Department of Energy
Achieving Small Business Prime Contracting Goals Involves Both Potential Benefits and Risks Gao ID: GAO-04-738T May 18, 2004Under the Small Business Reauthorization Act of 1997, the federal government has a goal of awarding at least 23 percent of prime, or direct, contracting dollars to small businesses each fiscal year. The Department of Energy (DOE), like other federal agencies, shares in the responsibility for meeting this goal. In fiscal year 2003, DOE spent $21.6 billion on prime contracts. More than 80 percent of this amount was spent on facility management contracts to manage and operate DOE's sites. Before 1999, DOE included subcontracts awarded by its facility management contractors when calculating its small business prime contracting achievements. In 1999, however, the Office of Federal Procurement Policy determined that DOE could no longer do so. This testimony discusses (1) the effect of the 1999 policy change on the amount of prime contract dollars that DOE will be required to direct to small businesses, (2) the steps that DOE has taken or plans to take to achieve its small business contracting goals, and (3) the likely implications for DOE's programs resulting from these changes.
To meet its share of federal goals, DOE would need to direct significantly more prime contracting dollars to small businesses. If it is to reach its near-term goals of 5.06 percent in fiscal year 2004, and 5.50 percent in fiscal year 2005, DOE must direct to small businesses an additional $226 million and $319 million, respectively, over the $847 million it directed to small businesses in fiscal year 2003. Achieving a long-term goal of directing 23 percent of prime contracting dollars to small businesses would require DOE to contract with small businesses at about 6 times its current rate. Such an increase is about equal to the combined annual budgets for Los Alamos and Sandia--the two largest national laboratories. To address its near-term small business prime contracting goals, DOE has improved its outreach efforts and has redirected to small businesses some contract dollars not associated with facility management contracts. DOE has also begun to review facility management contracts up for renewal to identify work that could be redirected to small business prime contracts. Achieving a long-term goal of 23 percent is much more problematic. Notably, DOE's three largest offices--the National Nuclear Security Administration (NNSA), Environmental Management (EM), and Science--have differing views as to what extent facility management contract work can be redirected to small businesses without having a negative impact on accomplishing their missions. EM is in favor of doing so if redirecting the work is consistent with its accelerated cleanup strategy. NNSA and Science officials express concern that redirecting work now done by facility management contractors could jeopardize critical research missions at the laboratories. DOE's efforts to increase small business prime contracting involve both potential benefits and risks, which depend on the eventual goal DOE attempts to achieve. The potential benefits to DOE of increased small business prime contracting include increasing the pool of potential contractors, which could result in better competition and better prices for the government; finding new and innovative approaches to the work developed by small businesses; and providing experiences to small businesses to allow them to better compete for other federal contracts. The potential risks include integrating and coordinating the work of a greater number of contractors at a site in a safe, secure, and effective manner, and having adequate federal resources for effective contract management and oversight--areas that already pose significant challenges for DOE. In addition, DOE's efforts to increase small business prime contracting may cause its facility management contractors to reduce the amount of subcontracting that they direct to local and regional small businesses. DOE largely agreed with the information in this testimony. However, it disagreed with GAO's characterization of DOE's long-term small business prime contracting goal and its strategy to achieve it. GAO believes that both the longterm goal and DOE's strategy have been accurately described.
GAO-04-738T, Department of Energy: Achieving Small Business Prime Contracting Goals Involves Both Potential Benefits and Risks
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Testimony:
Before the Committee on Energy and Natural Resources, U.S. Senate:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Tuesday, May 18, 2004:
DEPARTMENT OF ENERGY:
Achieving Small Business Prime Contracting Goals Involves Both
Potential Benefits and Risks:
Statement of Robin M. Nazzaro, Director. Natural Resources and
Environment:
GAO-04-738T:
GAO Highlights:
Highlights of GAO-04-738T, testimony before the Committee on Energy and
Natural Resources, United States Senate
Why GAO Did This Study:
Under the Small Business Reauthorization Act of 1997, the federal
government has a goal of awarding at least 23 percent of prime, or
direct, contracting dollars to small businesses each fiscal year. The
Department of Energy (DOE), like other federal agencies, shares in the
responsibility for meeting this goal. In fiscal year 2003, DOE spent
$21.6 billion on prime contracts. More than 80 percent of this amount
was spent on facility management contracts to manage and operate DOE‘s
sites.
Before 1999, DOE included subcontracts awarded by its facility
management contractors when calculating its small business prime
contracting achievements. In 1999, however, the Office of Federal
Procurement Policy determined that DOE could no longer do so.
This testimony discusses (1) the effect of the 1999 policy change on
the amount of prime contract dollars that DOE will be required to
direct to small businesses, (2) the steps that DOE has taken or plans
to take to achieve its small business contracting goals, and (3) the
likely implications for DOE‘s programs resulting from these changes.
What GAO Found:
To meet its share of federal goals, DOE would need to direct
significantly more prime contracting dollars to small businesses. If it
is to reach its near-term goals of 5.06 percent in fiscal year 2004,
and 5.50 percent in fiscal year 2005, DOE must direct to small
businesses an additional $226 million and $319 million, respectively,
over the $847 million it directed to small businesses in fiscal year
2003. Achieving a long-term goal of directing 23 percent of prime
contracting dollars to small businesses would require DOE to contract
with small businesses at about 6 times its current rate. Such an
increase is about equal to the combined annual budgets for Los Alamos
and Sandia”the two largest national laboratories.
To address its near-term small business prime contracting goals, DOE
has improved its outreach efforts and has redirected to small
businesses some contract dollars not associated with facility
management contracts. DOE has also begun to review facility management
contracts up for renewal to identify work that could be redirected to
small business prime contracts. Achieving a long-term goal of 23
percent is much more problematic. Notably, DOE‘s three largest offices”
the National Nuclear Security Administration (NNSA), Environmental
Management (EM), and Science”have differing views as to what extent
facility management contract work can be redirected to small businesses
without having a negative impact on accomplishing their missions. EM is
in favor of doing so if redirecting the work is consistent with its
accelerated cleanup strategy. NNSA and Science officials express
concern that redirecting work now done by facility management
contractors could jeopardize critical research missions at the
laboratories.
DOE‘s efforts to increase small business prime contracting involve both
potential benefits and risks, which depend on the eventual goal DOE
attempts to achieve. The potential benefits to DOE of increased small
business prime contracting include increasing the pool of potential
contractors, which could result in better competition and better prices
for the government; finding new and innovative approaches to the work
developed by small businesses; and providing experiences to small
businesses to allow them to better compete for other federal contracts.
The potential risks include integrating and coordinating the work of a
greater number of contractors at a site in a safe, secure, and
effective manner, and having adequate federal resources for effective
contract management and oversight”areas that already pose significant
challenges for DOE. In addition, DOE‘s efforts to increase small
business prime contracting may cause its facility management
contractors to reduce the amount of subcontracting that they direct to
local and regional small businesses.
DOE largely agreed with the information in this testimony. However, it
disagreed with GAO‘s characterization of DOE‘s long-term small business
prime contracting goal and its strategy to achieve it. GAO believes
that both the long-term goal and DOE‘s strategy have been accurately
described.
www.gao.gov/cgi-bin/getrpt?GAO-04-738T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robin M. Nazzaro, (202)
512-3841 or nazzaror@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the Department of Energy's
(DOE) efforts to increase its direct contracting with small businesses.
