House Small Business Committee Hearing Underscores AGC’s Concerns Over HUBZone Program

A new report by the Government Accountability Office (GAO) that validates the concerns of many AGC contractors was released at a Small Business Committee Hearing on oversight of the Small Business Administration and its programs. According to the report, available here, nineteen companies were improperly awarded nearly $30 million in DOD and HUD contracts that were supposed to go to small businesses in low-income neighborhoods. The GAO found these companies while reviewing a sample of participants of the Historically Underutilized Business Zone (or HUBZone) program. The GAO report goes further to say "there are likely hundreds and possibly thousands of firms" in the program that don't meet its requirements. The GAO determined that lack of oversight and effective fraud-fighting measures contributed to the funds being directed to undeserving companies. A similar GAO report last July noted that the SBA conducted few site visits and only asked for supporting evidence of a firm's eligibility claims about one-third of the time. Because the SBA was slow to suspend or otherwise punish them, several ineligible firms continued to receive more than $7 million in government contracts, the GAO said. Small Business Committee chairwoman, Rep. Nydia Velázquez (D-N.Y.), said she plans to urge the SBA to shut down the program until it can fix the problems. "When you starve an agency of resources and put in place the wrong people, this is the result: Fraud goes undetected and dishonest companies see skirting the rules as 'business as usual,'" said Rep. Velazquez. "You can't come to any other conclusion than this is a program that needs to be shut down." The SBA generally agreed with the GAO's recommendations that urged stronger checks, unannounced site visits and stiffer punishment for companies found to be ineligible. SBA officials told the GAO they are attempting to make the program more efficient and to do a better job of preventing and detecting fraud and abuse. AGC will continue to point out inconsistencies with the HUBZone program to Congressional leaders and advocate for reform of the program to better suit the realities of the construction industry.