Small and Disadvantaged Businesses
Some Agencies' Advocates Do Not Report to the Required Management Level Gao ID: GAO-03-863 September 4, 2003Section 15(k) of the Small Business Act requires that all federal agencies with procurement powers establish an Office of Small and Disadvantaged Business Utilization (OSDBU). This law is one of many designed to enhance the participation of small and disadvantaged businesses in federal procurement. Section 15(k)(3) of the act requires that OSDBU directors, who are intended to be advocates for small and disadvantaged businesses, be responsible only to and report directly to agency heads or deputy agency heads. GAO was asked to determine compliance with section 15(k)(3) across the government, review to whom the OSDBU director at the Office of the Secretary of Defense has reported since the office was exempted from that provision, and determine whether section 15(k) applies to the Office of Administration (OA), which is the central procurement arm of the Executive Office of the President (EOP).
Almost half of the federal agencies that GAO reviewed were not in compliance with section 15(k)(3) of the Small Business Act. Thirteen of the 24 agencies were in compliance--that is, the OSDBU director reported directly to and was responsible only to the agency head or deputy head (see table). Eleven agencies were not in compliance with the provision. At these 11 agencies, the OSDBU director (1) reported to officials below the level of agency head or deputy head, (2) was not responsible only to the agency head or deputy head but also to a lower level agency official, or (3) had delegated the responsibilities of the OSDBU director to officials who did not report to the agency head or the deputy head. Since Congress granted the Office of the Secretary of Defense an exemption from the section 15(k)(3) reporting requirement in 1988, the organizational reporting level of the OSDBU director has changed twice--in both cases to lower levels. From 1989-96, the director reported to officials on the Under Secretary of Defense level, one level below Deputy Secretary. Since 1996 (except in 1999), the director has reported to officials on the Deputy Under Secretary of Defense level, two reporting levels below Deputy Secretary. OA likely is a "Federal agency with procurement powers" subject to the OSDBU requirements of section 15(k) of the Small Business Act. OA has procurement powers deriving from its authority to contract on behalf of EOP. OA is a "federal agency" by virtue of its being an "agency" under the Administrative Procedure Act (APA), which the Small Business Act adopts by reference, and OA is an APA agency because it possesses the requisite "substantial independent authority."
RecommendationsOur 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.
Director: Team: Phone:GAO-03-863, Small and Disadvantaged Businesses: Some Agencies' Advocates Do Not Report to the Required Management Level
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Report to the Committee on Small Business and Entrepreneurship, U.S.
Senate:
September 2003:
Small and Disadvantaged Businesses:
Some Agencies' Advocates Do Not Report to the Required Management
Level:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-863] GAO-03-863:
GAO Highlights:
Highlights of GAO-03-863, a report to the Committee on Small Business
and Entrepreneurship, U.S. Senate
Why GAO Did This Study:
Section 15(k) of the Small Business Act requires that all federal
agencies with procurement powers establish an Office of Small and
Disadvantaged Business Utilization (OSDBU). This law is one of many
designed to enhance the participation of small and disadvantaged
businesses in federal procurement. Section 15(k)(3) of the act
requires that OSDBU directors, who are intended to be advocates for
small and disadvantaged businesses, be responsible only to and report
directly to agency heads or deputy agency heads. GAO was asked to
determine compliance with section 15(k)(3) across the government,
review to whom the OSDBU director at the Office of the Secretary of
Defense has reported since the office was exempted from that
provision, and determine whether section 15(k) applies to the Office
of Administration (OA), which is the central procurement arm of the
Executive Office of the President (EOP).
What GAO Found:
Almost half of the federal agencies that GAO reviewed were not in
compliance with section 15(k)(3) of the Small Business Act. Thirteen
of the 24 agencies were in compliance”that is, the OSDBU director
reported directly to and was responsible only to the agency head or
deputy head (see table). Eleven agencies were not in compliance with
the provision. At these 11 agencies, the OSDBU director (1) reported
to officials below the level of agency head or deputy head, (2) was
not responsible only to the agency head or deputy head but also to a
lower level agency official, or (3) had delegated the responsibilities
of the OSDBU director to officials who did not report to the agency
head or the deputy head.
Since Congress granted the Office of the Secretary of Defense an
exemption from the section 15(k)(3) reporting requirement in 1988, the
organizational reporting level of the OSDBU director has changed twice”
in both cases to lower levels. From 1989–96, the director reported to
officials on the Under Secretary of Defense level, one level below
Deputy Secretary. Since 1996 (except in 1999), the director has
reported to officials on the Deputy Under Secretary of Defense level,
two reporting levels below Deputy Secretary.
OA likely is a ’Federal agency with procurement powers“ subject to the
OSDBU requirements of section 15(k) of the Small Business Act. OA has
procurement powers deriving from its authority to contract on behalf
of EOP. OA is a ’federal agency“ by virtue of its being an ’agency“
under the Administrative Procedure Act (APA), which the Small Business
Act adopts by reference, and OA is an APA agency because it possesses
the requisite ’substantial independent authority.“
What GAO Recommends:
GAO recommends that the heads of agencies that were found not to be in
compliance with section 15(k)(3) of the Small Business Act take all of
the necessary steps to comply with the requirement. In their comments,
the agencies agreed with the report‘s description of their OSDBU
directors‘ reporting relationships; however, most disagreed with our
conclusion that the reporting relationships did not comply with the
law.
www.gao.gov/cgi-bin/getrpt?GAO-03-863.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact David G. Wood at
(202) 512-8678 or woodd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Almost Half of the Agencies We Reviewed Were Not Complying with Section
15(k)(3) of the Small Business Act:
Reporting Level of the OSDBU Director at the Office of the Secretary of
Defense Has Changed Twice:
OA Likely Is Subject to the OSDBU Requirements of Section 15(k) of the
Small Business Act:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Twenty-four Agencies Covered by the Compliance Review:
Appendix II: Scope and Methodology:
Appendix III: Legal Analysis of the Applicability of Section 15(k) of
the Small Business Act to the EOP's Office of Administration:
Introduction and Summary of Conclusions:
Background:
Analysis:
Conclusion:
Appendix IV: Comments from the Department of Agriculture:
Appendix V: Comments from the Department of Commerce:
Appendix VI: Comments from the Department of Education:
Appendix VII: Comments from the Department of Health and Human
Services:
Appendix VIII: Comments from the Department of Justice:
Appendix IX: Comments from the Department of State:
Appendix X: Comments from the Department of the Interior:
Appendix XI: Comments from the Department of the Treasury:
Appendix XII: Comments from the Social Security Administration:
Appendix XIII: Comments from the U.S. Agency for International
Development:
Appendix XIV: Comments from the Executive Office of the President,
Office of Administration:
Appendix XV: GAO Contact and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Table:
Table 1: Summary of Agency Compliance with Section 15(k)(3) of the
Small Business Act:
Figures:
Figure 1: The OSDBU Director's Reporting Relationship at the Department
of the Interior:
Figure 2: The OSDBU Director's Reporting Relationship at the Department
of Justice:
Figure 3: The OSDBU Director's Reporting Relationship at the Social
Security Administration:
Figure 4: The OSDBU Director's Reporting Relationship at the Department
of Commerce:
Figure 5: The OSDBU Director's Reporting Relationship at the Department
of Education:
Figure 6: The OSDBU Director's Reporting Relationship at the
Environmental Protection Agency:
Figure 7: The OSDBU Director's Reporting Relationship at the Department
of Health and Human Services before March 2003:
Figure 8: The OSDBU Director's Reporting Relationship at the Department
of Agriculture:
Figure 9: The OSDBU Director's Reporting Relationship at the Department
of the Treasury:
Figure 10: The OSDBU Director's Reporting Relationship at the Department
of State:
Figure 11: Timeline of the OSDBU Director's Reporting Relationship at
the Office of the Secretary of Defense:
Abbreviations:
APA: Administrative Procedure Act:
CFO: Chief Financial Officers:
CICA: Competition in Contracting Act:
DOD: Department of Defense:
EOP: Executive Office of the President:
EPA: Environmental Protection Agency:
FAR: Federal Acquisition Regulation:
FEMA: Federal Emergency Management Agency:
FOIA: Freedom of Information Act:
FRA: Federal Records Act:
GSA: General Services Administration:
HHS: Health and Human Services:
NAS: National Academy of Sciences:
NARA: National Archives and Records Administration:
OA: Office of Administration:
ONDCP: Office of National Drug Control Policy:
OSDBU: Office of Small and Disadvantaged Business Utilization:
OST: Office of Science and Technology:
JAG: Judge Advocate General of the Army:
Letter September 4, 2003:
The Honorable Olympia J. Snowe
Chair
The Honorable John F. Kerry
Ranking Minority Member
Committee on Small Business and Entrepreneurship
United States Senate:
During the last 25 years, Congress has enacted several laws designed to
enhance small business participation in procurement by federal
agencies--a market that reached more than $250 billion in fiscal year
2002. One of these laws--Public Law 95-507, enacted in 1978--amended
section 15 of the Small Business Act (15 U.S.C. § 644) to require all
federal agencies with procurement powers to establish an Office of
Small and Disadvantaged Business Utilization (OSDBU). Under this act,
the OSDBU is responsible for overseeing the agency's functions and
duties related to the awarding of contracts and subcontracts to small
and disadvantaged businesses. Congress intended that OSDBU directors
serve in their respective agencies as advocates for small and
disadvantaged businesses.
One specific provision of the act--section 15(k)(3)--requires that
OSDBU directors be responsible only to agency heads or deputy heads,
and that they report directly to these individuals. The purpose of this
provision is to ensure that the OSDBU directors have immediate access
to their agency's top decision-makers in order to advocate effectively
for small and disadvantaged businesses. In 1988, Congress amended
section 15(k)(3) and allowed the Department of Defense's (DOD)
Secretary of Defense the discretion to designate the official to whom
the Defense OSDBU director should report.[Footnote 1] The OSDBU
director of the Office of the Secretary of Defense is the only director
exempted from the reporting requirement in section 15(k)(3).[Footnote
2]
The Executive Office of the President (EOP) is a group of offices that
provide policy and administrative support to the President. Offices
within EOP include the Council of Economic Advisers, the Council of
Environmental Quality, the National Security Council, and the Office of
Management and Budget. In addition, EOP includes the Office of
Administration (OA), which is responsible for administrative support
for all of EOP's offices.
As requested, we determined (1) whether the reporting relationships for
the OSDBU directors at major federal agencies comply with section
15(k)(3) of the Small Business Act, (2) to whom the OSDBU director at
the Office of the Secretary of Defense has reported since 1988, and (3)
whether section 15(k) of the Small Business Act applies to EOP's OA. As
agreed with your staffs, we will provide you at a later date with an
additional report describing OSDBU duties and functions at the major
federal agencies.
To determine agency compliance with section 15(k)(3), we first
identified the designated OSDBU director at each of the 24 federal
agencies that procured $200 million or more in goods and services in
fiscal year 2001 (see app. I).[Footnote 3] We determined that agencies
were in compliance where the designated OSDBU director both exercised
the OSDBU responsibilities set forth in section 15(k)(4)-(10) of the
Small Business Act, and reported directly to and was responsible only
to the agency head or agency head's deputy. To reach our
determinations, we considered information provided by the designated
directors and documentary evidence. Using a written questionnaire, we
asked each designated director to identify the official(s) to whom he
or she reported during the past year (March 2002 - March 2003) and to
provide information characterizing the reporting relationship, such as
the extent to which small business issues were discussed. In addition,
we reviewed documentary evidence, including: organizational charts,
OSDBU directors' performance appraisals and position descriptions, and
memorandums or reports discussing the agencies' small business programs
that were submitted to the agency head or the deputy head. We did not
review the effectiveness of any agency's OSDBU or small business
programs. To determine the reporting levels of officials to whom the
OSDBU director within the Office of the Secretary of Defense has
reported since 1988, we reviewed documentation from the Secretary's
office and interviewed the appropriate officials. To determine whether
section 15(k) applies to EOP's OA, we analyzed relevant laws,
legislative history, and court cases. A more detailed description of
our scope and methodology is discussed in appendix II. We conducted our
work in Washington, D.C., between October 2002 and July 2003 in
accordance with generally accepted government auditing standards.
Results in Brief:
The reporting relationships for OSDBU directors at 13 of the 24
agencies that we reviewed complied with section 15(k)(3) of the Small
Business Act--that is, the OSDBU director reported directly to and was
responsible only to the agency head or deputy head (see table 1). The
reporting relationships for OSDBU directors at 11 of the 24 agencies
were not in compliance with section 15(k)(3).
Table 1: Summary of Agency Compliance with Section 15(k)(3) of the
Small Business Act:
Agency in compliance (13): Defense Logistics Agency; Department of
Energy; Department of Housing and Urban Development; Department of
Labor; Department of the Air Force; Department of the Army; Department
of the Navy; Department of Transportation; Department of Veterans
Affairs; General Services Administration; National Aeronautics and
Space Administration; Office of Personnel Management; U.S. Agency for
International Development;
Agency not in compliance (11): Department of
Agriculture; Department of Commerce; Department of Education;
Department of Health and Human Services; Department of Justice;
Department of State; Department of the Interior; Department of the
Treasury; Environmental Protection Agency; Federal Emergency
Management Agency; Social Security Administration.
Source: GAO (analysis).
[End of table]
At the 13 complying agencies, the OSDBU directors stated that they
reported directly to and were responsible only to the agency head or
the deputy head. Further, agency documentation generally showed that
relationship: the organizational chart showed a direct organizational
link between the OSDBU and agency head or deputy head, the agency head
or deputy head rated the OSDBU director's performance, the OSDBU
director's position description identified one of the top agency
officials as the director's supervisor, and the OSDBU director's
memorandums or reports on small business contracting were provided to
the agency head or deputy head. At the 11 agencies that were not in
compliance, we found a variety of reporting arrangements. At 4 of the
agencies, the OSDBU directors told us that they reported to a lower
level official than the agency head or deputy head. Also, agency
documents generally indicated that the OSDBUs were not organizationally
linked to the agency head or deputy head and that a lower level
official, such as an assistant secretary or a division director,
evaluated the OSDBU director's performance. At another 4 of the 11
agencies that were not in compliance, we found that the OSDBU directors
were responsible not only to the agency head or the deputy head, but
also were responsible to lower level officials. At these agencies,
documentary evidence indicated that lower level officials had a
supervisory relationship with the OSDBU director. At the remaining 3
noncomplying agencies, we found that the designated OSDBU directors had
delegated their responsibilities to others, generally lower level
officials who did not report to either the agency head or the deputy
head.
Since Congress granted the Office of the Secretary of Defense an
exemption from the section 15(k)(3) reporting requirement in 1988, the
organizational reporting level of the OSDBU director for the Office of
the Secretary of Defense has changed twice--in both cases to lower
levels. From 1989 through 1996, the OSDBU director reported to
officials at the level of Under Secretary of Defense, the level
immediately under the Deputy Secretary of Defense. Since 1996, with the
exception of one year--1999--the OSDBU director has reported to
officials at the level of Deputy Under Secretary of Defense, two
reporting levels below the Deputy Secretary of Defense.
We believe OA is a "Federal agency with procurement powers" subject to
the OSDBU requirements of section 15(k), although no court to date has
directly addressed this issue. OA has procurement powers because of its
authority to contract on behalf of EOP. We believe OA is a "Federal
agency" by virtue of its being an "agency" under the Administrative
Procedure Act (APA), which the Small Business Act adopts by reference.
Several courts have implicitly found that OA is an "agency" under the
APA. In addition, OA has a wide range of statutory and other
significant responsibilities and, therefore, exercises the requisite
"substantial independent authority" that is necessary to constitute an
"agency" under the APA.
We are making recommendations to 10 of the 11 agencies that we found to
be not in compliance with section 15(k)(3) of the Small Business
Act.[Footnote 4] We recommend that the agency heads at these agencies
take steps to ensure that the OSDBU directors are responsible only to
and report directly to the head or deputy head of the agency.
We sent a draft of this report to all 24 agencies for their comments.
All of the agencies that we concluded were not complying with section
15(k)(3) of the Small Business Act provided us with comments.
Generally, they agreed with the report's description of their OSDBU
directors' reporting relationships, but most disagreed with our
conclusion that the reporting relationships did not comply with section
15(k)(3). However, none of the legal arguments that the agencies raised
caused us to revise our conclusions or recommendations. In addition, we
provided a draft of our legal opinion on the applicability of section
15(k) of the Small Business Act to OA. OA declined to comment on the
draft report. It also stated that its declination to comment did not
indicate agreement with our conclusions, citing the court's decision in
Haddon v. Walters, 43F.3d 1488 (D.C. Cir. 1995).
