Government Contracts Monitor

Fraud, Waste, and Abuse Programs for Small Business R&D Contracts Continue to Evolve

December 14, 2012

By: Eric Whytsell

As detailed in a recent report issued by the Government Accountability Office (GAO), federal agency efforts to address fraud, waste, and abuse in small business research and development contracts are continuing to develop into more robust programs that remain agency-specific but will increasingly reflect a common set of strategies.

The GAO prepared the report, “Small Business Research Programs: Agencies Are Implementing New Fraud, Waste, and Abuse Requirements,” GAO-13-70R (November 15, 2012), pursuant to the National Defense Authorization Act for Fiscal Year 2012 (the Act).  In addition to its reauthorizing the Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) programs through September 30, 2017, the Act (i) required the Small Business Administration (SBA) to make certain changes to its policy directives related to fraud, waste and abuse; and (ii) directed GAO to establish a baseline of participating agencies’ changes to the SBIR and STTR programs in response to those SBA directives before December 31, 2012.  To that end, the report summarizes the status of the SBA’s revised policy directives and the agencies’ plans for implementing the fraud, waste, and abuse requirements in the revised directives. 

As the report explains, SBA issued its revised policy directives for SBIR and STTR programs in August 2012 with new requirements designed to help agencies identify and prevent potential fraud, waste, and abuse in such programs.  The new policy directives incorporate key elements of GAO’s recommended fraud-prevention framework, which includes up-front preventative controls, detection and monitoring, and investigations and prosecutions.  In addition to other aspects designed to address changes required by the Act, the SBA’s revised policy directives identify 10 minimum requirements that participating agencies must meet:

1. Require certifications from award recipients that they are in compliance with specific program requirements at the time of the award, as well as after award and during the life cycle of the funding agreement.
2. Include information explaining how and individual can report fraud, waste, and abise on the agency’s respective program website and in each funding solicitation using the method rovided by the agency’s Office of the Inspector General, such as publishing the agency’s fraud hotline number.
3. Designate at least one individual in the agency to, at a minimum, serve as the liason for the SBIR or STTR program, the Office of the Inspector General, and the agency’s suspension and debarment official, and ensure that inquiries regarding fraud, waste, and abuse are referred to the appropriate offices.
4. Include on its program website information concerning successful prosecutions of fraud, waste, and abuse in the programs.
5. Establish a written policy requiring all personnel involved with the program to notify the Office of Inspector General if anyone suspects fraud, waste, and/or abuse and ensure the policy is communicated to all personnel.
6. Create or ensure there is an adequate system to enforce accountability by developing standardized templates for referrals to the Office of the Inspector General and the suspension and debarment official, as well as a process for tracking such referrals.
7. Ensure compliance with program eligibility requirements and terms of funding agreements.
8. Work with the agency’s office of the Inspector General in its efforts to establish fraud detection indicators; coordinate sharing of information on fraud, waste, and abuse between federal agencies; and improve education and training to program officials, applicants, and award recipients.
9. Develop policies and procedures to avoid funding essentially equivalent work already funded by another agency.
10. Consider enhanced reporting requirements during the funding agreement.  

GAO found that the 11 agencies currently operating SBIR programs, 5 of which also operate STTR programs, each needs to make some modifications to become fully compliant with the policy directives.  It also noted that, while the agencies are taking varied approaches to fulfilling the requirements set forth in the new policy directives, none of them anticipates challenges to doing so. The agencies’ different strategies reflect differences among the legacy tools and procedures they already have in place to address fraud, waste, and abuse -- and the precise timelines being chosen for compliance.  Neither the Act nor the revised policy directives established deadlines for achieving full compliance.  At the time of GAO’s review, most agencies were still in the process of determining their implementation time frames.

Although the precise timing of the changes may be up in the air – and the exact changes may vary from agency to agency, one thing is certain: agency efforts to address fraud, waste, and abuse in the SBIR and STTR programs are, by design, becoming increasingly robust and standardized.  To the extent that contractors may have in the past been able to benefit from agency-specific “blind spots” or loop holes, those days appear to be drawing to a close.

 

Eric Whytsell is the attorney responsible for the content of this article.