Hurricane Katrina
Agency Contracting Data Should Be More Complete Regarding Subcontracting Opportunities for Small Businesses Gao ID: GAO-07-205 March 1, 2007In response to Hurricane Katrina, the Departments of Homeland Security (DHS) and Defense (DOD), the General Services Administration (GSA), and the U.S. Army Corps of Engineers (Corps) were responsible for 94 percent of the federal funds awarded for relief efforts via contracting as of May 2006. This report, which GAO conducted under the Comptroller General's Authority, describes (1) the amounts that small businesses received from prime contracts with these agencies, (2) the extent of subcontracting, (3) and the extent to which Disadvantaged Business Enterprises (DBEs) received Department of Transportation funds for Katrina-related projects. In conducting this study, GAO analyzed agency contract data, reviewed federal acquisition regulations, and interviewed agency procurement officials.
Small businesses received a total of 28 percent of the $11 billion in contracting dollars that DHS, GSA, DOD, and the Corps directly awarded in response to Hurricane Katrina. Local businesses of all sizes in Alabama, Louisiana, and Mississippi received 18 percent, or $1.9 billion of these funds. Small businesses received 66 percent of the $1.9 billion awarded in these states. Required information on small business subcontracting is not consistently available in official procurement data systems for the four agencies. The systems had no information on whether DHS or GSA required subcontracting plans for 70 percent or more of their contracting funds. In addition, when data showed agencies determined that the plans were not required, the four agencies often did not document a reason for their determinations, even though federal rules require such documentation when prime contracts meet criteria for having these plans. Incomplete information about subcontracting limits determining the extent to which agencies complied with contracting rules and gave small businesses maximum opportunities to win subcontracts. DBEs were awarded about 4 percent, or about $53 million, of the almost $1.3 billion the Department of Transportation's Federal Highway Administration funded for Katrina-related contracts in Alabama, Louisiana, and Mississippi between August 1, 2005, and June 30, 2006. These contracts were awarded by the three state departments of transportation. DBEs also received about 10 percent of $24 million that airports in the three states awarded using Federal Aviation Administration funds for Katrina-related contracts.
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-07-205, Hurricane Katrina: Agency Contracting Data Should Be More Complete Regarding Subcontracting Opportunities for Small Businesses
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Report to Congressional Addressees:
United States Government Accountability Office:
GAO:
March 2007:
Hurricane Katrina:
Agency Contracting Data Should Be More Complete Regarding
Subcontracting Opportunities for Small Businesses:
GAO-07-205:
GAO Highlights:
Highlights of GAO-07-205, a report to congressional addressees
Why GAO Did This Study:
In response to Hurricane Katrina, the Departments of Homeland Security
(DHS) and Defense (DOD), the General Services Administration (GSA), and
the U.S. Army Corps of Engineers (Corps) were responsible for 94
percent of the federal funds awarded for relief efforts via contracting
as of May 2006. This report, which GAO conducted under the Comptroller
General‘s Authority, describes (1) the amounts that small businesses
received from prime contracts with these agencies, (2) the extent of
subcontracting, (3) and the extent to which Disadvantaged Business
Enterprises (DBEs) received Department of Transportation funds for
Katrina-related projects.
In conducting this study, GAO analyzed agency contract data, reviewed
federal acquisition regulations, and interviewed agency procurement
officials.
What GAO Found:
Small businesses received a total of 28 percent of the $11 billion in
contracting dollars that DHS, GSA, DOD, and the Corps directly awarded
in response to Hurricane Katrina (see fig.) Local businesses of all
sizes in Alabama, Louisiana, and Mississippi received 18 percent, or
$1.9 billion of these funds. Small businesses received 66 percent of
the $1.9 billion awarded in these states.
Required information on small business subcontracting is not
consistently available in official procurement data systems for the
four agencies. The systems had no information on whether DHS or GSA
required subcontracting plans for 70 percent or more of their
contracting funds. In addition, when data showed agencies determined
that the plans were not required, the four agencies often did not
document a reason for their determinations, even though federal rules
require such documentation when prime contracts meet criteria for
having these plans. Incomplete information about subcontracting limits
determining the extent to which agencies complied with contracting
rules and gave small businesses maximum opportunities to win
subcontracts.
DBEs were awarded about 4 percent, or about $53 million, of the almost
$1.3 billion the Department of Transportation‘s Federal Highway
Administration funded for Katrina-related contracts in Alabama,
Louisiana, and Mississippi between August 1, 2005, and June 30, 2006.
These contracts were awarded by the three state departments of
transportation. DBEs also received about 10 percent of $24 million that
airports in the three states awarded using Federal Aviation
Administration funds for Katrina-related contracts.
Figure: Percentage of Katrina-Related Contracts Awarded to Small
Businesses, by DHS, GSA, DOD, and the U.S. Army Corps of Engineers:
[See PDF for Image]
Source: GAO analysis of FPDS-NG and DD-350 data on contracting actions
awarded from August 1, 2005 to June 30, 2006.
[End of figure]
What GAO Recommends:
GAO recommends that DOD, DHS, and GSA (1) issue guidance to key
personnel reinforcing the importance of subcontracting plan
requirements and (2) consider requesting that their Inspectors General
review their compliance with this guidance.
The agencies generally agreed with GAO‘s recommendations and are taking
steps to implement them.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-205].
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact William B. Shear at (202) 512-8678 or
shearw@gao.gov
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Small Businesses Received Varied Amounts of the Contracting Dollars
Awarded by Four Agencies:
Selected Corps Contractors Awarded Most Subcontracting Dollars to Small
Businesses, but Information on Subcontracting Plans for All Four
Agencies Was Incomplete:
Disadvantaged Business Enterprises Participated in FHWA-and FAA-Funded
Contracts and Subcontracts Related to Hurricane Katrina:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Homeland Security:
Appendix III: Comments from the General Services Administration:
Appendix IV: Comments from the Department of Defense:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Dollar Amount of Katrina-Related Contracts Awarded Directly to
Businesses in All States and in States Primarily Affected by Hurricane
Katrina:
Table 2: Small Businesses Received the Majority of Contracting Dollars
Awarded Directly to Local Businesses:
Table 3: Awards of Selected Corps Contractors to Small Businesses as a
Percent of the Subcontracting Dollars Awarded to All Businesses:
Table 4: Amounts Small Businesses Received as Subcontractors as a
Percent of Total Dollars Obligated for Selected Katrina-Related
Contracts:
Table 5: Subcontracting Plan Requirements by Dollar Amount Awarded:
Table 6: DBE Participation in Katrina-Related State DOT Contracts
Awarded With FHWA Funds:
Table 7: DBE Participation in Contracts Awarded by Airports with FAA
Grants:
Figures:
Figure 1: Amount and Percentage of Katrina-Related Contract Dollars
Awarded to Businesses by DHS, GSA, DOD, and the Corps:
Figure 2: Number of Katrina-Related Contract Actions Awarded Directly
to Businesses by Business Size:
Figure 3: Dollar Amount of Katrina-Related Contracts Awarded Directly
to Small Businesses, by Type of Businesses:
Figure 4: Katrina-Related Contracting Dollars by Location:
Abbreviations:
Corps: U.S. Army Corps of Engineers:
DBE: Disadvantaged Business Enterprise:
DCMA: Defense Contract Management Agency:
DHS: Department of Homeland Security:
DOD: Department of Defense:
DOT: Department of Transportation:
eSRS: Electronic Subcontracting Reporting System:
FAA: Federal Aviation Administration:
FAR: Federal Acquisition Regulation:
FHWA: Federal Highway Administration:
FPDS-NG: Federal Procurement Data System--Next Generation:
FTA: Federal Transit Administration:
HUBZone: Historically Underutilized Business Zone:
MOU: Memorandum of Understanding:
GSA: General Services Administration:
SBA: Small Business Administration:
SDB: Small Disadvantaged Business:
United States Government Accountability Office:
Washington, DC 20548:
March 1, 2007:
Congressional Addressees:
Hurricane Katrina caused billions of dollars in damage and affected
about 1.5 million people in Alabama, Louisiana, and
Mississippi.[Footnote 1] In response to the widespread destruction,
Congress provided emergency supplemental disaster appropriations
totaling about $88 billion to 23 different federal agencies. As of May
2006, these 23 agencies had awarded nearly $11 billion for Katrina-
related relief and recovery contracts, with the Departments of Homeland
Security (DHS) and Defense (DOD) as well as the U.S. Army Corps of
Engineers (Corps) and General Services Administration (GSA) accounting
for 94 percent of these dollars, according to official governmentwide
procurement data.[Footnote 2] The agencies were to use the funds to,
among other things, award contracts for a range of services related to
hurricane relief and recovery. Some in Congress have raised concerns
about how much access small businesses had to these contracting
opportunities, especially small businesses in the areas that were
affected by the hurricane. In addition, because of substantial damage
to the region's transportation networks and the role of the Department
of Transportation (DOT) in assisting the states with their rebuilding,
there has been congressional interest regarding the extent to which
Disadvantaged Business Enterprises (DBE)[Footnote 3] received funds
from DOT for projects related to Hurricane Katrina.
