do not believe that the ability to award contracts to 8(a)
firms prior to graduation should be prohibited. Our
recommendations are aimed at ensuring (1) an affirmative
management decision in these cases and (2) that this practice
is used to further develop participating firms.
MATTERS FOR CONGRESSIONAL CONSIDERATION
The issues raised in this chapter are not matters of
statutory or regulatory compliance. As acknowledged, EPA's
current practice is within the existing legal parameters.
Instead, our concerns are based on interpretation of
Congressional intent, appearances of favoritism, and
differing views of organizational responsibilities. None of
these provide a firm foundation for resolving the differences
of opinion between the Agency and the OIG. As a result, we
believe Congress should consider (1) the appropriateness of
awarding sole source contracts to 8(a) firms immediately
prior to expiration of program eligibility and (2) the role
awarding agencies have in monitoring development of 8(a)
firms with whom they do business. To encourage attention to
these issues, we will distribute this audit report to
Congressional members and committees responsible for
overseeing and directing the government's small and minority
business legislation.
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8(a) Contracting
CHAPTER 4
EPA MUST STRENGTHEN OSDBU'S ADVOCACY ROLE
IF THE AGENCY IS TO ACHIEVE ITS 8(A) CONTRACTING GOALS
OSDBU has battled several obstacles in its role as the
Agency's advocate for 8(a) contractors. These include: (1)
insufficient and untimely contract information, (2) a lack of
Agency-wide accountability for meeting 8(a) contracting
goals, and (3) an inefficient organizational structure. As a
result, EPA did not meet its goal for 8(a) contracting in
either fiscal 1992 or 1993. If EPA is to meet its
established goals in future fiscal years, it needs to: (1)
gather more timely and comprehensive information on current
and future 8(a) contracting opportunities, (2) increase
management accountability for 8(a) goals at all levels, and
(3) improve coordination between OSDBU and OARM in directing
and supervising the Small and Disadvantaged Business
Specialists (SDBSs).
Public Law 95-5078 required each Federal agency having
procurement authority to establish an OSDBU. The law also
prescribed that the OSDBU Director report directly to the
head of the Agency, or its deputy. In July 1979, EPA
established its OSDBU under the Office of the Administrator.
Public Law 100-6569 required EPA to establish small business
and 8(a) goals each year. To set these goals, each EPA
program office and region provides OSDBU with its individual
procurement goals for the upcoming year. OSDBU summarizes
the goals, obtains the EPA Administrator's approval, and
submits the information to SBA. For fiscal 1989 through
1991, EPA exceeded its annual 8(a) goal of 6 percent. In
fiscal 1992, EPA's goal increased to 8 percent; it achieved a
level of 5 percent. For fiscal 1993, EPA's goal was again 8
percent. Actual 8(a) contracting in fiscal 1993 totalled 5
percent.
8 Amendments to the Small Business Act and the Business
Investment Act of 1958, October 24, 1978.
9 Business Opportunity Development Reform Act of 1988.
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8(a) Contracting
CURRENT OSDBU ADVOCACY ACTIVITIES
OSDBU currently performs several functions in an effort to
promote use of the 8 (a) contracting program. These include
attending seminars and job fairs, compiling a forecast of
contract opportunities for small or small disadvantaged
firms, and providing information to project officers and
large prime contractors about small and disadvantaged
businesses. These activities are designed to ensure that
small and disadvantaged businesses, including 8(a) firms, are
provided the opportunity to compete for and receive a fair
proportion of the Agency's total acquisition dollars.
OSDBU takes part in trade fairs, seminars, and various
conferences to promote the Agency's small and disadvantaged
business goals for direct procurement. In cooperation with
OAM, OSDBU conducts briefings to inform prospective small and
disadvantaged businesses about new contracting opportunities.
Within the Agency, OSDBU provides information on available
small and disadvantaged businesses to project officers and
large prime contractors for consideration in their upcoming
activities.
Each year, OSDBU polls EPA program offices for information on
planned procurements. Using this information, OSDBU develops
a forecast of small business and 8(a) contracts that it
expects EPA to issue for the upcoming fiscal year. OSDBU
distributes the forecast to: (1) small and disadvantaged
businesses, (2) SBA, and (3) the Department of Commerce to
alert them to potential EPA contracting opportunities.