Background:
The U.S. government buys a myriad of goods and services through private
contractors. In fiscal year 2002, the federal government awarded $250.2
billion in contracts. It has been the government's long-standing policy
to maximize procurement opportunities for small business, small
disadvantaged business, and women-owned business. The Small Business
Act has been amended several times to increase small business
participation in the federal procurement marketplace. For example, the
Business Opportunity Development Reform Act of 1988 amended the Small
Business Act to require the President to establish an annual
governmentwide goal of awarding not less than 20 percent of prime
contract dollars to small businesses. The Small Business
Reauthorization Act of 1997 further amended the Small Business Act to
increase the goal to not less than 23 percent. The Small Business
Administration assigns small business prime contract goals to federal
agencies, which include all small
business categories.[Footnote 5] Although the Small Business
Administration is responsible for coordinating with executive branch
agencies to ensure that the federal government meets the mandated goal,
agency heads are responsible for achieving the small business goals
within their agencies.
In 1978, Congress enacted Public Law 95-507, which amended section
15(k) of the Small Business Act, by requiring each federal agency
having procurement powers to establish an OSDBU and the agency head to
appoint a director of the OSDBU. The purpose of the law was to create
an advocate for small and disadvantaged businesses within each federal
agency. A 1978 report by the Senate Select Committee on Small Business
noted that officials who were responsible for advocating small business
participation in federal government procurements often did not hold
high enough positions in the agency to be effective. The law mandates a
direct reporting relationship, whereby the OSDBU director is
responsible only to and reports directly to the agency head or deputy
head. In addition, the law specifies a number of duties and functions
that the OSDBU director is responsible for carrying out. These include
having supervisory authority over the OSDBU's staff; implementing and
executing the functions and duties under sections 8, 15, and 31 of the
Small Business Act; and identifying proposed solicitations that involve
the bundling of contract requirements.[Footnote 6]
Before 1987, the OSDBU director at the Office of the Secretary of
Defense reported to the Deputy Secretary of Defense. In 1987, Congress
created the position of Under Secretary of Defense for Acquisition at
DOD, a position considered to be chief of procurement. In conjunction
with the new position, Congress mandated that the OSDBU director report
to the Under Secretary of Defense for Acquisition. One year later,
Congress passed Public Law 100-656, which gave the Secretary of Defense
the discretion to designate the individual to whom the OSDBU director
would report. Section 15(k)(3) now reads, in relevant part, as follows:
"The management of each such office shall be vested in an officer or
employee of such agency or employee of such agency who shall be
responsible only to, and report directly to, the head of such agency or
to the deputy of such head except that the director for the Office of
the Secretary of Defense shall be responsible only to, and report
directly to, such Secretary or the Secretary's designee.":
Almost Half of the Agencies We Reviewed Were Not Complying with Section
15(k)(3) of the Small Business Act:
While 13 of the 24 agencies we reviewed were in compliance with section
15(k)(3) of the Small Business Act, we found that almost half (or 11)
were not in compliance because the OSDBU director did not directly
report to and was not responsible only to the agency head or deputy
agency head.
The OSDBU Directors Were Reporting to the Agency Head or Deputy Agency
Head at 13 Agencies:
At each of the 13 complying agencies, the OSDBU director stated that he
or she reports only to the agency head or the deputy head for the
purposes of carrying out OSDBU duties and functions. All 13 agencies'
organizational charts showed that the OSDBU was organizationally linked
to the agency's top decision-makers. Other documents also demonstrated
this relationship, as follows:
* At 11 of the 13 agencies (the Defense Logistics Agency, Department of
the Air Force, Department of the Army, Department of Housing and Urban
Development, Department of Labor,[Footnote 7] Department of the Navy,
Department of Veterans Affairs,[Footnote 8] General Services
Administration (GSA), National Aeronautics and Space Administration,
Office of Personnel Management, and U.S. Agency for International
Development), the OSDBU directors' position descriptions designate the
agency head or the deputy head as the supervisor; the OSDBU directors'
performance appraisals were signed by the agency head or the deputy;
and documents showed that the OSDBU directors periodically provided
information regarding the agency's small business programs, such as to
the agency head or deputy.[Footnote 9]
* At 2 agencies (the Departments of Transportation and Energy), the
documents we obtained indicated a direct reporting relationship;
however, we could not obtain the OSDBU directors' performance
appraisals that were signed by the agency head or deputy head for the
following reasons:
* At Transportation, the Secretary of Transportation's Chief of Staff
signed the director's performance appraisal.[Footnote 10] However, the
OSDBU director's position description indicated that the Secretary was
the OSDBU director's supervisor.
* At Energy, the OSDBU director is a Senate-confirmed presidential
appointee. According to the OSDBU director, she does not receive
written performance appraisals.
Eleven Agencies Were Not in Compliance with Section 15(k)(3):
Eleven agencies did not comply with section 15(k)(3) (see table 1). At
these agencies, the OSDBU directors (1) reported to lower level
officials than the agency head or deputy; (2) were not responsible only
to the agency head or deputy head, but also were responsible to a lower
level agency official; or (3) had delegated their OSDBU director
responsibilities to officials who do not report to either the agency
head or the deputy head. We believe these arrangements are contrary to
the intent of the law, which is that the official carrying out the
OSDBU function have direct access to the agency head or deputy head.
At Four Agencies, OSDBU Directors Did Not Directly Report to the Agency
Head or Deputy Head:
At the Departments of the Interior and Justice, the Federal Emergency
Management Agency (FEMA), and the Social Security Administration, the
OSDBU directors did not report to the agency head or deputy head. At
these agencies, the OSDBU director reported to a lower level official
who oversaw the agency's management or finance division.
The Department of the Interior:
The OSDBU director at Interior reported to the Deputy Assistant
Secretary for Budget and Finance for administrative matters and to the
Assistant Secretary for Policy, Management, and Budget and the Chief
Financial Officer (CFO) for policy matters (see fig. 1). On the basis
of Interior's organizational chart, the OSDBU is directly linked to the
Assistant Secretary for Policy, Management, and Budget and the CFO. The
OSDBU director told us that he met with the Assistant Secretary for
Policy, Management, and Budget and the CFO or the Deputy Assistant
Secretary on small business contracting issues on a regular basis and
on a key issue basis. Both the performance appraisal and the position
description confirmed that the Assistant Secretary for Policy,
Management, and Budget and the CFO was the OSDBU director's reporting
official.
Figure 1: The OSDBU Director's Reporting Relationship at the Department
of the Interior:
[See PDF for image]
[End of figure]
The Department of Justice:
As shown in figure 2, the OSDBU director at Justice reported to the
Deputy Assistant Attorney General for Policy, Management, and Planning.
According to Justice's organizational chart, the OSDBU was located
within the Justice Management Division, with the OSDBU director under
the supervision of the Deputy Assistant Attorney General Policy,
Management, and Planning. The OSDBU director told us that he did not
report to the Attorney General or Deputy Attorney General (the agency
head and deputy head, respectively) on any matters from March 2002 to
2003, the time frame covered by our study. The Deputy Assistant
Attorney General for Law and Policy[Footnote 11] evaluated the
director's performance, and the Assistant Attorney General for
Administration, who headed the Justice Management Division, reviewed
the director's ratings. The reporting relationship between the OSDBU
director and the Deputy Assistant Attorney General has been long-
standing. The OSDBU director's position description, dated 1981,
identified the director's supervisor at the Deputy Assistant Attorney
General level.
Figure 2: The OSDBU Director's Reporting Relationship at the Department
of Justice:
[See PDF for image]
[End of figure]
The Federal Emergency Management Agency:
Before it was absorbed into the Department of Homeland Security, FEMA
was not in compliance with section 15(k)(3). The OSDBU director
position had been vacant for 2 years, and a FEMA employee in the
Financial and Acquisition Management Division carried out the OSDBU
functions on a part-time basis. This employee told us that she did not
report directly to FEMA's top decision-makers. FEMA became part of the
Department of Homeland Security in March 2003 and ceased to be an
independent agency. According to the Department of Homeland Security's
organizational chart, the agency has established an OSDBU that is
organizationally linked to the Secretary.
The Social Security Administration:
Because the OSDBU director reports to neither the Social Security
Administration's Commissioner nor the Deputy Commissioner, we concluded
that the Social Security Administration is not complying with section
15(k)(3). The Social Security Administration's OSDBU director reported
to the Deputy Commissioner, Office of Finance, Assessment, and
Management, who is one of a number of deputy commissioners managing
various programs and operations (see fig. 3). The OSDBU director told
us that he reports to the Deputy Commissioner, Office of Finance,
Assessment, and Management. He does not report to the Commissioner or
the Deputy Commissioner of the Social Security Administration. Both the
OSDBU director's position description and performance appraisals were
signed by the Deputy Commissioner, Office of Finance, Assessment, and
Management.
Officials at the Social Security Administration advised us that, on the
basis of a 1999 opinion of its Office of General Counsel, the agency is
in compliance with section 15(k)(3). The primary argument underpinning
the opinion is that the Deputy Commissioner of Finance, Assessment, and
Management reports to the agency head, and that therefore the reporting
relationship of the OSDBU director to the Deputy Commissioner of
Finance, Assessment, and Management is appropriate. The opinion stated
that the Small Business Act does not define what is meant by the term
"deputy." At the Social Security Administration, each of the eight
Deputy Commissioners, including the Deputy Commissioner of Finance,
Assessment, and Management, as well as the General Counsel and the
Chief Actuary, report directly to the Commissioner. According to the
Social Security Administration's General Counsel Office, each of them
could be considered to have the status of a "deputy" to the
Commissioner, unless more is required by a specific statute or
regulation. Thus, each of these individuals could be considered to have
the status of deputy for purposes of section 15(k)(3).
We disagree with the Social Security Administration's legal analysis of
section 15(k)(3) and conclude that the Social Security Administration
is not complying with the provision. Section 15(k)(3) mandates that the
OSDBU director report to the agency head or "the deputy of such head,"
that is, the second-in-command. The legislative history of section
15(k)(3) supports this analysis. The conference report to the 1978
legislation, establishing the OSDBU, stated that the office would be
"directed by an employee of that agency, who would report to the head
of the agency or his deputy (i.e., the second ranking person in that
agency)."[Footnote 12] [Emphasis supplied.] Moreover, the Senate report
to the legislation stated, "these directors would report directly to
the agency head or an official not less than one level of
responsibility lower than the agency head." [Footnote 13] [Emphasis
supplied.]
The Social Security Administration has a Deputy Commissioner who has
been designated as the second-in-command. The Social Security
Administration's organizational manual states that the Deputy
Commissioner of Social Security is to serve as the Acting Commissioner
in the Commissioner's absence. The manual, in describing the functions
of the Commissioner's Office, also states that both the Commissioner
and the Deputy Commissioner of Social Security provide executive
leadership to the Social Security Administration and exercise general
supervision over its major components. Finally, according to the
manual, the Deputy Commissioner of Social Security assists the
Commissioner in carrying out his or her responsibilities and performs
other duties as the Commissioner may prescribe.
Figure 3: The OSDBU Director's Reporting Relationship at the Social
Security Administration:
[See PDF for image]
[End of figure]
At Another Four Agencies, OSDBU Directors Are Not Responsible Only to
the Agency Head or Deputy Head:
We found the Departments of Commerce, Education, and Health and Human
Services (HHS) and the Environmental Protection Agency (EPA) not to be
in compliance with section 15(k)(3) because the OSDBU directors were
not responsible only to the agency head and the deputy head. Although
evidence indicated that the OSDBU directors at these agencies reported
at times to the agency head or deputy, the position descriptions and
the performance evaluations identified lower level agency officials as
the OSDBU directors' supervisors.
The Department of Commerce:
The OSDBU director at Commerce told us that for administrative matters,
such as budget, personnel, and space, he reported to a CFO/Assistant
Secretary for Administration, but reported to the Deputy Secretary for
small business policy matters. However, we found that Commerce's
organizational chart directly linked the OSDBU to the CFO/Assistant
Secretary for Administration, which is one level below the Deputy
Secretary. Further, the performance appraisals showed that the CFO/
Assistant Secretary for Administration evaluated the OSDBU director,
while the position description did not identify the director's
supervisor. Also, according to a Commerce order that describes the
functions of the OSDBU, the director is to appeal to the CFO/Assistant
Secretary for Administration when internal disputes arise or when the
director determines that the procuring or program area is not providing
adequate opportunity to small and disadvantaged businesses (see fig.
4).
Figure 4: The OSDBU Director's Reporting Relationship at the Department
of Commerce:
[See PDF for image]
[End of figure]
The Department of Education:
The OSDBU director at Education was responsible not only to the
Secretary or Deputy Secretary, but she also was responsible to the
Deputy Secretary's Chief of Staff. The OSDBU director told us that she
reported to the Deputy Secretary, and that her office is located within
the Deputy Secretary's office. She told us that she met with the Deputy
Secretary 3 to 4 times from March 2002 to March 2003. The Deputy
Secretary's Chief of Staff told us that the OSDBU director can meet
with the Deputy Secretary whenever she believes it necessary, even
though the Deputy Secretary assigned the administrative aspects
pertaining to the OSDBU director to the Chief of Staff. However,
documentary evidence indicated that the OSDBU director was not always
directly reporting to the Deputy Secretary and often went through the
Deputy Secretary's Chief of Staff (see fig. 5). OSDBU employees,
including the OSDBU director, told us that all of their reports and
memorandums were sent through the Chief of Staff before going to the
Deputy Secretary. Moreover, the Chief of Staff signed the OSDBU
director's performance appraisal for the last 2 years. According to
Education officials, evaluating the performance of the OSDBU director
is part of the Chief of Staff's responsibilities.
Figure 5: The OSDBU Director's Reporting Relationship at the Department
of Education:
[See PDF for image]
[End of figure]
The Environmental Protection Agency:
The OSDBU director at EPA is not responsible only to the Administrator
or the Deputy Administrator (see fig. 6). The OSDBU director told us
that she met with the Administrator approximately 4 times from March
2002 to March 2003 to discuss small business contracting issues. Also,
her position description, last updated in 1984, identified her
supervisor as the Deputy Administrator, and EPA's organizational chart
indicated that the OSDBU director was organizationally linked to the
Administrator. However, the OSDBU director told us that she reported to
the Deputy Chief of Staff for the day-to-day operations and all matters
related to small business programs. Also, the performance appraisal
indicated that the Administrator's Deputy Chief of Staff evaluated the
OSDBU director's performance.
Figure 6: The OSDBU Director's Reporting Relationship at the
Environmental Protection Agency:
[See PDF for image]
[End of figure]
The Department of Health and Human Services:
The OSDBU director at HHS informed us that she reported to the Deputy
Secretary on high-level policy issues, such as small business
procurement, goal setting and achievement, contract bundling, and
overall support for the small business program. However, she advised us
that she coordinated with the Acting Deputy Assistant Secretary for
Grants and Acquisition Management for at least some small business
issues--what she categorized as the day-to-day issues affecting the
small business community, as well as budget and personnel issues (see
fig. 7). The HHS organization chart linked the OSDBU with the Assistant
Secretary for Administration and Management. Further, the OSDBU
director's position description and performance appraisal showed that a
supervisory relationship existed between the Deputy Assistant Secretary
for Grants and Acquisition Management and the OSDBU director. The only
evidence we found that the OSDBU director had reported to the Deputy
Secretary on small business issues was one statement from the OSDBU
director--that is, between March 2002 and March 2003, she met with the
Deputy Secretary once to discuss small business contracting issues. The
agency did not provide us with any documentary information that
indicated the OSDBU director reports to the Deputy Secretary on any
matters.
Since March 2003, HHS has reorganized some of its components. As of
June 19, 2003, the OSDBU director is located in the Office of the
Director for Acquisition Management and Policy, which is located within
the Office of the Assistant Secretary for Administration and
Management.[Footnote 14] The notice in the Federal Register announcing
HHS's reorganization stated that the OSDBU director reports directly to
the Deputy Secretary, with the day-to-day operational support provided
by the Office of Acquisition Management and Policy. However, as
discussed in the agency comments section of this report, it is unclear
whether the Deputy Secretary is the only official to whom the OSDBU
director is responsible.
Figure 7: The OSDBU Director's Reporting Relationship at the Department
of Health and Human Services before March 2003:
[See PDF for image]
Note: This figure represents the reporting relationship during the
period covered by our review (March 2002 to March 2003).
