Under the new 8(a) justification requirement, SBA may not accept a sole- source contract over $20 million for negotiation under the 8(a) program  unless the procuring agency has completed an 8(a) justification in  accordance with the FAR. Section 811 of the  NDAA for Fiscal Year 2010 required that the FAR be amended within 180  days of the statute’s enactment date to require justifications for 8(a) sole- source contracts over $20 million. OFPP officials who were involved in the implementation  of this rule explained that the primary reason for the FAR Council’s delay  was establishing a process for, and holding, tribal consultations. During this period, according to  FPDS-NG data, agencies awarded 42 sole-source 8(a) contracts with  anticipated values over $20 million—with a total value of over $2.3  billion—that would have been subject to the new justification requirement  if the FAR Council had implemented the change by the statutory deadline. Compared to fiscal years 2008 through 2010, the  number and value of these contracts declined significantly in fiscal year  2011, when only 20 were awarded, as shown in figure 4. The agencies  awarding the remaining 11 contracts did not comply with the new  justification requirement, either because they were not aware of the  requirement and did not prepare a justification, or because they were  confused and incorrectly used a CICA justification, as summarized in  Figure 5. While agencies are required to  prepare justifications in accordance with the FAR, SBA is required, in  practice, to confirm that these justifications are in place. SBA does not  currently have a process in place to do so. Recommendations

To help mitigate future confusion regarding justifications for 8(a) sole- source contracts over $20 million, we recommend that the Administrator  of the Office of Federal Procurement Policy, in consultation with the FAR  Council, promulgate guidance to:
Clarify whether an 8(a) justification is required for 8(a) contracts that  are subject to a pre-existing CICA class justification. To help ensure that federal procurement data provides accurate and  complete information, we recommend that the Administrator of the  General Services Administration implement controls in FPDS-NG to  preclude agency officials from entering a value of zero dollars for the  Base and All Options data element when the initial award of a contract is  entered into the database. SBA  did not fully address our recommendations. In email responses, OFPP  and GSA generally agreed with our recommendations, and OFPP also  included additional comments. Appendix I: Objectives, Scope, and Methodology

The objectives of this review were to determine (1) the timeliness of  actions taken to implement the 8(a) justification requirement in the  Federal Acquisition Regulation (FAR); (2) the number of sole source 8(a)  contracts over $20 million that have been awarded since October 2009  and trends over time; and (3) the extent to which agencies have  implemented the new justification requirement. We  selected those with the highest reported values in the Federal  Procurement Data System-Next Generation (FPDS-NG) at agencies  already within the scope of our review, and verified the absence of  justifications with agency contracting officials. We initially identified 14 sole- source 8(a) contracts with values over $20 million. Appendix II: 8(a) Sole-Source Contracts over $20 Million, by Agency, Awarded between October 28, 2009, and March 31, 2012

	Agency Department of Defense

	Department of Energy General Services Administration Department of Health and Human Services Department of the Interior Department of Justice Office of Personnel Management Department of State Department of Transportation Total

Air Force  Army  Navy  Other DOD  This table summarizes the number of contracts and reported value  awarded by agency between October 28, 2009—the date of enactment  for the National Defense Authorization Act for Fiscal Year 2010—and  March 31, 2012, the date of the most current data available at the time of  our review.
Why GAO Did This Study

SBA's 8(a) program is the government's primary means of developing small businesses owned by socially and economically disadvantaged individuals, including firms owned by Alaska Native Corporations and Indian tribes. The NDAA for Fiscal Year 2010, enacted on October 28, 2009, called for revisions to the FAR to provide for a written justification for sole-source 8(a) contracts over $20 million, where previously justifications were not required. GAO determined (1) the timeliness with which this new justification requirement was incorporated in the FAR; (2) the number of 8(a) sole-source contracts valued over $20 million that have been awarded since October 2009 and trends over time; and (3) the extent to which agencies have implemented this new justification requirement. GAO analyzed federal procurement data, reviewed the 14 contracts subject to the requirement across five federal agencies, and interviewed officials from OFPP, SBA, the Department of Defense, and other agencies.

What GAO Found

The National Defense Authorization Act (NDAA) for Fiscal Year 2010 required that the Federal Acquisition Regulation (FAR) be amended within 180 days after enactment to require justifications for 8(a) sole-source contracts over $20 million. These justifications bring more attention to large 8(a) sole source contracts. The FAR Council, which updates the FAR, missed this mandatory deadline by almost 325 days. During this delay, based on data in the Federal Procurement Data System-Next Generation (FPDS-NG), 42 sole-source 8(a) contracts with reported values over $20 million, totaling over $2.3 billion, were awarded without being subject to a justification. Office of Federal Procurement Policy (OFPP) representatives involved with the FAR Council's implementation of this rule attributed the delay primarily to the time required to establish a process for consulting with Indian Tribes and Alaska Native Corporations.
From October 28, 2009, through March 31, 2012, agencies reported awarding 72 sole-source 8(a) contracts over $20 million. GAO also analyzed trend information in FPDS-NG from fiscal year 2008 through fiscal year 2011 (the most current available information), which showed that the number and value of these contracts declined significantly in 2011. While GAO determined that FPDS-NG data was sufficiently reliable for the purposes of this review, GAO found errors, such as contracts with an implausible reported value of zero.
GAO found a slow start to implementation of the new justification requirement. Of the 14 sole-source 8(a) contracts awarded since the FAR was revised, only three included an 8(a) justification. The agencies awarding the remaining 11 contracts did not comply, either because contracting officials were not aware of the justification requirement or because they were confused about what the FAR required. For example, contracting officials were confused in one instance where another justification was already in place that covered multiple contracts. Further, the Small Business Administration (SBA) cannot accept a contract over $20 million for negotiation under the 8(a) program unless the procuring agency has completed a justification, but GAO found that SBA did not have a process in place to confirm the presence of a justification.

What GAO Recommends

GAO recommends that OFPP issue guidance to clarify the circumstances in which an 8(a) justification is required. GAO also recommends that the General Services Administration--which operates FPDS-NG--implement controls in FPDS-NG to help ensure that contract values are accurately recorded, and that SBA take steps to ensure that its staff confirm the presence of justifications. OFPP and GSA generally agreed with the recommendations. SBA indicated it would take some actions but did not fully address the recommendations.