OSDBU or a SDBS receive selected solicitation packages from
contracting officers. OSDBU or SDBSs review all
solicitations valued at more than $25,000 for possible 8(a)
contracting opportunities. If the solicitation is judged to
provide 8(a) contracting options, either OSDBU or the SDBS
may refer three to five eligible firms for the program office
to consider.
All of these actions increase the visibility of the 8(a)
program. In turn, visibility increases the likelihood that
more contracting opportunities will be made available to 8(a)
firms.
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ADDITIONAL ADVOCACY ACTIVITIES NEEDED TO
INCREASE 8(A) CONTRACTING OPPORTUNITIES
Contracting results from the last two years indicate that
more must be done to encourage EPA program offices to
participate in the 8(a) program. EPA's advocacy of the 8 (a)
program can be strengthened through: (I) improved
information on future contracting opportunities and (2)
better monitoring of program progress.
Improved Information on Contracting Opportunities
Both the quality and quantity of contracting information
available to OSDBU hindered its ability to adequately plan
8(a) activity. The information in OSDBU's annual procurement
forecast was neither timely nor complete. Improvements in
this information would increase the ability of OSDBU to
intervene early in the contracting process on behalf of 8(a)
companies.
Identifying procurements that can be satisfied by 8(a)
eligible companies is a major function of OSDBU. OSDBU's
annual contracting forecast is published in October and
contains only planned activities identified by EPA program
offices. According to the OSDBU Director, contracting plans
provided by the program offices have often been incomplete.
That is, the plans did not identify all anticipated
contracting actions. Efforts by OSDBU, to independently
identify contracting opportunities in combination with
program office input, will increase the universe of contract
awards available to qualified 8(a) contractors.
EPA's CIS contains extensive information on active contracts.
Reviewing this data would aid OSDBU in forecasting 8(a)
contract opportunities. For example, by reviewing CIS, we
identified a contractor who had completed its 8(a) program
participation term and held two contracts that would expire.
in fiscal 1994. The project officers stated that these
contracts were to be offered as 8(a) contracts in fiscal
1994. However, they were not included in the program's
submission to OSDBU. Thus, they were not in OSDBU's fiscal
1994 forecast. As a result, neither OSDBU nor 8(a) firms
were aware that these opportunities existed. If OSDBU staff
routinely monitored expiring 8(a) contracts, they would have
identified these two contracts for the fiscal 1994 forecast.
There may be similar contracts that OSDBU, and the 8(a)
community, are also unaware of.
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8(a) Contracting
The Agency's acquisition plans for full and open competition
contracts also provide an additional opportunity for OSDBU to
identify 8(a) contract opportunities. According to EPA's
Contract Management Manual, OSDBU should receive a copy of
the acquisition plans from each program office. While OSDBU
had received acquisition plans in the past, it no longer
does. An OSDBU official agreed that it is critical for 8(a)
contract opportunities to be considered early in the
acquisition planning process. By the time the actual
procurement request is submitted, it is often too late to
obtain 8(a) participation. Therefore, OSDBU should request
that it again receive the Agency's advance acquisition plans.
Better Monitoring of Program Progress
OSDBU has insufficient information to monitor the Agency's
progress toward its 8(a) procurement goals. As a result,
OSDBU was not able to effectively adjust its efforts during
the year to ensure that the goals were met. For example, in
November 1993, the Director could not determine whether EPA
had met its 8(a) goal for fiscal 1993. He also did not have
sufficient information to forecast how or whether the Agency
would meet its goal for fiscal 1994.
The SBA had reported problems with OSDBU's monitoring of the
small business programs in the past. In its 1991
Surveillance Review Report, SBA said that EPA's Small
Business Office at RTP lacked an organized system for record
keeping, tracking, and follow-up on the small business
programs. During the SBA's review, information on many
categories under the Small Business Award Goals could not be
supplied by EPA. As a result, the SBA recommended that EPA
establish a data tracking system for the small business
programs. To date, RTP has not developed an information
system to track small business goals. According to the SDBS
at RTP, OSDBU sets the goals for the Agency. Since RTP does
not have any specific small business goals, the SDBS believes
that tracking this information would not provide meaningful
statistical data.
OSDBU can take steps to improve its system for monitoring
progress toward meeting the 8(a) procurement goals. These
actions include periodically comparing each program's actual
procurements against the annual forecast and utilizing
information already available in EPA's management information
systems to monitor procurements. By taking these actions,
OSDBU would be able to continually track contract awards
versus the established 8(a) goals.