[End of figure]
Agriculture, the Treasury, and State Were Not in Compliance Because the
OSDBU Directors Delegated Their OSDBU Responsibilities to Lower Level
Officials:
We found that the Departments of Agriculture, the Treasury, and State
were not complying with section 15(k)(3) because their designated OSDBU
directors delegated all of their OSDBU director responsibilities to
officials who do not directly report to either the Secretaries or
Deputy Secretaries. At each agency, an Assistant Secretary who manages
the agency's administrative functions was designated as the statutory
OSDBU director. The Assistant Secretaries then delegated nearly all of
their OSDBU responsibilities to lower ranking officials, who reported
directly to the Assistant Secretaries. The lower ranking officials thus
became the de facto OSDBU directors. These arrangements, whereby an
Assistant Secretary for management or administration has delegated
nearly all of the responsibilities of the OSDBU director to a lower
level official, maintaining only the title of OSDBU director, defeats
the purpose of section 15(k)(3). Congress assigned to the OSDBU
director specific responsibilities to ensure that small and
disadvantaged businesses received a fair portion of federal
procurements. To ensure that these responsibilities were effectively
implemented, Congress also mandated that the OSDBU director--that is,
the person actually carrying out the responsibilities--have immediate
access and be responsible only to the agency head or deputy head.
Consistent with the explicitly specified reporting relationship, the
legislative history of the reporting requirements reveals congressional
frustration with a system that kept those whose principal job was the
promotion of procurement opportunities for small and disadvantaged
businesses in the lower echelons of federal agencies. As the Senate
Select Committee on Small Business reported:
"[Many] small business officials—are located in the lower echelons of
the bureaucracy and, therefore, are unable to advocate or effectively
assist in the procurement of contracts for small businesses. The
committee believes that the small business procurement officers must
have direct access to top level agency policymakers to improve their
effectiveness as small business advocates."[Footnote 15]
The reporting relationships at Agriculture, State, and Treasury, in
which the official responsible for the OSDBU function has no direct
access to the agency head or deputy head, is precisely the structure
Congress intended to avoid.
The Department of Agriculture:
Agriculture designated the Assistant Secretary for Administration by
the additional title of Director of Small and Disadvantaged Business
Utilization, the statutory title mandated by section 15(k) for agency
OSDBU directors. The Assistant Secretary reported to the Secretary and
the Deputy Secretary of Agriculture[Footnote 16] (see fig. 8). On the
basis of Agriculture's organizational chart, the Assistant Secretary
was linked to the Secretary and the Deputy Secretary. However, the
Assistant Secretary delegated nearly 100 percent of his OSDBU
responsibilities to a lower level official whose title is very similar-
-that is, Director, Office of Small and Disadvantaged Business
Utilization (hereafter Delegated Director)--and who reported to the
Assistant Secretary.
Figure 8: The OSDBU Director's Reporting Relationship at the Department
of Agriculture:
[See PDF for image]
[End of figure]
The Assistant Secretary for Administration told us that he, along with
an Associate Assistant Secretary and the Delegated Director, were
responsible for the day-to-day implementation and execution of the
functions and duties of the OSDBU. However, we found little evidence
that the Assistant Secretary handled the day-to-day functions of the
OSDBU. He told us that he spent 5 percent of his time on small business
contracting issues, while spending the rest of his time on his other
duties and responsibilities.[Footnote 17] On the basis of documents
that the agency provided, the only task that the Assistant Secretary
appeared to implement in terms of small business contracting was
providing information to the Secretary. He advised us that he met at
least weekly with the Secretary, and that small business contracting
was one of the many issues discussed at these meetings. For these
weekly meetings, he prepared reports on various administrative matters.
We reviewed 15 of these weekly reports dated from January 28, 2003,
through April 29, 2003, and found that 11 of them included some
information on Agriculture's small business issues.
Other evidence showed that the Delegated Director carried out the day-
to-day implementation of Agriculture's OSDBU. The Delegated Director
told us that he handled the day-to-day duties and functions of
Agriculture's OSDBU, and that he spent 100 percent of his time on OSDBU
duties and functions. Moreover, his position description indicated he
was the official responsible for carrying out the duties and functions
prescribed under section 15(k). The position description stated, among
other things, that the Delegated Director is responsible for:
* establishing short-and long-range program objectives, time schedules,
and courses of action for the accomplishment of small business goals;
* formulating, recommending, and implementing broad policies and
procedures, which provide the structural framework for all OSDBU
functions;
* keeping abreast of all OSDBU activities and initiating any corrective
actions deemed necessary;
* developing, presenting, and justifying to higher level authorities
recommendations for modifications of OSDBU operations, policies, and
procedures to enhance the Office's effectiveness toward maximum
satisfaction of functional requirements;
* representing Agriculture at conferences and meetings with Members of
Congress and their key staff members and representatives of the Small
Business Administration, the Office of Management and Budget, and other
Executive departments; and:
* planning, initiating, directing, and coordinating a comprehensive
evaluation system for review and analysis of budgets, program
developments, progress, and performance.
The Delegated Director told us that he did not report to the Secretary
or Deputy Secretary for any matters and his performance appraisals
showed that the Assistant Secretary evaluated his performance.
The Department of the Treasury:
In December 2002, Treasury appointed the Acting Assistant Secretary for
Management as Treasury's "Designated OSDBU Director." According to
Treasury's Small Business Program Handbook, the Assistant Secretary for
Management delegated the responsibility for the overall management of
Treasury's small business programs to the Director of the Office of
Small Business Development--an official who did not directly report to
either the Secretary or the Deputy Secretary. We found little evidence
that the Acting Assistant Secretary was involved with OSDBU functions
or duties during the period covered by our review. She told us that she
spent about 5 percent of her time on small business contracting issues
and acknowledged that she was not responsible for the day-to-day
implementation of OSDBU functions and duties. On the basis of
interviews with Treasury officials, it appeared that her only
responsibility in terms of small business contracting was to provide
information to the Secretary or Deputy Secretary on Treasury's small
business programs. Further, Treasury could not provide us with any
documentary evidence that information related to the OSDBU was provided
to the Secretary or the Deputy Secretary during the time frame covered
by our study. The Acting Assistant Secretary acknowledged that from
December 2002 to March 2003, she never met formally with the Secretary
or Deputy Secretary to discuss small business contracting issues
primarily because she had other Treasury matters that needed her
attention.[Footnote 18]
Evidence from Treasury showed that the Director of the Office of Small
Business Development carried out the day-to-day responsibilities under
section 15(k). The Director of the Office of Small Business Development
told us that he spent 100 percent of his time on OSDBU duties and
functions from March 2002 to March 2003. On the basis of the position
description, the Office of Small Business Development director's duties
and responsibilities, among other things, are:
* planning, developing, issuing, and providing overall direction for
policies and programs governing Treasury procurement and financial
assistance action in accordance with the Small Business Act;
* directing Treasury's annual goal setting process;
* working with Treasury bureau heads to establish individual bureau
goals, and developing and recommending for approval of the Assistant
Secretary (Management) the appropriate Department goals for each of the
small business categories; and:
* monitoring Treasury's small business goal accomplishments during the
fiscal year.
The Director of the Office of the Small Business Development told us
that he reported to the Acting Deputy Chief Financial Officer, who, in
turn, reported to the Acting Assistant Secretary (see fig. 9). Treasury
documents confirmed this statement. The Office of Small Business
Development director's most recent performance appraisal showed that
the Acting Deputy Chief Financial Officer rated the director on small
business goals and the position description identified the Deputy
Assistant Secretary (Management Operations) as the supervisor.
Figure 9: The OSDBU Director's Reporting Relationship at the Department
of the Treasury:
[See PDF for image]
[End of figure]
The Department of State:
Similar to Agriculture and Treasury, State was not in compliance with
the reporting requirement of section 15(k) because its de facto OSDBU
director--the Operations Director for the Office of the Small and
Disadvantaged Business Utilization--does not report to the Secretary or
Deputy Secretary. The State Department designated the Assistant
Secretary for Administration as its OSDBU director. The Assistant
Secretary, who reports to the Under Secretary for Management, delegated
his OSDBU responsibilities to the "Operations Director," who in turn
reports to the Assistant Secretary (see fig. 10). The Assistant
Secretary told us that he spends 5 percent of his time on OSDBU
functions. However, we found little evidence that the Assistant
Secretary handles any of the day-to-day functions of the OSDBU. On the
basis of agency documents, the only task that the Assistant Secretary
appeared to implement in terms of small business contracting was
providing information to the Under Secretary for Management.
Figure 10: The OSDBU Director's Reporting Relationship at the
Department of State:
[See PDF for image]
[End of figure]
The performance appraisal of the Assistant Secretary for
Administration, the "designated OSDBU director," indicated that he was
not evaluated on State's small business programs. However, the
Operations Director's performance appraisal indicated that she was
responsible for developing and implementing the goals and objectives of
the OSDBU. In addition, she was responsible for, among other things,
* delegating and overseeing the duties to screen all new domestic
contract actions over $100,000,
* reviewing subcontracting plans from those large prime contractors
required to submit plans,
* helping small businesses that request assistance with late payments,
and:
* helping small businesses in their efforts to do business with State.
It should also be noted that we found no evidence that the Assistant
Secretary reported to the Secretary or the Deputy Secretary. The
Assistant Secretary informed us that he reported to the Under Secretary
for Management for all matters related to small business contracting,
and agency documents confirmed his statement. The Under Secretary
signed his performance appraisal. In addition, the Assistant Secretary
prepared weekly reports on the agency's administrative matters, which
include small business contracting. We reviewed several of the weekly
reports and found that they were addressed to the Under Secretary for
Management.
Reporting Level of the OSDBU Director at the Office of the Secretary of
Defense Has Changed Twice:
Since Congress granted the Office of the Secretary of Defense an
exemption from the 15 U.S.C. § 644(k)(3) reporting requirement in 1988,
the organizational reporting level of the OSDBU director has changed
twice, in both cases to lower levels. From 1989 until 1996, the
director reported to officials on the Under Secretary of Defense level,
immediately below the Deputy Secretary of Defense. Since then, except
in 1999, the OSDBU director has reported to officials on the Deputy
Under Secretary of Defense level, two reporting levels below the Deputy
Secretary of Defense.
According to DOD Directive[Footnote 19] 5134.4, dated March 17, 1989,
the Office of the Secretary of Defense's OSDBU director reported to the
Under Secretary of Defense for Acquisition, a subordinate of the Deputy
Secretary of Defense. The Under Secretary of Defense for Acquisition
was the senior acquisition executive for DOD and advised the Secretary
and Deputy Secretary of Defense on all matters relating to DOD's
acquisition system. In 1994, the title of Under Secretary of Defense
for Acquisition was changed to the Under Secretary of Defense for
Acquisition and Technology.
However, the title change did not affect the reporting level of the
OSDBU director who continued reporting to the Under Secretary of
Defense for Acquisition and Technology.[Footnote 20]
In 1996, another DOD directive[Footnote 21] changed the reporting
relationship of the OSDBU director from the Under Secretary of Defense
for Acquisition and Technology to the Deputy Under Secretary of Defense
for International and Commercial Programs, two reporting levels below
the Deputy Secretary. This arrangement lasted until 1999, when for 1
year, the OSDBU director again reported[Footnote 22] to the Under
Secretary of Defense for Acquisition and Technology. In 2000, the
reporting relationship switched back to the Deputy Under Secretary
level when the OSDBU director began reporting[Footnote 23] to the
Deputy Under Secretary of Defense for Acquisition and Technology, two
levels below the Deputy Secretary. This reporting relationship remains
in effect today (see fig. 11).
Figure 11: Timeline of the OSDBU Director's Reporting Relationship at
the Office of the Secretary of Defense:
[See PDF for image]
Note: Shading indicates time period of each reporting relationship.
[End of figure]
OA Likely Is Subject to the OSDBU Requirements of Section 15(k) of the
Small Business Act:
Although no court to date has directly addressed this issue, we believe
OA is subject to the OSDBU requirements of section 15(k) of the Small
Business Act, which applies to any "Federal agency with procurement
powers." There is no dispute that OA has procurement powers because it
serves as the central procurement office for the significant majority
of EOP's procurements of goods and services. We believe that it is a
"Federal agency" by virtue of its being an "agency" under the APA,
which the Small Business Act adopts by reference, and it is an APA
"agency" because it exercises the requisite "substantial independent
authority." Several courts have implicitly found that OA is an "agency"
subject to the APA. In addition, OA has a wide range of statutory and
other significant responsibilities and, therefore, exercises the
requisite "substantial independent authority" necessary to constitute
an "agency" under the APA. See appendix III for our detailed legal
analysis of the applicability of section 15(k) to EOP's OA.
OA Serves as the Central Procurement Office for the Significant
Majority of EOP's Procurements:
OA has authority to contract on behalf of EOP and thus it clearly has
procurement powers. OA officials told us that, historically, OA has
served as a central procurement office for a significant portion of
EOP, and that except for procurements for the EOP Office of National
Drug Control Policy's antidrug campaign, OA manages the significant
majority of EOP's procurements. OA officials also told us that OA
currently has an OSDBU, headed by a director who also serves as Deputy
Director of OA; in both capacities, this official reports to the
Director of OA. According to these officials, the OA OSDBU works with
the Small Business Administration to ensure that an appropriate
procurement program is in place for small business, and much of EOP's
small business procurement activity is concentrated within OA.
OA Has Substantial Independent Authority and Likely Constitutes a
Federal Agency Under the Small Business Act:
The Small Business Act defines the term "Federal agency," with
exclusions not relevant here, as "having the meaning given the term
'agency' by Section 551(1) of title 5" of the APA. Section 551(1) of
the APA defines "agency" in relevant part as "each authority of the
Government of the United States, whether or not it is within or subject
to review by another agency." Several courts have implicitly found that
OA is an "agency" subject to the APA, and therefore is a "Federal
agency" subject to the Small Business Act. In addition, OA exercises
the type of "substantial independent authority" that courts have
declared constitutes an "agency" under the APA. Finally, OA satisfies
the broader Freedom of Information Act "agency" standards that courts
have developed to address entities specifically within EOP.
OA exercises "substantial independent authority" on the basis of its
wide range of significant responsibilities and functions performed
across EOP. These responsibilities include (1) administration of
significant statutory requirements under the Federal Records Act and
the Presidential Records Act, similar to the functions performed by the
National Archives and Records Administration; (2) serving as EOP's
central procurement office with the authority to contract on behalf of
EOP (of particular relevance to the OSDBU program); (3) oversight of
EOP's annual budget submission and testimony on EOP's behalf at
appropriations hearings; (4) provision of financial services, including
budget formulation, execution and analysis, centralized accounting
support, coordinated internal control reporting, and financial records
maintenance; (5) provision of wide-ranging legal support services; (6)
facilities management services similar to those performed by agencies
such as GSA; and (7) human resources management services similar to
those performed by agencies such as the Office of Personnel Management.
We believe that these responsibilities constitute "substantial
independent authority" as the courts have interpreted that term.
Conclusions:
Our review of 24 federal agencies showed that nearly half were not in
compliance with section 15(k)(3) of the Small Business Act, a provision
enacted by Congress to ensure that small business advocates within
federal agencies have access to the highest agency levels. One of these
noncomplying agencies--the Federal Emergency Management Agency--has
been subsumed into the Department of Homeland Security, which has
established an Office of Small and Disadvantaged Business Utilization
with a director reporting to the highest agency levels. The remaining
10 agencies--the Departments of Agriculture, Commerce, Education,
Health and Human Services, Justice, State, the Interior, and the
Treasury; the Environmental Protection Agency; and the Social Security
Administration--are not in compliance with section 15(k)(3). Because
the OSDBU directors at these agencies do not have a direct reporting
relationship with their agencies' head or deputy, the reporting
relationships potentially limit their role as an advocate for small and
disadvantaged businesses.
Recommendations:
We recommend that the following agency heads take steps as necessary to
comply with the requirement in section 15(k)(3) of the Small Business
Act that the Office of Small and Disadvantaged Business Utilization
director be responsible only to and report directly to the head or
deputy head of the agency:
* The Attorney General:
* The Commissioner of the Social Security Administration:
* The EPA Administrator:
* The Secretary of Agriculture:
* The Secretary of Commerce:
* The Secretary of Education:
* The Secretary of Health and Human Services:
* The Secretary of State:
* The Secretary of the Interior:
* The Secretary of the Treasury:
Agency Comments and Our Evaluation:
We sent drafts of this report to all 24 agencies for their comments. In
addition, we sent to OA a draft of our legal opinion, appendix III of
this report, on the applicability of section 15(k) of the Small
Business Act. Of the agencies that we concluded were complying with
section 15(k)(3), we received written comments only from the U.S.