The Small Business Act, as amended by the Small Business
Reauthorization Act of 1997, established a government-wide goal of
directing at least 23 percent of prime contracting dollars to small
businesses each fiscal year.[Footnote 1] DOE, like other federal
agencies, shares in the responsibility for meeting this goal.
Contracting is particularly significant at DOE, which spends more on
contracting than any other civilian agency in the federal government.
More than 90 percent of DOE's total fiscal year 2003 budget, or $21.6
billion, was spent on prime contracts. The majority of this amount--
$18.2 billion, or more than 80 percent of the contracting dollars--was
spent on 37 large contracts for the management of DOE's laboratories,
production facilities, and environmental restoration sites. As a group,
these contracts are referred to as facility management contracts. Under
these facility management contracts, a contractor is responsible for
performing, managing, and integrating the work at a DOE site, often
subcontracting specific portions of the work to other businesses.
DOE's approach to reporting its small business prime contracting
dollars has been affected by a change in federal policy concerning
whether subcontracts with small businesses can in certain situations be
counted toward achieving small business prime contracting goals. For
most of the 1990s, DOE included in its calculations of small business
prime contracting achievements the subcontracts awarded to small
businesses by its facility management contractors. The Office of
Federal Procurement Policy[Footnote 2] had allowed DOE to include these
subcontracts because of DOE's unique reliance on facility management
contractors to operate its facilities and carry out its missions. In
1999, however, the Office of Federal Procurement Policy determined that
to ensure consistent reporting of achievements across the federal
government, DOE could no longer include the subcontracts under facility
management contracts when calculating the percentage of prime
contracting dollars awarded to small businesses.[Footnote 3]
You asked us to examine what has happened as a result of this policy
change. My testimony will discuss (1) the effect of the 1999 policy
change on the amount of prime contracting dollars that DOE will be
required to direct to small businesses, (2) the steps that DOE has
taken or plans to take to achieve its small business contracting goals,
and (3) the likely implications for DOE's programs, if any, resulting
from these changes.
My testimony is based on a review of DOE small business contracting
goals and achievements from fiscal year 1990 through fiscal year 2003.
Our work included a review of DOE's plans to achieve its near-term
goals and the projected incremental increases needed to achieve long-
term goals. These goals were developed by DOE's Office of Small and
Disadvantaged Business Utilization (referred to in this testimony as
DOE's Small Business Office) within its Office of Economic Impact and
Diversity. We also reviewed documentation provided by DOE and the Small
Business Administration (SBA), and completed and current procurements
for new small business prime contracts.[Footnote 4] We interviewed DOE
and contractor officials at DOE headquarters and selected sites, as
well as national and regional small business associations and advocacy
groups. Our scope included DOE's three largest offices-the National
Nuclear Security Administration (NNSA)[Footnote 5], and the Offices of
Environmental Management (EM) and Science-that account for about 70
percent of DOE's annual budget. We conducted our review from February
2004 through May 2004 in accordance with generally accepted government
auditing standards. Our review included a data reliability assessment
on DOE's small business prime contracting and subcontracting results
for fiscal years 1990 through 2003. These data are being used primarily
for context. Our assessment of DOE's prime contracting data determined
that the data are sufficiently reliable for the purposes of this
testimony. Although we are not as confident of the reliability of the
subcontracting data as reported to DOE by its facility management
contractors, we determined that these are the only data available and
they are sufficiently reliable for the observations presented in this
testimony.
In summary, we found the following:
* To comply with the 1999 federal policy change and to achieve federal
small business prime contracting goals, DOE would need to direct
significantly more prime contracting dollars to small businesses. To
achieve DOE's near-term small business prime contracting goals of 5.06
percent in fiscal year 2004, and 5.50 percent in fiscal year 2005, DOE
will have to direct an additional $226 million in fiscal year 2004, and
$319 million in fiscal year 2005, above the roughly four percent of
prime contracting dollars directed to small businesses in fiscal year
2003. The long-term goal of 23 percent in small business prime
contracting represents a level significantly beyond what DOE has ever
achieved--about 6 times the $847 million directed to small businesses
in fiscal year 2003. Placed in the context of DOE's current contracting
base, such an increase would represent an amount approximately equal to
the annual budgets of the two largest laboratories--Los Alamos and
Sandia National Laboratories.
* DOE has taken steps to increase its near-term small business prime
contracting, but has no consistent strategy for reaching the eventual
goal of directing 23 percent of its prime contracting dollars to small
businesses. To achieve the near-term goals, DOE has focused primarily
on improving outreach to the small business community and directing
additional contract dollars to small businesses from procurements not
associated with facility management contracts. In addition, as certain
facility management contracts are due for renewal, DOE, and especially
EM, has begun identifying potential work that could be redirected in
the form of small business prime contracts. In the longer term, it is
less clear how, or if, DOE intends to achieve an eventual goal of 23
percent small business prime contracting. In 2002, DOE's Small Business
Office prepared a 20-year plan outlining when and how the department
would achieve the 23 percent small business prime contracting goal.
Since DOE's facility management contracts represent about 80 percent of
its total contract dollars, the department cannot mathematically
achieve the 23 percent goal without redirecting some of those dollars
to small business prime contracts. Although the 20-year plan proposed
that eventually DOE would redirect about a fifth of its facility
management contract dollars to small business prime contracts, it
provides no details as to which offices would provide those dollars.
DOE's three largest offices have differing views as to how much of the
work that is done by facility management contractors can be redirected
to small businesses without jeopardizing the department's missions.
While the EM program has begun to move work from its facility
management contracts and redirect these dollars to small business prime
contracts, EM officials said that doing so must be consistent with the
overall strategy of accelerating cleanup at DOE sites and must be at a
level that can be effectively managed by EM contract and project
management staff. In contrast, officials in the two offices that
oversee DOE's research laboratories--NNSA and Science--said that their
programs are less able to redirect significant segments of their work
from facility management contracts to small businesses without
jeopardizing critical research missions. DOE has not reconciled these
differing views into a consistent strategy for achieving its long-term
small business contracting goals.
* The implications of increasing small business prime contracts depend
on the eventual goals that DOE attempts to achieve. Given the
contrasting views of DOE's three largest offices, it is not clear if
DOE as a whole will commit to the incremental increases that would
eventually lead to a 23 percent rate of prime contracting to small
businesses. Regardless of how far DOE moves in the direction of
providing more prime contracting dollars for small businesses, efforts
to increase small business prime contracting involve both potential
benefits and risks. In addition to helping the federal government meet
the overall goal of 23 percent prime contracting, potential benefits
include increasing the pool of possible contractors, which could result
in better competition and perhaps better prices for the government;
finding new and innovative approaches developed by small businesses;
and providing experiences to small businesses that could enhance their
capacity to compete for other federal contracts. The potential risks
associated with increasing the number of small business prime contracts
include difficulties integrating and coordinating the activities of a
greater number of prime contractors at a site to ensure safe, secure,
and effective operations and having adequate federal resources for
effective contract management and oversight--two areas that continue to
be a challenge for DOE. Furthermore, DOE's efforts to increase small
business prime contracting may cause facility management contractors to
reduce the amount of subcontracting dollars that they direct to local
and regional small businesses.
