Part 4: SBA's contracting practices under close scrutiny

Thursday - 2/10/2011, 7:20am EST

WFED's Jason Miller

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(This is part 4 of Federal News Radio's investigative series, "Discouraged and Disrespected at SBA.")

By Jason Miller
Executive Editor
Federal News Radio

Over the past year, the Small Business Administration's contract practices have come under fire.

The House and Senate Small Business Committees questioned the agency about a contract to McKinsey and Company, SBA Administrator Karen Mills' former employer.

The SBA inspector general found that the agency's contract using Recovery Act funding for its customer relationship management tool fell short in meeting federal procurement policies and standards.

And now, new allegations of acquisition improprieties are coming to light.

Former SBA chief operating officer Eileen Harrington hired a consulting company, KnowledgeBank, to allegedly gain access to her longtime colleague, Rosemarie Straight.

Harrington, who moved back to the Federal Trade Commission in November, and Straight worked together at the FTC for more than 20 years. Straight retired in 2007 as the agency's executive director. Harrington, who now is FTC's executive director, served in several senior management positions while Straight was at the agency, including as deputy director and associate director for marketing practices.

SBA's contract to KnowledgeBank, a Native American-owned 8(a) firm, initially was worth $32,649 in August 2009. But SBA modified the contract three times over the next eight months and the award ended up being for more than $115,000. (SBA's modifications to KnowledgeBank's contract: Sept. 24, 2009, March 23, 2010, and April 15, 2010.)

The contracting documents specifically call out Straight as the consultant KnowledgeBank was presenting to SBA to do the work.

"Whether this contract was awarded properly or not, one would question whether there was proper judgment made and whether there was a violation of an appearance of a conflict," said Bill Shook, a procurement attorney with Shook Doran Koehl. "The code of conduct for all government employees requires each employee to avoid even an appearance of conflict of interest."

Shook said he's seen this type of contracting arrangement too often during his 20-plus year career as a procurement attorney.

"Unfortunately, it is a common practice to have directed awards where someone wants a desirable person and they look for a contract vehicle to make an award," he said. "It would appear this is a contract vehicle to make such an award."

SBA's Jonathan Swain, the assistant administrator for communications and public liaison, in e-mailed responses to questions said, "The agency is not aware of any wrongdoing with the specific contracts you mention. As for the contract with KnowledgeBank, the agency has found no indication of fraud in how the contract was awarded or performed. KnowledgeBank was hired to provide training services and performed timely and as promised."

Harrington declined to comment on the contract with KnowledgeBank or Straight.

Attempts to contact Straight were unsuccessful.

And KnowledgeBank CEO and founder Tom Wimer said he hasn't been made aware of anything involving his company that was improper. He said his company has done everything above board.

But Wimer refused to go into further details about the contract or his business relationship with Straight.

Experts question agency actions

The allegation of contracting abuse comes as four SBA employees claim retaliation for blowing the whistle on alleged human resources fraud and abuses.

Shook and other procurement experts who reviewed the contract paperwork say SBA's actions leave a lot of questions.

One congressional staff member, who requested anonymity because they didn't receive permission to speak on the record, said SBA's actions raise two concerns.

The staff member said the relationship between Harrington and Straight raises ethical issues. The Hill source also said it was unclear what SBA got for the $100,000 it spent with KnowledgeBank, and specifically Straight.

According to the contract documents, SBA hired KnowledgeBank, and specifically Straight at $132 per hour, to provide "technical insight and advice on particular strategies that could potentially help the COO in developing the high performing organization. Second, the consultant will conduct fact finding (to include a review of organizational structure and functions and interview staff designated by the COO). The result of all the fact finding will be shared with the COO. The consultant will also provide observations on whether the current organizational structure meets the needs of SBA. Lastly, general recommendations will be made to meet any management training needs."

In the final modification on April 15, 2010, SBA paid KnowledgeBank $80,852 for "technical expertise and executive coaching to achieve a sustainable program of administrative and management excellence."