Failing to Document S&D Decisions Opens SBA to Legal Challenges, OIG Says

In a new report, the SBA Office of Inspector General chided the agency for poor oversight of its suspension and debarment processes. OIG found that SBA’s lending partners did not use SAM to verify a borrower’s eligibility before approving loans, and that suspension and debarment officials sometimes took so long to take action on S&D referrals that the flagged contractors were able to win more federal contracts while the action was pending. Some of the contractors SBA allowed to continue obtaining contracts were a company that asked a small business to act as a pass-through and another that lied about its size to win 8(a) contracts.

OIG also warned that SBA opened itself to legal action by failing to properly document instances when it decided not to suspend or debar. While SBA argued its decisions were reasonable, OIG noted that contractors that are suspended or debarred could challenge SBA’s application of the rules. Without a documented rationale for denying a S&D referral, SBA could be accused of enforcing rules arbitrarily.