We have prepared this report under the Comptroller General's authority
to conduct evaluations on his own initiative as part of a continuing
effort to assist Congress in reviewing federal activities related to
Hurricane Katrina. Specifically, this report discusses (1) the amounts
that small and local businesses received directly from federal agencies
through contracts for relief and recovery efforts related to Hurricane
Katrina, (2) the extent to which selected large prime contractors
subcontracted with small businesses for relief and recovery efforts,
and (3) the extent to which DBEs received funds through DOT for
transportation projects related to reconstruction and recovery from
Hurricane Katrina.[Footnote 4]
To describe the amounts that small and local businesses received
directly from federal contracts, we analyzed data on contracts awarded
or used by DHS, GSA, DOD, and the Corps for Katrina-related projects in
Alabama, Louisiana, and Mississippi from August 1, 2005, through June
30, 2006. Our analysis included contract data from the Federal
Procurement Data System-Next Generation (FPDS-NG), the governmentwide
database of contracting activity, and DD-350, the Department of Defense
database that contains data on individual contracting actions. Although
we could not independently verify the reliability of these data, we
reviewed system documentation, conducted electronic data testing for
inconsistency errors and completeness and compared it with supporting
documentation when available, and interviewed agency officials about
each of the systems. On the basis of these efforts, we determined the
data on amounts received directly from federal contracts to be
sufficiently reliable for the purposes of this report. To describe the
extent to which prime contractors subcontracted with small businesses,
we identified contracts that were awarded or used between August 1,
2005, and June 30, 2006, for activities related to Hurricane Katrina
and that required subcontracting plans. We obtained and analyzed
documentation of subcontracting awards for selected DOD and Corps
contractors that received the most dollars from Katrina-related
contracts from August 1, 2005, through June 30, 2006. For those DHS and
GSA contracts with subcontracting plan requirements, we looked for
documentation of prime contractors' March 31, 2006, subcontracting
awards report in the Electronic Subcontracting Reporting System (eSRS),
a governmentwide database for capturing this information. In addition,
we interviewed officials from each of the four agencies to gather
additional information relating to the use of subcontracting plans. To
describe the extent to which DBEs received funds for DOT-assisted
transportation projects related to reconstruction and recovery from
Hurricane Katrina, we obtained and analyzed data on Federal Highway
Administration (FHWA) and Federal Aviation Administration (FAA)
contracts awarded for Katrina-related projects from August 1, 2005,
through June 30, 2006 (only FHWA and FAA awarded DOT funds to which DBE
requirements applied). A more detailed description of our scope and
methodology is presented in appendix I. We conducted our work in
Washington, D.C., between March 2006 and February 2007 in accordance
with generally accepted government auditing standards.
Results in Brief:
Small businesses received 28 percent of the $11 billion in contracting
dollars DHS, GSA, DOD, and the Corps awarded directly for relief and
recovery from Hurricane Katrina. DHS awarded the highest dollar amount
to small businesses (about $1.6 billion), and GSA awarded the highest
percentage of its Katrina-related contracting dollars directly to small
businesses (72 percent of about $658 million). Of the contracting
dollars that the four agencies awarded directly to small businesses,
those classified as disadvantaged businesses received 24 percent of the
approximately $3 billion that the four agencies awarded to small
businesses. Local businesses, or businesses located in the states
primarily affected by Hurricane Katrina (Alabama, Louisiana, and
Mississippi), received 18 percent, or $1.9 billion, of the $11 billion
the four agencies awarded overall. Small businesses received
approximately 66 percent of the $1.9 billion awarded to all local
businesses. Outside of this area, businesses in California and Florida
received 17 and 15 percent, respectively, of the Katrina-related
contracting dollars the four agencies awarded.
For the military agencies, 4 of the top 10 recipients--all large
businesses--of prime contracting dollars for projects related to
Hurricane Katrina reported awarding from 88 to 100 percent of their
subcontracting dollars to small businesses. The amounts subcontracted
ranged from $11,000 to $201 million. These 4 prime contractors received
their contracting dollars from the Corps. For the other 6 recipients of
contract dollars from DOD and the Corps, subcontracting plan
requirements did not apply or contracting activities related to
Hurricane Katrina could not be separated from unrelated activities.
Information on subcontracting accomplishments associated with 4 of 7
DHS contracts shows that small businesses received from 14 to 83
percent of the dollars awarded through subcontracts as of March 31,
2006. Information on subcontracting accomplishments for the remaining
DHS contracts and all 11 GSA contracts awarded to large businesses was
generally not available because contractors had not reported the data,
the agencies had not finalized the data, or the available data included
both Katrina-related and other contract activities. While we could
document this information, additional key information about small
business subcontracting plans was not consistently available in
official procurement data systems for the four agencies. These plans,
which detail goals for subcontracting to small businesses, are
generally required for acquisitions by executive agencies of more than
$500,000.[Footnote 5] For DHS and GSA, information on whether the two
agencies required subcontracting plans is generally not available in
the data systems for nearly three-fourths of the contracting dollars
each agency awarded. DHS officials could not explain the lack of
subcontracting information on $861 million in agency contracting
dollars; DOD officials were unable to explain the lack of
subcontracting information on $3.3 million in agency contracting
dollars. Also, according to official procurement data systems, the four
agencies determined that subcontracting plans were not required from
their large prime contractors for 12 percent (GSA) to 77 percent (DOD)
of their contracting dollars. However, information on the agencies'
reasons for not requiring these plans, which should be readily
available, is incomplete. The lack of information on the four agencies'
compliance with subcontracting plan requirements limits determining the
extent to which they followed federal contracting rules designed to
give small businesses maximum opportunities to participate in their
contracts.[Footnote 6]
To ensure compliance with federal contracting regulations and to more
transparently disclose the extent to which subcontracting opportunities
were available to small businesses, we recommend that the Secretary of
Homeland Security, the Secretary of Defense, and the Administrator of
General Services issue guidance to the appropriate procurement offices
and personnel reinforcing, among other things, the necessity for
documenting in publicly available sources the agencies' decisions
regarding subcontracting plan requirements. The Secretaries of DHS and
DOD along with the GSA Administrator should also consider asking their
Inspectors General to conduct a review at an appropriate future date to
ensure that this guidance and related requirements are being followed.
In written comments on a draft of this report, the agencies generally
agreed with our recommendations and described various steps they are
taking to implement them (see appendixes II, III, and IV).
DBEs were awarded about 4 percent, or about $53 million, of the
approximately $1.3 billion that FHWA funded for Katrina-related
contracts in Alabama, Louisiana, and Mississippi between August 1,
2005, and June 30, 2006. The Mississippi DOT awarded about 64 percent
of the FHWA dollars that DBEs were awarded. DBEs also were awarded
about 10 percent, or about $2.4 million, of the $24 million that FAA
awarded for Katrina-related contracts and subcontracts at airports in
the three states between August 1, 2005, and June 30, 2006.
Background:
When the President declares a state of emergency after a natural or
other major disaster, the declaration gives the federal government the
authority to engage in various emergency response activities, many of
which the agencies provide through contracts with private
businesses.[Footnote 7] Such activities include, among other things,
debris removal, temporary housing assistance, reconstruction, and the
provision of supplies. These contracts are subject to federal
procurement regulations.
Federal Goals for Contracts with Small and Local Businesses:
Federal agencies' contracts with private businesses, whether made in
the normal course of agency operations or specifically related to a
natural disaster declaration, are, in most cases, subject to certain
goals to increase participation by various types of small businesses.
The Small Business Act, as amended, defines a small business generally
as one that is "independently owned and operated and that is not
dominant in its field of operation."[Footnote 8] In addition, a
business must meet the size standards published by SBA to be considered
"small"; these standards use businesses' annual revenue or their number
of employees as criteria for determining size. The act sets a
governmentwide goal for small business participation of not less than
23 percent of the total value of all prime contract awards--contracts
that are awarded directly by an agency--for each fiscal year.[Footnote
9] The Small Business Administration (SBA) is responsible for reporting
annually to the President and Congress on agencies' achievements
relative to the goals.
Because some agencies' activities lend themselves to contracting
opportunities more than others, SBA negotiates goals in annual
procurement with federal executive agencies to achieve the 23 percent
governmentwide goal for contract dollars awarded directly by a federal
agency.[Footnote 10] As a result, some agencies have goals higher than
23 percent, while others may have goals that are lower than or just at
23 percent. For example, the agencies we reviewed had different goals
for awarding contract dollars directly to small businesses in fiscal
years 2005 and 2006. DHS's goals were 23 and 30 percent for 2005 and
2006, respectively. GSA's goals were 43 and 45 percent, respectively,
and DOD's (including the Corps) goal was 23 percent for both years. The
Small Business Act also sets annual prime contract dollar goals for
participation by five specific types of small businesses: small
businesses (23 percent); small disadvantaged businesses (5 percent);
women-owned or service-disabled, veteran-owned, (5 and 3 percent,
respectively); and businesses located in historically underutilized
business zones (HUBZones, 3 percent).[Footnote 11] The Small Business
Act[Footnote 12] defines these businesses as follows:
* Small businesses are those that are independently owned and operated,
and are not dominant in their field of operations.
* Small disadvantaged businesses must be owned and controlled by
socially and economically disadvantaged individuals, such as African
Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent
Asian Americans, or Native Americans. These owners must have at least a
51 percent stake in the business.
* Women-owned small businesses must have at least 51 percent female
ownership. For publicly owned businesses, one or more women must hold
at least 51 percent of the stock and control both management and daily
business operations.
* Service-disabled, veteran-owned small businesses must be owned--also
at least 51 percent--by one or more veterans with a service-related
disability. In addition, the management and daily operations of the
business must be controlled by one or more veterans with a service-
related disability.