Agency for International Development, which concurred. Among the
agencies that we concluded were not complying with section 15(k)(3), we
received written comments from the Departments of Agriculture,
Commerce, Education, Health and Human Services, the Interior, Justice,
State, and the Treasury and the Social Security Administration. The
written comments are reproduced in appendixes IV through XIII. EPA also
provided us with E-mail comments on the draft, which we did not
reproduce. We also received a written response from OA, which is
reprinted in appendix XIV.
Generally, the commenting agencies agreed with the report's description
of their OSDBU directors' reporting relationships. However, most of the
agencies disagreed with our conclusion that the reporting relationships
did not comply with section 15(k)(3) of the Small Business Act. None of
the legal arguments that the agencies raised caused us to revise our
conclusions or recommendations. The agencies' specific comments and our
responses are summarized below.
* Agriculture agreed that the Assistant Secretary for Administration,
as the designated OSDBU director (Designated Director), had delegated
to the Director, Office of Small and Disadvantaged Business
Utilization, the responsibilities of the OSDBU. However, Agriculture
pointed out that section 15(k) does not contain an explicit prohibition
on delegating this authority. It cites the case of Fleming v. Mohawk
Wrecking & Lumber Co., 331 U.S. 111, 121 (1947), for the proposition
that in the event that there is no statutory prohibition on the
delegation, one cannot be presumed. We acknowledge Agriculture's
statement. However, the lack of an express prohibition on delegation
does not necessarily mean that delegation of authority is thereby
permitted. The Fleming case recognizes that the delegation of authority
may be withheld by implication, and we believe section 15(k)(3) does
exactly that. Section 15(k) assigns specific duties to the OSDBU
director. As pointed out in the report, to ensure that the OSDBU
responsibilities are effectively implemented, the statute mandates that
the OSDBU director (i.e., the person actually carrying out the
responsibilities) have immediate access, and only be responsible, to
the agency head or deputy. The legislative history reveals that the
reason for this requirement is that Congress believed that too often,
agency officials responsible for promoting procurements for small and
disadvantaged businesses were relegated to positions too far down the
chain of command to be effective. The reporting requirement of section
15(k)(3) was intended to remedy that situation. Agriculture's reporting
arrangement frustrates the purpose of the law. Agriculture also argues
that section 15(k) does not require that the designated director
personally perform all of the specific duties it outlines. We
acknowledge that at some agencies, the OSDBU director may have a staff
that carries out many of the duties listed under section 15(k).
However, there is a difference between, on the one hand, having staff
carry out the duties while retaining responsibility for the duties and,
on the other, delegating responsibility for carrying out those duties
to a lower official.
* Commerce stated that they believe its current OSDBU director
reporting structure--whereby the OSDBU director reports directly to the
Deputy Secretary on all legislative and policy issues and to the CFO/
Assistant Secretary for Administration on administrative matters such
as personnel and budget--complied with the law. However, Commerce did
not include any analysis or information demonstrating how the above
mentioned reporting relationship fulfills the requirements of section
15(k)(3). Moreover, the comments did not respond to any of the evidence
we presented in the report showing that the OSDBU director reported to
the CFO/Assistant Secretary. We continue to believe Commerce is not in
compliance.
* Education disagreed with our conclusion that the OSDBU director is at
least partly responsible to the Deputy Secretary's Chief of Staff.
Their comments state that the OSDBU director reports to the Deputy
Secretary, who is the deputy agency head, and cite (1) the director's
position description and the agency's organizational chart, as evidence
that the position of the OSDBU director is in the Office of the Deputy
Secretary and (2) the functional statement of the Office of the Deputy
Secretary, which states that the OSDBU director reports to the Deputy
Secretary. Education disagreed with other factors that we used to
assess compliance, such as the level of the official to whom the OSDBU
director submits reports or who signs the director's performance
appraisal--in this case, the Deputy Secretary's Chief of Staff.
According to the comments, these factors are operating procedures
reflecting the Deputy Secretary's managerial preferences and should not
lead to a conclusion that the OSDBU director is not reporting to the
Deputy Secretary. However, we continue to believe that Education is not
in compliance with section 15(k)(3) because the OSDBU director is
responsible not only to the Deputy Secretary, but also to the Deputy
Secretary's Chief of Staff. Education's comments did not refute the
factual information presented in the draft report. Further, Education's
OSDBU staff told us that information on small business programs was
submitted to the Chief of Staff before going to the Deputy Secretary.
Education did not provide any evidence that the OSDBU director directly
provided information on small business programs to the Deputy
Secretary. The OSDBU director told us she was not sure what the Chief
of Staff did with the information after she submitted it.
* According to the OSDBU director, EPA generally agreed with the
report's findings, conclusions, and recommendations and told us that
EPA would take action to comply with section 15(k)(3). According to the
staff member, the OSDBU director will report to the Deputy
Administrator and will meet regularly with the Deputy Administrator to
discuss the overall program and the agency's performance.
* HHS stated that it believes it is in compliance with section
15(k)(3). However, our draft report prompted HHS to clarify the
reporting relationship of the OSDBU director and the Deputy Secretary.
Specifically, HHS stated that the OSDBU director will report to the HHS
Deputy Secretary on all policy matters and significant day-to-day
issues affecting the OSDBU and will arrange for monthly meetings with
the Deputy Secretary and/or prepare a monthly report for the Deputy
Secretary on major issues facing the OSDBU. In addition, the Deputy
Secretary will serve as the reviewing official for the OSDBU director's
performance evaluations. We agree that by taking these actions, HHS is
moving toward compliance with section 15(k)(3). However, the comment
letter is not clear regarding the extent to which the OSDBU director
will be reporting to the Assistant Secretary for Administration and
Management's Office of Acquisition Management and Policy or others. The
comments mentioned that the OSDBU director will report to the Deputy
Secretary on certain--but not all--matters. In addition, the comments
stated that the OSDBU director will continue to receive operational
support from the Office of Acquisition Management and Policy but did
not describe what areas were covered under operational support. Because
we could not conclude on the basis of the comments that the OSDBU
director would be responsible only to the Deputy Secretary, we did not
revise the recommendation for HHS.
* Interior agreed that the OSDBU director reports to the Assistant
Secretary for Policy, Management, and Budget; rather, its comment
letter stated that this reporting relationship has worked for the
department as evidenced by its successful small business program.
However, Interior stated that we mischaracterized the OSDBU director's
reporting relationship. According to Interior's letter, the OSDBU
director does not report to a lower level official within the
department, but reports to the "the agency head" as defined in Subpart
2.101 of the Federal Acquisition Regulations (FAR). The letter added
that the Assistant Secretary for Policy, Management, and Budget is the
agency head for acquisition matters, in accordance with the FAR. In our
draft report, we used the term "lower level official" to distinguish
the Assistant Secretary from the two officials--the agency head or
deputy agency head--that section 15(k)(3) designates as the permissible
officials to whom an agency's OSDBU director may report. Interior's
designation of the Assistant Secretary as its "agency head" for
procurement powers does not mean that the person thereby becomes its
agency head for purposes of section 15(k)(3).
* Justice acknowledged that its OSDBU resides within the Justice
Management Division. But Justice also said that the OSDBU's placement
in the division is for administrative purposes, and that the OSDBU
director reports to the Deputy Attorney General on matters of substance
requiring such attention. Justice's letter stated that the Office of
the Deputy Attorney General fully supports the objectives of the OSDBU
and has met with the director to discuss the office's work. According
to a Justice official, the OSDBU director met with a representative of
the Office of the Deputy Attorney General in May 2003. As our draft
report stated, the OSDBU director told us that he did not report to the
agency head or deputy head on any matters from March 2002 to March
2003, the time frame covered by our study. Also, agency documentation
did not show that the OSDBU director reported to the Deputy Attorney
General in any manner. Furthermore, the May 2003 meeting does not
provide any additional evidence on compliance, since the OSDBU director
met with a representative of the office, not the Deputy Attorney
General. Therefore, we did not revise our conclusion or recommendation.
* State wrote that it would not comment on our conclusions, since
neither Justice nor the President's counsel has provided guidance on
the matter. Most of State's comments focused on the effectiveness of
its small business programs, including contracting awarded to 8(a)
firms and to firms located in HUBZones. State's letter stated that as a
practical matter, the Department of State believed that the
organizational placement of its OSDBU was highly effective, and that if
the organization was reorganized to ensure that the OSDBU director
reported directly to the Secretary or the Deputy Secretary of State,
the OSDBU director would be less effective in securing contracts for
small and disadvantaged businesses. State's letter stated that given
the broad range of urgent issues upon which the Secretary and the
Deputy Secretary of State must focus, the OSDBU director would receive
much less attention than the director enjoys in their present
organizational location.
* The Social Security Administration disagreed with our conclusion that
because its OSDBU director reported to the Deputy Commissioner of
Finance, Assessment, and Management, the agency was not in compliance
with section 15(k)(3). As it had previously indicated to us, the Social
Security Administration again noted that its Deputy Commissioner of
Finance, Assessment, and Management reported directly to the
Commissioner, and that the Deputy Commissioner of Finance, Assessment,
and Management was considered to have the status of "deputy" to the
Commissioner. The Social Security Administration did not offer us any
new information that would affect our overall conclusions and
recommendation. We acknowledge that the Deputy Commissioner of Finance,
Assessment, and Management reports directly to the Commissioner and is
responsible for its programs and mission. However, as our draft report
stated, this official is not second in command. The legislative history
of section 15(k)(3) shows that Congress intended the deputy referred to
in section 15(k)(3) to be the second ranking person in that agency. In
the Social Security Administration, the second ranking person is the
Deputy Commissioner. As our draft report noted, the Social Security
Administration's organization manual states that the Deputy
Commissioner of the Social Security Administration assists the
Commissioner in carrying out his or her responsibilities and performs
other duties as the Commissioner may prescribe. Furthermore, a Social
Security Administration press release dated March 13, 2002, announcing
the swearing-in of the Deputy Commissioner, referred to the Deputy
Commissioner as the principal Deputy Commissioner.
* Like Agriculture, Treasury disagreed that section 15(k)(3) does not
allow the delegation of OSDBU responsibilities to lower level
officials. Treasury's letter stated that the statutory language or the
legislative history does not suggest that an OSDBU director cannot
delegate some of the OSDBU authority. The letter reiterated that the
department's OSDBU director remained responsible for the OSDBU
performance, whether the director personally performed the functions or
delegated them. However, as previously discussed, we believe that
section 15(k)(3) has an implied prohibition against delegating the
OSDBU director's authority. Therefore, we continue to believe Treasury
is not in compliance.
Agriculture, Commerce, Interior, State, and Treasury also commented on
the effectiveness of their small business programs. As stated in the
draft report, our review did not include an examination of the
effectiveness of agencies' small business programs; rather, it focused
only on agencies' compliance with section 15(k)(3) of the Small
Business Act.
OA declined to comment on the draft report, including the report's
discussion of the applicability of section 15(k) to OA. However, OA
also stated that its declination to comment did not indicate agreement
with our conclusions, citing the court's decision in Haddon v. Walters,
43 F.3d 1488 (D.C. Cir. 1995). The Haddon decision does not affect our
conclusions in any way. This case involved whether a unit other than
OA--the Executive Residence of the President--was an "executive agency"
covered by the employment discrimination prohibitions of Title VII of
the Civil Rights Act of 1964. That act, in turn, adopts a second
statute's definition of "independent establishment," and the court
noted in passing that under a third statute, OA is expressly excluded
as an "independent establishment." None of this dicta is relevant to
the issue in our report--that is, whether OA is an "agency" under the
Small Business Act or the APA--and thus does not change our conclusion
that OA is covered under those statutes.
:
As agreed with your offices, unless you publicly release its contents
earlier, we plan no further distribution of this report until 30 days
from its issuance date. At that time, we will send copies of this
report to the Chairman and the Ranking Minority Member of the House
Committee on Small Business. We will make copies available to others on
request. In addition, this report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov] http://www.gao.gov.
If you have any questions regarding this report, please contact me or
Charles E. Wilson, Jr., Assistant Director, at (202) 512-8678. Key
contributors to this report are listed in appendix XV.
Signed by:
David G. Wood:
Director, Financial Markets and Community Investment:
Appendixes:
Appendix I: Twenty-four Agencies Covered by the Compliance Review:
Defense Logistics Agency Department of Agriculture Department of
Commerce Department of Education Department of Energy Department of
Health and Human Services Department of Housing and Urban Development
Department of Justice Department of Labor Department of State
Department of the Air Force Department of the Army Department of the
Interior Department of the Navy Department of the Treasury Department
of Transportation Department of Veterans Affairs Environmental
Protection Agency Federal Emergency Management Agency General Services
Administration National Aeronautics and Space Administration Office of
Personnel Management Social Security Administration U.S. Agency for
International Development:
[End of section]
Appendix II: Scope and Methodology:
In assessing compliance with section 15(k)(3) of the Small Business
Act, we reviewed 24 federal agencies (see app. I). We focused on
agencies that procured $200 million or more in goods and services in
fiscal year 2001 on the basis of data from the Federal Procurement Data
System.[Footnote 24] Because the Department of Defense (DOD) has
established separate Offices of Small and Disadvantaged Business
Utilization (OSDBU) for its services and other command units, the 24
agencies we reviewed include the Departments of the Air Force, Army,
and Navy and the Defense Logistics Agency. These entities are
responsible for a large portion of DOD's procurements. The Office of
the Secretary at DOD was not included in our compliance review because
the law allows the Secretary of Defense the discretion to designate the
official to whom the OSDBU director should report. Agencies were
determined to be in compliance where the OSDBU director reported
directly to the agency head or agency head's deputy.
In making our determinations of compliance, we considered several
factors, including the OSDBU directors' statements about their
reporting relationships and documentary evidence that reflected the
reporting relationships. To obtain this information, we administered to
each of the 24 OSDBU directors a brief questionnaire regarding their
reporting relationships and requested supporting documentation. The
questionnaire consisted of 11 open-ended questions, including 1 that
asked the OSDBU directors to confirm whether they reported to the
agency head or deputy head. We reviewed organizational charts to
identify where the OSDBU was located in relation to the agency head or
deputy head; OSDBU directors' performance appraisals for the previous 2
years to identify the agency official who evaluated the OSDBU
director's performance; the most recent position description of the
OSDBU director position to identify the OSDBU director's supervisor;
and various other agency documents, such as reports and memorandums
discussing the agency's small business programs that the OSDBU director
prepared for the agency head or deputy head. In addition, we reviewed
and analyzed section 15(k)(3). We did not review or analyze the
effectiveness of any agency's OSDBU or small business programs.
To describe the reporting levels of the OSDBU director at the Office of
the Secretary of Defense since 1988 when the Secretary of Defense was
given discretion to designate the official to whom the OSDBU director
should report, we reviewed a written timeline from the Office of the
Secretary of Defense OSDBU. This timeline identified to whom OSDBU
directors serving from 1979 to 2003 reported. We reviewed DOD
directives from 1984 to 2000 pertaining to the reporting relationships
of the OSDBU directors of the Office of the Secretary of Defense. We
interviewed an official from the Office of the Secretary of Defense for
clarification on the information included in the directives and the
timeline. We reviewed section 15(k)(3), including the exemption for the
Office of the Secretary of Defense, and the legislative history and
congressional reports relating to the Office of the Secretary of
Defense, OSDBU.
To determine the applicability of the section 15(k) of the Small
Business Act to the Office of Administration (OA) within the Executive
Office of President (EOP), we reviewed and analyzed relevant
legislation, legislative history, and case law.
We conducted our work in Washington, D.C., between October 2002 and
July 2003 in accordance with generally accepted government auditing
standards.
[End of section]
Appendix III: Legal Analysis of the Applicability of Section 15(k) of
the Small Business Act to the EOP's Office of Administration:
Introduction and Summary of Conclusions:
According to officials in the Office of Administration (OA) within the
Executive Office of the President (EOP), OA serves, with one major
exception, as the central procurement arm for the significant majority
of EOP's procurements of goods and services.[Footnote 25] These
officials also indicated that OA has an Office of Small and
Disadvantaged Business Utilization (OSDBU), but they declined to
provide OA's legal position on whether it is subject to the OSDBU
requirements of section 15(k) of the Small Business Act, 15 U.S.C.
§ 644(k). As discussed below, we conclude that section 15(k) likely
applies to OA. The Small Business Act adopts the Administrative
Procedure Act's (APA) definition of a covered "agency," and several
courts have implicitly found that OA is an "agency" subject to the APA.
In addition, under the relevant statutes, legislative history and case
law, OA meets both the core APA "agency" standards and the broader
Freedom of Information Act (FOIA) "agency" standards that courts have
developed to address entities specifically within EOP.