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8(a) Contracting
If OSDBU periodically compared its annual forecast with each
program's actual procurement activity, OSDBU would timely
identify variances. Doing this could prevent contracts
targeted for 8(a) firms from going to full and open
competition. This would permit OSDBU to work with program
offices to follow through with 8(a) procurement plans or
recognize the need to identify other potential 8(a)
opportunities.
LACK OF MANAGEMENT ACCOUNTABILITY FOR MEETING
AGENCY S(A) CONTRACTING GOALS
EPA program officials were not held accountable for assisting
the Agency in meeting its annual 8(a) program goal. Each
year program offices and regions set their individual 8(a)
procurement goals for the upcoming year. When consolidated,
these individual goals may not be adequate to satisfy EPA's
overall goal. Program offices were not, however, measured on
whether they contributed their "fair share" toward meeting
the Agency's overall objective.
In addition, according to the OSDBU'Director, the Agency's
goal was generally not addressed through existing performance
agreements. The OSDBU Director stated that only his annual
performance standards contain specific language aimed at
meeting this objective. Thus, there was no effect on
individual contracting staff and program managers if the 8(a)
goal was not met. Establishing individual goals for each EPA
program office and holding program and contracting managers
accountable for meeting these goals would provide an
incentive to identify and execute 8(a) contracts.
EPA's 8(A) ADVOCACY STAFF WERE NOT CENTRALLY ORGANIZED
EPA staff responsible for advocating the use of 8(a)
contracting were not organized in a manner which insures a
unified effort or provides independence from the overall
contracting function. The EPA Acquisition Regulation (EPAAR)
requires that the Director of each Contracting Office appoint
a SDBS. EPA guidance10 states that the SDBSs are
responsible for carrying out the day-to-day responsibility
for operating the Small and Disadvantaged Business
10 Preferential Procurement Program Handbook for Project
Officers. Contract Officers, and Small Business Specialises
(August 1992).
27
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8(a) Contracting
Utilization Program within their CMD. According to the SDBSs
in Cincinnati and RTF, they devote 100 percent of their
efforts to the Agency's small business programs. The SDBS
receives technical direction from the OSDBU Director.
However, the SDBS is administratively responsible to the
Contracting Office Director.
EPA's OSDBU Director did not believe the EPAAR gave him
authority over the SDBSs. As a result, he had not monitored
their activities nor required them to report their activities
to him. For example, the Director told us the SDBSs should
be conducting outreach activities to potential 8(a)
contractors, but he did not know if they actually did. To
effectively manage EPA's 8(a) contracting program, the OSDBU
Director needs to exercise supervisory authority over the
SDBSs and direct their activity within the Agency's overall
8{a) objectives.
The current organization creates a potential, if not actual,
conflict of responsibilities. The SDBSs are advocates for
EPA's 8(a) and other small business programs. Contracting
divisions, in turn, work to obtain the highest quality
contractual support for EPA program offices. Since 8(a)
contractors are generally less experienced at competing for
Government contracts than non-8(a) contractors, these
objectives may conflict. Improved coordination between OARM
and OSDBU in directing and supervising the SDBSs is needed to
reduce this potential conflict.
CONCLUSION
Despite the efforts of EPA's OSDBU, the Agency did not reach
its established goals for 8(a) contracting during fiscal 1992
or 1993. OSDBU's advocacy role was hindered by: (1)
insufficient and untimely contract information, (2) a lack of
Agency-wide accountability for meeting 8(a) goals, and (3) an
inefficient organizational structure.
RECOMMENDATIONS
We recommend that:
1. OSDBU develop a multi-year plan which identifies current
8(a) contract levels and presents a strategy for
obtaining sufficient future contracts to meet the
Agency's projected goals.
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8(a) Contracting
OSDBU develop and implement a plan to regularly (a)
update its annual procurement forecast throughout the
year and (b) monitor the progress of Agency program
offices in meeting their 8(a) obligation.
The Assistant Administrator, OARM, require the Director,
0AM, to obtain timely annual acquisition plans
(including anticipated small business awards) from each
Assistant and Associate Administrator and provide this
information to OSDBU.