We discussed a draft of this testimony with DOE officials representing
DOE's Small Business Office, procurement organizations, NNSA, EM, and
Science. DOE officials generally agreed with the information and
observations presented in the testimony, with two exceptions. First,
DOE said that it disagreed with our statement that DOE has no
consistent strategy for reaching an eventual goal of directing 23
percent of its prime contracting dollars to small businesses. DOE
argued that its 20-year plan, its annual goal-setting process with SBA,
and the individual goal setting that occurs within NNSA and the program
offices collectively represented a consistent strategy. We disagree.
Although DOE has a 20-year plan that projects incremental increases in
small business prime contracting up to 23 percent by 2022, no strategy
is in place that defines how DOE will achieve this goal, identifies
what the contributions of the various DOE organizational components
will be, or reconciles the differing views within DOE as to what would
be an appropriate level of small business prime contracting. Second,
DOE said that we have mischaracterized its 23 percent small business
prime contracting goal as an eventual long-term goal, while DOE views
it as a goal that it may or may not agree to, based on its annual
negotiations with SBA. We believe we have appropriately described DOE's
goal and we stated that it is not clear if DOE will commit to the
incremental increases that would lead to achieving the goal. Finally,
DOE suggested technical corrections, which we incorporated as
appropriate.
Background:
DOE has about 50 major sites around the country where the department
carries out its missions, including developing, maintaining, and
securing the nation's nuclear weapons capability; cleaning up the
nuclear and hazardous wastes resulting from more than 50 years of
weapons production; and conducting basic energy and scientific
research, such as mapping the human genome. This mission work is
carried out under the direction of NNSA and DOE's program offices.
With a workforce of 16,000 federal employees and more than 100,000
contractor employees, DOE relies primarily on contractors to manage and
operate its facilities and to accomplish its missions. In addition to
accomplishing DOE's core mission work, managing and operating the sites
involves a broad range of support activities, such as information
technology, safety, security, and purchase of products and services.
The Small Business Act, as amended by the Small Business
Reauthorization Act of 1997, directed the President to establish the
goal that not less than 23 percent of the federal government's prime
contracting dollars would be directed to small businesses each fiscal
year. SBA is charged with working with federal agencies to establish
agency small business contracting goals that, in the aggregate, meet or
exceed the 23 percent government-wide goal. SBA negotiates an annual
goal with each agency based on the overall amount of contracting in the
agency (contracting base) and the agency's past achievements.[Footnote
6] SBA guidelines for setting individual agency goals specify that
certain types of federal spending should not be included in the
contracting base. These exclusions include items such as grants,
purchases from mandatory sources, or contracts for work done
internationally for which U.S. small businesses would not be competing.
For fiscal year 2003, excluding such items resulted in a DOE
contracting base of about $21 billion subject to the small business
prime contracting goal. As figure 1 shows, facility management
contracts account for more than 80 percent of this amount.
Figure 1: Components of DOE's Fiscal Year 2003 Contracting Base:
[See PDF for image]
[End of figure]
DOE's Small Business Office negotiates annual small business
contracting goals with SBA, coordinates outreach efforts with the small
business community, and works with NNSA and DOE's program offices to
establish and monitor annual goals for small business contracting.
DOE's Office of Procurement and Assistance Management and NNSA's Office
of Acquisition and Supply Management establish policies and guidance
for conducting procurements according to federal and departmental
regulations, and maintain the information systems on the department's
prime contracts, including annual dollars provided to each contract.
NNSA and DOE's program offices, such as EM and Science, are responsible
for identifying opportunities for small business contracting and
providing program oversight and direction to the contractors.
Unprecedented Levels of Small Business Prime Contracting Necessary for
DOE to Meet Future Goals:
Since the 1999 federal policy change, DOE can no longer include
subcontracts of its facility management contractors when calculating
the department's small business prime contracting goals. As a result,
to achieve even its near-term small business prime contracting goals,
DOE will have to direct more prime contracting dollars to small
businesses than it ever has in the past. Further, meeting a long-term
goal of 23 percent small business prime contracting would represent an
achievement far beyond what DOE has ever reached--about 6 times the
$847 million that it directed to small businesses in fiscal year 2003.
Meeting Near-term Goals Requires More Small Business Prime Contracting
Dollars Than Previously Achieved:
Now that DOE's facility management subcontracts can no longer be
counted toward achieving its small business prime contracting goals,
achieving its near-term goals for fiscal years 2004 and 2005, will
require DOE to expand the amount of prime contracting dollars it
provides directly to small businesses. The department has a goal of
directing to small business prime contracts 5.06 percent of its
contracting base in fiscal year 2004, and 5.50 percent of its
contracting base in fiscal year 2005. These goals surpass any of DOE's
small business prime contracting achievements prior to fiscal year
2004. As figure 2 shows, the percentage of prime contracting dollars
DOE directed to small businesses in any year since 1996 ranges from
2.68 percent to 3.99 percent. During 1991 through 1999, when DOE could
include in its achievements those dollars going to small business
subcontractors of facility management contractors, as well as dollars
going directly to small business prime contractors, DOE's reported
percentages of prime contracting dollars awarded to small businesses
ranged from 15.7 percent to 19.9 percent.[Footnote 7] However, most of
the reported achievements during those years came from facility
management subcontracting dollars going to small businesses. The
remainder of the reported achievements came from prime contracts to
small businesses for work not associated with facility management
contracts.
Figure 2: DOE's Reported Small Business Prime Contracting Achievements
for Fiscal Years 1996 through 2003 and Goals for Fiscal Years 2004 and
2005:
[See PDF for image]
Note: For fiscal years 2000 through 2003, DOE did not include facility
management subcontracting dollars in calculating small business prime
contracting achievements. Therefore, facility management
subcontracting is not shown in figure 2 for those years.
[End of figure]
Meeting the small-business prime contracting goals in fiscal years 2004
and 2005 will require DOE to achieve a substantial increase over the
$847 million in prime contracting dollars that DOE provided directly to
small businesses in fiscal year 2003. To meet its fiscal year 2004
goal, DOE will need to direct an additional $226 million, or 26.7
percent, over the 2003 amount. Meeting the department's 2005 goal will
require directing $319 million more than in 2003, an increase of 37.7
percent over 2003 levels.[Footnote 8]
Meeting the Long-term Goal of 23 Percent Requires Huge Increases in
Small Business Prime Contracting:
Although achieving DOE's near-term small business prime contracting
goals for fiscal years 2004 and 2005 will not be easy, the long-term
goal of 23 percent would require an achievement far beyond what DOE has
accomplished in the past. SBA expects DOE to achieve a small business
prime contracting goal at least on par with the federal goal of 23
percent. DOE's response has been to formulate a plan for gradual
compliance. In 2002, DOE's Small Business Office submitted a plan to
SBA to achieve the 23 percent goal in 20 years, by the year 2022.
According to this 20-year plan, DOE would increase its level of small
business prime contracting by about 1 percentage point per year to
achieve the 23 percent goal by 2022. To achieve this goal, the
department would need to increase its small business prime contracting
to about $5 billion, or 6 times its 2003 achievement. Put in terms of
DOE's current contracting base, the additional amount of contracting
dollars necessary to achieve the 23 percent goal approximately equals
the combined annual budgets of the facility management contracts for
the two largest laboratories--Los Alamos and Sandia National
Laboratories.
