The Small Business Administration (SBA) requires that agencies act to prevent fraud, waste and abuse in research and development, and technology commercialization programs. Through such programs, federal agencies awarded small businesses almost $4 billion in FY 2019.
In order to prevent fraud, waste and abuse, the SBA has established 10 requirements to hold both individuals and businesses accountable during the eligibility process. A Government Accountability Review (GAO) has found however that a number of federal agencies did not implement these requirements.
The 11 federal agencies have been awarding contracts to small businesses since 1982 through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs to stimulate technological innovation, help small businesses meet federal R&D, improve participation by minorities in technological innovation and increase private sector commercialization of innovations from federal R&D efforts.
GAO conducts a review every four years to examine what the agencies, along with agency Inspector Generals, are doing to prevent, identify, respond to, and reduce fraud, waste, and abuse in the SBIR and STTR programs.
According to GAO, since agencies did not fully implement all 10 requirements or the leading practices that GAO identified in 2015, they may face difficulties and miss the opportunity to manage fraud risks in the federal program.
“Multiple agencies did not fully implement certain requirements, such as ones to collect eligibility certifications and to have a process for tracking referrals to Offices of Inspector General (OIG),” GAO said. “Agency officials gave various reasons for partially implementing requirements, such as their belief that they had met a requirement’s intent through other actions.”
OIG’s role is to, “mitigate risks of fraud, waste, and abuse in the SBIR and STTR programs by establishing, sharing, and using fraud detection indicators and by conducting investigations,” the report said.
“Fraud detection indicators ranged from specific fraud risks—such as “bait and switch” schemes, in which contractors propose an experienced researcher as the principal investigator (project manager) and then use a less-qualified, lower-cost employee to serve in that role—to general indicators of potential fraud, such as significant levels of foreign ownership,” the report said. “Common indicators include a small business submitting duplicate proposals to more than one agency or having non-existent or inadequate R&D facilities.”
According to the report, only one out of the 11 agencies, participating in the SBIR and STTR programs, fully implemented all 10 minimum requirements. From the remaining agencies, nine of them implemented more than six of the minimum requirements, one agency implementing seven requirements and two agencies implementing eight requirements.
GAO made 21 recommendations to various agencies that consisted of ensuring the collection of certifications from new program awardees, ensuring that the program website provides information on how to report potential fraud and ensuring communication and between the program and agency over reporting suspected fraud, waste or abuse.
Most of the agencies concurred with the recommendations made to their agency except for the Department of Defense (DOD), who concurred with four of the recommendations made to their agency, partially concurred with one and did not concur with two, the report said. For example, DOD did not concur with GAO’s recommendation that the Navy
SBIR/STTR program track referrals to the Navy OIG or Naval Criminal Investigative Service (NCIS). DOD said that the Navy was in compliance with this requirement because the Navy OIG and NCIS track such referrals. However, GAO responded that the requirement in the SBIR/STTR Policy Directive is for agencies to track the referrals, not for the agency OIGs or military investigative offices to do so.
Meanwhile the Department of Homeland Security (DHS) concurred with the recommendations that it should ensure that the SBIR program collects the required certifications from new SBIR awardees, and to foster collaboration between the SBIR program office and OIG to establish fraud indicators and train applicants. DHS said it has already completed work to address the first recommendation and expects to meet the second by January 31, 2022.