The Assistant Administrator, OARM, and the Director,
OSDBU, develop a method of setting 8(a) program goals
for Assistant Administrators, Regional Administrators,
and Office and Division Directors, as appropriate.
Also, a mechanism for timely tracking of actual
achievements needs to be developed and implemented.
The Assistant Administrator, OARM, and the Director,
OSDBU, implement procedures that improve the
coordination between OSDBU and 0AM in directing and
supervising the SDBSs. This should, at a minimum,
include input from the OSDBU Director to the SDBSs
annual performance standards and evaluation.
AGENCY COMMENTS
The OSDBU Director agreed with recommendations 1 and 2. He
did not comment on recommendation 3 and 4. The OARM
Assistant Administrator did not comment on recommendations 1
through 3 and agreed with the purpose of recommendation 4.
Both OSDBU and OARM agreed with the objective of improved
coordination between their offices in directing and
supervising the work of the SDBSs (recommendation 5).
However, OARM disagreed with our conclusion that there was an
inherent conflict of responsibilities between the SDBSs and
the Contract Management Divisions. Both OSDBU and OARM
disagreed with the recommendation in the draft report (which
has since been revised) that the positions should be
transferred to direct OSDBU control. Instead, OARM stated
that there were various ways of accomplishing improvement in
this area.
PIG EVALUATION OF AGENCY COMMENTS
We continue to view the current organization of SDBSs
reporting to the Directors of CMD at Cincinnati and RTF as a
29
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8(a) Contracting
potential conflict of responsibilities. However, it is
appropriate for OARM and OSDBU to suggest alternative methods
of addressing the objective of improved coordination and
supervision. As a result, we revised recommendation 5 to
provide this opportunity. The Agency should provide a
specific plan and milestones for achieving this improved
oversight.
Since neither OSDBU nor OARM disagreed with recommendations 1
through 4, the Agency should provide specific tasks and
milestones for addressing these recommendations.
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8(a) Contracting
APPENDIX I
Page 1 of 2
OSDBU'S RESPONSE TO PIG DRAFT REPORT
UNfTED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
•WTOH
SUBJECT: OSDBU Response to the Draft Audit Report No. E1BMF3-05-
0018, EPA's 8(a) Contracting Program
FROM: Leon H. Hampton, Jr., Director^r""
Office of Small 6 Disadvantage^
Business utilization (1230C)
TO: Elissa R. Xarpf
Associate Assistant Inspector General
for Acquisition and Assistance Audits (2421)
As per the administrative instructions issued in your May
12, 1994 memorandum, the Office of Small and Disadvantaged
Business Utilization (OSDBU) responds to the aforementioned draft
audit report.
Overall, X am pleased with the in-depth review and the
analyses of the 8(a) Program undertaken by the OIG, and I see it
having beneficial effects on the program. The thought provoking
comments have allowed me and my staff an opportunity to
thoroughly reflect on the program and to take steps for its
improvement.
Having reviewed the subject report, I concur with three of
the four recommendations for improving and advancing the 8 (a)
program within the Agency. The one exception is the
recommendation that:
1. The Agency establish a policy requiring the Directors
of 0AM and OSDBU to concur and provide written justification for
awarding 6(a) contracts whose base or option periods extend
beyond the established program term of the recipient 6(a) firm.
It is important again to note that the Small Business
Administration (SBA) has developed policies and guidelines for
awarding contracts to 8(a) firms before expiration of the firms'
program eligibility. The award of such contracts, including
options, are intended to help 8(a) firms through the transitional
period to better assure long range viability which ultimately
result in employment opportunities for those communities where
these firms are located.
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8(a) Contracting
APPENDIX I
Page 2 of 2
From this perspective, it ie presumptuous to assume that
8(a) firms who received such contracts before graduation are not
actively pursuing competitive opportunities. Data reported by
the SBA indicates that a fair number of graduated 6(a) firms are
winning competitive contracts. We must be mindful that the 8(a)
program is a socioeconomic program designed to provide assistance
to the fullest extent practical.
It is also important to point out that federal agencies,
including the EPA, have a responsibility and obligation to help
bridge these firms to assure that both the intent and spirit of
applicable statues and regulations are adhered to. Thus, the
rationale offered by the 016, respecting the above-cited
recommendation, in my opinion does not provide a strong
justification for changing the current practices of awarding 8(a)
contracts which include options prior to the firm's graduation.