Meeting the 23 percent goal under DOE's current contracting approach
means that a substantial portion of dollars now included in facility
management contracts would have to be redirected to small business
prime contracts, resulting in more prime contracts for DOE to manage.
Redirecting these dollars would be necessary because prime contracts
not associated with facility management generally account for less than
20 percent of DOE's total prime contract dollars. Therefore, even if
all the dollars not associated with facility management contracts were
directed to small businesses, the total amount would be insufficient to
meet the 23 percent small business prime contracting goal.
DOE Has Near-term Plans But No Consistent Strategy for Achieving Long-
term Small Business Contracting Goals:
Although DOE has an agreed upon organizational strategy to achieve its
near-term small business prime contracting goals, a consistent view
does not prevail within the department on whether or how to reach the
eventual goal of directing 23 percent of prime contracting dollars to
small businesses. To achieve the near-term goals of 5.06 of prime
contracting dollars to small businesses in fiscal year 2004, and 5.50
percent in fiscal year 2005, DOE has focused primarily on improving
outreach to the small business community, directing more of the dollars
not associated with facility management contracts toward small
businesses, and beginning to redirect selected facility management
contract activities to small business prime contracts. It is less
clear, however, how DOE intends to achieve the eventual long-term goal
of 23 percent small business prime contracting. DOE's Small Business
Office's 20-year plan calls for redirecting about 20 percent of
facility management contract dollars to small business prime contracts
but provides no details as to how NNSA and the program offices, such as
EM and Science, would implement the plan. Officials in these offices
have differing views as to how much of the work done by their facility
management contractors can be redirected to small businesses without
jeopardizing critical agency missions.
Near-Term Plans Focus Primarily on Increasing Awards of Non-Facility
Management Contracts to Small Businesses:
DOE's plan for achieving its near-term small business prime contracting
goals focuses primarily on directing more of the dollars not associated
with facility management contracts to small businesses. To increase the
percentage of such dollars going to small businesses, DOE has expanded
its outreach to the small business community, notifying small
businesses of contracting opportunities and preparing them to compete
for these contracts. DOE's Small Business Office has developed a
variety of outreach and capacity-building activities designed to assist
small businesses in competing for DOE prime contracts. For example,
DOE's Small Business Office fosters mentor-protégé relationships
between small businesses and DOE's large prime contractors to help the
small businesses expand their expertise. In addition to these
department-wide efforts, offices such as NNSA and EM have also
developed outreach activities, generally related to specific prime
contract opportunities (see table 1 for examples.):
Table 1: Examples of Outreach Efforts by DOE's Small Business Office
and Program Offices:
Small Business Office efforts; Approach: Marketing and outreach;
Description: Educate and inform small businesses about the contracting
opportunities at DOE; Provide a listing of potential prime and
subcontracting opportunities for the next 3 years. These potential
opportunities for small businesses are organized by program office or
state and are posted on the Small Business Office's Web site; Sponsor
annual conferences, workshops, procurement fairs, and seminars for the
small business community.
Small Business Office efforts; Approach: Mentor-protégé relationship;
Description: Foster long-term business relationships between small
business entities and DOE prime contractors in order to increase the
overall number of these small business entities that can successfully
compete for DOE contract and subcontract awards.
Small Business Office efforts; Approach: Small business advisory team;
Description: Established an advisory group consisting of small business
trade associations, chambers of commerce, and other federal agencies to
provide advice and guidance to the Small Business Office on small
business programs and activities. Purposes of the group include
identifying best practices and exploring business models that promote
outreach and interaction with the small business community.
Program Office efforts; Approach: Teaming workshops;
Description: Sponsor meetings of small and large businesses to discuss
upcoming requests for proposals to encourage formation of teams that
combine the advantages of small and large businesses, or combine the
different strengths of several small businesses, for proposed new prime
contracts (NNSA and EM).
Program Office efforts; Approach: Market research;
Description: Conduct market research before issuing a request for
proposals for a new contract not associated with facility management to
identify whether small businesses exist with capabilities in specific
performance areas (NNSA, EM, and Science).
Program Office efforts; Approach: Database of small businesses;
Description: Build a database of interested small businesses to
identify highly skilled small businesses that meet program requirements
(NNSA).
Source: GAO analysis of DOE information.
[End of table]
In addition to its outreach efforts, DOE has taken steps in two other
major areas. First, it has established internal requirements that it
believes will help make progress toward achieving its small business
prime contracting goals. These internal requirements were part of a 14-
item plan of action included in the 20-year plan. The plan of action
includes reviews of upcoming contracts to identify work activities that
could potentially be awarded to small businesses, and regular
monitoring of DOE program level and agency-wide achievements toward
DOE's annual goals. For example, each year DOE's Small Business Office
requires each program office to develop a small business plan that
reflects the program's goals for increasing prime contracts with small
businesses. These program plans are used to develop DOE's overall small
business contracting goals, and DOE's Small Business Office tracks
progress toward these goals quarterly. Second, DOE has modified some of
its procurement processes to eliminate certain barriers for small
businesses, such as bonding requirements, and to help small businesses
minimize the cost of developing proposals. For example, DOE has limited
the amount of documentation that small businesses are required to
submit in response to a request for proposals to 50 pages instead of
volumes of supporting documentation.
To achieve the near-term small business prime contracting goals in
fiscal years 2004 and 2005, DOE is concentrating primarily on contracts
not associated with facility management, because doing so does not
involve significant changes in the way the department does business.
For contracts not associated with facility management, as new work is
identified or existing contracts come up for renewal, DOE sets them
aside for small businesses and awards them as small business prime
contracts whenever possible. For example, the information technology
support contract for DOE headquarters came up for renewal in January
2002. DOE determined that this contract, which was held by a large
business, could be carried out by a small business. The new contract,
for a 5-year term with a total value of $409 million, was awarded in
January 2003, to a team that included a consortium of 10 small
businesses.
NNSA and the program offices have also focused primarily on
procurements not associated with their facility management contracts.
NNSA, EM, and Science officials issued policy letters stressing the
importance of directing contracts for activities not associated with
facility management to small businesses to the maximum extent possible.
For example, for any upcoming contract not associated with facility
management, program office personnel must first conduct market research
to determine if any small businesses are capable of performing all or
parts of the work and have the necessary qualifications to do so. If
the program office finds two small businesses capable of doing the
work, the policy requires the contract or parts of the contract to be
"set aside" from unrestricted competition and instead generally be made
available for a more restricted competition among small businesses. Any
exceptions to this policy must be approved by the head of the program
office.
Although in the near term DOE is concentrating primarily on contracts
not associated with facility management, it has also begun to look at
certain facility management contracts as they come up for renewal to
identify potential work that could be made available to small
businesses. DOE's Offices of EM and Fossil Energy have identified
several specific activities that had been within a facility management
contractor's scope of work and have set those activities aside for
small business prime contracts. (See table 2 for examples.):
Table 2: Status of Selected Procurements Redirecting Facility
Management Contract Dollars to Small Business Prime Contracts:
Fossil Energy; Program office/site: Strategic Petroleum Reserve,
Louisiana;
Nature of work: Construction management services;
Current facility management contractor: DynMcDermott;
Contract amount: $26.5 million for 2 years, plus three 1-year options;
Status of procurement: Contract awarded November 2003.