* HUBZone small businesses must have their principal offices physically
located in these historically underutilized business zones, which are
economically distressed metropolitan or nonmetropolitan areas--that is,
areas with low-income levels or high unemployment rates--and must
employ some staff who live in these zones.[Footnote 13]
Finally, the Stafford Act sets forth requirements for the federal
response to presidentially declared disasters. It requires federal
agencies to give contracting preferences, to the extent feasible and
practicable, to organizations, firms, and individuals residing or doing
business primarily in the area affected by a major disaster or
emergency.[Footnote 14]
Federal Rules for Contracts with Businesses:
The general rules governing procurement for executive agencies are set
out in federal procurement statutes and in the Federal Acquisition
Regulation (FAR). Individual agencies may also have additional
acquisition regulations to supplement the FAR. The FAR requires
agencies to measure small business participation in their acquisition
programs. A small business may participate via contracts that are
awarded directly by a federal agency or through subcontracts with the
businesses that receive contracts directly from a federal agency. Any
business receiving a contract directly from a federal executive agency
for more than the simplified acquisition threshold[Footnote 15] must
agree to give small business the "maximum practicable opportunity" to
participate in the contract "consistent with its efficient
performance."[Footnote 16] Additionally, for contracts (or
modifications to contracts) that (1) are individually expected to
exceed $500,000 ($1 million for construction contracts) and (2) have
subcontracting possibilities, the prime contractor generally must have
in place a subcontracting plan.[Footnote 17] The subcontracting plan
must identify the types of work the prime contractor believes it is
likely to award as subcontracts as well as the percentage of
subcontracting dollars it expects to direct to the specific categories
of small businesses for which the Small Business Act sets specific
goals.[Footnote 18] For contracts that have individual subcontracting
plans, prime contractors must semiannually and at project completion
report on their progress toward reaching the goals in their
subcontracting plans. Contractors that meet or exceed their goals may
receive monetary incentives if the contract included such incentives.
Contractors that fail to meet their subcontracting goals may be
assessed damages if the contracting officer for the contract (i.e., the
agency official responsible for awarding and monitoring the contract)
determines that the contractor failed to make a good-faith effort to
comply with a subcontracting plan.
Agency and Governmentwide Contract Data:
When they award contracts, federal agencies collect and store
procurement data in their own internal systems--typically called
contract writing systems. The FAR requires federal agencies to report
the information about procurements directly to the Federal Procurement
Data System-Next Generation (FPDS-NG), GSA's governmentwide contracting
database, which collects, processes, and disseminates official
statistical data on all federal contracting activities of more than
$2,500.[Footnote 19] This system automatically obtains from other
systems or online resources additional information that is important to
the procurement, such as the contractor's location. According to GSA,
nearly all civilian agencies have directly linked their contract
writing systems to FPDS-NG so that information about their contracting
activities is available in "real time." DOD also reports its
contracting information to FPDS-NG via its system, DD-350, but GSA does
not publicly reveal these data for 90 days due to security
considerations.
DOT's Disadvantaged Business Enterprise Program:
The Disadvantaged Business Enterprise Program[Footnote 20] (DBE
Program) of DOT was enacted to help ensure nondiscrimination in the
award and administration of DOT-assisted contracts in the department's
highway, transit, and airport financial assistance programs. State
DOTs, transit authorities, and airports receiving DOT funding for
transportation projects are to have a goal-oriented program for small
businesses owned and controlled by socially and economically
disadvantaged individuals to participate on DOT-assisted contracts. The
objectives of the DBE Program are to ensure that these businesses have
an equitable opportunity to participate in contracts awarded by the
recipients of DOT financial assistance, and that they receive a share
of the resulting contract awards. Within DOT, the three major operating
administrations--FHWA, FAA, and the Federal Transit Administration
(FTA)--oversee the DBE Program. DOT requires that the state and local
transportation agencies and airports that receive its funds set two
kinds of goals for DBE participation: (1) annual goals for the
percentage of dollars that DBEs would be expected to receive through
contract and subcontract awards of all DOT-assisted contracts for the
year absent the effects of discrimination[Footnote 21] and (2) when
appropriate and as needed to meet the annual goal for the year,
contract-specific goals for DBE participation as subcontractors on
prime contracts that have subcontracting possibilities. According to
DOT officials, there were no overall DBE goals set for Katrina-related
contracts as a whole.
DOT also requires that the state and local agencies certify the
eligibility of the DBE firms participating in DOT-assisted contracts
through on-site visits, personal interviews, and reviews of business
licenses and stock ownership. The purpose of certification is to ensure
that the firms that state and local agencies certify as DBEs are owned
and controlled by individuals who are socially and economically
disadvantaged as the statute and implementing regulations define those
terms.[Footnote 22] SBA's Small Disadvantaged Business Program (SDB)
and DOT's DBE Program share many common certification requirements.
According to DOT officials, a memorandum of understanding (MOU) is
presently under consideration for renewal that establishes processes
and procedures to streamline the certification of firms certified under
DOT rules in SBA programs and participation of firms certified under
SBA rules in DOT programs.[Footnote 23]
Small Businesses Received Varied Amounts of the Contracting Dollars
Awarded by Four Agencies:
Overall, small businesses received 28 percent of the $11 billion that
DHS, GSA, DOD, and the Corps awarded for Katrina-related projects, but
the percentages varied among the four.[Footnote 24] These four agencies
awarded about $3 billion of their Katrina-related contracting dollars
directly to small businesses and over $8 billion to large businesses
between August 1, 2005, and June 30, 2006 (fig. 1). Assessed
individually, DHS awarded the highest dollar amount to small
businesses--about $1.6 billion dollars--and GSA awarded the highest
percentage of its dollars to small businesses--72 percent of about $658
million.
Figure 1: Amount and Percentage of Katrina-Related Contract Dollars
Awarded to Businesses by DHS, GSA, DOD, and the Corps:
[See PDF for image]
Source: GAO analysis of FPDS-NG and DD-350 data on contracting actions
awarded from August 1, 2005 to June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[End of figure]
While small businesses received 28 percent of the funds that DHS, GSA,
DOD, and the Corps awarded, they received 55 percent of contract
actions for activities related to Hurricane Katrina, awarded directly
by these agencies (fig. 2).[Footnote 25] Individually, the agencies
awarded from 41 to 68 percent of their contract actions to small
businesses, with DHS awarding the lowest percentage and GSA awarding
the highest. In relation to Hurricane Katrina, small businesses have
received contracts directly from the four agencies to provide a variety
of products, such as trailers and sewage treatment equipment, and
services, such as construction, data entry, and housing.
Figure 2: Number of Katrina-Related Contract Actions Awarded Directly
to Businesses by Business Size:
[See PDF for image]
Source: GAO analysis of FPDS-NG and DD-350 data on contracting actions
awarded from August 1, 2005 to June 30, 2006.
[End of figure]
Among categories of small businesses, small disadvantaged businesses
received 24 percent of the approximately $3 billion that the four
agencies awarded to small businesses. Other categories of small
businesses, including women-and veteran-owned businesses and businesses
located in HubZones, received from 2 to 16 percent (fig. 3).
Individually, the agencies we reviewed awarded different percentages of
their contracting dollars directly to various types of small
businesses. For example, DHS, DOD, and the Corps awarded more than 10
percent of their contracting dollars directly to HUBZone and women-
owned businesses, and from 23 percent to 29 percent to disadvantaged
businesses. GSA awarded 3 percent to HubZone businesses, 12 percent to
women-owned businesses, and 8 percent to disadvantaged businesses.
Contracting dollars awarded directly to businesses can be counted in
more than one category, so the dollars awarded to various types of
small businesses are not mutually exclusive.
Figure 3: Dollar Amount of Katrina-Related Contracts Awarded Directly
to Small Businesses, by Type of Businesses:
[See PDF for image]
Source: GAO analysis of FPDS-NG and DD-350 data on contracting actions
awarded from August 1, 2005 to June 30, 2006.
Note: Percentages cannot be totaled across columns because under SBA
Guidelines, contracting dollars awarded directly to businesses can be
counted in more than one category--for example, a small disadvantaged
business owned by a woman can be counted as both disadvantaged and
women-owned. Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] The service-disabled category is a subset of the veteran- owned
business category.
[End of figure]
Local businesses, or businesses of all sizes located in the states
primarily affected by Hurricane Katrina--Alabama, Louisiana, and
Mississippi--received 18 percent, or $1.9 billion, of the $11 billion
in contracting dollars that the four agencies directly awarded between
August 1, 2005, and June 30, 2006. Louisiana businesses received the
most contracting dollars--about $1 billion, or 10 percent of the total
amount of dollars the four agencies awarded during this time period
(see table 1).
Table 1: Dollar Amount of Katrina-Related Contracts Awarded Directly to
Businesses in All States and in States Primarily Affected by Hurricane
Katrina:
Dollars in millions.
Agency: DHS[B];
All states[A]: Dollar amount: $6,418;
All states[A]: Percent: 100%;
Alabama: Dollar amount: $160;
Alabama: Percent: 2%;
Louisiana: Dollar amount: $460;
Louisiana: Percent: 7%;
Mississippi: Dollar amount: $138;
Mississippi: Percent: 2%.
Agency: GSA;
All states[A]: Dollar amount: 658;
All states[A]: Percent: 100;
Alabama: Dollar amount: 77;
Alabama: Percent: 12;
Louisiana: Dollar amount: 48;
Louisiana: Percent: 7;
Mississippi: Dollar amount: 210;
Mississippi: Percent: 32.
Agency: DOD;
All states[A]: Dollar amount: 987;
All states[A]: Percent: 100;
Alabama: Dollar amount: 10;
Alabama: Percent: 1;
Louisiana: Dollar amount: 7;
Louisiana: Percent: 1;
Mississippi: Dollar amount: 45;
Mississippi: Percent: 5.
Agency: Corps;
All states[A]: Dollar amount: 3,110;
All states[A]: Percent: 100;
Alabama: Dollar amount: 84;
Alabama: Percent: 3;
Louisiana: Dollar amount: 609;
Louisiana: Percent: 20;
Mississippi: Dollar amount: 114;
Mississippi: Percent: 4.
Total[A];
All states[A]: Dollar amount: $11,173;
All states[A]: Percent: 100%;
Alabama: Dollar amount: $331;
Alabama: Percent: 3;
Louisiana: Dollar amount: $1,124;
Louisiana: Percent: 10;
Mississippi: Dollar amount: $508;
Mississippi: Percent: 5.