He can further strengthen the 8(a) program within EPA by having
each major program seriously begin structuring their procurement
packages to make them suitable for more 8(a) firms to win
contracts in a competitive manner.
Alternately, I am asking the Small Business Administration,
the Commerce Department's Minority Business Development Agency,
and EPA'e Office of Acquisition Management to join me in a
demonstration project to orient graduating participating 8(a)
firms toward business opportunities generated through EPA's
financial assistance programs viz. grants and cooperative
agreements with states and local municipalities.
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8(a) Contracting
APPENDIX II
Page 1 of 8
OARM'S RESPONSE TO OIG DRAFT REPORT
This appendix contains the Assistant Administrator for OARM's
response to our draft report in its entirety. After
considering these comments, we made revisions to the final
audit report. These changes are described in Appendix III.
We have placed reference numbers in the left margin of this
appendix to correspond to the notes in Appendix III.
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8(a) Contracting
APPENDIX II
Page 2 of 8
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JUN 23 1994
KgMQRXKPPK
SUBJECT: Draft Audit Report No. E1BMF3-05-001B
EPA's 8(a) Contracting Problem
/ea**Wr*~ V Srffe^U^.
FROM* ^—-i..«..
TO:
*DMINISTR»TION
WORE SOURCES
MANAGEMENT
i/ Assistant Administrator
Elissa R. Karpf
Associate Assistant Inspector General
For Acquisition and Assistance Audits
Thank you for the opportunity to comment on the draft audit
findings on EPA's 8(a) program. Attached are our written
comments.
We appreciate your recognition of improvements in our
procedures, and agree that additional emphasis must be placed on
meeting our goals for 8 (a) contracting, we do not concur,
however, with some of your specific findings and recommendations.
EPA remains committed to the Small Business Administration's
(SBA) 8(a) program and will continue to work with program offices
to meet our established goals. As you know, we have initiated an
effort to break up our "umbrella" contracts. As we break-up
large, level-of-effort requirements, we are making a concerted
effort to create more opportunities for 8(a) firms.
We would be happy to discuss the findings with you at your
convenience.
Attachment
MmMMMir'BMItMlMMirlMt
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APPENDIX II
Page 3 of 8
ATTACHMENT
Note 1
Note 2
CHAPTER 2
INCREASED ATTENTION TO CONTRACTING PROCEDURES
IMPROVES RECENT 8(A) AWARDS
We appreciate the acknowledgement that EPA's 8(a) contract
awards during fiscal year 1993 showed a broader distribution of
8(a) contract awards among eligible contractors and an increased
emphasis on detecting and correcting contracting problems
reported in past Office of inspector General (OIG) audits.
We do not concur, however, in the broad conclusions of this
chapter that if we stopped making awards of contracts to firms
close to their graduation date, we would improve our distribution
of 8(a) contracting dollars. While changing this practice would
shift awards to other firms, those other firms could also be the
recipients of other EPA 8(a) awards. The actual distribution of
awards could still remain with a small number of firms.
The OIG relates an instance where the Agency estimated a
procurement at $2.5 million, the proposal was greater than $12
million, and after revisions to the SOW and negotiations, the
award was just under $3 million. By way of clarification, it
should be noted that, as long as the contracting officer (CO)
receives reasonable/believable independent government cost
estimates for less than $3 million, the regulations do not
prohibit the CO from negotiating and awarding a sole source 8(a)
contract in excess of $3 million. Nor is it prohibited to revise
the statement of work during negotiations if the program office
indicates that its requirements have changed or were originally
stated in error. Nonetheless, we will remain vigilant in our
efforts to ensure that we are not manipulating our requirements
just to get below $3 million.
-l-
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8(a) Contracting
APPENDIX II
Page 4 of 8
CHAPTER 3
AWARDS MADE IS ANTICIPATION OP A FIRM'S
8(A) GRADUATION HINDER PROGRAM GOALS
The OIG contends throughout this chapter that the award of
sole source 8(a) contracts to a firm near the end of its program
eligibility, while not technically illegal, is contrary to the
intent oC the 8(a) Program. The OIG .also believes that it is
EPA's responsibility to evaluate the 8(a) firm's aix of 8(a) and
non-8(a) revenues to ensure that sole source 8(a) awards do not
cause the firm to exceed the appropriate mix. Me disagree with
both of these contentions.