Environmental Management; Program office/site: Fast Flux Test Facility,
Hanford, WA;
Nature of work: Decontamination, decommissioning, demolition, disposal
of reactor waste;
Current facility management contractor: Fluor Hanford;
Contract amount: $46.1 million per year, contract length not to exceed
8 years;
Status of procurement: Request for proposals closed March 2004.
Environmental Management; Program office/site: 222-S Laboratory,
Hanford, WA;
Nature of work: Laboratory analysis of tank waste samples;
Current facility management contractor: CH2M Hill;
Contract amount: $10 million per year for 5 years, plus five additional
1-year options;
Status of procurement: Request for proposals closed March 2004.
Environmental Management; Program office/site: Portsmouth, OH;
Nature of work: 1 contract for environmental remediation;
1 contract for infrastructure;
Current facility management contractor: Bechtel Jacobs;
Contract amount: $273 million over 5 years for remediation;
$129 million over 5 years for infrastructure;
Status of procurement: Request for proposals closed March 2004.
Environmental Management; Program office/site: Paducah, KY;
Nature of work: 1 contract for environmental remediation;
1 contract for infrastructure;
Current facility management contractor: Bechtel Jacobs;
Contract amount: $377 million over 5 years for remediation;
$100 million over 5 years for infrastructure;
Status of procurement: Request for proposals closed March 2004.
Source: GAO analysis of DOE information.
[End of table]
Of the examples shown in table 2, the procurement at the Strategic
Petroleum Reserve in Louisiana is the only one that DOE has completed
so far. According to DOE officials with the Office of Fossil Energy,
when the facility management contract was nearing the end of its term,
DOE's Small Business Office asked the program office to look for
opportunities for small business prime contracts. DOE officials at the
Strategic Petroleum Reserve said they identified a number of
construction projects that could be performed by small businesses, and
awarded several prime contracts to small businesses for this work. DOE
officials then decided to remove all the construction management work
from the facility management contract for the site so that a new small
business prime contractor for construction management could then award
and manage subcontracts for individual construction projects. According
to DOE's contracting officer at the Strategic Petroleum Reserve, having
the new prime contractor responsible for awarding and managing the
contracts will reduce the amount of additional work required by DOE
procurement and program personnel. The prime contract was awarded in
November 2003.
DOE's Small Business Office and Program Offices Have Different Views on
the Extent to Which Facility Management Contract Dollars Can Be
Redirected to Small Business:
While DOE's Small Business Office and the three largest offices have a
consistent approach to their near-term goals--primarily focusing on
increasing small business prime contracting by using dollars not
associated with facility management contracts--a consistent view does
not prevail in the department on whether or how to achieve the eventual
goal of directing 23 percent of prime contracting dollars to small
businesses. DOE's Small Business Office's plan to achieve the long-term
small business prime contracting goals has two main components. The
first is to continue increasing the small business share of contract
dollars not associated with facility management contracts. For any new
contracts not associated with facility management, DOE has a stated
preference to set aside those contracts for small businesses where
possible. The three largest offices have been consistent in their
efforts to do so. However, even this portion of DOE's contracting base
(about 20 percent of total contract dollars) is not immediately
available for small business prime contracts. For example, many of the
contracts not associated with facility management cover multiple years,
so only a portion of these contracts are up for award or renewal in a
given year.[Footnote 9] In addition, some contracts for work not
associated with facility management may not be available for award to
small businesses, for example, if market research determines that there
are not at least two small businesses capable of performing all or
parts of the work in an upcoming procurement.
Because of the limited amount of contracting dollars for work not
associated with facility management, the second component of DOE's
Small Business Office's long-term plan is to redirect dollars now going
to facility management contracts to small business prime contracts.
DOE's 20-year plan calls for increasing dollars redirected from
facility management contracts to small business prime contracts from
less than 1 percent in 2003 to about 20 percent by 2022 (see figure 3).
Figure 3: Projected Percentage of Facility Management Contract Dollars
to Be Redirected to Small Business Prime Contracts:
[See PDF for image]
Note: The actual percentage of facility management contract dollars
redirected to small business prime contracts between fiscal years 1990
and 2003 was less than one percent.
[End of figure]
Nevertheless, DOE does not have a consistent strategy in place to
accomplish its plan for redirecting dollars from its facility
management contracts to small business prime contracts. Officials in
NNSA, EM, and Science have considerably different views about the
feasibility of redirecting significant amounts of funding from their
facility management contracts to small businesses. For example:
* Both NNSA and Science officials are very concerned about the
implications of setting aside for small businesses significant portions
of the dollars now going to facility management contractors that
operate the weapons and research laboratories. NNSA and Science
officials' concerns stem from the large scale of laboratory operations,
the integrated nature of the mission and mission support work, and the
complexity and critical importance of the laboratory missions. These
officials said that fragmenting mission activities among several
contractors at the research laboratories, whether the contractors were
large or small businesses, was inadvisable. Therefore, according to
NNSA's Director of Acquisition and Supply Management and Science's
Director of Grants and Contracts, NNSA and Science may never achieve a
23 percent small business prime contracting level because doing so
would be inconsistent with accomplishing their missions safely,
securely, and effectively.
Despite the reluctance to fragment core mission activities, NNSA and
Science officials said they would explore opportunities to contract
separately with small businesses for mission support functions at the
laboratories if those mission support functions were not closely
integrated with the laboratories' core missions.[Footnote 10] For
example, NNSA is analyzing its own purchases of goods and services,
such as computer hardware, software, and staffing services, as well as
similar purchases by its facility management contractors. NNSA is
assessing the feasibility of purchasing these items in bulk under a
prime contract, rather than multiple separate contracts. An NNSA
official said that NNSA is not trying to increase its small business
prime contracting numbers by becoming a purchasing agent for its
facility management contractors, but rather combining similar
requirements as a way to possibly increase NNSA's level of prime
contracting to small business. On the basis of this analysis, NNSA is
pursuing three potential opportunities, valued at about $80 million,
involving technical services and services to provide temporary staff,
and is exploring other opportunities.
* By contrast, EM officials were more optimistic about the potential
role of small businesses in accomplishing its core missions. The
Assistant Secretary for EM said that part of its initiative to
accelerate the cleanup of DOE sites involves greater use of
alternatives to traditional facility management contracts, including
removing work from facility management contracts and setting that work
aside for small businesses. The Assistant Secretary said that these
small business procurements are part of EM's overall strategy to clean
up sites more quickly and at a lower cost to the government, not just
to increase the amount of small business prime contracting.
EM is also developing a complex-wide contracting arrangement, called
indefinite delivery/indefinite quantity, which will result in prime
contracts with both large and small businesses for smaller-scale
cleanup activities. According to EM's Director of Acquisition
Management, the multiple contracts awarded under this initiative will
allow EM sites nationwide to quickly purchase cleanup services from
small and large businesses without having to conduct a separate
procurement, which can take months to complete. Instead, either EM or
the facility management contractor will be able to simply write a task
order against these existing contracts.
Finally, it is unclear to what extent EM can expand its use of small
business prime contracts to accomplish its core missions. According to
the Assistant Secretary, the main constraint is the ability of EM staff
to effectively oversee those contracts, not the availability of
qualified small businesses to perform the work. The Assistant Secretary
said that EM is proceeding carefully to ensure that effective
management and oversight will occur; that cost, schedule, and technical
standards are met; and that safety and security issues are adequately
addressed.
