SBA, IG disagree on sole-source awards

Awarding two sole-source contracts, IG says SBA officials defeated the purpose of the Recovery Act.

The Small Business Administration’s inspector general has scolded agency officials in a new report for awarding two sole-source contracts using economic stimulus law money when the administration wanted companies to compete for the funds. The IG also wrote that one contract seemed to be a pass-through contract.

Although the law allows agencies to award sole-source contracts through SBA’s 8(a) Business Development program at times, the contract SBA awarded to Copper River Information Technology LLC did not appear to qualify for a small-business set-aside contract or an 8(a) award, the IG said. It was basically a “pass through” contract to purchase Microsoft software and licenses, Debra Ritt, the SBA's assistant inspector general for auditing, wrote in a report posted online on July 6.

A pass-through contract is an award to a company that does little or nothing to accomplish the work.

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The SBA awarded the contracts to streamline and automate its Customer Relationship Management IT system, which relates to lender processes and oversight. On June 16, 2009, SBA awarded a firm, fixed-price contract to Copper River for $1.8 million to buy Microsoft Dynamics software licenses. The second contract was awarded to DRT Strategies, Inc. on Aug. 6, 2009, as an indefinite-delivery,indefinite-quantity contract for $3.5 million for integration support, the report states.

According to the report, Copper River didn’t have the necessary business relationship with Microsoft to purchase the licenses for SBA’s IT project. Instead, SBA sent the key documents directly to Microsoft without Copper River’s involvement, Ritt wrote.

“Ultimately, Copper River did little, if any, discernible value-added work for this procurement,” she wrote.

Company officials were unavailable for comment.

Meanwhile, the SBA failed to promote competition by awarding the large sole-source contracts using the stimulus law funds, when Office of Management and Budget officials in 2009 told agencies to have companies compete for the work, Ritt wrote.

In response to the overall report, Darryl Hairston, SBA’s associate administrator of the Office of Management and Administration, said administration officials didn’t prohibit agencies from using small-business programs, such as the SBA’s 8(a) program, to award the stimulus money.

“The sole issue in this matter is whether or not this particular contract was suitable for award through the 8(a) [Business Development] program,” he wrote.

In addition, the IG also said both of the sole-source contracts “appeared to be pushed through the agency, without obtaining the proper signatures and clearance for the acquisition plan,” which SBA requires for contracts. The IG recommended procurements get both senior-level approvals and legal review before award.

Hairston wrote that SBA has such a process in place, but would revise it to note which contracts should, in fact, get legal review.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Fri, Jul 16, 2010

My understanding is that the 8(a) program is a development program. How much development is required for muti-million dollar ANC's that sub-contract with over 20 large firms. What developement benefit besides dollars or they receiving? Who if ayone is watching this? RWS

Mon, Jul 12, 2010 Concerned Anymouse NoVA

Guess the use of the Congressionally created Alaska Native Corporation is once again rearing its head. Its disconcerting when the IG says it shouldn't have happened, but no action is taken to reverse it. Congress created ANC's as a PAYOFF/bribe for stealing, Oops, I mean wrongfully acquiring tribal lands for the oil pipeline. All they do is pass through work to actual performers then collect a huge amount of money for "handling" the transaction. If anyone but Congress and ANC's had done this, it would mean prosecution and jail time.

Thu, Jul 8, 2010 Frank Matt Tucson, AZ

Agree with Beel! Another screw up by SBA officials and all they can say is basically oops! Give me a break! I thought the SBA and its official were the small business experts and should know better! By the way, not surprised one of the company’s involved with the controversy was an ANC.

Thu, Jul 8, 2010 Beel VA

Unfortunately this shows a major problem with the government "system": a big problem or mistake is brought to light; no one is 'fingered'; no heads roll; some procedure is put into place to supposedly prevent future reoccurrences; amen.

Thu, Jul 8, 2010 jwt

This is stupid. The contracts were for licenses of Microsoft Software licenses (Microsoft's intellectual property)and that should be paid directly to Microsoft. What value added component could there be to a license? If either company provided a separate service, that is all they are entitled to bill SBA. This is a ruse plain and simple to filter money to a small business entity, no matter how undeserving.

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