SBA contracting functions could be moving to Denver

Small Business Administration leaders have recommended moving internal acquisition functions from the agency's Washington headquarters to its Denver Finance Center, Administrator Karen Mills announced on Wednesday.

Mills told the House Small Business Committee that as part of a reorganization of its purchasing operations, agency contracting would move from the Office of Mergers and Acquisitions to the Office of the Chief Financial Officer. The CFO, who is based in Washington, supervises the Denver office, which currently focuses on financial management, administrative and programmatic accounting, and financial reporting.

SBA's CFO, chief operating officer, and associate administrator for mergers and acquisitions suggested the change to Mills. A final decision on the move has not been made.

Officials announced the proposal to staff in an internal memo on Monday, according to SBA spokeswoman Hayley Matz. The American Federation of Government Employees, the labor union representing the contracting officials, has been notified of the recommendation but has yet to be briefed on the plan, she said.

"The [CFO] currently utilizes automated financial management tools and processes that will enable a comprehensive review of acquisition practices and existing contracts," Matz said. "Such a review will result in the development of more strategic acquisition approaches to leverage buying power and achieve best value, increase use of technology to improve contract management, reengineer business processes to reduce cost to spend, build the skills of the acquisition workforce and end contracts that are no longer needed."

The reorganization would lead to the elimination of SBA's Office of Business Operations, Matz said. The Office of Grants Management, meanwhile, would be established to administer, award and monitor grants programs.

The transition would affect about 10 SBA contracting officers, who would be offered positions in Denver. Those unwilling to move to the Mile High City would receive help finding positions at the same grade level either at SBA or at another federal agency, Matz said. SBA does not expect the move to result in a net change in the size of its procurement staff.

SBA is the 10th agency to align its contracting functions under the CFO's office, Mills testified.

But a Senate source raised questions on how the transition would comply with the 2003 Services Acquisition Reform Act, which mandated the creation of agency chief acquisition officers. The bill requires that agency procurement functions be managed by a non-career official whose primary duty is acquisition management. SBA did not respond to questions about the statute.

Mills told the committee she has taken a number of other steps recently to improve the operations and management of SBA's small business contracting programs.

In response to a pair of Government Accountability Office reports finding widespread fraud in the HUBZone Business Development program, SBA increased the number of site visits from less than 100 in 2008 to more than 900 in 2009, Mills said. The agency is on track to conduct 1,000 additional visits in 2010.

"We're working to ensure that only legitimate and eligible firms are benefiting from HUBZone," she said.

To prevent ineligible firms from winning small business contracts, Mills said the agency has beefed up front-end oversight of the certification process. And, when companies are found to be out-of-compliance or ineligible to win small business contracts, they will have 30 days to remove themselves from the Central Contracting Registry database or SBA will do it for them, Mills said.

But, the agency's chief watchdog testified that SBA's contracting data often is inaccurate and unreliable.

In February, the SBA Inspector General's Office issued an audit examining SBA's fiscal 2008 acquisition data in the governmentwide Federal Procurement Data System. The report found SBA certified to the accuracy of its contracting data, even though 92 percent of a random sample of contract actions the IG reviewed contained one or more inaccurate or incomplete data elements.

The most common mistakes related to the size of the business, the code used to determine the size standard, the type of award, the contractor's Data Universal Number System identifier, or the location of the contract.

"Due to the volume of errors identified in FPDS, it appears that contracting personnel did not review FPDS data inputs to ensure they reflected accurate information, as required by the Federal Acquisition Regulation," SBA IG Peggy Gustafson said.

Mills called the audit findings "extremely disturbing and unacceptable." But issues remain. The IG sampled SBA's fiscal 2009 contracting data and found an error rate of 97 percent. The 2009 data indicated fewer problems with each individual data element, however.

Two other IG reports issued this month also raised concerns about SBA's procurement functions. An April 9 memorandum found SBA's current procurement workforce was "insufficient to effectively award, administer and oversee Recovery Act contracts as well as other SBA contracts."

The second audit found SBA failed to report all noncompetitive stimulus contract actions to Recovery.gov and mischaracterized some of the actions it did report. SBA agreed with the findings of both reports and has begun to implement many of the IG's staffing and oversight recommendations.