Consolidated OIG Findings on Subcontracting Limitation Concerns for Set-Aside Awards

The Office of Inspector General (OIG) is issuing this evaluation report to 1) evaluate a body of oversight work to identify opportunities to strengthen federal-wide compliance with limitations on subcontracting requirements for set-aside awards; and 2) follow up on select recommendations from SBA Office of Inspector General (OIG) reports 22-10 and 23-11 to determine whether SBA’s corrective actions for establishing pre-award procedures and post-award monitoring for subcontracting compliance are operating as intended.

Our review of oversight reports across the government identified recurring deficiencies in the federal contracting community’s ability to interpret the rule’s requirements, apply them consistently, and monitor and enforce compliance throughout the life of a contract. We also found that SBA’s corrective actions did not effectively strengthen its compliance controls, and that SBA’s own internal review identified critical contract terms that were often missing or unenforced. As a result, confusion over roles and responsibilities, compliance gaps, and challenges contracting officers faced in performing key oversight tasks increased the risk that pass-through schemes, to include fraud, would go undetected.

We made four recommendations to clarify regulations to improve monitoring and enforcement, strengthen compliance through training, reinforce use of available tools, and coordinate with the General Services Administration to assign oversight roles and responsibilities.

SBA management agreed with Recommendations 1, 2, and 3 and partially agreed with Recommendation 4. Management’s planned corrective actions are sufficient to resolve all recommendations.