Federal Reports

We reviewed the U.S. Small Business Administration’s (SBA) process for handling complaints, or protests, filed to request review of contracts awarded to businesses that may not have been eligible in size or certification status, as required by the offer terms. The small business protest process was created to allow self-interested offerors to police themselves and prevent awards from going to ineligible businesses. The process was intended to protect the integrity of set-aside awards and of SBA’s small business contracting certification programs.Congress authorized small business set-asides to ensure federal agencies award a fair proportion of goods and service contracts to small businesses in each industry to diversify and strengthen the American economy. In Fiscal Year (FY) 2021, federal agencies awarded over $154 billion to small businesses. The objectives of this audit were to determine whether SBA had effective controls in place to ensure protest decisions were properly enforced and to monitor the protest process.We found SBA had effective controls in place to ensure protest decisions were properly enforced and used to monitor the protest process. We found that only 4 percent of the small businesses protested in FY 2021 did not update their proper status in their company profile after SBA found they did not qualify for set-aside awards. We also found program officials decided 80 percent of small business protests within the required 15 business days, or within extension dates approved by the contracting officer.We made one recommendation for SBA management to strengthen controls to consistently document and monitor required protest information to ensure decisions are made in a timely manner. SBA Management agreed with the recommendation.

The Office of Inspector General (OIG) is issuing this management advisory to express concerns regarding the U.S. Small Business Administration’s (SBA) decision to end collections on purchased Paycheck Protection Program (PPP) loans with an outstanding balance of $100,000 or less.In anticipation of a significant number of delinquent PPP loans that lenders will submit for guaranty purchase, we began reviewing SBA’s process for approving PPP guaranty purchases. During our review, we identified concerns with SBA’s decision to end collections on these loans and found that expedited management action is needed to determine whether it is cost effective to pursue collections on these loans. Management attention is needed to ensure effective stewardship of billions of dollars in potential funds owed to taxpayers. Ending collections could incentivize ineligible borrowers to obtain loans valued at $100,000 or less in similar future loan programs. However, continuing to pursue collections will help ensure accountability from delinquent borrowers.We recommend the SBA Administrator stay the April 27, 2022 decision to end collections on purchased PPP loans with an outstanding balance of $100,000 or less until a comprehensive cost benefit analysis is conducted. We recommend the agency explore alternative means of collections for PPP loans with an outstanding balance of $100,000 or less. We also recommend conducting an initial and periodic cost benefit analysis on PPP purchase guarantees with comprehensive estimates to sufficiently assess whether the cost of collecting loans of $100,000 or less is more than the recovery amount and pursue collections based on results of the analysis. Management disagreed with recommendations 1 and 2 and agreed with recommendation 3.