Source: FPDS-NG and DD-350 data on contract actions awarded between
August 1, 2005, and June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand, and
percentages were calculated from unrounded numbers.
[A] The total includes dollars awarded to businesses in all states and
the District of Columbia as well as businesses located outside of the
United States.
[B] DHS data are missing information on the contractor's state for 3.5
percent of its records. Where possible, GAO used available information
on the contractor's city and place of performance to identify the state
in which the contractor was located.
[End of table]
Small businesses in these states received 66 percent of the $1.9
billion in Katrina-related contracting dollars awarded to local
businesses by the four agencies we reviewed. Among the three states,
Mississippi saw the largest proportion (75 percent) of Katrina-related
contracting dollars awarded to small businesses (see table 2). Although
small businesses in Louisiana received the smallest proportion of
Katrina-related contracting dollars (62 percent) awarded directly by
the four agencies, the actual amount these businesses received was
nearly double what small businesses received in Mississippi, and more
than three times what they were awarded in Alabama. In general, these
small local businesses received contracting dollars directly from the
four agencies to provide trailers, administrative and service
buildings, restoration activities, and other supportive services.
Table 2: Small Businesses Received the Majority of Contracting Dollars
Awarded Directly to Local Businesses:
Dollars in millions.
DHS[A];
Alabama: All businesses: Dollar amount: $160;
Alabama: Small businesses: Dollar amount: $119;
Alabama: Small businesses: Percent: 75%;
Louisiana: All businesses: Dollar amount: $460;
Louisiana: Small businesses: Dollar amount: $345;
Louisiana: Small businesses: Percent: 75%;
Mississippi: All businesses: Dollar amount: $138;
Mississippi: Small businesses: Dollar amount: $138;
Mississippi: Small businesses: Percent: 100%.
GSA;
Alabama: All businesses: Dollar amount: 77;
Alabama: Small businesses: Dollar amount: 72;
Alabama: Small businesses: Percent: 92;
Louisiana: All businesses: Dollar amount: 48;
Louisiana: Small businesses: Dollar amount: 26;
Louisiana: Small businesses: Percent: 54;
Mississippi: All businesses: Dollar amount: 210;
Mississippi: Small businesses: Dollar amount: 194;
Mississippi: Small businesses: Percent: 92.
DOD;
Alabama: All businesses: Dollar amount: 10;
Alabama: Small businesses: Dollar amount: 10;
Alabama: Small businesses: Percent: 27;
Louisiana: All businesses: Dollar amount: 7;
Louisiana: Small businesses: Dollar amount: 6;
Louisiana: Small businesses: Percent: 89;
Mississippi: All businesses: Dollar amount: 45;
Mississippi: Small businesses: Dollar amount: 9;
Mississippi: Small businesses: Percent: 20.
Corps;
Alabama: All businesses: Dollar amount: 84;
Alabama: Small businesses: Dollar amount: 16;
Alabama: Small businesses: Percent: 19;
Louisiana: All businesses: Dollar amount: 609;
Louisiana: Small businesses: Dollar amount: 320;
Louisiana: Small businesses: Percent: 53;
Mississippi: All businesses: Dollar amount: 114;
Mississippi: Small businesses: Dollar amount: 42;
Mississippi: Small businesses: Percent: 36.
Total;
Alabama: All businesses: Dollar amount: $331;
Alabama: Small businesses: Dollar amount: $217;
Alabama: Small businesses: Percent: 65%;
Louisiana: All businesses: Dollar amount: $1,124;
Louisiana: Small businesses: Dollar amount: $697;
Louisiana: Small businesses: Percent: 62%;
Mississippi: All businesses: Dollar amount: $508;
Mississippi: Small businesses: Dollar amount: $383;
Mississippi: Small businesses: Percent: 75%.
Source: FPDS-NG and DD-350 data on contract actions awarded between
August 1, 2005 and June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] DHS data are missing information on the contractor's state for 3.5
percent of its records. Where possible, GAO used available information
on the contractor's city and place of performance to identify the state
in which the contractor was located.
[End of table]
The remaining 82 percent of the approximately $11 billion awarded by
the four agencies went to businesses throughout the United States
(including Puerto Rico and the U.S. Virgin Islands) and Canada. For
example, the agencies directly awarded 17 percent of their Katrina-
related contracting dollars, or almost $1.9 billion, to businesses
located in California, and 15 percent, or approximately $1.7 billion,
to businesses located in Florida (fig. 4). Businesses located in
Virginia received about 9 percent of the funds the four agencies
awarded, or about $996 million.
Figure 4: Katrina-Related Contracting Dollars by Location:
[See PDF for image]
Source: GAO analysis of FPDS-NG and DD-350 data on contracting actions
awarded from August 1, 2005 to June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] "Other" includes other states, the U.S. Virgin Islands, Puerto
Rico, and Canada.
[End of figure]
Selected Corps Contractors Awarded Most Subcontracting Dollars to Small
Businesses, but Information on Subcontracting Plans for All Four
Agencies Was Incomplete:
We found that the four Corps contractors that we reviewed awarded the
majority of their Katrina-related subcontracting dollars to small
businesses. However, viewed in terms of the total amounts obligated, we
found that the selected Corps contractors awarded from less than 1
percent in one case to over half of the total amounts obligated as of
March 31, 2006, to small businesses. In addition, subcontracting
accomplishment information was not consistently available for the DHS
and GSA contracts that were awarded to large businesses, and that,
according to agency officials or FPDS-NG, required subcontracting
plans. This information was not consistently available because
contractors failed to submit it, agencies had not finalized the data,
or the information could not be isolated from non-Katrina activities.
Also, key information about small business subcontracting plans was not
consistently available in official procurement data systems even though
federal contracting rules state that the information should be
documented there. Specifically, for significant amounts of contracting
dollars, primarily at DHS and GSA, the systems had no information at
all on whether or not the agencies required these plans. Also, at all
four agencies, when they did not require subcontracting plans, to
varying degrees there was no information on the reason for the
agencies' decision even though the FAR requires that contract files
contain "justifications and approvals, determinations and findings, and
associated documents."[Footnote 26] The incomplete information on
subcontracting plan requirements limits determining the extent to which
agencies complied with contracting rules designed to give small
businesses maximum opportunities to win subcontracts.
Corps Contractors Reported Awarding the Majority of their
Subcontracting Dollars to Small Businesses:
We reviewed 4 of the top 10 recipients of prime contracting dollars
from DOD and the Corps for projects related to Hurricane
Katrina.[Footnote 27] Together, these 10 contractors accounted for 60
percent of these agencies' prime contracting dollars. Of these top 10
recipients, only 4 received contracts that were strictly for Hurricane
Katrina-related projects and were required to submit small business
subcontracting plans for these projects.[Footnote 28] These 4
contractors were large businesses and received eight contracts from the
Corps that accounted for $928 million of the Corps' contracting dollars
as of March 31, 2006.[Footnote 29] In accordance with federal
requirements for reporting of subcontracting information, the
contractors reported the amounts they subcontracted to businesses by
business size and type. According to the reports submitted for the
period ending March 31, 2006, these 4 contractors awarded from 88 to
100 percent of their subcontracting dollars to small businesses, or
from about $11,000 to $201 million (table 3).[Footnote 30] According to
their subcontracting plans, the 4 contractors we reviewed intended to
use subcontractors to assist with a variety of clean-up and repair
activities, including excavation, debris removal, and temporary roofing
installation.
Table 3: Awards of Selected Corps Contractors to Small Businesses as a
Percent of the Subcontracting Dollars Awarded to All Businesses:
Dollars in millions.
Prime contractor: Contractor A;
Contract number: A-1;
Amount contractor awarded to all subcontractors: $228;
Amount contractor awarded to small subcontractors: $201;
Percent[A]: 88%.
Prime contractor: Contractor B;
Contract number: B-1;
Amount contractor awarded to all subcontractors: 3;
Amount contractor awarded to small subcontractors: 3;
Percent[A]: 100.
Prime contractor: Contractor B;
Contract number: B-2;
Amount contractor awarded to all subcontractors: 0.6;
Amount contractor awarded to small subcontractors: 0.6;
Percent[A]: 100.
Prime contractor: Contractor B;
Contract number: B-3;
Amount contractor awarded to all subcontractors: 1;
Amount contractor awarded to small subcontractors: 1;
Percent[A]: 100.
Prime contractor: Contractor B;
Contract number: B-4;
Amount contractor awarded to all subcontractors: 0.4;
Amount contractor awarded to small subcontractors: 0.4;
Percent[A]: 100.
Prime contractor: Contractor B;
Contract number: B-5;
Amount contractor awarded to all subcontractors: 0.01;
Amount contractor awarded to small subcontractors: 0.01;
Percent[A]: 100.
Prime contractor: Contractor C;
Contract number: C-1;
Amount contractor awarded to all subcontractors: 24;
Amount contractor awarded to small subcontractors: 23;
Percent[A]: 95.
Prime contractor: Contractor D;
Contract number: D-1;
Amount contractor awarded to all subcontractors: $212;
Amount contractor awarded to small subcontractors: $188;
Percent[A]: 89%.
Source: Individual subcontracting reports as of March 31, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] The percent of all subcontracting dollars awarded that were awarded
to small businesses.