Potential Benefits and Risks of Increased Small Business Prime
Contracting Depend on the Goal that DOE Tries to Achieve:
Since DOE is in the early stages of implementing a long-term strategy
to redirect facility management contracting dollars to small
businesses, the implications of increased small business prime
contracting are still relatively uncertain. However, the implications
depend heavily on the extent to which DOE agrees, in its negotiations
with SBA, to meet the 23 percent small business prime contracting goal.
Given the differences we heard in the approaches of the three largest
offices, it is not clear if DOE will commit to the incremental
increases that would eventually lead to a 23 percent rate of prime
contracting to small businesses, as detailed in the 20-year schedule
prepared by DOE's Small Business Office. Absent more specific direction
from Congress or the executive branch, DOE's eventual commitment to a
particular small business prime contracting goal appears to rest
heavily on whether the department will be willing to change its
approach to contracting for activities at the science and weapons
laboratories, its environmental cleanup work, or both. Regardless of
the extent to which DOE directs more prime contracting dollars to small
businesses, efforts to increase small business prime contracting
involve potential benefits as well as potential risks.
Potential Benefits of Increasing Small Business Prime Contracting:
An overarching benefit of increasing small business prime contracting
is that DOE would be helping to carry out the President's small
business agenda and would be contributing to the federal government's
overall goal of directing 23 percent of prime contracting dollars to
small businesses. Beyond contributing to this overall effort, DOE's
Small Business Office and procurement officials explained that the
benefits included increased competition, greater innovation, and
enhanced small business capacity.
One example of increased competition can be seen in EM's program. DOE's
efforts to increase small business contracting have resulted in new
procurements with narrower scope. In the past, EM has been concerned
about the limited pool of potential contractors for large cleanup
projects, sometimes receiving only two proposals on multibillion dollar
procurements. By structuring the cleanup work into smaller contracts
and opening them to individual small businesses or small business
teams, EM expects to attract more potential bidders. One of EM's
current procurements is for cleanup work at the Fast Flux Test Facility
at the Hanford site in Washington state. Currently included in a
facility management contract, EM is in the process of redirecting this
work as a small business set-aside. EM officials said that in the
response to the request for proposals for this project, with an
estimated contract amount of $46 million per year for up to 8 years,
DOE received proposals from several small business teams. According to
EM officials, increased competition from a larger pool of potential
contractors could result in better prices for the government. However,
since the contracts for the current small business procurements have
not yet been awarded, it is too soon to tell whether better prices will
be realized.
In addition to increased competition, DOE procurement and program
office officials believe that small businesses may bring new ideas and
innovative approaches to the work. For example, as part of its
accelerated cleanup strategy, EM has been looking for better and faster
ways to accomplish cleanup at its sites and facilities. According to EM
officials, expanding the pool of potential contractors for cleanup
projects may increase the potential for new technology and
ideas.[Footnote 11]
Increasing small business prime contracting can also provide small
businesses with the experience necessary to compete for other federal
prime contracts. According to small business associations and advocacy
groups that we contacted, a direct contracting relationship with DOE
provides small businesses with more challenging work and better
opportunities to grow and expand their businesses. The use of mentor-
protégé arrangements or teaming with other small or large businesses
also provides opportunities for growth and economic development. For
example, an owner of a small construction company in New Mexico told us
that his business had successfully teamed with a large construction
company for several projects and that his small company was now the
senior member of that team and was competing for DOE prime contracts.
Potential Risks of Increasing Small Business Prime Contracting:
DOE's long-term strategy for achieving a 23-percent small business
prime contracting goal includes redirecting a substantial amount of
facility management contract dollars to small business prime contracts.
DOE procurement and program officials acknowledge that doing so would
significantly increase the number of prime contracts DOE would have to
manage. Increasing DOE's number of prime contracts, whether these are
with small or large businesses, could create problems with integrating
and coordinating the efforts of more contractors at a site, as well as
create problems with contract management and oversight. In addition,
DOE's efforts to increase small business prime contracting could
inadvertently reduce the amount of small business subcontracting
directed to local and regional small businesses.
Increasing the number of prime contracts at a site raises concerns
about integration, coordination, and accountability. If a facility
management contractor has primary responsibility for accomplishing work
at the site, that contractor is also accountable for integrating the
efforts of multiple subcontractors to ensure that the mission work is
accomplished. In addition, the facility management contractor has the
responsibility for ensuring that all contractor and subcontractor
employees at the site comply with DOE safety and security standards. If
the work done by the facility management contractor becomes fragmented
and spread among multiple prime contracts, DOE may need to carry out
these integration functions, which places more oversight
responsibilities on federal program and project management personnel.
If the number of prime contractors at a site increases significantly,
the challenges associated with integrating and coordinating the
activities also increase. Both DOE and facility management contractor
officials have expressed concerns about successfully integrating and
coordinating the efforts of an increased number of prime contractors at
a site. Ensuring that all work is performed in accordance with DOE
safety and security standards is a significant concern, especially
given the continuing challenges that the department faces in these two
areas.[Footnote 12]
To begin to address the constraint of having a limited number of
federal employees to perform coordination and integration functions,
DOE is considering awarding small business prime contracts but then
having the facility management contractors at the sites manage and
oversee the work. As some facility management contracts are extended or
awarded, DOE includes a provision that specifically allows the
department to identify and redirect work within the facility management
contract to a small business prime contract. The provision also allows
DOE to request the facility management contractor to manage and oversee
the work. Since the work that DOE would redirect is generally already
being done by a facility management subcontractor, the only actual
change is the contractual relationship. In fiscal year 2003, NNSA
started using this arrangement for facilities and infrastructure
restoration projects at the Sandia National Laboratory in New Mexico.
NNSA awarded prime contracts--$100,000 in fiscal year 2003 and an
estimated $3 million in fiscal year 2004--to small businesses for some
of these projects. Although it is too soon to fully assess the
implications of this arrangement, facility management contractor
officials at the Sandia laboratory have expressed concern that it could
confuse the lines of authority and accountability at the site, because
the contractual relationship is not consistent with the daily
management and oversight of the activities being performed. In prior
work, we have also expressed concerns about confusing the lines of
authority, which can make it difficult to hold contractors accountable
for performance.[Footnote 13]
Regarding contract management and oversight, increasing the number of
prime contracts with DOE could place further strain on DOE's
procurement and program oversight personnel. DOE's reliance on
contractors to operate its facilities and carry out its missions,
coupled with the department's history of inadequate contractor
management and oversight, led us in 1990 to designate DOE contract
management as a high-risk area vulnerable to fraud, waste, abuse, and
mismanagement. This high-risk designation is still in effect. GAO and
others have stated that one of the contributing factors to DOE's
inadequate oversight of its contractors has been a shortage of
personnel with the right skills to perform these functions.
Although DOE has over the past several years made progress in training
and certifying its procurement and project management personnel, DOE
procurement and program officials said that the overall number of
available personnel has not grown, and has significantly decreased in
NNSA. More prime contracts would create additional work for federal
employees in two phases: managing the procurement process by requesting
and evaluating proposals to award a contract, and overseeing the work
of the contractor to ensure that performance is acceptable. DOE
officials at headquarters and at the sites we visited expressed
concerns that significantly increasing the number of prime contracts
could reduce the ability to adequately oversee and evaluate contractor
performance.
