GAO: Oversight of Contractor Compliance with Small Business Subcontracting Plans Needs Improvement

Certain federal contracts must have a small business subcontracting plan if subcontracting opportunities exist. Under these plans, contractors have to make a good-faith effort to offer subcontracting opportunities to small businesses. But recent Department of Defense Inspector General reports raised concerns about agency oversight of subcontracting requirements. The Government Accountability Office (GAO) has therefore reviewed oversight of subcontracting plans. GAO publicly released its report on June 29, detailing its findings. 

GAO found that selected agencies did not consistently follow all required procedures for oversight of small business subcontracting plans, both before and after contracts were awarded. GAO reviewed 26 contracts with a subcontracting plan at four agencies—Defense Logistics Agency (DLA), General Services Administration (GSA), National Aeronautics and Space Administration (NASA), and the Department of the Navy (Navy).

For about half of the 26 contracts, agencies could not demonstrate that procedures for Procurement Center Representative (PCR) reviews were followed. These representatives may review small business subcontracting plans and provide recommendations for improving small business participation. When an agency is awarding a contract that includes a subcontracting plan, contracting officers are required to notify these representatives of the opportunity to review the proposed contract. 

For 14 of the 26 contracts, GAO found that contracting officers did not ensure contractors submitted required subcontracting reports. After a contract is awarded, contracting officers must review reports contractors submit that describe their progress towards meeting approved small business subcontracting goals. In some cases, contracting officers accepted reports with subcontracting goals different from those in the approved subcontracting plans, with no documentation explaining the difference. 

The Small Business Administration (SBA) encourages agency compliance with small business subcontracting plan requirements by providing training to contracting officers and contractors, and by conducting reviews. For instance, SBA Commercial Market Representatives conduct compliance reviews to evaluate a large prime contractor’s compliance with subcontracting program procedures and goal achievement. However, GAO’s review found that SBA could not provide documentation or information on almost all compliance reviews conducted in fiscal years 2016–2018. SBA has developed new procedures for conducting compliance reviews, but as of mid-March 2020, had yet to fully implement them. SBA has conducted fiscal year 2019 compliance reviews that reflect a first phase of their new procedures. SBA has draft guidance on the new compliance review process, including some specific information regarding what Commercial Market Representatives are to record as part of the compliance review. The administration has also begun to conduct compliance reviews in accordance with the guidance, but GAO found it does not have clearly documented and maintained records for the first phase of these reviews. 

In its report, GAO made a total of 10 recommendations to five agencies (three to DLA, one to GSA, two to NASA, three to Navy, and one to SBA): 

  1. The Director of DLA should include a step for the opportunity for Procurement Center Representative (PCR) review of the proposed contract and subcontracting plan in agency procedures and memorandums, and develop a mechanism for documenting whether the opportunity for PCR review was provided. 
  2. The Secretary of the Navy should include a step for the opportunity for PCR review of the proposed contract and subcontracting plan in agency procedures and memorandums, and develop a mechanism for documenting whether the opportunity for PCR review was provided. 
  3. The Director of DLA should take steps to fulfill the requirement that contracting officers ensure that subcontracting reports are submitted by contractors in a timely manner. For example, the agency could require contracting officers to verify that prior reports were submitted when reviewing current submissions. 
  4. The NASA Administrator should take steps to fulfill the requirement that contracting officers ensure that subcontracting reports are submitted by contractors in a timely manner. For example, the agency could require contracting officers to verify that prior reports were submitted when reviewing current submissions. 
  5. The Secretary of the Navy should take steps to fulfill the requirement that contracting officers ensure that subcontracting reports are submitted by contractors in a timely manner. For example, the agency could require contracting officers to verify that prior reports were submitted when reviewing current submissions. 
  6. The Director of DLA should take steps to ensure contracting officers compare subcontracting goals in contractor report submissions to goals in the approved subcontracting plan and address any discrepancies. 
  7. The Administrator of the GSA should take steps to ensure contracting officers compare subcontracting goals in contractor report submissions to goals in the approved subcontracting plan and address any discrepancies. 
  8. The NASA Administrator should take steps to ensure contracting officers compare subcontracting goals in contractor report submissions to goals in the approved subcontracting plan and address any discrepancies. 
  9. The Secretary of the Navy should take steps to ensure contracting officers compare subcontracting goals in contractor report submissions to goals in the approved subcontracting plan and address any discrepancies. 
  10.  The SBA Administrator should ensure Commercial Market Representatives clearly and consistently document compliance reviews and maintain these records. 

The Department of Defense (DOD), NASA and GSA concurred with their recommendations.  DOD notified GAO of steps that DLA and Navy intend to take to address the recommendations, including actions to remind contracting officers or to provide additional guidance related to giving the Procurement Center Representative an opportunity to review the proposed contract and subcontracting plan. DOD also said that DLA and Navy intend to remind contracting officers of the requirement to ensure that subcontracting reports are submitted in a timely manner and to remind contracting officers to compare subcontracting goals in contractor report submissions to goals in the approved subcontracting plan and address any discrepancies. 

SBA partially concurred, stating that it has comprehensive documents and records for fiscal year 2019 compliance reviews and while its Commercial Market Representatives (CMRs) maintain a separate workbook of spreadsheets for reviews they conduct, the agency maintains a summary document that combines the compliance reviews performed collectively by its CMRs. During the audit and as part of its written response to GAO’s draft report, SBA did not provide a summary document that showed all reviews conducted by its CMRs for fiscal year 2019. SBA also acknowledged that it could not provide requested documentation for compliance reviews conducted during fiscal years 2016 through 2018. SBA stated it has developed detailed procedures for maintaining consistent records for compliance reviews and that while CMRs are using these procedures currently, the agency intends to finalize the procedures on May 29, 2020 to ensure that SBA continues to fully document its compliance reviews. 

Read the full report at GAO

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Kylie Bielby has more than 20 years' experience in reporting and editing a wide range of security topics, covering geopolitical and policy analysis to international and country-specific trends and events. Before joining GTSC's Homeland Security Today staff, she was an editor and contributor for Jane's, and a columnist and managing editor for security and counter-terror publications.

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