[End of table]
We also conducted additional analysis on the four selected Corps
contractors. This analysis shows that the percentages of contracting
dollars that small businesses received through subcontracts from the
four Corps contractors are smaller when analyzed in broader terms than
those used for federal reporting requirements. The federal government
requires that, when subcontracting plan requirements apply, contractors
must agree to report the percentages and amounts of the total
subcontracting dollars that small businesses receive, and the four
contractors we analyzed met this reporting requirement.[Footnote 31]
However, as we have previously reported, because a contractor could
decide to subcontract only a small amount of its total federal
contract, the portion of subcontracted dollars going to small
businesses--if reported as a percentage of total subcontracted dollars
rather than of total contract dollars--could appear to be
large.[Footnote 32] We compared the amounts each of the four selected
Corps contractors subcontracted to small businesses through eight
Katrina-related contracts as of March 31, 2006, with the total amount
obligated for each contract as of March 31, 2006 (table 4). This
comparison, using the total amounts obligated, showed that the
contractors awarded small businesses from less than 1 to 54 percent of
the total amounts obligated. As we have noted, these percentages could
change over time if the contractors award additional dollars to small
businesses over the life of the contracts and if the total amounts
obligated change.
Table 4: Amounts Small Businesses Received as Subcontractors as a
Percent of Total Dollars Obligated for Selected Katrina-Related
Contracts:
Dollars in millions.
Prime contractor: Contractor A;
Contract number: A-1;
Total obligated[A]: $447,025,736;
Amount each prime contractor awarded to small business: $201;
Percent[B]: 45%.
Prime contractor: Contractor B;
Contract number: B-1;
Total obligated[A]: 7,130,002;
Amount each prime contractor awarded to small business: 3;
Percent[B]: 39.
Prime contractor: Contractor B;
Contract number: B-2;
Total obligated[A]: 15,189,862;
Amount each prime contractor awarded to small business: 0.6;
Percent[B]: 4.
Prime contractor: Contractor B;
Contract number: B-3;
Total obligated[A]: 28,283,410;
Amount each prime contractor awarded to small business: 1;
Percent[B]: 4.
Prime contractor: Contractor B;
Contract number: B-4;
Total obligated[A]: 8,662,500;
Amount each prime contractor awarded to small business: 0.4;
Percent[B]: 4.
Prime contractor: Contractor B;
Contract number: B-5;
Total obligated[A]: 14,817,225;
Amount each prime contractor awarded to small business: 0.01;
Percent[B]: 0.08.
Prime contractor: Contractor C;
Contract number: C-1;
Total obligated[A]: 60,000,000;
Amount each prime contractor awarded to small business: 23;
Percent[B]: 38.
Prime contractor: Contractor D;
Contract number: D-1;
Total obligated[A]: $347,390,830;
Amount each prime contractor awarded to small business: $188;
Percent[B]: 54%.
Source: Individual subcontracting report as of March 31, 2006, DD-350,
and Corps data.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] This total amount obligated as of March 31, 2006.
[B] The percent of the total amount obligated that was awarded to small
businesses.
[End of table]
Subcontracting Accomplishment Information Is Not Consistently Available
for the DHS and GSA Contracts Related to Hurricane Katrina That
Required Subcontracting Plans:
Subcontracting accomplishment information is not consistently available
for the DHS and GSA contracts that were awarded to large businesses for
activities related to Hurricane Katrina, and that, according to agency
officials or FPDS-NG, required subcontracting plans. Contractors that
have individual subcontracting plans are generally required to report
on their subcontracting goals and accomplishments twice a year to the
federal government through eSRS. Furthermore, the agencies' contracting
officers are responsible for monitoring the prime contractors'
activities and ensuring, among other things, that they submit complete
and timely information in accordance with the terms of their federal
contract.
For DHS, in response to our inquiries, agency officials researched
contracts that appeared to meet the regulatory criteria for requiring a
subcontracting plan (i.e., awarded to a large business for over
$500,000 or $1,000,000 for construction) but which FPDS-NG indicated
either did not require one or the system was missing information on a
plan requirement altogether. For every contract that an agency awards,
the agency is required to indicate in FPDS-NG whether a subcontracting
plan is required. These officials found that subcontracting plans were,
in fact, required for seven contracts, but that this had not been
entered into FPDS-NG. DHS officials determined that subcontracting
accomplishment information was available on four of the seven
contracts.[Footnote 33] For the four contracts, the contractors
reported awarding from 14 to 83 percent of their subcontracting
dollars, which ranged from $154 to $520 million, to small businesses as
of March 31, 2006. For the remaining three contracts, subcontracting
information was not available either because the prime contractor had
not, as required, reported subcontracting accomplishment information to
the electronic subcontracting reporting system (eSRS) as of March 31,
2006, or the contractor was not required to report on individual
contracts.[Footnote 34]
For GSA, information is generally unavailable on the subcontracting
activities associated with the 11 contracts the agency awarded to large
businesses for Katrina-related activities and which included
subcontracting plans. According to FPDS-NG, GSA awarded 11 Katrina-
related contracts (worth a total of about $9.6 million) for which
subcontracting information was not available because contractors had
failed to report it, the data had not been finalized, or, in one case,
the contractor had reported aggregated figures for both Katrina-related
and other subcontracts. Specifically, information was unavailable on 9
GSA-awarded contracts because the contractors had not submitted data
into eSRS, and on 1 other contract because the data were still in
"draft" form in eSRS.[Footnote 35] While subcontracting information was
available on 1 of the GSA-awarded contracts related to Hurricane
Katrina, we could not isolate data related solely to that disaster, as
the contract had been used for other unrelated activities and the
available subcontracting information was reported for the entire
contract. Because subcontracting accomplishments were reported for the
contract as a whole, and not for individual contract actions, it is not
possible, with available data, to disaggregate Katrina and non-Katrina-
related subcontracting accomplishments.
Agency officials could not entirely explain what caused certain DHS and
GSA prime contractors, whose contracts did include subcontracting
plans, to fail to submit the required documentation of their activities
and accomplishments into eSRS for the period ending March 31, 2006.
However, one possible reason may have to do with the effect that
incomplete information about prime contracts in FPDS-NG can have when
it carries over into eSRS. Specifically, eSRS only allows contractors
to submit information on their subcontracting activities when contracts
are correctly coded in FPDS-NG as requiring a subcontracting plan. As a
result, if a contract is not in FPDS-NG or has not been entered
correctly as requiring a subcontracting plan, the contractor will not
be able to submit information about subcontracting activities into
eSRS. Without timely and complete information on the extent to which
contractors are subcontracting with small businesses, the eSRS is less
useful as a tool for providing transparency on the extent to which
small businesses are, as intended, receiving opportunities to
participate in federal contracts. In addition, the ability of eSRS to
accurately produce reports on subcontracting achievements is
compromised.
Incomplete Agency Information on Subcontracting Plan Requirements
Raises Concerns about Compliance with Contracting Rules and
Opportunities for Small Businesses:
As was the case with certain agency data on subcontracting
accomplishments, in two respects, key information on small business
subcontracting plans was not consistently available in official
procurement data systems for the four agencies. First, the official
procurement data system, primarily for DHS and GSA, had no information
at all on whether or not they required subcontracting plans for 70
percent or more of their contracting funds. DHS and GSA officials were,
to varying degrees, unable to explain the lack of information on
subcontracting plan requirements associated with their Katrina-related
contracting dollars. Second, the four agencies, according to
procurement data systems, determined that subcontracting plans were not
required for contracts representing 12 to 77 percent of the dollars
they awarded to large businesses for Katrina-related projects that
appeared to meet the criteria for including such plans. Data on the
four agencies' reasons for their determinations about not requiring
these plans, which should be in the data systems or readily available,
were incomplete.
For the types of contracts we reviewed, executive agencies generally
must require subcontracting plans when they award federal contracts of
more than $500,000 to large businesses.[Footnote 36] According to the
FAR, agencies must make the maximum practical opportunities available
for small businesses to participate in federal procurements and
agencies must take steps to ensure that prime contractors play a role
in ensuring those opportunities are made available.[Footnote 37]
Additionally, the FAR requires that federal executive agencies must
maintain public files of data on their procurement activities, such as
whether or not they have required prime contractors to submit and
report on subcontracting plans.[Footnote 38] We also note that the FAR
requires that federal agencies have readily accessible information on
each of the contracts that they have awarded.[Footnote 39] Finally,
under the FAR, a contractor is not required to submit a subcontracting
plan if the contracting officer determines that no subcontracting
possibilities exist.[Footnote 40] The contracting officer's
determination must be approved at a level above the contracting officer
and documented in the contract file.[Footnote 41] This information is
to be captured in FPDS-NG for civilian agencies and in its military
counterpart, DD-350, for military agencies. By capturing the reason for
decisions about forgoing subcontracting plans, such as the lack of
subcontracting possibilities, these systems provide transparency into a
process intended to ensure maximum opportunities for small businesses
to participate in federal procurements.
As we noted, information about whether the four agencies met the
criteria for requiring subcontracting plans and, when they did not
require a plan, their reasons for doing so were incomplete.
Specifically, for contracts representing the majority of the dollars
that DHS and GSA awarded to large businesses for contracts valued over
$500,000, no information was available in FPDS-NG on whether the two
agencies required subcontracting plans or had waived this requirement
(see table 5, column 6). Also, for contracts representing 12 to 77
percent of the funds they awarded to large businesses through contracts
for over $500,000, the procurement system showed that the agencies
determined that subcontracting plans were not required (table 5, column
5). Agency officials were unable to explain why subcontracting plans
were not required for contract dollars ranging from at least $16
million to $861 million.
Table 5: Subcontracting Plan Requirements by Dollar Amount Awarded:
Dollars in millions.
DHS;
Total amount awarded to large businesses over $500,000[A]: $4,866.2;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: 1%; Percent of total amount awarded and dollar
amount requiring a subcontracting plan: $27.2;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: 0%; Percent of total amount awarded and
dollar amount with no subcontracting possibilities: $16.3;
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: 29%;
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: $1,406.0; Percent of total amount
awarded and dollar amount with no information on subcontracting plan
requirements: 70%;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: $3,416.7.