Background:
Section 15(k) of the Small Business Act:
Section 15(k) requires each "Federal agency having procurement powers"
to establish an OSDBU. The establishment of OSDBUs "is central to the
goal of the Small Business Act which directs that small businesses
receive a fair portion of the Federal procurement through vigorous
action on the part of Federal departments and agencies." S. Rep. No.
1070, 95TH Cong., 2d Sess. 18 (1978); see 15 U.S.C. §§ 631(a), 644(a)
(small businesses should receive "fair proportion" of federal
government contracts for goods and services).
The Executive Office of the President and the Office of Administration:
By Reorganization Plans I and II of 1939 and Executive Order 8248 of
September 8, 1939, President Roosevelt transferred the functions of
several existing federal agencies into the Executive Office of the
President, so that EOP would be organized "with functions and duties so
prescribed and responsibilities so fixed that the President will have
adequate machinery for the administrative management of the Executive
branch of the Government." See E.O. 8248. As initially established, EOP
had five principal divisions, with no division specifically designated
as responsible for procurement.[Footnote 26] Since 1939, EOP has grown
and undergone a number of organizational changes according to the aims
of different administrations. EOP's total annual budget is now
approximately $276 million and it employs approximately 1,760
people.[Footnote 27] There are currently more than 15 separate units in
EOP, including the Office of the President (known as the White House
Office), the Office of Management and Budget, the Council on
Environmental Quality, the Council of Economic Advisers, and the
National Security Council.
In 1977, in order to improve the efficiency and effectiveness of EOP's
operations, President Carter took the administrative support functions
then being performed by individual EOP units and consolidated them into
one central Office of Administration. See Reorganization Plan No. 1 of
1977, 91 Stat. 1633; E.O. 12028 (Dec. 12, 1977). The mission of the
newly created OA (originally to be called the Central Administrative
Unit) was "to provide support in administrative services common to all
EOP entities. It should be a separate EOP entity because of the need to
assure equal access by all other units." See Message of the President
to the Congress of the United States, transmitting Reorganization Plan
No. 1 of 1977. After congressional hearings and debate on the
President's Reorganization Plan, OA was officially
established.[Footnote 28]
OA's functions today can be broadly defined as "all types of
administrative support and services that may be used by, or useful to,
[EOP] units" (although generally not the White House Office). See
Message of the President Accompanying Reorganization Plan No. 1 of
1977, Sec. III. These services include: (1) financial management; (2)
information technology and records management; (3) procurement; (4)
data processing; (5) research and other library services; (6) personnel
management; (7) facilities management and security; and (8) office
services and operations, including printing and duplication, mail,
messenger, graphics, word processing, and supply services.[Footnote 29]
With respect to financial management, for example, OA officials oversee
submission of the annual EOP budget request to Congress and testify
before congressional funding panels. With respect to records
management, OA is responsible for administering the Federal Records Act
and the Presidential Records Act throughout EOP.[Footnote 30] OA also
administers, with respect to information it possesses, the requirements
of FOIA, 5 U.S.C. § 552, the Privacy Act, 5 U.S.C. § 552a, and other
information-disclosure statutes applicable to federal agencies and
entities. See 5 C.F.R. Parts 2500, 2502, 2504. At least one federal
judge has recognized OA as a significant administrative resource in the
federal government. See Meyer v. Bush, 981 F.2d 1288, 1304 n. 11 (Wald,
J., dissenting).
OA is nominally headed by the President, but its day-to-day operations
are managed by a Presidentially appointed Director. The Director serves
as chief administrative officer, whose duties include "contract[ing]
for supplies and services, and do[ing] all other things that the
President, as head of [OA], might do." See E.O. 12028 § 4(a). In
addition to its Director and associated staff, OA currently has an
Office of the Deputy Director, Office of the General Counsel, and
Office of the Executive Secretary, as well as six principal divisions,
each headed by a director, and offices dedicated to equal employment
opportunity, operations and legislative liaison, and security. See 5
C.F.R. § 2502.3; United States Government Manual 2002-2003 at 95. The
Director of OA does not have program or management responsibilities for
the other EOP units; that authority is retained by the respective
office heads. See E.O. 12028 § 4(d).
Finally, with respect to procurement responsibilities, OA officials
told us that historically, OA has served as a central procurement
office for a significant portion of EOP, and as noted above, except for
procurements for the EOP Office of National Drug Control Policy's anti-
drug campaign, OA manages the significant majority of EOP's
procurements.[Footnote 31] OA officials also told us that OA currently
has an OSDBU, headed by a director who also serves as Deputy Director
of OA; in both capacities, this official reports to the Director of OA.
The OA OSDBU works with the Small Business Administration to ensure
that an appropriate procurement program is in place for small business,
and much of EOP's small business procurement activity is concentrated
within OA.
Analysis:
In order to be subject to the OSDBU requirements of the Small Business
Act, OA[Footnote 32] must both be a "Federal agency" and have
"procurements powers." OA clearly has "procurement powers," a term
presumed to have its common meaning of authority to make
purchases.[Footnote 33] As to the requirement to be a "Federal agency,"
the Small Business Act defines this term, with exclusions not relevant
here, as "hav[ing] the meaning given the term 'agency' by section
551(1) of title 5" of the APA. See 15 U.S.C. § 632(b). Section 551(1)
of the APA, in turn, with exclusions not relevant here, defines
"agency" as: "each authority of the Government of the United States,
whether or not it is within or subject to review by another agency. .
.." 5 U.S.C. § 551(1). Thus, whether OA is covered by section 15(k) and
required to have an OSDBU turns on whether it is an "agency" under the
APA.[Footnote 34]
Although no court to date has addressed whether OA is a "Federal
agency" under the Small Business Act, at least three courts have
implicitly found that OA is an "agency" under the APA and, thus, a
"Federal agency" under the Small Business Act. The courts determined
that because the actions of OA and other federal entities did not
comply with certain statutory requirements, their actions were
"arbitrary and capricious" under the APA, and the decisions were
necessarily premised on OA being an "agency" under the APA.[Footnote
35]
We conclude that OA also is an APA agency under the standards set forth
in the case law and legislative history. As the courts have recognized,
"the law on the simple question of what is an [APA] agency is quite
complex." Lee Constr. Co. v. Federal Reserve Bank, 558 F. Supp. 165,
172 (D. Md. 1982). Likewise, the courts have acknowledged that "[a]ny
general definition [of "agency" under the APA] can be of only limited
utility . . . [when] confronted with one of the myriad organizational
arrangements for getting the business of the government done. . . .The
unavoidable fact is that each new arrangement must be examined anew and
in its own context." Washington Research Project, Inc. v. HEW, 504 F.2d
238, 245-46 (D.C. Cir. 1974), cert. denied, 421 U.S. 963
(1975)(citations omitted).
The issue of whether an EOP unit in particular constitutes an APA
"agency" is further complicated by the fact that virtually all cases
analyzing EOP units' "agency" status are based not on the APA but on
FOIA (or statutes adopting FOIA's "agency" definition), and FOIA's
definition of "agency" has expanded over time. Until 1974, FOIA
incorporated the APA "agency" definition without change, meaning that
decisions interpreting FOIA were effectively decisions interpreting the
APA. In 1974, Congress broadened the APA definition, for FOIA purposes
only, to include entities "which perform governmental functions and
control information of interest to the public" but which "might have
eluded the APA's definition [of agency] in § 551(1). . .."[Footnote 36]
Further, even though one of the EOP offices already had been held
covered by the pre-1974 FOIA (APA) definition (see Soucie v. David, 448
F. 2d 1067 (D.C. Cir. 1971), discussed below), EOP was specifically
included in the entities added by the 1974 amendments, and the
amendments' history shows Congress intended to codify the pre-1974
Soucie analysis into FOIA.[Footnote 37] The net effect of these events
is that although there are a number of post-1974 FOIA decisions
addressing the "agency" status of various EOP offices, the decisions
must be applied with care in determining whether a particular EOP
entity is an "agency" under the APA, because the decisions typically do
not specify which aspect of FOIA they are applying--the more stringent
core APA "agency" definition or the potentially less stringent list of
entities added by the 1974 amendments, including EOP. With that
background, we examine how the courts have defined "agency" under the
APA, including any relevant cases pertaining to offices within EOP.
Courts have taken somewhat different approaches to what constitutes an
"agency" under the APA. The seminal case is Soucie v. David, above,
which involved what was then called EOP's Office of Science and
Technology (OST). Because the APA and FOIA definitions of "agency" were
identical at the time of the lawsuit, the court looked to
interpretations of the APA in determining whether OST was an "agency"
under FOIA. The court found that while the meaning of "agency" under
the APA was "not entirely clear," it "apparently confers agency status
on any administrative unit with substantial independent authority in
the exercise of specific functions." 448 F.2d at 1073 (emphasis added).
Because OST's "sole function" was not limited to advising and assisting
the President--OST also evaluated federal science programs previously
evaluated by the National Science Foundation--the court found OST had
"substantial independent authority" and "must be regarded as an agency
subject to the APA and [FOIA]." Id. at 1075.
Applying the Soucie test, the court reached a different conclusion
regarding the Judge Advocate General of the Army (JAG) in McKinney v.
Caldera, 141 F. Supp. 2d 25 (D.D.C. 2001). JAG was found not to have
"substantial independent authority," and thus not to be an APA agency,
even though JAG supervised the Army's military justice system,
performed appellate review of court martial trials, and furnished legal
services. Notwithstanding that the APA contemplates an "agency" within
an "agency," the court focused on the fact that JAG's duties flowed
from the authority of the Secretary of the Army, suggesting that JAG's
responsibilities were not sufficiently independent.[Footnote 38]
Other courts have framed the APA "agency" definition slightly
differently, looking to whether an entity can take "final and binding
action." This standard is based in part on the Soucie "substantial
independent authority" test and the APA's legislative history
indicating Congress intended covered agencies to have "final and
binding" legal authority.[Footnote 39] In Dong v. Smithsonian
Institution, 125 F.3d 877 (D.C. Cir. 1997), cert. denied, 524 U.S. 922
(1998), for example, the court looked to whether the Smithsonian
Institution was:
"a part of government which is generally independent in the exercise of
[its] functions and. . .by law has authority to take final and binding
action affecting the rights and obligations of individuals,
particularly by the characteristic procedures of rule-making and
adjudication.":
Id. at 881 (emphasis added). The court found that the Smithsonian was
not an APA "agency" under this standard, because while it exercised
authority, the authority was not sufficiently "substantial." Although
the Smithsonian is closely linked with the federal government, receives
federal funding, has certain police powers to protect its physical
plant, and publishes regulations in the Code of Federal Regulations,
the court noted that it does not make binding rules of general
application, determine rights and duties through adjudications, issue
orders, or perform regulatory functions.
Finally, courts have focused on whether an entity is one of the
"centers of gravity" in the exercise of administrative power "where
substantial 'powers to act' . . .are vested," see Lee Constr. Co.,
above, 558 F. Supp. at 173 (Federal Reserve Bank was APA agency based
on its substantial delegated decision-making authority from Federal
Reserve System's Board of Governors), or whether the entity has
"authority in law to make decisions," see Washington Research Project,
Inc. v. HEW, above, 504 F.2d at 248 (HEW peer review groups for grant
applications were not APA agencies, because they only recommended
grants to an NIH entity which in turn recommended to the HEW
Secretary), or whether the "governmental unit has substantial authority
to act with the sanction of the government behind it," see Conservation
Law Foundation v. Harper, 587 F. Supp. 357, 364 (D. Mass.
1984)(Property Review Board, created by Executive Order to review
federal real property acquisition and disposal policies, advise GSA on
same, and establish annual agency targets may be APA agency if it
controls disposition of public property). Thus, the National Academy of
Sciences (NAS) was held not to be an APA "agency," even though it was
authorized to veto EPA's suspension of auto-emission standards. See
Lombardo v. Handler, 397 F. Supp. 792 (D.D.C. 1975), aff'd, 546 F.2d
1043 (D.C. Cir. 1976). As the Lombardo court explained, NAS is not the
kind of "center of gravity in the exercise of administrative power" to
which the APA refers. 397 F. Supp. at 796.
Applying these authorities, we conclude that OA possesses the requisite
"substantial independent authority" to constitute an "agency" under the
APA. In OA's administration of the significant requirements of the
Federal Records Act and Presidential Records Act, for example, it
issues statutorily required records disposition schedules and other
directives for all EOP units. In this regard, OA serves a function
similar to the National Archives and Records Administration (NARA), and
indeed, OA was embroiled in substantial APA-based litigation, along
with the head of NARA (the Archivist of the United States), EOP, and
the National Security Council, challenging the manner in which these
parties carried out their statutory obligations.[Footnote 40] Another
of OA's significant functions, of particular relevance to the OSDBU
program, is serving as EOP's central procurement office with authority
to contract on behalf of EOP. This procurement responsibility includes
the authority to bind the United States government in contracts backed
by the full faith and credit of the United States. See 41 Op. Atty.
Gen. 403 (1959); White v. DOI, 639 F. Supp. 82 (M.D. Pa. 1986), affd,
815 F.2d 697 (3RD Cir. 1987).
Other significant EOP-wide OA functions include the OA Director's
oversight of submission of EOP's annual budget request and testimony on
EOP's behalf at appropriations hearings,[Footnote 41] and the OA
Financial Management Division's provision of financial services
including budget formulation, execution and analysis; centralized
accounting support; coordinated internal controls reporting; and
financial records maintenance. See 2002 EOP Budget Hearings at 167-69.
OA's Office of General Counsel also has significant responsibilities
across EOP. The office "advises other EOP components in areas related
to OA's administrative support mission, particularly in cases where EOP
components do not have counsel with expertise in government agency
law," for example, on matters involving "a wide range of substantive
areas including general administrative law, ethics, federal
procurement, employment law, legal aspects of budgetary and
congressional matters, federal record keeping, and information
technology management." Id. at 167. In the area of security, OA manages
"personnel, computer and information security for the EOP complex," as
well as overseeing access to the EOP complex. Id. OA directs background
investigations for personnel, pre-screens candidates for employment
based on security guidelines, and briefs employees on requirements and
guidelines for handling classified materials.
Finally, with respect to facilities management and human resources
management, OA carries out functions for EOP similar to the functions
of agencies such as the General Services Administration and the Office
of Personnel Management, respectively. Among other things, OA's
Facilities Management Division manages "space use, rent allocation,
repairs, and renovations in the White House complex." Id. at 168. OA's
Human Resources Management Division manages "recruitment and placement,
internal staffing, general employee and management advisory services,
employee development and training, and position management" for all of
EOP, as well as the automated management systems and the EOP Drug Free
Workplace Program. Id.
In carrying out many of these functions and responsibilities, OA acts
independently, and the nature of the delegation from the President to
OA is extensive. According to the Executive Order establishing OA, "the
primary responsibility for performing all administrative support and
service functions of units within the Executive Office of the President
shall be transferred to the Office of Administration." E.O. 12028 § 5.
Although OA is nominally headed by the President, OA acts independently
in contracting for and providing administrative supplies and services
to the other EOP units. E.O. 12028 §§ 3(a), 4(a). In the words of
Soucie, OA's "sole function" is not to advise and assist the President
but rather it exercises "substantial independent authority.":
In addition to finding that OA is an "agency" under these core APA
standards, we also find OA to be an "agency" under the so-called Meyer
test, developed in Meyer v. Bush, 981 F. 2d 1288 (D.C. Cir. 1993).
Meyer sets forth an interrelated three-factor test to determine when a
component of EOP is an "agency" under the post-1974 FOIA
definition:[Footnote 42] (1) how operationally close the entity is to
the President; (2) what the nature is of the delegation from the
President to the entity; and (3) whether the entity has a self-
contained structure. The first Meyer factor--the degree of operational
closeness of the President--weighs in favor of OA being an
"agency."[Footnote 43] Although the President is the nominal head of
OA, its mission of providing common administrative support and services
to all EOP units, developing and implementing guidance for them
relating to records management and disposition, and carrying out
facilities and human resources management are all accomplished without
close continuing interaction with the President. The second Meyer
factor--the nature of the delegation from the President--also weighs in
favor of OA being an "agency." The nature of the delegation from the
President to OA is extensive: the Executive Order creating OA assigned
it primary responsibility for performing all administrative support and
service functions for EOP. See E. O. 12028 § 5. Finally, the third
Meyer factor--whether OA has a self-contained, firm structure--confirms
that OA is an "agency." OA has such a structure: it is organized, under
the direction of a Director, Deputy Director, General Counsel, and
Executive Secretary, into a series of functional divisions, each headed
by a director. See 5 C.F.R. § 2502.3; United States Government Manual
2002-2003 at 94-96.