To assist firms transitioning into the competitive Federal
marketplace, SBA created business aix targets for each of the
transitional phase years of the 8(a) program. Pursuant to 13 CFR
124.312, the responsibility rests with SBA to monitor that nix
and take action if a firm fails to attain the minimum required
business activity targets (13 CFR 124.312 (c) (12)). EPA does
not have the authority nor access to the information required to
perform this function.
As long as a firm is otherwise eligible to receive 8(a)
awards (has the appropriate Standard Industrial Code approval,
the capability to perform, etc.) and SBA accepts an offer for
that firm, we may award contracts right up to the date the firm
becomes ineligible/graduates. To do otherwise would, in effect,
be treating a firm as if the graduation date was actually earlier
than the date specified.
SBA's regulations allow sole source awards to be made up to
the date of program termination (13 CFR 124.206(d)) and
specifically state that awards may contain options which may be
exercised after the firm's 8(a) program term has ended. (13 CFR
124.208(d) and 13 CFR 124.318(b).) He feel that such a practice
actually aids an 8(a) firm in transitioning into a 100%
competitive marketplace, since it will have some on-going work to
sustain its business while it is competing for new contracts.
It is our understanding that SBA is currently amending its
regulations to specify that in cases of 8(a) competitions, the
firm need only be eligible under the 8(a) program to receive the
award as of the date of its priced offer, rather than as of the
date of contract award. This means that contract awards could be
made well after a firm actually graduates from the program and
that the entire performance of the contract could occur after the
graduation date.
-2-
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APPENDIX II
Page 5 of 8
RECOMHENDATIOH
Establish a policy requiring the Directors of the Office of
Acquisition Management (0AM) and the Office of Small and
Disadvantaged Business Utilization (OSDBU) to concur and
provide a written justification for awarding 8(a) contracts
whose base or option periods extend beyond the established
program term of the recipient 8(a) firm.
Me oppose the QIC's recommendation that the Agency establish
policy which requires the Directors of 0AM 6 OSDBU to concur and
justify in writing the award of any 8(a) contract with a period
of performance beyond an 8(a) firm's graduation date.
Such a policy is contrary to streamlining, re-engineering,
and vice-president Gore's National Performance initiatives, and
would create a requirement for new written justifications and
approvals to accomplish something which is legal and encouraged
under existing regulations.
-3-
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APPENDIX II
Page 6 of 8
Note 3
Note 4
CHAPTER 4
ETA MOST STRENGTHEN OSDBU'8 ADVOCACY ROLE
IF THE AGENCY IS TO ACHIEVE ITS 8 (A) CONTRACTING GOALS
By way of clarification, please note that the Agency's Snail
Business specialists (SBSs) rather than the OSDBU review all
solicitations over $25,000. Either the SBSa or the OSDBU Day
refer 8(a) firms to the program offices for consideration.
In addition, please note that.the Contracts Management
Division in Research Triangle Park, N.C. (CMC-RTF) does not
maintain "an automated database to track the status of its
contracts." Nor is true that the section chiefs update the
database bi-weekly. The Chief, Contract Placement Branch, has
created a Lotus spreadsheet to track acquisitions in process and
contract awards made. Information provided by the section chiefs
and specialists is used to update the spreadsheet at least once a
month.
Thus, the OIG's contention that "OSDBU could use information
from this system to identify potential contracts for the 8(a)
program and monitor the status of awarded contracts" is
misleading. There is not really enough information on the
spreadsheet to enable anyone to identify procurements for the
8 (a) program. Once requirements are included on the spreadsheet,
they are too far in the acquisition process for this to be a
productive mechanism for identification of 8(a) candidates.
The spreadsheet is used by CMD-RTP to track the status of a
procurement in the pre-award process. If helpful, the OSDBU
could gather data from the spreadsheet regarding the number and
estimated dollar value of on-going 8(a) acquisitions for each
program office and subsequent award information.
EPA'S BfAJ ADVOCACY STAFF ARE NOT CENTRALLY ORGANIZED
The OIG contends that centralized tracking and coordination
of the activities of the Agency's SBSs is necessary. The OIC
also believes that having the SBSs administratively responsible
to the CMD division directors creates an appearance, if not an
actual, conflict of interest.