While headquarters and site office officials in the EM program
acknowledge the potential risks that additional prime contracts can
create in both integrating work activities at a site and contract
management and oversight, they are pursuing ways to mitigate those
risks. To address concerns about sitewide integration of safety and
security, DOE officials at Hanford plan to use contract language and
incentives to encourage the site's new small business prime contractors
and the facility management contractors to work together. To earn
potential incentive fees under this proposed arrangement, for example,
all prime contractors will have to cooperate in such areas as safety
and security. But, since these are new approaches and the small
business prime contracts have yet to be awarded, the extent to which
these steps will mitigate the potential risks is unknown. To lessen the
impact of additional prime contracts on procurement and program
personnel, EM officials said they intend to use a contract for small
business procurements that has a well-defined statement of work and
that ties incentive fees to accomplishing the contract's stated final
goal rather than to interim steps. According to EM's Director of
Acquisition Management, administering such contracts generally may
require less federal involvement, although EM will also have to train
its staff on the most effective way to manage these contracts.
In addition to the potential risks discussed above, DOE and contractor
officials, as well as representatives of small business advocacy
groups, raised concerns about DOE's efforts to increase small business
prime contracting. One concern expressed was that such efforts could
inadvertently result in less total contracting dollars directed to the
small business community. Procurement regulations require that all
facility management contractors have a small business subcontracting
plan and facility management contractors must generally negotiate
annual small business subcontracting goals with the department.
However, if work is removed from a facility management contract, the
facility management contractor may negotiate lower subcontracting goals
with the department and then subcontract less of the remaining work to
small businesses. Since the efforts to redirect facility management
contract dollars to small businesses is in its early stages, no data
are yet available to validate this concern.
A related concern is that if DOE removes work from a facility
management contract and sets that work aside for a small business
procurement, there may be fewer contracting dollars available to local
and regional small businesses. This could occur because DOE's facility
management contractors generally are not required to follow federal
regulations in their procurements, but instead comply with "best
business practices." In doing so, a facility management contractor can
restrict a competition for its subcontracts to the local small business
community. In contrast, DOE must generally open up its procurements to
nationwide competition, which may result in fewer contracts going to
local and regional small businesses. Again, no data are yet available
to validate this concern.
Finally, representatives of some small business advocacy groups told us
that some small businesses would rather have a subcontract with a
facility management contractor than a prime contract with DOE. This is
because facility management contractors generally have fewer
administrative requirements and a less burdensome and faster
procurement process.
It is not clear to what extent these potential risks will affect DOE's
ability to carry out its missions in a safe, secure, and effective
manner. The impact on DOE's missions of increasing small business prime
contracts will depend both on the total number of new prime contracts
awarded and on how well the department manages the contractors and the
work. The stakes are high as DOE attempts to contribute to the federal
government's goal of increasing the prime contracting dollars directed
to the small business community, while striving to accomplish its
missions efficiently and effectively.
This concludes my testimony. I would be pleased to respond to any
questions that you may have.
Contacts and Acknowledgments:
For further information on this testimony, please contact Ms. Robin
Nazzaro at (202) 512-3841. Individuals making key contributions to this
testimony included Carole Blackwell, Ellen W. Chu, Matt Coco, Doreen
Feldman, Jeff Rueckhaus, Stan Stenersen, and Bill Swick.
[End of section]
Appendix I: Department of Energy (DOE) Contract Dollars Directed to
Small Businesses, Fiscal Years 1990-2003:
Millions of dollars:
Row no. 1;
Contract type: Contracting base[A];
1990: $17,095.8;
1991: $18,628.6;
1992: $18,852.2;
1993: $18,392.5;
1994: $18,826.3;
1995: $17,177.4;
1996: $16,213.2;
1997: $15,844.0;
1998: $15,117.5;
1999: $15,483.8;
2000: $17,067.9;
2001: $18,551.2;
2002: $19,170.9;
2003: $21,210.0.
Row no. 2;
Contract type: Facility management contracts;
1990: 13,790.2;
1991: 15,592.5;
1992: 15,798.2;
1993: 14,970.0;
1994: 15,788.0;
1995: 14,240.1;
1996: 13,127.7;
1997: 13,844.4;
1998: 13,226.6;
1999: 13,487.8;
2000: 14,079.1;
2001: 14,756.4;
2002: 15,671.7;
2003: 18,189.1.
Row no. 3;
Contract type: All other prime contracts;
1990: 3,305.5;
1991: 3,036.1;
1992: 3,054.0;
1993: 3,422.5;
1994: 3,038.3;
1995: 2,937.3;
1996: 3,085.5;
1997: 1,999.6;
1998: 1,890.9;
1999: 1,995.9;
2000: 2,988.8;
2001: 3,794.7;
2002: 3,499.2;
2003: 3,020.9.
Row no. 4;
Contract type: Contracts to small businesses;
1990: 3,047.2;
1991: 3,211.8;
1992: 3,162.3;
1993: 3,578.8;
1994: 3,616.2;
1995: 3,441.8;
1996: 3,001.1;
1997: 3,173.4;
1998: 3,033.5;
1999: 3,225.3;
2000: 2,805.1;
2001: 3,539.9;
2002: 4,241.9;
2003: 4,382.2.
Row no. 5;
Contract type: Small business prime contracts;
1990: 500.9;
1991: 529.8;
1992: 578.8;
1993: 512.7;
1994: 508.1;
1995: 484.5;
1996: 434.9;
1997: 460.9;
1998: 442.6;
1999: 472.9;
2000: 486.8;
2001: 509.5;
2002: 555.7;
2003: 847.2.
Row no. 6;
Contract type: Small business subcontracts awarded by prime
contractors;
1990: 2,546.3;
1991: 2,682.0;
1992: 2,583.5;
1993: 3,066.1;
1994: 3,108.2;
1995: 2,957.3;
1996: 2,566.2;
1997: 2,712.5;
1998: 2,591.0;
1999: 2,752.4;
2000: 2,318.3;
2001: 3,030.4;
2002: 3,686.2;
2003: 3,535.0.
Row no. 7;
Contract type: Small business subcontracts awarded by facility
management contractors;
1990: 2,402.4;
1991: 2,464.0;
1992: 2,374.8;
1993: 2,772.3;
1994: 2,795.6;
1995: 2,699.3;
1996: 2,328.1;
1997: 2,156.7;
1998: 2,037.3;
1999: 2,608.7;
2000: N/A[B];
2001: N/A[B];
2002: N/A[B];
2003: N/A[B].
Row no. 8;
Contract type: Small business subcontracts awarded by all other prime
contractors;
1990: 144.0;
1991: 217.9;
1992: 208.7;
1993: 293.9;
1994: 312.5;
1995: 258.0;
1996: 238.1;
1997: 555.8;
1998: 553.6;
1999: 143.7;
2000: N/A[B];
2001: N/A[B];
2002: N/A[B];
2003: N/A[B].