Our conclusion that OA is an agency under FOIA finds support in the
fact that OA itself believes it is covered. As noted above, OA has
promulgated regulations "implementing 5 U.S.C. 552" (FOIA), see 5
C.F.R. § 2502.2, with respect to records possessed by OA. This
conclusion also is consistent with the fact that OA has been subject to
GAO's government procurement bid protest proceedings under the
Competition in Contracting Act (CICA) applicable to "executive
agencies," see 31 U.S.C. § 3551(3), in which this term is broadly
defined in a manner similar to FOIA.[Footnote 44] OA has raised no
objection to the jurisdiction of those proceedings.[Footnote 45] OA
also raised no objection to GAO's evaluation of OA's acquisition of a
software system under the Federal Acquisition Regulation (FAR), with
the FAR being applicable to "executive agencies" defined in a similarly
broad, FOIA-like manner.[Footnote 46]
Finally, in determining whether OA should be considered an agency under
the Small Business Act, we are guided by the overall remedial purpose
of the statute. It is well settled that remedial statutes should be
construed liberally to effectuate their purposes. See, e.g., United
States v. Kayser-Roth Corp., 910 F.2d 24, 26 (1ST Cir. 1990)
(interpreting environmental cleanup statute broadly to ensure
protection of human health and environment). One of the central
purposes of the Small Business Act is to ensure small businesses
receive a "fair proportion" of federal government contracts, see 15
U.S.C. §§ 631(a), 644(a), and Congress has amended the Act several
times over the last 25 years to increase small business participation
in federal procurement. The OSDBU amendments were enacted in 1978 to
remedy the particular problem of small and disadvantaged businesses
lacking effective advocates at high levels within agencies. Congress
deemed these amendments to be necessary to ensure that the voice of
these communities are heard. See S. Rep. No. 1070, 95TH Cong., 2d Sess.
18 (1978) (OSDBU amendments); see also H.R. Rep. No. 460, 100TH Cong.,
1ST Sess. 40 (1987). Thus, any doubt about whether OA is an "agency"
within the scope of the Small Business Act should be resolved in favor
of coverage.
Conclusion:
In summary, we conclude that OA likely is a "Federal agency with
procurement powers" subject to the OSDBU requirements of section 15(k)
of the Small Business Act. OA clearly has procurement powers, and
several courts have implicitly found that OA is an "agency" within the
meaning of the APA and therefore a "Federal agency" within the meaning
of the Small Business Act. In addition, OA meets both the core APA
"agency" standards and the broader FOIA "agency" standards that courts
have developed to address entities specifically within EOP.
[End of section]
Appendix IV: Comments from the Department of Agriculture:
USDA
United States; AUG 1 9 2003.
Department of Agriculture;
Mr. Charles E. Wilson, Jr.
Assistant Director, Financial Markets and Community Investment.
General Accounting Office.
441 G Street, N.W.
Washington, D.C. 20548.
Dear Mr. Wilson:.
Thank you for the opportunity to comment on the proposed draft
report entitled "Small
and Disadvantaged Business: Some Agencies' Advocates Do Not
Report to Required Management Level." We found this report, which
examines the reporting relationships for the Office of Small and
Disadvantaged Business Utilization (OSDBU) directors at major federal
agencies, useful.
We agree with the General Accounting Office (GAO) assessment
that the Assistant Secretary for Administration, as the designated
Director of Small and Disadvantaged Business Utilization (Designated
Director), has delegated to the Director, Office of Small
and Disadvantaged Business Utilization the responsibilities of the
OSDBU. We disagree, however, with the GAO conclusion that the
Department of Agriculture (USDA) does not comply with Section 15(k)(3)
of the Small Business Act.
The GAO determined that compliance with Section 15(k)(3) requires the
Designated Director to both exercise OSDBU responsibilities and
report directly to and be responsible only to the Secretary or Deputy
Secretary. At USDA, the Designated Director both supervises the
Director, OSDBU, in implementing the responsibilities pursuant to
the delegation of authority and, as the report notes, provides
information to the Secretary and Deputy Secretary on small business
issues. Significantly, Section 15(k) of the Small Business Act does
not contain an express prohibition on delegation of authority or a
requirement that the Designated Director personally perform all of the
specific responsibilities it outlines. Absent an express limitation
on redelegation, one cannot be presumed.
Cf. Fleming v. Mohawk Wrecking & Lumber Co., 331 U.S. 111, 121 (1947).
Contrary to the assertion of the GAO, the Director, OSDBU, has
not become the de facto Designated Director. The Secretary holds the
Assistant Secretary for Administration responsible and accountable for
the duties delegated to him as the Designated Director. We believe,
therefore, that USDA's reporting structure is in compliance with
Section 15(k)(3) of the Small Business Act.
Consistent with USDA's commitment that the small business
program receive the priority Congress intended, the Director, OSDBU,
is a full-time employee dedicated to guiding and implementing the
small business program. Furthermore, the Director, OSDBU, position
remains classified as a non-career, senior executive service position,
appointed by and serving at the pleasure of the Secretary.
USDA has found its present OSDBU reporting structure to be effective.
The most recent Congressional Report Card prepared by the House Small
Business Committee Democratic Staff rates the DA small business program
as the best among the 21 top Federal agencies. Also, Federal
Procurement Data System reports show that since Fiscal Year 1997, the
USDA small business prime contracting volume has grown from 33 percent
of total procurements to over 48 percent in FY 2002. The Federal
statutory goal for small business prime contracting is 23 percent
annually. This evinces the USDA firm commitment to fostering
opportunities for small and disadvantaged business, and we will
continue to carry out that commitment effectively. Thank you for the
opportunity to comment on this draft report.
Sincerely,
John Surina
Acting Assistant Secretary for Administration:
Signed by John Surina:
[End of section]
Appendix V: Comments from the Department of Commerce:
UNITED STATES DEPARTMENT OF COMMERCE Chief Financial Officer:
Assistant Secretary for Administration Washington, D.C. 20230:
AUG 22 2003:
Mr. Charles E. Wilson, Jr. Assistant Director:
Financial Markets and Community Investment U.S. General Accounting
Office:
441 G. Street, N. W., Room 2A32 Washington, D.C. 20548:
Dear Mr. Wilson:
Thank you for the opportunity to comment on the draft General
Accounting Office (GAO) report entitled, "Small and Disadvantaged
Business: Some Agencies' Advocates Do Not Report to Required Management
Level (GAO-03-863).":
The Director of the Office of Small and Disadvantaged Business
Utilization (OSDBU) reports directly to the Deputy Secretary on all
legislative and policy issues and to the Chief Financial Officer and
Assistant Secretary for Administration on administrative matters such
as personnel and budget. I believe this organizational structure
complies with the statute. Further, this organizational structure
strengthens the role of OSDBU within the Department and focuses the
Department's resources to create contracting opportunities for small
businesses. In FY 2002, the Department had the highest percent among
cabinet level agencies of total procurement dollars awarded to small
businesses. The Department also exceeded its small business goals in
the small disadvantaged, 8(a), and women-owned small business programs.
The Department of Commerce is deeply committed to the goals of the
Small Business Act, and our record reflects our determination to
increase business opportunities for small, small disadvantaged and
women-owned small firms. As a result of our strong commitment, the
Department is a leader in awarding Federal contracts to small business
concerns.
If you have any further questions, please call me at (202) 482-4951.
Sincerely,
Otto J. Wolff:
Chief Financial Officer and Assistant Secretary for Administration:
Signed by Otto J. Wolff:
[End of section]
Appendix VI: Comments from the Department of Education:
UNITED STATES DEPARTMENT OF EDUCATION:
THE DEPUTY SECRETARY:
August 15, 2003:
Mr. David G. Wood:
Director, Financial Markets and Community Investment General Accounting
Office:
Washington, DC 20548:
Dear Mr. Wood:
This is in response to the draft GAO report, "Small and Disadvantaged
Business: Some Agencies' Advocates Do Not Report to Required Management
Level.":
The draft report lists the Department of Education as not in compliance
with Section 15(k)(3) of the Small Business Act. I strongly disagree
with that characterization. Section 15(k)(3) requires that the Director
of the Office of Small and Disadvantaged Business Utilization be
responsible directly to agency heads or deputy agency heads. In the
Department of Education, the OSDBU Director reports to the Deputy
Secretary, who is the deputy agency head. The Director's position
description and the official organizational chart both clearly show
that the position of the director is in the Office of the Deputy
Secretary. In addition, the Functional Statement of the Office of the
Deputy Secretary states that the OSDBU reports to the Deputy Secretary.
GAO bases its conclusion on the following facts: that the OSDBU
Director met with the Deputy Secretary's Chief of Staff, in addition to
meeting with the Deputy Secretary; that the Director submitted reports
through the Chief of Staff to the Deputy Secretary; and that the Chief
of Staff signed the Director's performance appraisal. These operating
procedures reflected the management preference of then-Deputy Secretary
William Hansen, who opted to manage the significant workflow of his
office in this way. These procedures in no way indicate a revision in
the reporting relationship of the Director to the Deputy Secretary. As
the Secretary is fully supportive of the goals of the Small Business
Act and the activities of the OSDBU Director, it has not been necessary
for the Deputy Secretary to closely oversee or monitor the Director's
activities.
It is my hope that this information demonstrates that the Department is
in fact fully in compliance with Section 15(k)(3) of the Small Business
Act, and I request that the final report be revised accordingly.
Sincerely,
Eugene W. Hickok
Acting Deputy Secretary:
Signed by Eugene W. Hickok:
[End of section]
Appendix VII: Comments from the Department of Health and Human
Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES Office of Inspector General:
AUG 20 2003:
Mr. David G. Wood:
Director, Financial Markets and Community Investment United States
General Accounting Office Washington, D.C. 20548:
Dear Mr. Wood:
Enclosed are the Department's comments on your draft report entitled,
"Small and Disadvantaged Business: Some Agencies' Advocates Do Not
Report to Required Management Level." The comments represent the
tentative position of the Department and are subject to reevaluation
when the final version of this report is received.
The Department appreciates the opportunity to comment on this draft
report before its publication.
Sincerely,
Signed by:
Dara Corrigan:
Acting Principal Deputy Inspector General:
Enclosure:
The Office of Inspector General (OIG) is transmitting the Department's
response to this draft report in our capacity as the Department's
designated focal point and coordinator for General Accounting Office
reports. OIG has not conducted an independent assessment of these
comments and therefore expresses no opinion on them.
Comments of the Department of Health and Human Services on the General
Accounting Office's Draft Report, "Small and Disadvantaged Business:
Some Agencies' Advocates Do Not Report to Required Management Level"
(GAO-03-863):
The Department of Health and Human Services (HHS) has received and
reviewed the draft report that examined the reporting relationships for
the Office of Small and Disadvantaged Business Utilization (OSBDU)
Directors at Federal agencies that procured $200 million or more in
goods and services in FY 2001.
While the Department believes it has been in compliance with the law,
your report has stimulated us to clarify and explicitly state certain
arrangements as follows:
(1) The OSDBU Director will continue to report directly to the HHS
Deputy Secretary on all policy issues and will also report on all
significant day-to-day issues affecting the OSDBU.
(2) The OSDBU Director will arrange for monthly meetings with the HHS
Deputy Secretary and/or prepare monthly reports for the HHS Deputy
Secretary on major issues facing the OSDBU.
(3) The HHS Deputy Secretary will serve as the reviewing official on
performance-evaluation documents for the OSDBU Director, with the
Assistant Secretary for Administration and Management (ASAM) serving as
the appraisal official.
(4) The OSDBU Director will continue to receive operational support
from ASAM's Office of Acquisition Management and Policy.
We have enclosed the memorandum, dated August 11, 2003, from the HHS
Deputy Secretary to the OSDBU Director, which delineates the changes
discussed above.
THE DEPUTY SECRETARY OF HEALTH AND HUMAN SERVICES WASHINGTON. D.C.
20201:
AUG 1 1 ONE:
MEMORANDUM:
TO: Debbie Ridgley, Director Office of Small and Disadvantaged
Utilization (OSBDU) SUBJECT: OSBDU Reporting Relationship:
The purpose of this memo is to clarify OSBDU's reporting relationship
to my office, and to affirm several important aspects of that
relationship.
In accordance with Section 644 (k)(3) of the Small Business Act, you,
as HHS's OSBDU Director, will continue to report directly to me as the
Department's Deputy Secretary. Thus, all policy issues and all
significant day-to-day issues affecting OSBDU should be brought to my
attention. Additionally, you should arrange for monthly meetings and/or
monthly reports to me on major issues facing OSBDU. As set out in the
statement of organization and functions for the Office of the Assistant
Secretary for Administration and Management (ASAM) published in the
Federal Register on June 19, 2003, OSBDU will continue to receive
operational support from ASAM's Office of Acquisition Management and
Policy. I will serve as reviewing official on performance-evaluation
documents for the OSBDU Director, with the Assistant Secretary for
Administration and Management serving as appraising official.
Thank you for your continuing efforts on behalf of small, disadvantaged
and women-owned businesses and HubZones in their dealings with the
Department.
Signed by:
Claude Allen:
[End of section]
Appendix VIII: Comments from the Department of Justice:
U.S. Department of Justice:
Washington, D.C. 20530:
AUG 19 2003:
David G. Wood Director Financial Markets and Community Investment
General Accounting Office:
441 G Street, NW Washington, DC 20548:
Dear Mr. Wood:
On August 1, 2003, you provided the Department with a copy of the
General Accounting Office's draft report entitled SMALL AND
DISADVANTAGED BUSINESS: Some Agencies' Advocates Do Not Report to
Required Management Level (GAO-03-863/250109) with a request for
comments by August 19, 2003. We appreciate the opportunity to review
and comment on the draft report.
While the Department agrees that organizationally the Office of Small
and Disadvantaged Business Utilization (OSDBU) resides within the
Justice Management Division, this placement, initially made in 1981,
has been consistently described as being for administrative purposes.
The Department has previously advised both the GAO and the Congress
that the Director, OSDBU reports to the Deputy Attorney General on
matters of substance requiring his attention. We believe it is
important for the GAO to recognize the commitment of the Deputy
Attorney General to facilitate the participation of small and
disadvantaged businesses as contractors, subcontractors, and suppliers
for the Department. The Office of the Deputy Attorney General fully
supports the objectives of the OSDBU and has met with the Director to
discuss the office's work.
If you have any questions concerning the Department's comment in this
matter, please feel free to contact Vickie L. Sloan, Audit Liaison
Office, Justice Management Division on (202) 514-0469.
Sincerely,
Paul R. Corts:
Assistant Attorney General for Administration:
Signed by Paul R. Corts:
[End of section]
Appendix IX: Comments from the Department of State:
United States Department of State Washington, D. C. 20520:
AUG 25 2003:
Dear Mr. Wood:
We appreciate the opportunity to review your draft report, "SMALL AND
DISADVANTAGED BUSINESS: Some Agencies' Do Not Report to the Required
Management Level," GAO-03-863, GAO Job Code 250109.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Durie White, Director, Office of Small and Disadvantaged Business, at
(703) 875-6824.
Sincerely,
Sid L. Kaplan, Acting Assistant Secretary for Resource Management and
Chief Financial Officer:
Signed by Sid L. Kaplan:
Enclosure:
As stated.
cc: GAO - Charles Wilson, Jr. State/OIG - Luther Atkins State/A -
William Eaton State/H - Paul Kelly:
Mr. David G. Wood Director, Financial Markets and Community Investment,
U.S. General Accounting Office.
GAO Draft Report: Small and Disadvantaged Business: Some Agencies'
Advocates Do Not Report to the Required Management Level (GAO-03-863):
The Department of State is pleased to have the opportunity to comment
on the GAO's report regarding the organizational placement of federal
agency Offices of Small and Disadvantaged Business Utilization. The
report finds State Department as not in compliance with Section
15(k)(3) of the Small Business Act. The report recommends that State
Department and other agencies found not in compliance take steps to
comply with the requirement of Section 15(k)(3) of the Small Business
Act that OSDBU directors be responsible only to, and report directly
to, the head or deputy head of the agency.
The facts concerning the organizational placement of the Office of
Small and Disadvantaged Business Utilization as stated in the draft
report are accurate. The Department of State reserves comment on the
legal conclusions in the draft report in the absence of authoritative
guidance from the Department of Justice or the President's counsel. As
a practical matter, the Department of State believes that the
organizational placement of its Office of Small and Disadvantaged
Business Utilization (OSDBU) is highly effective. The Department
created the OSDBU in 1980. At the time, the OSDBU reported directly to
the Secretary. The placement was not effective. The OSDBU Director did
not meet with the Secretary of State, but dealt exclusively with the
staff of the Executive Office of the Secretariat. The OSDBU had a
skeletal staff of three and a small operational budget. Since its
reorganization into the Bureau of Administration in 1991, the OSDBU
receives much more attention from senior management. Its staff has
grown to six direct hires and one contract employee. Its budget has
also grown. The office was relocated to larger space, the design of
which presents a much more professional face to the small business
public that it serves.