The OIC notes that,
"The SBSs are advocates for EPA's 8(a) and other small
business programs. Contracting divisions, in turn, work to
obtain high quality, low cost contractual support for EPA
program offices. Since 8(a) contractors are acknowledged to
be less competitive (i.e., higher price and/or lower
-4-
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8(a) Contracting
APPENDIX II
Page 7 of 8
quality) than non-B(a) contractors,
conflict."
these objectives
Note 5
The QIC's statement regarding the "higher price and/or lower
quality" of 8(a) contractors is an inappropriate and inaccurate
generalization. It would be more accurate to say that 8(a)
contractors are generally inexperienced at competing for
Government contracts.
Moreover, while we agree that centralized tracking and
coordination makes sense, we do not agree that the SBS functions
conflict with the duties of COs. COs are charged with awarding
contracts which neat program needs within applicable regulations
and policies. Those regulations require COs to utilize the 8(a)
Program when certain conditions are met. OAM has a high stake in
seeing the 8(a) program succeed, and the SBSs are working to help
accomplish this. While we agree that more centralized
coordination of the Agency's small business program is needed, we
believe there are various ways to achieve this short of direct
OSDBU supervision of the SBSs.
RECOMMENDATIONS
Of the six recommendations made by the OIG, we offer comment
on three:
4. The Agency develop policy requiring written
justification for removing a requirement from the 8(a)
Program.
The procedures in place are sufficient to address this
concern, and we do not believe additional policy guidance is
necessary. In accordance with Federal Acquisition Regulation
subpart 19.5, Set-Asides for Small Business, and EPA Acquisition
Regulation subpart 1519.501, Set Asides for Small Business, EPA
form 1900-37, "Record of Procurement Request Review" must be
completed and approved for each acquisition exceeding the small
purchase limitation ($25,000). The form requires the CO to
document the history of a procurement and fully justify his/her
determination to set aside the procurement for small businesses,
offer it to SBA for the 8(a) program, or openly compete the
requirement. This includes the determination to remove a
requirement from the 8(a) program. The SBS and a representative
from SBA must concur with the CO's determination.
please note that there are valid reasons for moving
acquisitions out of the 8(a) program. An example is the SBA
provision for cases where a firm graduated from the program, but
because a particular contract constitutes a major percentage of
the firm's business, the firm should not be precluded from
-5-
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8(a) Contracting
APPENDIX II
Page 8 of 8
e.r / 4)
competing. There are other instances where the incumbent has
Note 6 graduated, but no new qualified 8(a) firm can be identified.
5. The Agency include measurable 6(a) contracting goals
within the individual performance standards for all
Assistant Administrators, Office Directors, and Division
Directors.
He do not object to the requirement that performance
standards include 8(a) goals as long as a reasonable method
for setting goals is established and an accurate mechanism
for timely tracking of achievements versus goals is implemented.
6. The Agency transfer the Small and Disadvantaged
Business Specialist positions from QAM to the OSDBU.
He do not feel that transferring the SBSs from OAK to OSDBU
is necessary since we believe that the current organizational
Note 8 structure does not inhibit the achievement of the goals of the
OSDBU.
Note 7
-6-
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8(a) Contracting
APPENDIX III
Page 1 of 1
PIG REVISIONS TO THE FINAL REPORT IN RESPONSE TO
OARM'S COMMENTS TO THE DRAFT REPORT
The Assistant Administrator for OARM's response to our draft
report is contained in Appendix II. After considering these
comments, we made revisions to the final audit report. The
following notes correspond to specific sections of OARM's
response as indicated by the reference numbers which we
placed in the left margin of Appendix II.
Note 1 We eliminated this conclusion from the final
report.
Note 2 We eliminated this example from the final report.
Note 3 We clarified the text in the final report to
indicate that OSDBU and SDBSs have responsibility
for reviewing solicitations over $25,000.
Note 4 After further discussions with the Contract
Management Division in RTP, we eliminated the
referenced paragraph from the final report.
Note 5 We eliminated the referenced phrase from the final
report and revised the paragraph to reflect OARM's
suggested wording.
Note 6 We eliminated this recommendation and the related
issue from the final report.
Note 7 We modified our original recommendation that
increased accountability be obtained through
performance standards. The final report contains a
more general recommendation based on OARM's
comments.