GSA;
Total amount awarded to large businesses over $500,000[A]: 127.1;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: 7;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: 8.9;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: 4;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: 4.7;
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: 12;
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: 15.1;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: 77;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: 98.4.
DOD;
Total amount awarded to large businesses over $500,000[A]: 631.2;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: 22;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: 141.4;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: 0;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: [Empty];
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: 77;
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: 483.6;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: 1;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: 6.2.
Corps;
Total amount awarded to large businesses over $500,000[A]: $2,468.7;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: 76%;
Percent of total amount awarded and dollar amount requiring a
subcontracting plan: $1,880.1;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: 0%;
Percent of total amount awarded and dollar amount with no
subcontracting possibilities: [Empty];
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: 23%;
Percent of total amount awarded and dollar amount reported as not
requiring a subcontracting plan: $574.5;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: 1%;
Percent of total amount awarded and dollar amount with no information
on subcontracting plan requirements: $14.1.
Source: GAO analysis of FPDS-NG and DD-350 data for contract actions
awarded between August 1, 2005, and June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] One million dollars for construction.
[End of table]
Overall, procurement officials from the four agencies were able to
explain some of the missing or incomplete subcontracting plan
information, for example, by identifying data entry errors or providing
evidence of additional justification for not requiring the
subcontracting plans. Nonetheless, for each agency, there remain
contracting dollars for which the subcontracting plan information is
incomplete and which agency officials have not been able to explain.
Specifically:
* For DHS, table 5 shows that $3.4 billion in contracting dollars
lacked any information on whether a subcontracting plan was required.
DHS officials stated that information was missing for $3.2 billion of
these dollars due to data entry errors. For example, for nearly $3
billion of these dollars, subcontracting plans were in fact
required.[Footnote 42] DHS officials were unable to explain the lack of
information on subcontracting plan requirements associated with the
remaining $191 million of the dollars for which subcontracting plan
requirement information is missing. Table 5 also shows that DHS did not
require subcontracting plans for $1.4 billion of the funds it awarded.
DHS officials indicated $545 million of these funds were miscoded and
should have been entered in FPDS-NG as having "no subcontracting
possibilities." DHS officials were unable to explain why the remaining
$861 million were not required to have subcontracting plans.
* According to GSA officials, contracting officers did not require
subcontracting plans for the Katrina-related contracts awarded to large
businesses for over $500,000 in some cases because of a temporary
increase (to $10 million) in the threshold for requiring these plans
and in other cases because the emergency nature of the situation
required a faster response than normal contracting procedures would
have allowed.[Footnote 43] Table 5 shows that GSA awarded a total of
almost $114 million through acquisitions that were coded in FPDS-NG as
either not requiring a subcontracting plan or for which there was no
information on whether a subcontracting plan was required (columns 5
and 6 of table 5, which round to $114 million); of this amount, GSA
officials indicated that $72 million was awarded at amounts below the
$10 million threshold.[Footnote 44] Of the remaining $42 million, GSA
determined that a subcontracting plan was not required for a $26
million contract for ice because the urgent nature of the situation
required procuring and delivering the ice faster than normal
contracting procedures would have allowed. According to GSA officials,
contracts such as this and others for which GSA did not require
subcontracting plans, such as one for ambulance services to transport
people from nursing homes, illustrate their point about the need to
expedite contracting in an emergency situation. The ambulance services
contract they cited was valued high enough that they ordinarily would
have had to include a subcontracting plan which, in the normal course
of operations, would require review by the SBA's Procurement Center
Representatives for advisory purposes as well as a certain amount of
market research to determine if subcontracting possibilities existed
for potential prime contractors. In the judgment of the GSA contracting
officials, the urgency of the situation requiring the ambulances was
sufficient justification for forgoing the subcontracting plan
requirements and procedures. GSA officials were unable to explain the
lack of information on subcontracting plan requirements associated with
the remaining $16 million.[Footnote 45]
* Table 5 shows that DOD's data system, DD-350, had no information at
all on subcontracting plan requirements for $6.2 million of its Katrina-
related contracts. Based on our queries, DOD officials determined that
these contracts actually did require such plans. The system lacked this
information because the DFARS instructions do not require this
information for orders under a supply schedule contract. Of the $483.6
million that table 5 shows as not requiring a subcontracting plan,
based on our inquiries, DOD officials determined that $475.9 million of
these contract actions represented data entry errors and did, in fact,
require such plans or should have been coded as having "no
subcontracting possibilities." Moreover, DOD officials stated that
about $4.4 million in contract actions were correctly coded as not
requiring subcontracting plans because they were awarded as blanket
purchase agreements, purchase orders, or were awarded to a small
business. DOD officials were unable to explain why the remaining $3.3
million in contracting dollars coded as not requiring subcontracting
plans were not required to have such plans.
* For the Corps, table 5 shows $14 million for which DD-350 contained
no information on subcontracting plan requirements. Corps officials
determined that these were orders against existing GSA federal supply
schedule contracts and for which, according to these officials, the FAR
does not require subcontracting plans. Table 5 also shows $574.5
million for which the Corps determined that subcontracting plans were
not required; according to Corps officials, data entry errors explain
$437.2 million of these funds--some small businesses (which do not have
to have subcontracting plans) were miscoded as large, some contracts
were miscoded as not requiring a subcontracting plan when they actually
did, and some should have been coded as having "no subcontracting
possibilities." Corps officials were unable to explain why
subcontracting plans were not required for the remaining $102 million
in contracting dollars that were coded as not requiring a
subcontracting plan.
More than 1 year after Hurricane Katrina, key information about
subcontracting plan requirements remains incomplete, as we show in
table 5. As we noted in reporting on the agencies' efforts to respond
to our inquiries, data entry errors explain some of what we found.
Additionally, officials from GSA and DOD stated that in the emergency
situation that Hurricane Katrina presented, they placed priority on
awarding contracts for vital supplies with the expectation that data
entry would be completed at a later time. However, as we noted, these
agencies were still unable to explain why data were missing on
subcontracting plan requirements, or why subcontracting plans were not
required for from $3.3 million to $861 million in contract dollars. The
incomplete information limits using the agencies' procurement data
systems and publicly reported contracting data to tell the extent to
which agencies complied with federal contracting rules designed to give
small businesses the maximum practical opportunity to participate in
federal contracts.
Disadvantaged Business Enterprises Participated in FHWA-and FAA-Funded
Contracts and Subcontracts Related to Hurricane Katrina:
Through contracts and subcontracts, DBEs were awarded about 4 percent
of almost $1.3 billion of FHWA funding for Katrina-related contracts
awarded between August 1, 2005, and June 30, 2006, in the three states
primarily affected by Hurricane Katrina.[Footnote 46] The Mississippi
Department of Transportation awarded the majority of the FHWA dollars
DBEs received in these three states. DBEs were awarded about 10 percent
of FAA dollars that airports in these three states awarded for Katrina-
related contracts during the same period of time.[Footnote 47] FTA
officials said that FTA did not fund any grants to transit agencies for
Katrina-related recovery projects.[Footnote 48]
DBEs Received about 4 Percent of FHWA Dollars for Katrina-Related
Contracts in Mississippi, Alabama, and Louisiana:
DBEs were awarded about 4 percent of the total dollar value of Katrina-
related contracting dollars awarded by three state transportation
agencies through contracts and subcontracts between August 1, 2005, and
June 30, 2006. The DOTs in the three states primarily affected by
Katrina (Alabama, Louisiana, and Mississippi) awarded 76 FHWA-funded,
Katrina-related contracts, totaling about $1.3 billion (table 6). DBEs
were awarded approximately $53 million of this amount as prime
contractors and subcontractors. Specifically, DBEs were prime
contractors on 2 and subcontractors on 10 of the 76 contracts awarded.
Table 6: DBE Participation in Katrina-Related State DOT Contracts
Awarded With FHWA Funds:
Dollars in millions.
Mississippi;
Total dollar value of contracts awarded: $790.0;
Total dollars awarded to DBEs[A]: $34.2;
Percentage of total dollar value of contracts awarded to DBEs: 4.3%.
Louisiana;
Total dollar value of contracts awarded: 490.0;
Total dollars awarded to DBEs[A]: 18.8;
Percentage of total dollar value of contracts awarded to DBEs: 3.8.
Alabama;
Total dollar value of contracts awarded: 2.9;
Total dollars awarded to DBEs[A]: 0.1;
Percentage of total dollar value of contracts awarded to DBEs: 4.0.
Total;
Total dollar value of contracts awarded: $1,282.9;
Total dollars awarded to DBEs[A]: $53.1;
Percentage of total dollar value of contracts awarded to DBEs: 4.1%.
Source: GAO analysis of Mississippi, Louisiana, and Alabama DOT data
for contracts awarded between August 1, 2005, and June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] Includes amount paid to DBEs for completed projects and amount
committed to DBEs for ongoing projects through prime contracts and
subcontracts.
[End of table]
In Mississippi, DBEs were awarded a total of about $34 million, or 4.3
percent of the $790 million that the Mississippi DOT awarded in FHWA-
funded, Katrina-related contracts. The Mississippi DOT awarded the $790
million through 55 contracts. DBEs were the prime contractor on 2 of
these contracts, which totaled about $2 million, and subcontractors on
6 others. Almost all of the 8 contracts that DBEs participated in were
for debris removal and work on U.S. Highway 90, which runs along the
Mississippi coast and received substantial damage from the hurricane.
As of October 2006, of the approximately $34 million awarded to DBEs in
Mississippi, about $3 million had been paid for completed work and $31
million is committed for work in progress.
