Information on the Number of Small Business Set-Asides Issued and
Successfully Challenged (01-NOV-02, GAO-03-242R).		 
                                                                 
The Small Business Act requires small businesses to have the	 
maximum practicable opportunity to participate in the performance
of federal government contracts. Congress directed the President 
to set a governmentwide 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. The small	 
Business Administration's (SBA) 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. GAO found	 
that the number of PCR-recommended small businesses set-asides	 
has declined by almost one-half since fiscal year 1991. Overall, 
contracting officers accepted 76 percent of the set-aside	 
recommendations. Of the 24 percent rejected, SBA did not pursue  
85 percent. Of the 15 percent appealed, 26 percent were 	 
successful. SBA officials attributed the decline to several	 
factors, including (1) downsizing the number of PCRs; (2)	 
assigning other duties to PCRs, such as requiring some PCRs to be
Commercial Marketing Representatives, further reducing available 
PCR resources; and (3) fewer set-aside opportunities due to	 
increasing size and 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 information PCR	 
actions.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-242R					        
    ACCNO:   A05435						        
  TITLE:     Information on the Number of Small Business Set-Asides   
Issued and Successfully Challenged				 
     DATE:   11/01/2002 
  SUBJECT:   Contract administration				 
	     Federal procurement				 
	     Procurement practices				 
	     Small business assistance				 
	     Small business contractors 			 
	     Small business set-asides				 

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GAO-03-242R

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- asides 4
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.
*** End of document. ***