IG says GSA made small biz mistakes

Large businesses were misidentified as small businesses in General Services Administration's procurement data system, according to the agency's watchdog.

NOTE: This story first appeared on FCW.com.

The General Services Administration misclassified millions of dollars in procurements, due to inaccurate coding in its procurement data system, according to a new report from the agency's Office of Inspector General's audits division.

The IG's Office of Audits found that almost $90 million in procurements registered in GSA's Federal Procurement Data System-Next Generation (FPDS-NG) were mislabeled as small business set-asides, when the contracting businesses didn't fit the definition, according to the report issued Sept. 14.

The GSA IG office audited a sample of procurements from fiscal 2016 and 2017 to gauge the accuracy of small business designations. The report looked at the use of North American Industry Classification System (NAICS) codes used to designate business size, differentiating large from small.

The distinction is significant, since federal agencies have goals of supporting small businesses by setting aside 23% of their contracts for them.

The codes are set by the Small Business Administration and used by GSA to classify businesses. The designation is initially a self-evaluation by the contractor, generally using its number of employees, or average gross revenues, through GSA's System for Award Management, according to the report.

The audit found that 10 procurements in the audit period, worth $274 million, had NAICS codes in FPDS-NG that did not match the NAICS codes on the contract award documents. Four of the 10, said the report, totaling $89 million, were large businesses misidentified in FPDS-NG with a small business NAICS code, according to the report.

GSA's Federal Acquisition Service (FAS) personnel, as well as the FPDS-NG's own data library, informed auditors that the incorrect coding was a combination of a limitation of the data system and the NAICS codes. They said the system automatically pre-populates the codes into contracts, and contracting officers can't change them once they're entered.

The audit also found a glitch in reporting large businesses working for small businesses on procurements. The report said there are no requirements or mechanisms to measure small business awards that are subcontracted to large businesses.

The audit office recommended the GSA FAS commissioner address the NAICS code limitations in FPDS-NG, as well as hold discussions with the SBA about possibly requiring reporting of subcontracting and reseller work for small businesses.

GSA took issue with some of the conclusions of the report, noting that the procurements under review were compliant with rules that existed at the time. An acquisition rule that took effect this year allowed for the assignment of multiple NAICS codes to a single procurement to differentiate work done at the order level on a multiple-award contract.

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