DBEs were awarded a total of about $19 million, or 3.8 percent of the
$490 million that the Louisiana DOT awarded in FHWA-funded, Katrina-
related contracts. The Louisiana DOT awarded a total of 19 contracts,
and DBEs were subcontractors on 3 of them. The 3 subcontracts included
work for bridge repair and work on Interstate Highway 10, which
received significant damage from Hurricane Katrina between New Orleans
and Slidell, Louisiana. As of October 2006, of the approximately $19
million awarded to DBEs, approximately $700,000 had been paid for
completed work, and a little more than $18 million had been committed
for work in progress.
DBEs were awarded a total of about $100,000, or 4 percent, of the
nearly $3 million that the Alabama DOT awarded in FHWA-funded, Katrina-
related contracts. Two contracts accounted for the nearly $3 million
and two DBEs were subcontractors on one of the contracts.[Footnote 49]
As of October 2006, the two DBEs had received over half of their
awarded amounts, and the remainder was committed for the rest of the
project, which was designed to repair a ramp on a section of Interstate
Highway 10.
DBEs Received About 10 Percent of the FAA Dollars Awarded for Katrina-
Related Contracts:
DBEs were awarded about $2.4 million of the nearly $24 million in
Katrina-related contracts that airports in Alabama, Louisiana, and
Mississippi awarded with FAA funds for Katrina-related contracts during
the period of our analysis (table 7). This $24 million was awarded by
airports through 44 contracts, and DBEs participated in 1 contract as a
prime contractor and in 10 contracts as subcontractors.
Table 7: DBE Participation in Contracts Awarded by Airports with FAA
Grants:
Dollars in millions.
Airports in Mississippi;
Total dollar value of all contracts awarded: $21.1;
Total dollar value awarded to DBEs[A]: $2.3;
Percentage of total dollar value of contracts awarded to DBEs: 11.0%.
Airports in Louisiana;
Total dollar value of all contracts awarded: 2.6;
Total dollar value awarded to DBEs[A]: 0.1;
Percentage of total dollar value of contracts awarded to DBEs: 4.1.
Airports in Alabama;
Total dollar value of all contracts awarded: 0.3;
Total dollar value awarded to DBEs[A]: ---[B];
Percentage of total dollar value of contracts awarded to DBEs: ---[B].
Total;
Total dollar value of all contracts awarded: $24.0;
Total dollar value awarded to DBEs[A]: $2.4;
Percentage of total dollar value of contracts awarded to DBEs: 10.1%.
Source: GAO analysis of FAA data for contracts awarded by airports
between August 1, 2005 and June 30, 2006.
Note: Dollars are rounded to the nearest hundred thousand and
percentages were calculated from unrounded numbers.
[A] Includes amount paid to DBEs for completed projects and amount
committed to DBEs for ongoing projects through prime contracts and
subcontracts.
[B] Airports in Alabama awarded a total of nearly $300,000 in three FAA-
funded, Katrina-related contracts, and DBEs participated in one of the
three contracts. For contracts awarded with FHWA or FAA funds, we
determined that contract values were sufficiently reliable to report
aggregated contract amounts rounded to the nearest $100,000. Because
the dollar value awarded to DBEs in Alabama was less than $50,000 and
rounding this figure would require reporting it as zero, we chose not
to report on the amount or percentage of total dollars DBEs received in
Alabama. See the detailed discussion of our methodology in appendix I
for more information.
[End of table]
DBEs were awarded approximately $2.3 million (11 percent) of about $21
million that airports in Mississippi awarded in FAA-funded, Katrina-
related contracts. DBEs participated in 8 out of 27 contracts awarded
by airports in Mississippi. The contracts included repair work for
terminal areas and runway lighting, as well as construction of a new
cargo building.
DBEs were awarded a total of about $100,000, all through subcontracts,
of nearly $2.6 million that airports in Louisiana awarded in FAA-
funded, Katrina-related contracts. The $100,000 DBEs received accounted
for approximately 4 percent of the $2.6 million that the Louisiana
airports awarded. Overall, DBEs participated in 2 of 14 contracts that
included work to update one airport's master plan and consulting
services provided to another airport.
Conclusions:
There is little doubt that Hurricane Katrina posed challenges to
federal agencies to award contracts expeditiously while adhering to
federal acquisition regulations, including those governing
subcontracting plans. We recognize that the response to Katrina was
unprecedented for most agencies and that complying with certain
requirements, such as negotiating subcontracting plans and documenting
compliance with subcontracting requirements, may have understandably
been deferred to a later time, as GSA and DOD officials said was the
case. Nonetheless, a substantial amount of information about the four
agencies' subcontracting requirements remains incomplete over a year
after the hurricane. Conclusively demonstrating compliance with the
rules about subcontracting plans is important for reasons beyond just
documentation. By requiring these plans, agencies commit prime
contractors to specific goals for providing opportunities to small
businesses and give themselves tools--incentives as well as sanctions-
-that they can use to ensure the contractors engage in good faith
efforts to meet their small business subcontracting goals. In doing so,
the agencies ensure compliance with federal procurement regulations and
that small businesses have all of the practical opportunities to
participate in federal contracts that they are supposed to have.
Because so much key information about subcontracting plans was
incomplete in federal procurement data systems and, at the conclusion
of our review, remains unresolved, we cannot tell the extent to which
the agencies are complying with the regulations. Furthermore, the lack
of transparency surrounding much of the agencies' subcontracting data-
-missing information on plans when contracts appear to meet the
criteria for having them--may lead to unwarranted perceptions about how
the federal procurement system is working, particularly in terms of the
government's stated preference for contracting with small businesses.
For their Katrina-related relief contracts, until DHS, GSA, DOD, and
the Corps improve documentation of (1) the status of whether
subcontracting plan requirements are in place and (2) their decisions
on whether subcontracting plans were required, the agencies will lack
the ability to provide assurance they offered small businesses the
maximum practical opportunity to do business with them. However, it is
questionable whether the benefit from clearing up the agencies'
incomplete subcontracting information would outweigh the costs of doing
so for Katrina-related contracts. Consequently, the agencies' best
course of action in response to what we found may be to improve
documentation for all future contracts and reinforce to all of its
contracting officers and others involved in the procurement process the
importance of adhering to subcontracting plan requirements and ensuring
that publicly available information--such as what the agencies report
in FPDS-NG--accurately reflects the extent to which the agency made
subcontracting opportunities available to small businesses.
Recommendations for Executive Action:
To ensure compliance with federal contracting regulations and to more
transparently disclose the extent to which subcontracting opportunities
are available to small businesses, we recommend that the Secretaries of
Homeland Security and Defense and the Administrator of General Services
take the following two actions:
* Issue guidance to the appropriate procurement offices and personnel
reinforcing (1) the reasons for subcontracting plan requirements and
the importance of complying with them; (2) the necessity for
documenting in publicly available sources the agencies' decisions,
particularly in instances when they determine not to require
subcontracting plans; and (3) where subcontracting plans are in place,
the need to adhere to the requirement for all prime contractors to
report on their small business subcontracting accomplishments.
* Consider asking their respective Inspectors General to conduct a
review at an appropriate future date to ensure that this guidance and
related requirements are being followed.
Agency Comments and Our Evaluation:
We provided a draft of this report to DHS, GSA, DOD, DOT, and the SBA
for their review and comment. Officials from DOT and SBA provided
technical clarifications, which we incorporated as appropriate. Through
written comments, DHS, GSA, and DOD--the agencies to which our
recommendations are addressed--concurred with our recommendations.
Their comments are reprinted in appendixes II, III, and IV.
In written comments from the Director of DHS's Departmental GAO/OIG
Liaison Office (app. II), DHS noted actions that it plans to take to
implement the recommendations within the Federal Emergency Management
Agency (which was responsible for the vast majority of the agency's
Katrina-related contracting) and stated that it plans to apply them as
best practices across all of the department. Specifically, the agency
plans to:
* issue guidance to all acquisition offices reinforcing previously
issued guidance regarding the importance of awarding all appropriate
contracts to small businesses and encouraging large businesses to
subcontract all appropriate work to small businesses;
* have an acquisition oversight team within the agency's Office of the
Chief Procurement Officer review DHS acquisition offices' compliance
with federal and DHS acquisition regulations, policies, and procedures;
and,
* pursue a review by the Defense Contract Management Agency (DCMA) to
benchmark the agency's contract administration efforts, including its
subcontracting plan administration, against DCMA practices and
procedures.
In commenting on our presentation of subcontracting accomplishments,
DHS stated that many of the DHS contracts did not require contractors
to enter subcontracting accomplishment data into the electronic
subcontracting reporting system (eSRS), and that inputting
subcontracting accomplishment information into eSRS was voluntary in
fiscal year 2006. However, we note that according to a November 2005
memo to Chief Acquisition Officers from the Office of Management and
Budget, all contractors for civilian agencies were required to use eSRS
as of fiscal year 2005.
DHS also stated that we could have emphasized the agency's
administration of four key contracts with large businesses that had
subcontracting plans, noting that these businesses provided
subcontracting information weekly. While we were aware that DHS was
obtaining weekly subcontracting accomplishment information from
selected contractors, our methodology for DHS (and the other agencies)
was to obtain and analyze the subcontracting accomplishment information
that federal regulations required the agency to collect and report
(semiannually, in this case, as of March 31, 2006).
DHS also offered comments regarding the report's presentation of
contracts awarded directly to small businesses. Specifically, DHS
stated that work under two contracts that were awarded directly to
large businesses was transferred to multiple small businesses. As we
note in the report, DHS awarded $1.6 billion in Katrina-related
contracting dollars directly to small businesses. To the extent that
DHS accurately indicated in FPDS-NG that the contracting dollars were
awarded directly to small and not large businesses, our report reflects
this activity.