The Secretaries of State in both this Administration and the previous
Administration have willingly given their support to OSDBU initiatives
when asked to do so. Very early in his Administration (March 2001),
Secretary Powell signed a Memorandum to All Department of State
Employees reaffirming his support for the Department's Small Business
Program. In November 2002, he gave opening remarks at the Department's
first Veteran-Owned Business Small Business Exposition. He is serving
on the Honorary Committee to commemorate the Small Business
Administration's 50Th anniversary. He spoke at an event during last
year's Department of Commerce Minority Enterprise Development Week and
may do so again this year. In addition, former Secretary of State
Albright signed a Memorandum of Understanding with the Small Business
Administration, committing the Department to redouble its efforts to
assist women business owners.
The Department of State believes that the effectiveness of its OSDBU's
organizational placement is borne out by the results of our program. We
traditionally meet or exceed our small business goals. Normally, at
least 40% of our domestically awarded contracts
go to small businesses each fiscal year. We have done an extensive
analysis of the FY 2002 performance of the twenty-three large federal
agencies (those that awarded over
$100 million in contracts) and note that there is no direct correlation
between the OSDBUs' reporting level and the agencies' achievements.
(See the attached booklet). State Department outperformed all the
compliant agencies in the percentage of contract dollars awarded to
small businesses. We ranked first among the twenty-three large agencies
in the percentage of dollars awarded to 8(a) firms and second among the
twenty-three in the percentage of dollars awarded to HUBZone firms. In
fact, State Department was one of only two federal departments that
achieved the statutory 3% minimum goal for awarding contracts to firms
located in HUBZones during FY 2002. The Small Business Administration
recently notified us that State Department's OSDBU staff has been
selected to receive SBA's 2003 Gold Star Award. The award recognizes
the exemplary performance of Federal personnel within the OSDBU who
have primary responsibility for the goals and strategic initiatives
that ensure small businesses have a role in the Federal marketplace.
State Department maintains that to reorganize its Office of Small and
Disadvantaged Business Utilization to report to the Secretary or his
Deputy would result in its being less effective. Given the broad range
of urgent issues upon which the Secretary and Deputy Secretary of State
must focus, the OSDBU Director would receive much less attention than
she enjoys in her present organizational location. The OSDBU Director
regularly meets with the Assistant Secretary for Administration,
attends staff meetings, and has direct access whenever necessary.
Whether the Director would enjoy the level of visibility and
operational influence were she moved to the Secretary's level is
questionable. If the objective of Section 15(k)(3) is to insure that
the OSDBU program receives support from top management, the Department
of State believes we have achieved that objective.
[End of section]
Appendix X: Comments from the Department of the Interior:
United States Department of the Interior:
OFFICE OF THE ASSISTANT SECRETARY POLICY, MANAGEMENT AND BUDGET
Washington, D.C. 20240:
AUG 27 2003:
Mr. Charles Wilson, Jr. Assistant Director General Accounting Office
441 G Street, NW Washington, DC 20548:
Dear Mr. Wilson:
We are writing regarding the draft GAO report dated September 2003
entitled, "Small and Disadvantaged Business, Some Agencies' Advocates
Do Not Report to Required Management Level.":
The Assistant Secretary - Policy, Management and Budget is the agency
head for acquisition matters, in accordance with the Federal
Acquisition Regulation (FAR). Consequently, Interior's Office of Small
and Disadvantaged Business Utilization's (OSDBU) Director reports to
the "agency head" as defined in Subpart 2.101 of the FAR The Report
seems to mischaracterize the situation when it states that the OSDBU
reports to a "lower-level official within the Department" as indicated
on page 9 of the draft report. This reporting relationship has worked
well. Interior has led Federal cabinet agencies in small business
achievements for a variety of categories in the present structure.
(Over 50 percent of all procurement dollars for the past four fiscal
years have been awarded to small business.) Secretarial support and
autonomy that are critical for program success have been emphasized in
the Department through the reporting relationship with the Assistant
Secretary - Policy, Management and Budget.
If you have any additional questions regarding our comments, please
contact Mr. Robert W. Faithful, IV, Director, Office of Small and
Disadvantaged Business Utilization at (202) 208-3493.
Sincerely,
Signed by:
P. Lynn Scarlett
Assistant Secretary - Policy, Management and Budget:
[End of section]
Appendix XI: Comments from the Department of the Treasury:
ASSISTANT SECRETARY:
DEPARTMENT OF THE TREASURY WASHINGTON:
AUG 20 2003:
David G. Wood:
Director, Financial Markets and Community Investment U.S. General
Accounting Office:
441 G Street, N. W. Washington, D.C. 20548:
Dear Mr. Wood:
The Department of the Treasury is pleased to have the opportunity to
comment on the U.S. General Accounting Office's (GAO) draft report
entitled Small and Disadvantaged Business: Some Agencies 'Advocates Do
Not Report to Required Management Level (GAO-03-863). This report
reviews the organizational placement and reporting relationships of the
position of Director of Small and Disadvantaged Business Utilization
(OSDBU) at a number of agencies. The report concludes that Treasury,
among other agencies, is not complying with § 15(k)(3) of the Small
Business Act (15 U.S.C. §644(k)(3)) because, as GAO states,
"[Agriculture, Treasury and State] designated OSDBU directors delegated
all of their OSDBU director responsibilities to officials who do not
directly report to either the secretary or deputy secretary." [Draft
report, p. 19] The report states: "The lower ranking officials thus
became the de facto OSDBU directors." [id.] The apparent view of the
report is that Director of Small and Disadvantaged Business Utilization
must, as a matter of law, be engaged essentially full-time in OSDBU
functions.
Section 15(k)(3) of the Small Business Act makes the OSDBU directors
responsible for the implementation and execution of the specific
functions and duties assigned under sections 8 & 15 of the Small
Business Act. The responsibilities are assigned, but there is no
requirement that the director personally perform any specific
functions. Counsel has advised me that there is no bar in the statutory
language, and no explanation of that language in its legislative
history that suggests a bar, to the Director's delegation of some of
this authority. As Director, I remain responsible for OSDBU
performance, whether I personally perform the functions or delegate
portions of the OSDBU authority. I do report directly to the Secretary
and Deputy Secretary.
We believe that Treasury's Office of Small Business Development (OSBD)
has been particularly successful: Winning awards from the Small
Business Administration (SBA); receiving approbation from small
businesses themselves for our outreach efforts; leading Government
agencies in our small business contracting; and serving in leadership
roles in the Government's small business efforts.
The OSBD assists, counsels, and advises small businesses of all types
on procedures for contracting with Treasury. Additionally, the OSBD
works closely with each Treasury bureau to implement the Department's
small business procurement assistance program.
Each bureau has appointed a Small Business Specialist, located within
the procurement office, to coordinate the program.
We attribute our small business success to a number of critical
factors. These include: senior management support, commitment, a team
approach, outreach, information dissemination, training, mentor-
protege/subcontracting efforts, and recognizing that we are part of a
larger network that makes up the small business community (senior
management, small businesses, large business prime contractors, Small
Business Administration, Treasury procurement/program/small business
staff, other federal agency small business offices, and small business
trade associations).
Sincerely,
Teresa Mullet Ressel
Assistant Secretary for Management And Chief Financial Officer:
Signed for: Teresa Mullet Ressel
[End of section]
Appendix XII: Comments from the Social Security Administration:
SOCIAL SECURITY:
The Commissioner:
August 13, 2003:
Mr. David G. Wood Director, Financial Markets and Community Investment
U.S. General Accounting Office Washington, D.C. 20548:
Dear Mr. Wood:
Thank you for the opportunity to review and comment on the draft report
"Small and Disadvantaged Business: Some Agencies' Advocates Do Not
Report to Required Management Level" (GAO-03-863). Our comments on the
report are enclosed.
If you have any questions, please have your staff contact Laura Bell at
(410) 965-2636.
Sincerely,
Jo Anne B. Barnhart:
Signed by Jo Anne B. Barnhart:
Enclosure:
SOCIAL SECURITY ADMINISTRATION BALTIMORE MD 21235-0001:
COMMENTS ON THE GENERAL ACCOUNTING OFFICE (GAO) DRAFT REPORT "SMALL AND
DISADVANTAGED BUSINESS: SOME AGENCIES' ADVOCATES DO NOT REPORT TO
REQUIRED MANAGEMENT LEVEL" (GAO-03-863):
Thank you for the opportunity to review and comment on the draft
report. The report accurately describes the reporting relationship of
the Director of the Office of Small and Disadvantaged Business
Utilization (OSDBU) within the Social Security Administration (SSA).
However, we do not agree with the conclusion that the reporting
relationship of our OSDBU director does not comply with the requirement
of Section 14(k)(3) of the Small Business Act (SBA). The rationale for
our disagreement is provided below. Attached is a copy of the March 2,
1999 General Counsel (GC) opinion (which was provided to the GAO
auditors during the review) that supports our position.
Recommendation 1:
The Commissioner of SSA should take steps as necessary to comply with
the requirement in Section 15(k)(3) of the SBA that the OSDBU director
be responsible only to, and report directly to, the head or deputy head
of the agency.
Comment:
On March 2, 1999, our GC issued an opinion specifically related to the
OSDBU director position. In that opinion, the Associate General Counsel
for General Law states that each of SSA's Deputy Commissioners,
including the Deputy Commissioner for Finance, Assessment and
Management (DCFAM), as well as the GC and the Chief Actuary report
directly to the Commissioner. The GC concluded that each of them (i.e.,
the Deputy Commissioners) could be considered to have the status of a
"deputy" to the Commissioner, unless more is required by a specific
statute or regulation. Based on that opinion and the current direct
reporting relationship of our Deputy Commissioners, including the
DCFAM, to the Commissioner, we continue to believe we are in compliance
with Section 15(k)(3) of the SBA.
Additionally, with respect to GAO's interpretation of the role of the
Agency's "Deputy Commissioner" provided on page 13 in the second
paragraph we offer the following: "While the Deputy Commissioner shares
responsibility for providing executive leadership to the Social
Security Administration, including acting for the Commissioner in her
absence, each of the other Deputy Commissioners report directly to her.
The DCFAM's functional statement in the SSA Organization Manual reads,
"The Deputy Commissioner, Finance, Assessment and Management (S 1) is
directly responsible to the Commissioner for carrying out the ODCFAM
mission and providing general supervision to the major components of
ODCFAM. The Deputy Commissioner also is the SSA Chief Financial Officer
(SSACFO) and is directly responsible to the Commissioner for carrying
out the SSACFO mission.":
SOCIAL SECURITY:
Office of the General Counsel:
MEMORANDUM:
DATE: March 2, 1999:
TO: Dale Sopper:
Assistant Deputy Commissioner for Finance, Assessment and Management:
FROM: Michael Hoover Associate General Counsel for General Law Division:
SUBJECT: Your Inquiry as to Who May Serve as SSA's Director of Office of
Small and Disadvantaged Business Utilization:
You requested our views as to the interpretation of language contained
at 48 C.F.R. Chapter 1, Subpart 19.201(d), stating that each agency
with contracting authority is required by the Small Business Act to:
... establish an Office of Small and Disadvantaged Business
Utilization. Management of the office shall be the responsibility of an
officer or employee of the agency who shall, in carrying out the
purposed of the Act ... 3. Be responsible to and report directly to the
agency head or the deputy to the agency head; ...
Specifically, you requested our opinion as to whether the language
"deputy to the agency head," contained in this regulation, could be
interpreted to mean the Deputy Commissioner for Finance, Assessment and
Management.
The regulation which you cited implements section 15 of the Small
Business Act, 15 U.S.C. § 644k, which states:
(k) Office of Small and Disadvantaged Business Utilization; Director.
There is hereby established in each Federal agency having procurement
powers an office to be known as the "Office of Small and Disadvantaged
Business Utilization." The management of each such office shall be
vested in an officer or employee of such agency who shall:
(1) be known as the "Director of Small and Disadvantaged Business
Utilization" for such agency,
(2) be appointed by the head of such agency,
(3) be responsible only to, and report directly to, the head of such
agency or to the deputy of such head, except that the director for the
Office of the Secretary of Defense shall be responsible only to, and
report directly to, such Secretary or the Secretary's designee,
(4) be responsible for the implementation and execution of the
functions and duties under sections 8 and 15 of this Act [15 USCS § 637
and this section] which relate to such agency, . . .
(5) identify proposed solicitations that involve significant bundling
of contract requirements, and work with the agency acquisition
officials and the Administration to revise the procurement strategies
for such proposed solicitations where appropriate to increase the
probability of participation by small businesses as prime contractors,
or to facilitate small business participation as subcontractors and
suppliers, if a solicitation for a bundled contract is to be issued;
(6) assist small business concerns to obtain payments, required late
payment interest penalties, or information regarding payments due to
such concerns from an executive agency or a contractor, in conformity
with chapter 39 of title 31, United States Code [31 USCS §§ 3901 et
seq.], or any other protection for contractors or subcontractors
(including suppliers) that is included in the Federal Acquisition
Regulation or any individual agency supplement to such Government-wide
regulation,
(7) have supervisory authority over personnel of such agency to the
extent that the functions and duties of such personnel relate to
functions and duties under sections 8 and 15 of this Act [15 USCS § 637
and this section],
(8) assign a small business technical adviser to each office to which
the Administration has assigned a procurement center representative--:
(A) who shall be a full-time employee of the procuring activity and
shall be well qualified, technically trained and familiar with the
supplies or services purchased at the activity,
(B) whose principal duty shall be to assist the Administration
procurement center representative in his duties and functions relating
to section 8 and 15 of this Act [15 USCS § 637 and this section], and:
(9) cooperate, and consult on a regular basis, with the Administration
with respect to carrying out the functions and duties described in
paragraph (4) of this subsection; and:
(10) make recommendations to contracting officers as to whether a
particular contract requirement should be awarded pursuant to
subsection (a), or section 8(a) of this Act or section 2323 of title
10, United States Code. Such recommendations shall be made with due
regard to the requirements of subsection (m) and the failure of the
contracting officer to accept any such recommendations shall be
documented and included within the appropriate contract file.
The Small Business Act does not define what is meant by the term
"deputy." Specifically, it does not require that a "deputy" be one
whose appointment is subject to the advice and consent of the Senate.
Generally, a deputy is one who reports directly to the official as
whose deputy he serves. In SSA, each of the eight Deputy Commissioners,
as well as the General Counsel and the Chief Actuary, report directly
to the Commissioner. For this reason, each of them could be considered
to have the status of a "deputy" to the Commissioner, unless more is
required by a specific statute or regulation. Accordingly, we believe
that where an agency has created an organizational structure which has
more than one individual reporting directly to the agency head and has
given each of these individuals the title "deputy," the Small Business
Act does not create any statutory impediment to finding that an
individual who reports directly to one of these individuals may serve
as the Director of Small and Disadvantaged Business Utilization.
We note that several federal agencies have established organizational
structures which have the Director of Small and Disadvantaged Business
Utilization (SDBU) reporting to an individual who reports to the agency
head, but who does not have the title of "deputy." For example, in the
Department of State, the Director, SDBU reports to the Assistant
Secretary of State for Administration. 48 C.F.R. § 619.201(c). In the
Department of Labor, the Director, SDBU reports to the Assistant
Secretary for Administration and Management for all substantive
responsibilities under sections 8 and 15 of the Small Business Act, and
on his own has an advisory role only. 48 C.F.R. §§ 2901.603-1(a),
2901.603(f)(3), 2901.603(gx4).
Another approach, followed by the Department of Treasury, was to name
its Assistant Secretary (Managenent)/CFO as the statutory Director,
SDBU, and have an Office of Procurement which reported to him/her carry
out the functions of the Small and Disadvantaged Business Utilization
program. 57 FR 32614, July 22, 1992, § 4.c.(1). ,
In our view, it would be legally defensible for the agency head either
to name an official who reports directly to the Deputy Commissioner for
Finance, Assessment and Management to serve as SSA's Director of Small
and Disadvantaged Business Utilization, or to name the DCFAM as the
Director, SDBU, and for the DCFAM to have the Office of Acquisition and
Grants carry out the functions of the SDBU program.
Should you have any additional questions, I would be pleased to discuss
this matter with you' further. Staff inquiries may be directed to Ms.
Eileen Houghton who can be reached at extension 54816.
