House Republicans investigating SBA over alleged misappropriation of COVID funds

FIRST ON FOX: The GOP-led House of Representatives' Committee on Small Business has launched a probe into the Small Business Administration (SBA) after the agency's Office of Inspector General said it overpaid a contractor millions of dollars for running COVID-19 pandemic loan programs.

House Small Business Committee Chair Roger Williams and Oversight Subcommittee Chair Beth Van Duyne, both Republicans from Texas, sent a letter Tuesday to SBA Administrator Isabella Guzman and Chief Acquisition Officer Patrick Ingram, informing the officials of the investigation and requesting information and documentation related to the allegations in the report.

The OIG's report, which was released late last month, focused on the SBA's blanket purchase agreement with contractor Highlight Technologies LLC, a company that administered loan payments for the agency, and found the agency's handling of the contracts inflated them an extra $5 million after assessing 29 separate contracts spanning from 2017 to 2021, which totaled $254 million.

The OIG found that instead of paying the staffing rates originally agreed upon in its agreement with Highlight, the SBA allowed the contractor to bill the government using labor rates for Washington, D.C., the highest rate in the country, rather than paying the rates for the regions where the work was being conducted. That change cost taxpayers an extra $3.8 million more than it should have, according to the report.

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"As the OIG noted, it is not a prudent business practice for the SBA to allow Highlight to charge the government using rates for the most expensive region when most of the work was projected to be performed largely outside of Washington, D.C.," Williams and Van Duyne wrote. "In fact, it is not clear whether any Highlight staff actually lived in this region, as the OIG report shows staff in only Little Rock, AR; Fresno, CA; Citrus Heights, CA; and Dallas-Ft. Worth, TX."

The OIG also found five instances in which Highlight exceeded the federal subcontracting limit, which requires that at least 50% of an order's value be performed by a small business and not subcontracted to a larger entity. According to the IG, the SBA failed to actively monitor Highlight's compliance with that rule, which cost taxpayers an extra $1.2 million.

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"This is antithetical to the 8(a) [Business Development] program and a violation of the [Federal Acquisition Regulations (FAR) that no more than 50 percent of 8(a) contracts may be subcontracted out to larger businesses," Williams and Van Duyne said in their letter. 

"As the main advocate for small businesses within the Executive Branch, the SBA is responsible for safeguarding contracting benefits meant for intended recipients, and is required to effectively monitor contract compliance with small business set-aside subcontracting limitations."

In their letter to the SBA, chairs Williams and Van Duyne wrote, "It is imperative to understand how the SBA allowed such lax compliance and poor stewardship of taxpayer funds," and asked the agency to provide documentation and justification for the added contract costs.

"In a recent report, the SBA Office of Inspector General found more than $5 million in misappropriated taxpayer funds," Chairman Williams told FOX Business in a statement. "The SBA should be held to the same standards as our primary job creators, who cannot afford million-dollar errors. I guarantee my colleagues and I on this Committee will investigate and ensure taxpayer dollars are spent responsibly."

In response to the House Small Business Committee Republicans' letter, an SBA spokesperson pointed to the Trump administration. 

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"We understand that the committee is investigating the SBA’s pandemic-era staffing decisions made in 2020 under the previous administration and will work to provide the information requested," the spokesperson said. "The Biden administration is committed to responsible stewardship of taxpayer dollars, which is why the SBA has been laser-focused on addressing the problems we inherited in COVID emergency relief programs." 

The SBA said that at the time the contracts in question were made, all the agency's employees were working remotely, and the Trump administration made the decision to use the single-duty station of Washington, D.C., because of the pandemic emergency. The agency said the contract allowed COVID loans to be expedited to businesses during that time.