NASA auditors find a third of women-owned small business certifications to be false

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Self-certification for the newest socioeconomic small business set aside category -- women owned small businesses -- may not be working out, says the NASA office of inspector general.

In a Feb. 28 report (.pdf), auditors found that 35 percent of the fiscal 2010 contracts NASA awarded to small businesses self-certified as being owned and controlled by women were given to companies that falsely self-certified. For these 35 percent, auditors say that "in every instance, our review found evidence that daily business operations were actually controlled and managed by the male spouse of the purported business owner."

SBA says for businesses to qualify as WOSB, they must be at least 51 percent owned and controlled by one or more women, primarily managed by one or more women, and meet size restrictions that vary by industry.

These businesses received approximately $74.5 million in contract obligations from 54 procurement organizations in fiscal 2010, say auditors.

SBA implemented the WOSB set-aside program in October 2010; the government has a collective goal of awarding  5 percent of prime federal contracting dollars to women-owned small businesses. Under the rule, these businesses can either self-certify or be certified by a third-party.

Agency contracting officers can accept self-certifications in the absence of a protest or other credible information that calls into question the concern's eligibility. Officials told NASA auditors that they only examine a small sample of WOSBs self-certifications and "rely on competitor firms or contracting officers to bring allegations of potential fraud or abuse to their attention."

Auditors note that NASA personnel lack the resources and time for eligibility verification, which "could add several hours to each procurement action and would not be cost efficient."

NASA auditors spoke with SBA about their concerns but SBA program officials said it already has implemented controls to mitigate false certification risk. "However, we believe that the level of false self-certification as a woman-owned business is troubling and may exist governmentwide," says the report.

Auditors made no specific recommendations for changing NASA processes, but said the agency should work with SBA to develop mitigation measures for these risks.

For more:
- download the IG report (.pdf)

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