Report 10-15 - The Colorado District Office’s Servicing of 8(A) Business Development Program Participants

This report presents the results of our review of the Colorado District Office's servicing of 8(a) Business Development program participants. We conducted the review in response to a complaint the Office of Inspector General received on July 13,2009, alleging that actions taken by the Colorado District Office hurt small businesses and wasted government resources. The complaint, which identified potential violations of 8(a) servicing rules between March 2007 and June 2009 involving 12 companies, (1) alleged that the Colorado District Office was not:

• Taking steps to graduate and terminate 8(a) program participants when their Business Development Specialists (BDS) determined that they were no longer qualified to be in the program;

• Applying servicing procedures consistently, in a timely manner, and ensuring that past personal histories with the participant's owners did not influence servicing decisions;

• Ensuring that BDSs were knowledgeable of 8(a) program requirements;

• Communicating with 8(a) participants in a professional manner; and

• Properly collecting and reporting 8(a) contract data.

To determine whether the Colorado District Office was appropriately graduating and terminating 8(a) firms, we reviewed actions taken by the district office relative to two firms identified in the complaint that allegedly should have been removed from the program based on criteria outlined in Agency regulations and Standard Operating Procedure (SOP) 80 05 3A, 8(a) Business Development. We also judgmentally selected four additional firms after discussions with the complainants and our Investigations Divisions and a review of SBA' s 8( a) data. To determine actions relative to these firms, we visited the Small Business Administration's (SBA) Colorado District Office where we reviewed the 8(a) files of the six companies and interviewed the Business Development Division staff and District Director.

To determine whether the district office was applying servicing procedures consistently, we reviewed the 8(a) files of eight firms identified as having servicing issues. We also solicited feedback from 205 participant firms serviced by the Colorado District Office between 2007 and 2009, including those identified in the complaint, to obtain their opinion about the quality and timeliness of service provided by the district office. We obtained feedback from 39 firms, which equated to a 19 percent response rate. Because of the low response rate, the results could not be projected to the universe of 8(a) participants serviced by the Colorado District Office. Each of the 39 firms was asked uniform questions regarding the district office's assistance in developing their business and identifying procurement opportunities, and whether the participant would recommend the 8(a) program to others in their community. Participant firms were also asked to rate the service they received on a scale from 1 to 5 (1 being poor and 5 being excellent). Because participants wanted to remain anonymous, we did not validate their statements with district officials. We also reviewed the 8(a) and mentor protege agreement files that were maintained by the district office for the three companies identified in the complaint as having approved agreements. Further, we interviewed officials from SBA's Office of Business Development, Colorado District Office, and reviewed SBA Office of Hearing and Appeals case law related to similar situations outlined in the complaint.

To determine whether BDSs were properly trained, we reviewed employee training documentation at the district office. The 39 participant firms we contacted were also asked their opinion about the district office's professionalism and their BDS's knowledge of the 8(a) program. Further, we reviewed officestaffing levels and determined the length of time that BDSs had served in their positions, and obtained feedback from 6 BDSs who had less than 2 years of experience with the 8(a) program regarding the level of training they were provided on program requirements.

While one of the complaints concerned whether the district office was properly collecting and reporting 8(a) procurement data, we did not address this issue as we determined that district offices are not required to report 8(a) data to headquarters. Instead, SBA relies on procurement data from the Federal Procurement Data System. We also did not determine validity of personnel and other issues identified in the complaint because they were not related to potential violations of the 8(a) servicing rules. We conducted our review between September 2009 and August 2010 in accordance with Government Auditing Standards for attestation engagements prescribed by the Comptroller General of the United States.