[End of section]
Appendix XIII: Comments from the U.S. Agency for International
Development:
USAID:
AUG 14 2003:
U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT:
Mr. David G. Wood Director:
Financial Markets and Community Investment U.S. General Accounting
Office:
441 G Street, N.W. Washington, D.C. 20548:
Dear Mr. Wood:
I am pleased to provide the U.S. Agency for International Development's
(USAID's) formal response on the draft GAO report entitled "SMALL AND
DISADVANTAGED BUSINESS: Some Agencies' Advocates Do Not Report to
Required Management Level (GAO-03-863).
Upon review of the draft, we concur with the conclusions as they apply
to USAID, and therefore have no comment.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed for:
John Marshall
Assistant Administrator Bureau for Management:
CLEARANCE PAGE FOR response on the draft GAO report entitled "'SMALL
AND DISADVANTAGED BUSINESS: Some Agencies' Advocates Do Not Report to
Required Management Level (GAO-03-863):
Clearances:
[End of section]
Appendix XIV: Comments from the Executive Office of the President,
Office of Administration:
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF ADMINISTRATION
WASHINGTON, D. C. 20503:
August 15, 2003:
Ms. Susan Sawtelle
Associate General Counsel
U.S. General Accounting Office
Washington, DC 20548:
VIA FAX: (202) 512-3445:
Dear Ms. Sawtelle:
This responds to the letter of July 31, 2003 from David G. Wood,
Director, Financial Markets and Community Investment, transmitting
GAO's draft report entitled "Small and Disadvantaged Business: Some
Agencies' Advocates Do Not Report to Required Management Level.":
We do not plan to provide views or comments to GAO with respect to the
views expressed by GAO in the draft report, including Appendix M's
discussion of GAO's legal views on the applicability of Section 15(k)
of the Small Business Act to the Office of Administration. However,
this does not indicate our agreement with the views expressed in the
report, see, e.g., Haddon v. Walters, 43 F.3d 1488 (D.C. Cir. 1995).
Sincerely,
Signed for:
Adam F. Greenstone:
[End of section]
Appendix XV GAO Contact and Staff Acknowledgments:
GAO Contacts:
David G. Wood, (202) 512-8678 Charles E. Wilson, Jr., (202) 512-6891:
Staff Acknowledgments:
In addition to the individual names above, the following individuals
made significant contributions to this report: Emily R. Chalmers, Nancy
Eibeck, Edda Emmanuelli-Perez, Brodi Fontenot, Gregg J. Justice III,
John T. McGrail, Marc Molino, and Susan D. Sawtelle.
:
(250109):
FOOTNOTES
[1] DOD does not have a single OSDBU director for the entire agency.
The services (Departments of the Air Force, Army, and Navy) and other
DOD command units have established separate OSDBUs, each of which is
headed by a director. These organizational units carry out procurement
for most of DOD. The DOD agencies refer to their offices as Small and
Disadvantaged Business Utilization, or SADBUs. For simplicity, we use
the term OSDBU for all agencies in our study.
[2] The Office of the Secretary of Defense is the principal staff
element of the Secretary of Defense in the exercise of policy
development, planning, resource management, and fiscal and program
evaluation responsibilities.
[3] One agency--the Federal Emergency Management Agency (FEMA)--is no
longer independent, having become part of the Department of Homeland
Security in March 2003. Because FEMA was independent during the period
of our review, we included it in our review and are reporting on it as
an independent agency.
[4] We are not making a recommendation for FEMA because it no longer
exists as an independent agency.
[5] The small business categories include small business; women-owned
small business; section 8(a) business; small disadvantaged businesses;
HUBZone small business; veteran-owned small business; and service-
disabled, veteran-owned small business.
[6] The Small Business Reauthorization Act of 1997 defines the bundling
of contract requirements as the consolidation of two or more
procurement requirements for goods or services previously provided or
performed under separate, smaller contracts into a solicitation of
offers for a single contract that is likely to be unsuitable for award
to a small business concern.
[7] The OSDBU director position at Labor became vacant in April 2002; a
new OSDBU director assumed his position on April 21, 2003.
[8] Although the director's position description, dated 1988,
identified the supervisor as the Associate Deputy Administrator for
Logistics, the OSDBU director's most recent performance appraisal
indicated that the agency head evaluated the performance of the OSDBU
director.
[9] GSA could not provide us with any formal reports because of the
high turnover rate of the OSDBU director position since 2000.
[10] In a memorandum dated January 25, 2001, the Chief of Staff is
delegated with the authority, by the Secretary, to take personnel
actions, including the authority to certify, on behalf of the
Secretary, all personnel documents.
[11] According to a Department of Justice staff member, in 2002, the
title of Deputy Assistant Attorney General for Law and Policy was
changed to the title of Deputy Assistant Attorney General Policy,
Management, and Planning.
[12] H.R. Conf. Rep. No 1714, 95TH Cong. 2d Sess. 18 (1978).
[13] S. Rep. No. 1070, 95th Cong., 2d Sess. 18 (1978).
[14] 68 Fed. Reg. 36811 (2003).
[15] S. Rept. No. 1070, 95TH Cong.2d Sess. 18 (1978). See also S. Rept.
No. 1140, 95TH Cong., 9 (1978); H.R. Conf. Rep. No. 1714, 95TH Cong. 2d
Sess. 27 (1978); and H.R. Rep. No. 460, 100TH Cong., 1ST Sess. 40
(1987).
[16] The Assistant Secretary for Administration, who served as the
OSDBU director during the period covered by our study, retired as of
June 30, 2003. Subsequently, the Acting Assistant Secretary for
Administration was appointed the OSDBU director.
[17] The Assistant Secretary for Administration's additional
responsibilities included human resources management, procurement and
property management, facilities operations, conflict resolution,
crisis planning and management, energy efficiency, ethics, and outreach
programs.
[18] The Acting Assistant Secretary said that she was dealing with,
among other things, the transfer of part of Treasury to the Department
of Homeland Security.
[19] DOD directives are broad policy documents containing what is
required by legislation, the President, or the Secretary of Defense to
regulate the actions of DOD components. DOD directives establish or
describe policies, programs, and organizations; define missions;
provide authority; and assign responsibilities.
[20] DOD Directive 5134.1, dated June 8, 1994, implemented the position
change of Under Secretary of Defense for Acquisition and Technology.
The directive added the responsibilities of advanced technology,
economic security, environmental security, and atomic energy to the
responsibilities of the Under Secretary of Defense for Acquisition.
[21] DOD Directive 4205.1, September 11, 1996.
[22] DOD Directive 5134.1, September 17, 1999.
[23] DOD Directive 5134.13, May 25, 2000.
[24] The Federal Procurement Data Center is a unit of the General
Services Administration that collects data on all federal contract
actions.
[25] OA does not manage the roughly $200 million in annual procurements
associated with the EOP Office of National Drug Control Policy's
(ONDCP) National Youth Anti-Drug Media Campaign, but does manage the
"significant majority" of the remainder of EOP's procurements, which
total roughly $50 million annually.
[26] These were the White House Office, the Bureau of the Budget, the
National Resources Planning Board, the Liaison Office for Personnel
Management, and the Office of Government Reports, with a sixth division
authorized in the event of an actual or threatened emergency.
[27] See Pub. L. No. 107-67, 115 Stat. 514 (2001); U.S. Office of
Management and Budget, Budget of the United States Government, Fiscal
Year 2003 (Feb. 4, 2002).
[28] A reorganization plan proposed by the President can take effect
only if neither house of Congress passes a resolution disapproving the
plan within a certain time period. Resolutions disapproving of
Reorganization Plan No. 1 of 1977 were introduced in both the House and
Senate, see S. Res. 222 (July 18, 1977)(introduced by Sen. Ribicoff);
H. Res. 688 (July 18, 1977)(introduced by Rep. Brooks), but after
hearings on the Plan, including acknowledgement of the proposed
creation of OA, neither resolution passed. See generally S. Rep. No.
465, 95TH Cong., 1ST Sess. (1977); H.R. Rep. No. 661, 95TH Cong., 1ST
Sess. 4, 44-46, 56 (1977).
[29] See E.O. 12028 § 3(b), as amended by E.O. 12122 (Feb. 26, 1979);
E.O. 12134 (May 9, 1979); Hearings Before a Subcommittee of the
Committee on Appropriations, House of Representatives, on Executive
Office of the President and Funds Appropriated to the President and
Independent Agencies, FY 2002 (hereafter 2002 EOP Budget Hearings).
[30] The Federal Records Act, a collection of statutes at 44 U.S.C. §§
2101-2118, 2901-2910, 3101-3107, 3301-3324, governs the creation,
management, and disposal of federal records. The Presidential Records
Act, 44 U.S.C. §§ 2201-2207, governs the creation, management, and
disposal of Presidential records, which are documentary materials
"created or received by the President, his immediate staff, or a unit
or individual in [EOP] whose function is to advise and assist the
President, in the course of conducting activities which relate to or
have an effect upon the carrying out of the constitutional, statutory,
or other official or ceremonial duties of the President." Id. §
2201(2).
[31] Since 1994, OA generally has contracted for EOP procurements over
$25,000, with other EOP units making smaller procurements through
purchase orders. See U.S. General Accounting Office, Executive Office
of the President: Major Procurements for Calendar Years 1990 to 1993,
GAO/GGD-94-138FS (Washington, D.C.: Sept. 16, 1994) at 1.
[32] Our congressional requesters asked us to analyze whether the
statutory OSDBU requirements apply to EOP and its constituent offices.
As agreed, we are responding to this question by focusing on OA as the
centralized procurement arm of EOP. (We do not express an opinion on
whether any EOP units other than OA, which manage the remainder of
EOP's procurements, also may be "Federal agencies" under the Small
Business Act.) We have not focused on EOP as a whole in light of the
general practice of the courts, in litigation filed against the
"Executive Office of the President," to look to the specific EOP office
involved in determining whether there is an "agency" under the relevant
statute. A number of recent suits against EOP under the Privacy Act,
for example, which adopts the FOIA definition of "agency," have been
resolved by examining the activities of the White House Office rather
than EOP. See, e.g., Tripp v. EOP, 200 F.R.D. 140 (D.D.C. 2001), appeal
dismissed, No. 01-5189, 2001 WL 1488614 (D.C. Cir. Oct. 17, 2001); Dale
v. EOP, 164 F. Supp. 2d 22 (D.D.C. 2001); Falwell v. EOP, 113 F. Supp.
2d 967 (W.D. Va. 2000); Barr v. EOP, No. 99-CV-1695, 2000 WL 33539396
(D.D.C. 2000).
Several courts, however, have either allowed suit to proceed directly
against EOP or suggested that EOP would be a proper party. See Public
Citizen v. Carlin, 2 F. Supp. 2d 1, 8-9 (D.D.C. 1997), rev'd on other
grounds, 184 F.3d 900 (D.C. Cir. 1999), cert. denied, 529 U.S. 1003
(2000) (rejecting argument in APA/Federal Records Act suit against EOP,
OA, and others that EOP should be dismissed on ground that it
"functions simply as an 'umbrella' designation for various separately
designated components which operate in close proximity to the
President"); Armstrong v. EOP, 1 F.3d 1274, 1282 n. 4 (D.C. Cir.
1993)(rejecting untimely argument in APA/Federal Records Act/
Presidential Records Act suit that EOP was improper party); United
States v. Espy, 145 F.3d 1369, 1372-74 (D.C. Cir. 1998)(Independent
Counsel argues EOP is "agency of the United States" under Criminal Code
provision 18 U.S.C. § 6, defining "agency" to include any "authority .
. .of the United States.").
[33] When statutes use unambiguous terms without providing a
specialized technical meaning, the terms generally are deemed to have
their ordinary, "plain" meaning. See, e.g., Cowart v. Nicklos Drilling
Co., 505 U.S. 469, 475 (1992).
[34] When Congress enacts a statute incorporating a section of another
statute, Congress generally is presumed to have adopted the
interpretations given to that other statute. Lorillard v. Pons, 434
U.S. 575, 581 (1978).
[35] In Carlin, footnote 8 above, the court ruled that the actions of
OA, EOP and the Archivist of the United States violated the Federal
Records Act and therefore also violated the APA as "arbitrary and
capricious" actions. In Armstrong, footnote 8 above, the court found
that OA's electronic records management guidelines violated the APA and
thus the Federal Records Act. Finally, in Hartness v. Bush, 712 F.Supp.
986 (D.D.C 1989), rev'd on other grounds, 919 F.2d 170 (D.C. Cir.
1990), the court preliminarily enjoined OA and others, under the APA,
from enforcing an EOP-wide plan under the Drug-Free Workplace statute.
[36] Energy Research Foundation v. Defense Nuclear Facilities Safety
Board, 917 F.2d 581, 583 (D.C. Cir. 1990). See also Meyer v. Bush,
above, 981 F. 2d at 1304 (Wald, J. dissenting)(APA definition of agency
is "less expansive than FOIA's"). As amended, FOIA's definition of
"agency" now reads: "For purposes of this section, the term...'agency'
as defined in section 551(1) of this title includes any executive
department, military department, Government corporation, Government
controlled corporation, or other establishment in the executive branch
of the Government (including the Executive Office of the President), or
any independent regulatory agency...." 5 U.S.C. § 552(f)(1) (emphasis
added).
[37] See H.R. Conf. Rep. No. 1380, 93d Cong., 2d Sess. 15 (1974) ("With
respect to the meaning of the term 'Executive Office of the President,'
the conferees intend the result reached in Soucie v. David. The term is
not to be interpreted as including the President's immediate personal
staff or units in the Executive Office whose sole function is to advise
and assist the President."); S. Rep. No. 854, 93d Cong., 2d Sess. 33
(1974).
[38] The court also was influenced by the fact that finding JAG to be
an APA "agency" would "fundamentally alter the relationship between the
civilian and military courts and would, in essence, defy the
presumptions against civilian-court review of military-court
decisions." McKinney, 141 F. Supp. 2d at 34.
[39] See Report on the Administrative Procedure Act, 79TH Cong., 1ST
Sess. 13 (Comm. Print 1945).
[40] See Armstrong v. EOP, 810 F. Supp. 335 (D.D.C 1993); Armstrong v.
EOP, 821 F. Supp. 761 (D.D.C. 1993), rev'd on other grounds, 1 F.3d
1274 (D.C. Cir. 1993). See also Carlin, footnote 8 above (involving
OA's Federal Records Act responsibilities).
[41] See, e.g., 2002 EOP Budget Hearings at 1; OA Web site at http://
www.whitehouse.gov/oa/ ("The Director of the agency [OA] oversees the
submission of the annual EOP Budget Request and represents the agency
before congressional funding panels.").
[42] While these factors are not strictly applicable in determining
what is an "agency" under the APA, some courts have considered them in
that context because they relate back to the pre-1974 APA/FOIA analysis
in the Soucie decision. In Dong, above, for example, the court cited
EOP FOIA "agency" cases in determining whether the Smithsonian was an
"agency" under the APA. See Dong, 125 F.3d at 881, citing, in addition
to Soucie, Armstrong v. EOP, 90 F.3d 553 (D.C. Cir. 1996)(National
Security Agency not an "agency"); Meyer v. Bush, above, (Task Force on
Regulatory Reform not an "agency"); Rushforth v. Council of Economic
Advisers, 762 F. 2d 1038 (D.C. Cir. 1985) (CEA not an "agency");
Pacific Legal Foundation v. Council on Environmental Quality, 636 F.2d
1259 (D.C. Cir. 1980) (CEQ is an "agency").
[43] As the court explained this factor in Armstrong v. EOP, 90 F. 3d
553, 558 (D.C. Cir. 1996), "[t]he closer an entity is to the President,
the more it is like the White House staff, which solely advises and
assists the President, and the less it is like an agency to which
substantial independent authority has been delegated."
[44] As relevant here, "executive agencies" is defined for purposes of
CICA bid protest proceedings as "an executive department or independent
establishment in the executive branch of the Government." 40 U.S.C. §
102(4).
[45] See, e.g., In re Stay Inc. Protective Services, 92-1 CPD ¶ 393,
1992 WL 93059 (Apr. 24, 1992).
[46] See U.S. General Accounting Office, White House: Acquisition of
Automated Resume Processing System, GAO/GGD-93-117 (Washington, D.C.:
June 17, 1993); U.S. General Accounting Office, White House: Follow-up
on Acquisition of Automated Resume Processing, GAO/GGD-94-127
(Washington, D.C.: Aug. 3, 1994). The FAR applies to "executive
agencies," defined to mean "executive department[s] . . .or any
independent establishment[s] within the meaning of 5 U.S.C. 101, 102,
and 104(1). . .." See 48 C.F.R. §§ 1.101, 2.101(b). Those sections, in
turn, contain a broad, FOIA-like definition of "agency."
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