December 1, 2022

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DOD Small Business Contracting: Use of Sole-Source 8(a) Contracts over $22 Million Has Increased

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<div>What GAO Found The Small Business Administration's (SBA) 8(a) business development program is one of the federal government's primary means for developing small businesses owned by socially and economically disadvantaged individuals. In this program, contract awards may be competed among eligible 8(a) firms or awarded on a sole-source basis in certain instances. A provision in the National Defense Authorization Act of 2020 raised the threshold for Department of Defense (DOD) sole-source 8(a) contracts requiring a written justification and approval from over $22 million to over $100 million, which DOD implemented on March 17, 2020. Since GAO's last report on this topic in 2016, the number and value of DOD's sole-source 8(a) contracts over $22 million increased (see figure), and none were valued over $100 million either before or after implementation of the increased threshold. Number and Total Contract Value of DOD Competitive and Sole-Source 8(a) Contracts over $22 Million, Fiscal Years 2016 through 2021 Note: Within this 6-year time period, the Department of Defense did not award any sole-source 8(a) contracts over $100 million before or after the March 17, 2020, threshold change. The number of sole-source 8(a) contracts over $22 million grew steadily from six in fiscal year 2016 to 65 in fiscal year 2021. The collective value of these sole-source 8(a) contracts increased over the 6-year period, from $143.5 million to $3.4 billion. In total, DOD awarded 159 of these contracts from fiscal years 2016 through 2021. At the same time, the number of competed 8(a) contracts over $22 million fluctuated, from 100 in fiscal year 2016 to a high of 186 in fiscal year 2020, with a downturn in fiscal year 2021. Despite the downturn, the total value of the competed contracts increased from $3.3 billion in fiscal year 2016 to $9.5 billion in fiscal year 2021. In total, DOD awarded 738 competed 8(a) contracts over $22 million over this time. Why GAO Did This Study Under the SBA's 8(a) program, contract awards may be competed among eligible 8(a) firms or awarded on a sole-source basis in certain instances. For example, 8(a) firms owned by Alaska Native Corporations, Indian Tribes, or Native Hawaiian Organizations (for DOD only) can receive sole-source contracts for any dollar amount, while other 8(a) firms generally must compete for contracts valued above certain thresholds. In March 2011, the Federal Acquisition Regulation was amended to implement section 811 in the National Defense Authorization Act for Fiscal Year 2010. That provision included a new requirement for a written justification and approval for sole-source 8(a) awards over $20 million, where previously none was required. On October 1, 2015, the threshold for contracts requiring this justification and approval was raised to over $22 million. Then on March 17, 2020, the threshold was raised—for only DOD sole-source 8(a) contracts—to over $100 million. And finally on October 1, 2020, the threshold for sole-source 8(a) awards requiring a justification and approval for civilian agencies was raised to those over $25 million. Since 2013, GAO has reported on trends in sole-source 8(a) contracts. In June 2016, GAO found that the number of DOD sole-source 8(a) contracts requiring a justification steadily declined between 2011 and 2015, while the number of competitive 8(a) contracts generally increased over this time. The National Defense Authorization Act for Fiscal Year 2020 includes a provision for GAO to report on DOD's use of the authority requiring a justification and approval for sole-source 8(a) contracts. This report describes the trends in DOD's use of sole-source and competitive 8(a) contracts above $22 million, from fiscal years 2016 through 2021, including sole-source 8(a) contracts valued at over $100 million since implementation of the increased threshold. To do this work, GAO obtained and analyzed data from the Federal Procurement Data System from fiscal years 2016 through 2021. For more information, contact John D. Sawyer at (202) 512-4841 or Sawyerj@gao.gov.</div>

What GAO Found

The Small Business Administration’s (SBA) 8(a) business development program is one of the federal government’s primary means for developing small businesses owned by socially and economically disadvantaged individuals. In this program, contract awards may be competed among eligible 8(a) firms or awarded on a sole-source basis in certain instances. A provision in the National Defense Authorization Act of 2020 raised the threshold for Department of Defense (DOD) sole-source 8(a) contracts requiring a written justification and approval from over $22 million to over $100 million, which DOD implemented on March 17, 2020.

Since GAO’s last report on this topic in 2016, the number and value of DOD’s sole-source 8(a) contracts over $22 million increased (see figure), and none were valued over $100 million either before or after implementation of the increased threshold.

Number and Total Contract Value of DOD Competitive and Sole-Source 8(a) Contracts over $22 Million, Fiscal Years 2016 through 2021

Note: Within this 6-year time period, the Department of Defense did not award any sole-source 8(a) contracts over $100 million before or after the March 17, 2020, threshold change.

The number of sole-source 8(a) contracts over $22 million grew steadily from six in fiscal year 2016 to 65 in fiscal year 2021. The collective value of these sole-source 8(a) contracts increased over the 6-year period, from $143.5 million to $3.4 billion. In total, DOD awarded 159 of these contracts from fiscal years 2016 through 2021.

At the same time, the number of competed 8(a) contracts over $22 million fluctuated, from 100 in fiscal year 2016 to a high of 186 in fiscal year 2020, with a downturn in fiscal year 2021. Despite the downturn, the total value of the competed contracts increased from $3.3 billion in fiscal year 2016 to $9.5 billion in fiscal year 2021. In total, DOD awarded 738 competed 8(a) contracts over $22 million over this time.

Why GAO Did This Study

Under the SBA’s 8(a) program, contract awards may be competed among eligible 8(a) firms or awarded on a sole-source basis in certain instances. For example, 8(a) firms owned by Alaska Native Corporations, Indian Tribes, or Native Hawaiian Organizations (for DOD only) can receive sole-source contracts for any dollar amount, while other 8(a) firms generally must compete for contracts valued above certain thresholds.

In March 2011, the Federal Acquisition Regulation was amended to implement section 811 in the National Defense Authorization Act for Fiscal Year 2010. That provision included a new requirement for a written justification and approval for sole-source 8(a) awards over $20 million, where previously none was required. On October 1, 2015, the threshold for contracts requiring this justification and approval was raised to over $22 million. Then on March 17, 2020, the threshold was raised—for only DOD sole-source 8(a) contracts—to over $100 million. And finally on October 1, 2020, the threshold for sole-source 8(a) awards requiring a justification and approval for civilian agencies was raised to those over $25 million.

Since 2013, GAO has reported on trends in sole-source 8(a) contracts. In June 2016, GAO found that the number of DOD sole-source 8(a) contracts requiring a justification steadily declined between 2011 and 2015, while the number of competitive 8(a) contracts generally increased over this time.

The National Defense Authorization Act for Fiscal Year 2020 includes a provision for GAO to report on DOD’s use of the authority requiring a justification and approval for sole-source 8(a) contracts. This report describes the trends in DOD’s use of sole-source and competitive 8(a) contracts above $22 million, from fiscal years 2016 through 2021, including sole-source 8(a) contracts valued at over $100 million since implementation of the increased threshold.

To do this work, GAO obtained and analyzed data from the Federal Procurement Data System from fiscal years 2016 through 2021.

For more information, contact John D. Sawyer at (202) 512-4841 or Sawyerj@gao.gov.

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