How Should 8(a) Program Participants Think About the Announced Program-Wide Audit?

By Joe Kirkwood 

On June 27, the U.S. Small Business Administration (SBA) announced that it was undergoing a full-scale audit of the entire 8(a) Business Development Program. This audit is intended to cover the entire past 15 years of the Program’s history and includes in its scope the contracting activity of all government agencies with 8(a) companies, joint ventures, and passthroughs.

The audit will focus on high-dollar-value contracts and limited competition contracts, including sole-source and set-aside contracts, meaning that, by having any such contract in its history, an 8(a) Program participant is exposed to risk that the audit could come to their doorstep.

Importantly, the SBA has indicated that it intends to act punitively towards those who they deem have engaged in noncompliance, misrepresentation, or fraud, including suspension and debarment, termination from the 8(a) Program, and damages, which can equal as much as the full amount of the contract in question.

Contractors with the 8(a) Program in their history should review the record and determine whether any risk exists with regard to their compliance with Program requirements. It would likely be prudent to consult with a legal professional to discuss any concerns and/or to facilitate the review itself. After taking stock, it may be to certain companies’ advantage to engage in corrective action, and even voluntary pre-emptive
disclosure in some cases. At the very least, every 8(a) company should prepare a full response in advance in the event the SBA has questions about a contract in their history. A proactive approach allows the company to quickly correct the record in the event of a mistake on the part of the auditor, and importantly, respond promptly in general and show that they are cooperative and easy to work with. All of these things can have outsized positive effects on end results.

Looking forward, the audit signals two major themes: first, this action is another in a constellation of events that have shown the government’s increasing skepticism towards the 8(a) Program as a whole, and second, it’s fair to assume that the compliance requirements that go along with being an 8(a) company are soon to become much more onerous.