Row no. 9;
Contract type: Small and large business subcontracts awarded by prime
contractors;
1990: 5,617.8;
1991: 6,300.1;
1992: 5,653.5;
1993: 6,458.5;
1994: 6,347.3;
1995: 5,870.3;
1996: 5,055.1;
1997: 5,223.4;
1998: 5,684.5;
1999: 5,547.1;
2000: 4,826.4;
2001: 6,409.3;
2002: 7,548.6;
2003: 7,349.0.
Small business prime contracts (as a percent of contracting base)[C];
1990: 2.93;
1991: 2.84;
1992: 3.07;
1993: 2.79;
1994: 2.70;
1995: 2.82;
1996: 2.68;
1997: 2.91;
1998: 2.93;
1999: 3.05;
2000: 2.85;
2001: 2.75;
2002: 2.90;
2003: 3.99.
Small business prime contracts and facility management subcontracts (as
a percent of contracting base)[D];
1990: N/A;
1991: 16.07;
1992: 15.67;
1993: 17.86;
1994: 17.55;
1995: 18.53;
1996: 17.04;
1997: 16.52;
1998: 16.40;
1999: 19.90;
2000: N/A;
2001: N/A;
2002: N/A;
2003: N/A.
Small business prime and subcontracts (as a percent of contracting
base)[E];
1990: 17.82;
1991: 17.24;
1992: 16.77;
1993: 19.46;
1994: 19.21;
1995: 20.04;
1996: 18.51;
1997: 20.03;
1998: 20.07;
1999: 20.83;
2000: 16.44;
2001: 19.08;
2002: 22.13;
2003: 20.66.
Small business subcontracts (as a percent of all subcontracts)[F];
1990: 45.33;
1991: 42.57;
1992: 45.70;
1993: 47.47;
1994: 48.97;
1995: 50.38;
1996: 50.76;
1997: 51.93;
1998: 45.58;
1999: 49.62;
2000: 48.03;
2001: 47.28;
2002: 48.83;
2003: 48.10.
Source: GAO analysis of DOE data.
Note: Dollars in the table are expressed in current-year (unadjusted)
dollars and include DOE prime contracts valued at $25,000 or more that
are tracked in DOE data systems. Prime contracts awarded by another
federal agency but funded by DOE are excluded from the table.
Subcontract dollars are included only for contractors who are required
to report on their small business subcontracting activities.
[A] DOE's contracting base includes dollars that can potentially be
directed to U.S. small businesses, excluding, under Small Business
Administration (SBA) guidelines, dollars that cannot go to small
business prime contracts, such as grants and purchases from mandatory
or foreign sources.
[B] For fiscal years 2000 through 2003, DOE did not account separately
for subcontract dollars going to small businesses from facility
management prime contractors versus those from all of its other prime
contractors.
[C] We calculated the percentage of DOE's contract dollars going to
small business prime contracts by dividing small business prime
contract dollars (row 5) by the contracting base (row 1).
[D] For fiscal years 1991 through 1999, DOE's annual small business
prime contracting achievements, as reported to SBA, included DOE
subcontracts awarded to small businesses by its facility management
contractors, as well as prime contracts awarded directly to small
businesses. To calculate small business prime contracting achievements
for these 9 years, we therefore added rows 5 and 7 and divided the sum
by row 1. We did not do this calculation for fiscal years 1990 and 2000
through 2003 because small business subcontracts from facility
management contractors did not "count" in those years toward small
business achievement percentages.
[E] We calculated the overall percentage of DOE's contract dollars
going to small businesses--via both prime contracts and subcontracts--
by dividing DOE's contract dollars to small businesses (row 4) by the
contracting base (row 1).
[F] We calculated the percentage of total subcontracting dollars going
to small business by dividing small business subcontract dollars from
prime contractors (row 6) by total subcontract dollars going to small
and large businesses (row 9).
[End of table]
FOOTNOTES
[1] Prime contracts are direct contracts between the government and a
contractor.
[2] The Office of Federal Procurement Policy within the Office of
Management and Budget, in addition to issuing policy letters, has the
responsibility for resolving any disagreements between the Small
Business Administration and another federal agency on small business
prime contracting goals. 15 U.S.C. § 644(g)(2).
[3] The Office of Federal Procurement Policy stated that for fiscal
year 2000 and beyond, contracts awarded by DOE's facility management
contractors should instead be counted toward DOE's small business
subcontracting goals.
[4] DOE awards new small business contracts through a procurement
process that generally includes issuing a request for proposals,
evaluating those proposals, and selecting a contractor.
[5] NNSA is a separately organized agency within DOE, with its own
procurement organization and program offices such as Defense Programs
and Defense Nuclear Nonproliferation. Program offices referred to in
this testimony generally include NNSA and its program offices as well
as DOE's program offices of Environmental Management and Science.
[6] Small Business Administration officials said that it is important
that the three largest federal contracting agencies--the Department of
Defense, the National Aeronautics and Space Administration, and DOE--
meet the 23 percent goal in order for the government-wide goal to be
achieved.
[7] See appendix I for information on DOE's prime and subcontract
dollars directed to small businesses between 1990 and 2003.
[8] These estimates assume that the contracting base--or the amount of
contracting dollars used to calculate achievements--remains the same
for fiscal years 2004 and 2005 as it was in fiscal year 2003.
[9] Of the $3.4 billion in contracting dollars not associated with
facility management contracts in fiscal year 2003, only about $672
million, or 20 percent, was available to award as new contracts. The
remaining $2.7 billion was annual funding for existing contracts.
[10] Although the facility management contracts for the laboratories
distinguish between core mission work and mission support functions,
individual laboratories may differ from one another in the extent to
which a specific activity is regarded as an integral part of
accomplishing the mission. At some of DOE's laboratories, for example,
information technology provides a support function that could
potentially be separated from the facility management contract and
awarded to small business without jeopardizing the mission; such a
separation is being proposed at the Office of Science's Oak Ridge
National Laboratory in Tennessee. In contrast, NNSA officials have said
that information technology at NNSA's weapons laboratories represents
an integral part of simulated testing and certification of the nation's
nuclear weapons stockpile and cannot be separated from the mission work
without jeopardizing the results.
[11] To assist in the development of new technologies, EM as well as
other program offices with research and development programs provide
funding for two small business grant programs managed by the Office of
Science. The Small Business Innovation Research Program and the Small
Business Technology Transfer Program, with combined funding of more
than $100 million in fiscal year 2003, encourage the development of new
technologies, including those dealing with environmental cleanup.
[12] For information on safety and security challenges, see U.S.
General Accounting Office, Major Management Challenges and Program
Risks: Department of Energy, GAO-03-100 (Washington, D.C.: Jan. 2003);
Department of Energy, Management Challenges at the Department of
Energy, DOE/IG-0626 (Washington, D.C.: Nov. 12, 2003); U.S. General
Accounting Office, Department of Energy: Mission Support Challenges
Remain at Los Alamos and Lawrence Livermore National Laboratories,
GAO-04-370 (Washington, D.C.: Feb. 27, 2004); and U.S. General
Accounting Office, Nuclear Security: DOE Must Address Significant
Issues to Meet the Requirements of the New Design Basis Threat,
GAO-04-701T (Washington, D.C.: Apr. 27, 2004).
[13] U.S. General Accounting Office, Department of Energy: Fundamental
Reassessment Needed to Address Major Mission, Structure, and
Accountability Problems, GAO-02-51 (Washington, D.C.: Dec. 21, 2001).
