8(a) Subcontracting Limitations: Compliance Oversight Lacking

Compliance with the limitations on subcontracting are not adequately being monitored by the contracting officers responsible for 8(a) contracts, according to a recent GAO report.

After reviewing a representative sample of ten 8(a) contracts, the GAO determined that contracting officers effectively monitored subcontracting limit compliance on two of those contracts.  In other cases, agency contracting officers failed to effectively monitor compliance, even in situations presenting a heightened risk of potential violations–such as where ineligible incumbents were serving as subcontractors.

The GAO report documents “confusion” among contracting officers regarding their obligations to ensure compliance with subcontracting limits.  Some contracting officers were confused about what the FAR, Small Business Act, and SBA partnership agreements require.  Other contracting officers seemed to assume that their CORs were primarily responsible for ensuring compliance with the subcontracting limits–although all 10 of the CORs in question “stated that contracting officers have not delegated this responsibility to them and they do not take steps to monitor the amount of subcontracted work.”

Perhaps most worrisome, some contracting officers appeared to rely on the 8(a) firms themselves to self-report any violations:

In addition, some contracting officers stated that the contractor was responsible for ensuring compliance with subcontracting limitations, in part, because the contract included the limitation on subcontracting FAR  clause. For example, one HHS contracting officer stated that the 8(a) contractors he works with understand the amount of work they must perform, should be monitoring the amount of subcontracted work, and should inform the government if subcontractors perform more work than allowed. This contracting officer, however, was not aware if the contractor had performed the required amount of work on the contract we reviewed, and contractor representatives for this contract told us that they were not in compliance with the subcontracting limitations at the time we spoke with them.

Not surprisingly, the GAO labeled its findings “troubling.”  To address the problem, the GAO recommends that the FAR be amended to include three new provisions:

  • At the time of the contract award, contracting officers shall conduct and document an assessment of the 8(a) firm’s ability to comply with the subcontracting limitations
  • Contracting officers shall include monitoring and oversight provisions in all 8(a) contracts to ensure that the contractors comply with the subcontracting limitations
  • Prime 8(a) contractors shall periodically report to the contracting officer on the percentage of subcontracted work being performed

Even if the FAR is ultimately amended to reflect the GAO’s recommendations, the process will take many months–if not years.  In the meantime, perhaps, the GAO’s report will help focus attention on the issue of subcontracting limit compliance in the 8(a) program and remind contracting officers of their existing oversight obligations.

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