Of 34 WOSB and EDWOSB set-aside awards examined by the SBA Office of Inspector General, 15 of those awards were improper.
The SBA OIG’s conclusion comes in a new WOSB program report, and suggests that some Contracting Officers are unaware of the WOSB progran’s unique requirements, including the NAICS code limitations for WOSB and EDWOSB set-asides.
In its study, the SBA OIG reviewed 17 WOSB set-asides and 17 EDWOSB set-asides. In 10 cases, the SBA OIG found that contracts were improperly awarded under invalid NAICS codes.
Of these, four contracts were awarded in NAICS codes for which WOSBs are not eligible to receive set-asides. Six others “should have been set aside for an EDWOSB but were misclassified as WOSB set-aside awards.” The SBA OIG explained, “[t]his put EDWOSBs at a further disadvantage, as they then had to compete with WOSBs for awards that should have been non-competitively awarded solely to EDWOSBs.” The SBA OIG continued:
NAICS code errors may be due to contracting officers’ uncertainty on WOSBP NAICS code requirements. WOSBP is structured differently than other SBA-run Federal contracting programs. While other programs generally apply to all NAICS codes, WOSBP is limited to specific NAICS codes—and not all program-eligible NAICS codes are eligible for both EDWOSBs and WOSBs.
The SBA OIG encouraged the SBA to “ensure that any outreach and training on [the WOSB Program] sufficiently covers NAICS code requirements for this program.” The SBA OIG wrote that “for this program to operate effectively, contracting officers must understand their responsibilities and the difference between eligible and ineligible NAICS codes, as well as WOSB-eligible and EDWOSB-eligible NAICS codes.”
The SBA OIG also found significant problems with the WOSB self-certification process. Of the 34 awards, nine occurred with no documentation in the WOSB Document Repository.
The SBA OIG noted that “[i]f a contracting officer determines that a firm has represented itself as a WOSB or EDWOSB but did not provide all the required documents to verify its eligibility, the CFR directs the contracting officer to file a status protest with SBA.” Because these nine awards were made to firms that had not provided their documentation “it appears contracting officers are not following the set-aside procedures.”
The SBA OIG recognized that the 2015 NDAA eliminated the ability of companies to self-certify for WOSB and EDWOSB set-asides. The SBA OIG wrote that this change will ultimately eliminate problems associated with the WOSB Document Repository, but the change “could take SBA several years to implement.” In the meantime, the WOSB Program “will continue to be governed by rules established before the NDAA for FY 2015.”
As I have written before, the 2015 NDAA did not explicitly authorize the SBA to continue to accept WOSB self-certifications for any period of time–and certainly not for “several years.” I am concerned that the SBA may be on shaky legal ground in continuing to accept WOSB self-certifications that are not authorized by statute.
Regardless of whether WOSB self-certifications will remain a viable option for the next few years, the SBA OIG report suggests that there is widespread confusion among contracting officers regarding how the WOSB program is supposed to work. Hopefully, the SBA will follow through with the education initiatives recommended by the SBA OIG.