Among Other Trends, the Percentage of Obligations to Small Businesses in Puerto Rico Was Relatively High, and Use of SBA Programs Varied

Our analysis of federal prime contracting data identified a number of  trends in federal contracting obligations to small businesses in Puerto  Rico from fiscal years 2006 through 2016. Additionally, we found that a  greater percentage of obligations was awarded to small businesses in  Puerto Rico through full and open competition and the 8(a) program  compared to the other three SBA socioeconomic contracting programs. Small Businesses in Puerto Rico Received a Relatively High Percentage of Federal Prime Contracting Obligations

The percentage of federal prime contracting obligations awarded to small  businesses within Puerto Rico for contracts performed there was  relatively high from fiscal years 2006 through 2016, particularly in the last  4 fiscal years. In fiscal year 2016, small  businesses in Puerto Rico received about 47 percent of federal prime  contracting obligations (about $319 million out of $682 million) for work  performed there. Stakeholders Believe That Small Business Challenges in Puerto Rico May Be Exacerbated by Geography and Economic Conditions

Stakeholders we spoke with identified a number of challenges that small  businesses in Puerto Rico may face in obtaining federal contracting  opportunities. These challenges  included increased use of contract bundling or consolidation, difficulty in  meeting contract procurement requirements, and lack of knowledge about  the federal procurement process. None of the  stakeholders we interviewed identified federal laws that have created  unique challenges for small businesses in Puerto Rico in obtaining federal  contracting. SBA has conducted various small business outreach activities in Puerto  Rico, including training and seminars, to promote participation in its small  business contracting programs. Appendix I: Objectives, Scope, and Methodology

This report examines (1) trends in small business contracting and the use  of Small Business Administration (SBA) programs that provided federal  contracting preferences to small businesses in Puerto Rico from fiscal  years 2006 through 2016, and (2) stakeholder views on any challenges  small businesses in Puerto Rico face in obtaining federal contracting  opportunities, including those posed by federal laws, and steps SBA and  other agencies have taken to assist Puerto Rican small businesses in  obtaining federal contracting opportunities. We used the  nationwide data as a reference point for our analysis of small business  federal contracting trends in Puerto Rico. Those programs are 8(a)  Business Development (8(a)), Historically Underutilized Business Zones  (HUBZone), Women-Owned Small Business (WOSB), and Service- Disabled Veteran-Owned Small Business (SDVOSB). To identify stakeholder views on any challenges small businesses in  Puerto Rico face in obtaining federal contracting opportunities, including  those posed by federal laws, and steps SBA and other agencies have  taken to assist Puerto Rican small businesses in obtaining federal  contracting opportunities, we interviewed SBA officials and other  stakeholders, such as federal agency contracting officials, industry  associations, and economic development entities in Puerto Rico. We also conducted a literature  review of trade articles, academic articles, testimonies, and GAO and  SBA reports to identify challenges cited for the 8(a), HUBZone, WOSB,  and SDVOSB programs and challenges faced by small businesses in  federal contracting in Puerto Rico. The  keywords used included “SBA,” “Puerto Rico,” and “contracting,” and the  names of the four SBA programs we reviewed in this report.
Why GAO Did This Study

SBA administers several programs nationwide and in Puerto Rico that provide federal contracting preferences to small businesses. The Puerto Rico Oversight, Management, and Economic Stability Act includes a provision for GAO to review the application and utilization of SBA programs in Puerto Rico.
GAO examined, among other things, (1) trends in small business contracting and the use of SBA programs in Puerto Rico that provide contracting preferences to small businesses and (2) stakeholder views on any challenges that small businesses in Puerto Rico face in obtaining federal contracting opportunities.
To analyze trends in the use of SBA programs, GAO obtained data on prime contracts for Puerto Rico for fiscal years 2006 through 2016 and used nationwide data as a reference point. GAO interviewed stakeholders such as federal agency contracting officials, industry associations in Puerto Rico, and economic development entities about any challenges small businesses in Puerto Rico face in obtaining federal contracts and steps SBA has taken to promote participation in its programs. Additionally, GAO conducted a literature review to identify challenges cited for the 8(a), HUBZone, WOSB, and SDVOSB programs and challenges faced by small businesses in federal contracting in Puerto Rico.
GAO makes no recommendations in this report.

What GAO Found

From fiscal years 2006 through 2016, a higher percentage of federal contracting obligations was awarded to small businesses within Puerto Rico for contracts performed there compared to the percentage for small businesses nationwide, particularly in the last 4 fiscal years of the period (see fig.). In fiscal year 2016, small businesses in Puerto Rico received about 47 percent of federal contracting obligations to Puerto Rico (about $319 million out of $682 million) compared to 23 percent of federal obligations awarded to small businesses nationwide. Of the four Small Business Administration (SBA) programs that provide contracting preferences based on socioeconomic designations, a higher percentage of obligations was awarded in Puerto Rico through the 8(a) Business Development program compared to the Historically Underutilized Business Zone (HUBZone), Women-Owned Small Business (WOSB), and Service-Disabled Veteran-Owned Small Business (SDVOSB) programs. The use of 8(a) contract awards in Puerto Rico was somewhat higher than nationwide, while the use of the other three SBA programs was roughly comparable.
Agencies and industry associations GAO interviewed identified several challenges small businesses in Puerto Rico may face in obtaining federal contracting opportunities. Challenges they identified included a lack of knowledge about the federal contracting process; difficulty meeting procurement requirements; and difficulty accessing bonding, financing, and capital. Many of these challenges are similar to those GAO identified in a September 2012 report (GAO-12-873) that small businesses in general face in seeking federal contracting opportunities. However, stakeholders indicated that some challenges may be exacerbated by Puerto Rico's geography and economic conditions. Stakeholders did not identify any federal laws that have created unique contracting challenges for small businesses in the region. SBA and the three other federal agencies GAO contacted identified examples of conducting outreach, providing training and seminars, coordinating with local organizations, and other efforts intended to help Puerto Rican small businesses obtain federal contracting opportunities.