Defense Contracting

Concerned about the low participation rates of small disadvantaged businesses in the Defense Department's procurement system, Congress passed legislation in 1986 requiring that such firms be awarded five percent of the total dollar amount subcontracted by DOD prime contractors. To provide incentives for prime contractors to increase the participation of small disadvantaged businesses in DOD subcontracting, Congress later created the Mentor-Protege Pilot Program, under which prime contractors are supposed to help small disadvantaged businesses become better subcontractors and suppliers for DOD and other federal agencies. This report (1) evaluates the regulatory implementation of the program, (2) assesses the initial participation of eligible mentor and protege firms, (3) identifies any deficiencies in the statutory and regulatory framework of the program that are likely to harm success, and (4) recommends corrections to program impediments.

GAO found that: (1) DOD program policy and procurement regulations are consistent with the legislative requirements and congressional intent for the Mentor-Protege Pilot Program; (2) as a result of comments on proposed regulations that characterized some provisions as restrictive or burdensome, DOD incorporated changes into the final regulations; (3) the program was not fully implemented in October 1991, as intended, because Congress did not provide specific funds for cash reimbursement until December 1991; (4) DOD did not adopt an aggressive implementation strategy because of uncertainty about the amount and timing of program funds; (5) the President has proposed that fiscal year 1992 funds be rescinded as part of a budget-cutting effort; (6) with participation limited to mentors seeking credit toward subcontracting goals, the Office of Small and Disadvantaged Business Utilization (OSADBU) had approved 8 agreements and had 12 applications in process as of March 1992; (7) the program's full implementation delay of about 1 year could affect Congress's reauthorization and extension decision scheduled for 1994; (8) DOD has not established internal controls for reviewing and approving applications or monitoring the program, which could serve to protect the integrity of the program; (9) existing measures do not quantify specific program accomplishment or rates of progress; and (10) existing incentives may not be sufficient inducement for significant participation by prime contractors.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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