Department of Energy:

Improved Oversight Could Better Ensure Opportunities for Small Business Subcontracting

GAO-05-459: Published: May 13, 2005. Publicly Released: May 24, 2005.

Additional Materials:

Contact:

Eugene E. Aloise
(202) 512-6870
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Federal policy requires that small businesses receive the maximum practicable subcontracting opportunity for providing goods and services to large businesses that contract directly with federal agencies. The Department of Energy (DOE) annually directs almost $20 billion to the 34 "facility management contractors" of which $3.3 billion was redirected to small business subcontractors in fiscal year 2004. DOE negotiates annual small business subcontracting goals with individual contractors and monitors their achievements. GAO was asked to (1) determine the usefulness of the data that DOE uses to monitor subcontracting performance and (2) discuss the actions that DOE has taken to address any problems with the contractors' subcontracting efforts.

DOE's facility management contractors' small business subcontracting achievements--reported as a percentage of their total subcontracted dollars--are not useful for monitoring purposes because the reported data overstates subcontracting achievements in two ways: (1) All of the contractor-reported data incorrectly excluded some large-business subcontracts, beyond what federal reporting guidelines allow. Excluding these subcontracts made the percentage of subcontracted dollars going to small businesses appear larger than it would have, if such subcontracts were not incorrectly excluded. If these subcontracts had been included, some contractors said it was likely they would have requested lower goals. (2) Even when all relevant subcontracts are included, the contractor-reported data can still overstate contractors' subcontracting achievements. Because a contractor could decide to subcontract only a small amount of its total federal contract, the portion of subcontracted dollars going to small businesses could, by comparison, appear misleadingly large. As a result, contractor-reported data is not useful to DOE in determining its contractors' actual small business subcontracting achievements or adequately assessing whether small businesses are receiving maximum practicable subcontracting opportunities. DOE has not taken adequate steps to address known problems with the contractor-reported data. Because the data showed that the department was meeting its subcontracting goals, DOE officials were not inclined to closely monitor contractors' practices for calculating their subcontracting goals and achievements. DOE officials were aware in 2002 that the contractors were not following federal guidelines on which subcontracts to include when developing goals. DOE's Small Business Office did provide clarifying information on the requirements, but DOE officials failed to ensure that the guidelines were being followed, and problems continued. In March 2005, DOE issued additional guidance, but it is uncertain whether DOE will ensure that the guidance is followed. These oversight problems occurred, in part, because DOE has not clearly defined the roles, responsibilities, and needed interaction of the various headquarters and field organizations that collectively oversee the contractors' small business subcontracting efforts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Subsequent to the March 2005 guidance, DOE and NNSA procurement executives and the Director of the Small Business Office issued a memo to all procurement officers, contracting officers and DOE field office managers. This June 2005 memo emphasized the importance of accurate reporting of small business subcontracting data, and directed the recipients of the memo to ensure that all contractors complied with the SBA goaling guidelines.

    Recommendation: To ensure that facility management contractors comply with SBA guidelines and follow a consistent practice for calculating and reporting small business subcontracting goals and achievements, the Secretary of Energy should direct the appropriate officials responsible for DOE's Small Business Office and procurement organizations to ensure, through regular oversight and review activities, that facility management contractors comply with DOE's March 2005 guidance on small business procurement goals.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: In its "60-day" letter to OMB and the Congress, DOE committed to developing an internal management report listing the contractors' subcontracting achievements as a percent of the annual contract funding after it receives fiscal year end data from the government-wide e-SRS system. Furthermore, in a June 2005 memo from the Deputy Secretary of Energy to the Chairwoman of the Senate Committee on Small Business and Entrepreneurship, DOE also agreed that it would do this calculation for internal management purposes.

    Recommendation: To ensure that DOE has useful data for managing its small business subcontracting program and for measuring and comparing contractors' performance in pursuing the maximum practicable opportunity for small business subcontracting, the Secretary of Energy should direct the appropriate officials responsible for DOE's Small Business Office and procurement organizations to use, for internal management purposes, data on facility management contractors' annual small business subcontracting achievements calculated as a percentage of the obligated dollars facility management contractors received that year on their contract with DOE.

    Agency Affected: Department of Energy

  3. Status: Closed - Implemented

    Comments: DOE has issued several guidance documents to clarify the roles and responsibilities associated with small business subcontracting. In September 2007, DOE issued a revised acquisition letter (AL-2007-11) to provide updates on small business programs. At the same time, information on roles and responsibilities was incorporated into the DOE Acquisition Guide as a new chapter 19. Furthermore, DOE's Small Business Office issued "Guidance on the Department of Energy Subcontracting Program" in September 2006 which included a section on roles and responsibilities.

    Recommendation: To improve DOE's oversight of the small business subcontracting program and to provide the maximum practicable opportunity for small businesses to subcontract at DOE sites, the Secretary of Energy should take steps to strengthen oversight of the program, including issuing guidance clarifying the roles, responsibilities, and necessary interactions among DOE small business office, program office, and procurement officials responsible for managing the small business subcontracting program.

    Agency Affected: Department of Energy

 

Explore the full database of GAO's Open Recommendations »

Sep 22, 2014

Sep 16, 2014

Jul 28, 2014

Jul 23, 2014

Jul 22, 2014

Jul 21, 2014

Jun 26, 2014

Jun 20, 2014

Jun 6, 2014

Looking for more? Browse all our products here