Page 1 GAO-03-242R Small Business Set Asides

November 1, 2002

The Honorable John F. Kerry

Chairman, Committee on

 Small Business and Entrepreneurship

United States Senate

The Honorable Max Cleland

United States Senate

Subject: Information on the Number of Small Business Set-Asides Issued and

 Successfully Challenged

This letter responds to your request that we identify the number of small business set-asides issued

over the past 10 years and how many successful Small Business Administration (SBA) challenges

have resulted. The Small Business Act requires small businesses to have the maximum practicable

opportunity to participate in the performance of federal government contracts.1

 Congress directed

the President to set a government-wide goal of at least 23 percent of the total dollar value of the

federal government’s prime contract awards to be awarded to small businesses each fiscal year.2

SBA’s Procurement Center Representatives (PCRs) work with federal agencies and procuring

activities by reviewing proposed acquisitions to determine whether they can be set aside for small

businesses. If the PCR believes that the agency/activity should set aside the procurement for small

business, the PCR may issue a formal request to the contracting officer. Should the contracting

officer reject the PCR’s recommendation, the PCR may appeal the rejection to the Head Contracting

Authority (HCA) for the agency/activity.3

We found that the number of PCR-recommended small business set-asides4 has declined by almost

one-half since fiscal year 1991. (See table 1 and fig. 1.) Overall, contracting officers accepted about

76 percent of the set-aside recommendations. Of the 24 percent rejected, SBA did not pursue about

85 percent. Of the approximately 15 percent SBA appealed, about 26 percent were successful.

 1

 See 15 U.S.C. 637(d)(1).

2

 See 15 U.S.C. 644(g)(1).

3

 13 C.F.R. 125.2(b)(6)

4

 PCRs use the small business set-aside request process when they believe that the agency should have set aside certain

procurements for small business.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-03-242R Small Business Set Asides

Table 1: Status of Small Business Set-Aside Requests Filed by SBA, Fiscal Years 1991-2001

Fiscal year

Set-aside

requests filed

Set-aside

requests

rejected

Percent of

set-aside

requests

rejected

HCA

appeals filed

HCA

appeals

rejected

Percent of

HCA appeals

rejected

1991 529 85 16.1 9 9 100.0

1992 543 133 24.5 4 4 100.0

1993 482 140 29.0 14 13 92.9

1994 439 96 21.9 20 12 60.0

1995 404 93 23.0 9 7 77.8

1996 300 92 30.7 11 8 72.7

1997 265 55 20.8 22 14 63.6

1998 253 57 22.5 20 13 65.0

1999 285 57 20.0 9 7 77.8

2000 277 97 35.0 13 11 84.6

2001 281 55 19.6 13 9 69.2

Total 4,058 960 23.7 144 107 74.3

Source: SBA’s PCR Information System and SBA Area records.

Figure 1: Number of Small Business Set-Aside Requests Filed by SBA, Fiscal Years 1991-2001

Source: SBA’s PCR Information System and SBA Area records.
Page 3 GAO-03-242R Small Business Set Asides

SBA officials attributed the decline to several factors, including (1) downsizing the number of PCRs;

(2) assigning other duties to PCRs, such requiring some PCRs to be Commercial Marketing

Representatives (CMRs),5

 further reducing available PCR resources; and (3) fewer set-aside

opportunities due to the increasing size of individual federal procurements. SBA officials also

explained that PCRs take different approaches to filing set-aside recommendations—some choose to

influence contract actions informally, without filing set-aside recommendations. SBA does not keep

track of informal PCR actions.

Agency Comments

We provided SBA officials with a copy of this letter for comments. They concurred with our findings.

Scope and Methodology

To determine small business set-aside trends, we reviewed SBA databases and records. To determine

possible reasons for the decline in set-asides, we interviewed all six Area Directors and cognizant

headquarters officials. We conducted our work from November 2001 through July 2002 in

accordance with generally accepted government auditing standards.

- - - - -

We will send copies of this report to the Administrator, SBA; the Director, Office of Management and

Budget; and interested congressional committees. We will also make copies available to others upon

request. We will also make copies available to others upon request. In addition, the report will be

available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions concerning this report, please call me at (617) 565-7555. Key contributors

to this review included Catherine Baltzell, Art Fine, David Bennett, Cristina Chaplain, and Sylvia

Schatz.

David E. Cooper

Director, Acquisition and Sourcing Management

(120183)

 5

 A CMR is a specialist who facilitates the process of matching large federal prime contractors with small businesses as

subcontractors. CMRs identify and develop small businesses and market them to the large contractors, and assist the small

businesses in obtaining subcontracts. CMRs also perform compliance reviews on large federal prime contractors’

subcontracting programs to assure compliance with all applicable laws.