Note 8 We modified our original recommendation that the
SDBSs be transferred from OARM to OSDBU. The final
report contains a recommendation that OARM identify
appropriate ways of improving coordination with
OSDBU in directing and supervising the SDBSs.
comments.
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APPENDIX IV
Page 1 of 1
CIS
CMD
EPA
EPAAR
GAO
LAI
NASA
OARM
0AM
DIG
OSDBU
Program Term
RTP
SBA
SDBS
VSI
ABBREVIATIONS
Contract Information System
Contract Management Division
Environmental Protection Agency
EPA Acquisition Regulations
Government Accounting Office
Labat-Anderson
National Aeronautics and Space Administration
Office of Administration and Resources
Management
Office of Acquisition Management
Office of Inspector General
Office of Small and Disadvantaged Business
Utilization
Fixed Program Participation Term
Research Triangle Park, NC
Small Business Administration
Small and Disadvantaged Business Specialist
Viking Systems International
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8(a) Contracting
RELATED REPORTS
APPENDIX V
Page 1 of 1
Report Title
Small Business Administration: Status,
Operations, and View on the 8 (a) Program
Special Review of Allegations of
Improprieties and Management of Interim
Computer Workstation Contract
Small Business: Problems in Restructuring
SBA's Minority Business Development Program
Contracting Activities at Environmental
Research Laboratory - Duluth, MN
Survey Report ORD Environmental Research
Laboratory - Gulf Breeze
Survey Report on Contracting Activities at
the Atmospheric Research and Exposure
Assessment Laboratory
Survey Report on Contracting Activities at
the Health Effects Research Laboratory
Survey Report on Contracting Activities at
the Environmental Research Laboratory -
Corvallis, OR
Survey of Contracting Activities at the Air
and Energy Engineering Research Laboratory
Management of Extramural Resources at the
Environmental Research Laboratory - Athens,
GA
Management of Extramural Resources at the
Environmental Research Laboratory -
Narragansett , RI
Report
Date
05/24/88
03/30/91
01/31/92
07/07/92
09/29/92
09/30/92
09/30/92
02/03/93
02/26/93
03/31/93
06/16/93
Source
(Number)
GAO
(RCED-88-148BR)
EPA OIG
(1400060)
GAO
(RCED-92-68)
EPA OIG
(2100443)
EPA OIG
(2300093)
EPA OIG
(2300100)
EPA OIG
(2700016)
EPA OIG
(3400019)
EPA OIG
(3400025)
EPA OIG
(3100156)
EPA OIG
(3100236)
45
Report No. E1BMF3-05-0018-4100452
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8(a) Contracting
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46
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8(a) Contracting
APPENDIX VI
Page l of 2
DISTRIBUTION
Office of Inspector General
Inspector General (2410)
Chief, Resources Management Unit (2421)
Executive Assistant to the Inspector General (2410)
EPA Headquarters Office
Administrator (1101)
Deputy Administrator (1102)
Assistant Administrator for Administration and Resources
Management (3101)
Director, Office of Small and Disadvantaged Business
Utilization (1230)
Director, Office of Acquisition Management (3801F)
Director, Program and Policy Coordination Office (3102)
Liaison, Office of Acquisition Management (3801F)
Liaison, Office of Administration and Resources Management
(3102)
Special Assistant to the Director, Office of Acquisition
Management (38OIF)
Agency Followup Official (3304)
Attention: Assistant Administrator for the Office of
Administration and Resources Management
Agency Followup Coordinator (3304)
Attention: Director, Resources Management Division
Audit Followup Coordinator (3304)
Attention: Management Controls Branch
47
Report No. E1BMF3-05-0018-4100452
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8(a) Contracting
APPENDIX VI
Page 2 of 2
DISTRIBUTION
Audit Followup Coordinator (3802F)
Office of Policy, Training and Oversight Division Audit
Followup Coordinator (1104)
Executive Support Office
Associate Administrator for Regional Operations
and State/Local Relations (1501)
Associate Administrator for Communications, Education and
Public Affairs (1701)
Associate Administrator for Congressional and
Legislative Affairs (1301)
EPA Regional Office
Director, Contract Management Division at Cincinnati, OH
Director, Contract Management Division at Research Triangle
Park, NC
Audit Followup Coordinator (CMD-Cincinnati)
Audit Followup Coordinator (CMD-Research Triangle Park)
48
Report No. E1BMF3-05-0018-4100452
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