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OIG Report: Agencies Score an F in WOSB Sole Source Awards

In a report released by the Small Business Administration’s Office of Inspector General (“OIG”) just yesterday, contracting agencies were heatedly criticized for failing to comply with the requirements for awarding sole source contracts under the Woman-Owned Small Business (“WOSB”) Program. The potential cost of this mistake? $52.2 million.

As an initial note, the requirements for awarding sole source contracts to WOSBS are set forth at FAR 19.1506. This provides that a contracting officer may award a sole source contract to an economically-disadvantaged WOSB, or EDWOSB, when: WOSBs are underrepresented in the applicable NAICS code, the contracting officer does not have a reasonable expectation that offers would be received from two or more EDWOSB concerns, and the anticipated award will not be greater than $4 million (for contracts other than manufacturing). The requirements for sole source awards to WOSBs are the same, with the added requirement that WOSBs be substantially underrepresented.

If the SBA’s OIG report was to assigned a grade to contracting officers for following sole source requirements, it would be an F. Of other findings, the OIG found that contracting officers did not comply with sole source requirements for 50 out of 56 contracts. That’s 11%!

The OIG report found that contracting officers awarded sole source contracts to WOSBs without the necessary documentation to determine eligibility for 50 of the 56 Program contracts they reviewed. Examples of missing documentation included WOSB and EDWOSB self-certifications, articles of incorporation, birth certificates, and financial information. Without this documentation, it was not possible to ascertain that a firm was owned and controlled by a woman who is a U.S. citizen. Specifically, contracting officers awarded 18 contracts, valued at $11.7 million, on a sole-source basis, to firms that had no documentation in Certify.SBA.gov, and 32 contracts, valued at $40.5 million, to firms that uploaded incomplete documentation.

Compounding these issues, within these 56 contracts, the OIG found instances where contracting officers had awarded a contract using a NAICS code that SBA had not identified as being substantially underrepresented by women-owned businesses. Additionally, contracting officers awarded two contracts to Program firms for NAICS codes that were identified by SBA, but the firms had not identified themselves as being eligible small businesses for those codes.

Also, the SBA OIG found that the firms that received those contracts did not comply with the Program’s self-certification requirements. These conditions could have been precluded had SBA implemented a certification program the same time it implemented the sole-source authority provisions. As a result, there is no assurance that Program set-aside contracts awarded on a sole-source basis were awarded to eligible WOSB or EDWOSB firms.

The OIG report offered five recommendations to improve sole source procedures and ensure awards are made only to eligible firms:

  1. Conduct eligibility reviews for the firms we identified in this report that lacked the required documentation in Certify.SBA.gov and require those firms to remove their designation in the System for Award Management
  2. Initiate debarment proceedings, if warranted based on the results of eligibility reviews in Recommendation #1.
  3. Implement a Women-Owned Small Business Federal Contracting Program certification process as required by the National Defense Authorization Act for FY 2015.
  4. Conduct quarterly reviews of firms with newly obtained WOSB or EDWOSB status, to ensure that they have the required documentation in Certify.SBA.gov, until SBA implements a Women-Owned Small Business Federal Contracting Program certification process.
  5. Conduct quarterly reviews of Federal Procurement Data System-Next Generation data for Program set-aside contracts to ensure Federal agencies’ contracting officers used the appropriate North American Industry Classification System codes and take the necessary action(s) with identified exceptions.
  6. In coordination with the Office of Federal Procurement Policy and the General Services Administration, strengthen controls in the Federal Procurement Data System-Next Generation to prevent Federal agencies’ contracting officers from using ineligible North American Industry Classification System codes.

As most are well aware, WOSBs are fairly underrepresented with respect to the receipt of set-aside and sole source contracts from the federal government. (This is reflected in the small business scorecard the SBA released in 2018). This underscores the unfortunate nature of the SBA OIG’s findings, as it demonstrates that those lucky enough to receive a bit of the “WOSB federal pie” may not have been allowed to order from the menu in the first place.

Access the full SBA OIG report here.

Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on federal contracting issues at: http://www.legalmeetspractical.com.

Some folks shouldn’t have taken a piece. . .

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