GSA's Administrator generally concurred with our recommendations (see
app. III). The agency's Office of the Chief Acquisition Officer will,
among other things, take steps such as:
* distribute an acquisition alert reminding the acquisition community
of the importance of subcontracting plan requirements, and the need to
document decisions, including those regarding subcontracting plan
requirements;
* remind contracting officers of their responsibility to ensure that
contractors properly report their subcontracting accomplishments as
required; and,
* include compliance with the guidance about subcontracting plan
requirements in its regularly scheduled Procurement Management Reviews
as well as the special reviews it conducts during major catastrophes in
order to ensure procurement statutes, regulations, and guidance are
being met; when appropriate, GSA indicated it will seek the assistance
of the agency's Inspector General to support these reviews.
GSA emphasized--during the course of our review as well as in its
comments on our draft report--that during catastrophic situations, time
is of the essence in getting goods and services to a disaster area
immediately. While its contracting officers and personnel worked to
comply with all contracting requirements, including the subcontracting
plan requirement, GSA stated that the latter proved to be impossible
given the urgency of the needs resulting from the hurricane. GSA also
noted that the subcontracting plan requirement is one it did not
address when it waived certain procurement rules in early September
2005 during the emergency response. One reason GSA did not extend these
waivers to the requirement for subcontracting plans is that, in the
judgment of GSA procurement officials, there are no provisions or
flexibility in the Federal Acquisition Regulation (FAR) that would have
given them the authority, even in an emergency situation such as the
response to Hurricane Katrina, to deviate from subcontracting plan
requirements. We agree with GSA's conclusion that the FAR currently
does not specifically permit agencies to waive the requirement for an
approved subcontracting plan prior to contract award. This is because
the FAR requirement is based on the Small Business Act, which does not
provide for an agency to waive the subcontracting plan requirement or
allow deferral of it until after the agency has awarded a contract. As
a result of our findings and the lack of flexibility GSA determined the
FAR has on subcontracting plan requirements, GSA plans to raise the
issue of emergency processes with the FAR Council. [Footnote 50]
DOD's Director, Defense Procurement and Acquisition Policy, in the
Office of the Under Secretary of Defense for Acquisition, Technology,
and Logistics, concurred with our recommendations (see app. IV) and
noted that the department plans to issue a policy memorandum in 2007
containing the guidance we recommend. Additionally, DOD indicated it
would direct review officials for each of its military departments and
other defense agencies to include subcontracting guidance and
compliance as a special interest item in the periodic oversight reviews
they conduct of the organizations within each department or agency.
Moreover, DOD will ask the military departments' Offices of Inspectors
General as well as the DOD Inspector General to review the adequacy of
departmental and agency oversight and management review processes.
We are sending copies of this report to appropriate congressional
committees, the Secretary of Homeland Security, the Administrator of
General Services, the Secretary of Defense, the Secretary of
Transportation, and the Administrator of the Small Business
Administration. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
call me at (202) 512-8678 or shearw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix V.
Signed by:
William B. Shear:
Director, Financial Markets and Community Investment:
List of Congressional Addressees:
The Honorable John F. Kerry:
Chairman:
The Honorable Olympia J. Snowe:
Ranking Member:
Committee on Small Business and Entrepreneurship:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Richard J. Durbin:
Chairman:
The Honorable Sam Brownback:
Ranking Minority Member:
Subcommittee on Financial Services and General Government:
Committee on Appropriations:
United States Senate:
The Honorable Nydia M. Velázquez:
Chair:
The Honorable Steve Chabot:
Ranking Member:
Committee on Small Business:
House of Representatives:
The Honorable Henry A. Waxman:
Chairman:
The Honorable Tom Davis:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable José E. Serrano:
Chairman:
The Honorable Ralph Regula:
Ranking Minority Member:
Subcommittee on Financial Services:
Committee on Appropriations:
House of Representatives:
The Honorable Donald A. Manzullo:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To identify the amounts that small and local businesses received
through direct contracts from the four federal agencies for relief and
recovery efforts related to Hurricane Katrina, we identified the
agencies that had received the largest supplemental appropriations for
Katrina-related relief and recovery work, and then analyzed data from
the Federal Procurement Data System-Next Generation (FPDS-NG), the
governmentwide database of contracting activity, and DD-350, the
Department of Defense (DOD) database that contains data on individual
contracting actions, to identify federal agencies that had directly
awarded the most contracting dollars as of May 2006. This analysis
showed that the Department of Homeland Security (DHS), DOD, and the
U.S. Army Corps of Engineers (Corps) had received the largest
supplemental appropriations and that these three agencies plus the
General Services Administration (GSA) had awarded 86 percent of all
funds for Katrina-related contracts as of May 2006. Our analysis
focused on these agencies.[Footnote 51] For consistency, we decided to
analyze all Katrina-related obligations from August 1, 2005, to June
30, 2006, in order to capture contracting actions that occurred in
preparation for Hurricane Katrina, and because June 30th was the most
current data available at the time we began data analysis.[Footnote 52]
In addition, this time frame allowed for analysis of nearly 1 year's
worth of contracting activities.
To identify and obtain information on the Katrina-related contracting
dollars awarded by DHS and GSA between August 1, 2005, and June 30,
2006, we analyzed data in FPDS-NG on new contracts, contract
modifications, and task orders against existing contracts. We excluded
contract modifications that were administrative or that did not change
the dollar value of the contract. We analyzed data that were reported
into FPDS-NG as of October 23, 2006. Although we could not
independently verify the reliability of all of these data, we conducted
electronic data testing for inconsistency errors and completeness, and
interviewed agency officials. For DHS, we also assessed the reliability
of contract information in FPDS-NG by comparing these data to
information that the agency maintained on Katrina-related contracts in
an ad hoc spreadsheet that it developed in the early days after the
hurricane; DHS used this spreadsheet to collect and maintain Katrina-
related contract information from late September 2005 through the
present in order to be able to provide timely information to the White
House. Subsequently DHS used this spreadsheet to check the Katrina-
related contract information in FPDS-NG, and investigate any anomalies.
We determined the data to be sufficiently reliable for the purposes of
this report.
To identify and obtain information on the Katrina-related contracting
dollars awarded by DOD and the Corps between August 1, 2005, and June
30, 2006, we analyzed data in DD-350 on new contracts, contract
modifications, and task orders against existing contracts. We excluded
contract modifications that were administrative or that did not change
the dollar value of the contract. We analyzed data for DOD and the
Corps that were reported into DD-350 as of October 26, 2006, and FPDS-
NG as of November 13, 2006. Although we could not independently verify
the reliability of all of these data, we conducted electronic data
testing for inconsistency errors and completeness, and interviewed
agency officials. For the Corps, we also assessed the reliability of
contract information in DD-350 by comparing these data to information
that the Corps maintained on Katrina-related contracts in an ad hoc
spreadsheet that it developed following the hurricane; the Corps used
this spreadsheet to collect and maintain current Katrina-related
contract information from late in September 2005 through the present in
order to be able to report timely information to the White House.
Subsequently the Corps used this spreadsheet as a check on the accuracy
and completeness of Katrina-related contract information in DD-350.
Based on these efforts, we determined the data to be sufficiently
reliable for the purposes of this report.
To describe the extent to which prime contractors subcontracted with
small businesses, we used different approaches for military and
civilian agencies. For DOD and the Corps, we obtained information on
the top 10 contractors because data on the extent to which military
contractors awarded subcontracts to various types of small businesses
are not electronically aggregated.[Footnote 53] To identify the 10
contractors that cumulatively had received the most funds for Katrina-
related contracts from DOD and the Corps between August 1, 2005, and
June 30, 2006, we analyzed information from DD-350 and FPDS-NG. Of
these 10 contractors, 4 received contracts for strictly Katrina-related
projects from the Corps, and were required to submit subcontracting
plans for these contracts. These 4 contractors were all large, and
received a total of eight contracts. For each of the eight contracts,
we obtained and reviewed the subcontracting plans and the individual
subcontracting reports as of March 31, 2006. We also interviewed
contractors about their subcontracting activities. We compared the
amounts each of the 4 contractors awarded to small businesses to the
total amounts obligated as of March 31, 2006.
To identify the extent to which contractors for DHS and GSA
subcontracted with small businesses to do Katrina-related relief and
recovery work, we used FPDS-NG to identify those contractors that
received prime contracting dollars between August 1, 2005, and June 30,
2006, for activities that were coded as being related to Hurricane
Katrina, and were required to submit a subcontracting plan. For those
contracts that required a subcontracting plan, we searched for
documentation of subcontracting awards in the electronic subcontracting
reporting system (eSRS) as of March 31, 2006.
In addition, for all four agencies, we assessed the extent to which the
agencies required subcontracting plans for Katrina-related contracting
actions to large businesses for over $500,000.[Footnote 54] According
to federal acquisition regulations, contracts or contract modifications
to large business valued at over $500,000 ($1 million for construction)
and which have subcontracting possibilities, are required to submit
subcontracting plans. For each of the four agencies, we identified
Katrina-related contracting actions that occurred between August 1,
2005, and June 30, 2006, that met this criteria. We asked each agency
to explain why subcontracting plans were not required for those
contracting activities that met these criteria, but for which the data
showed they had not been required to submit subcontracting plans. We
also contacted, where appropriate, the procurement and legal officials
at each agency to determine any basis upon which agencies may have
determined not to require subcontracting plans for any contracts that
otherwise appeared to have met the criteria for them.
To obtain information on the extent to which Disadvantaged Business
Enterprises (DBEs) received federal funds for transportation projects
that relate to reconstruction or recovery from Hurricane Katrina, we
analyzed data on contracts awarded between August 1, 2005, and June 30,
2006, with Department of Transportation funds in the states of Alabama,
Louisiana, and Mississippi. Specifically, we obtained data on contracts
awarded through funds from two of the three operating administrations
of the DBE program--the Federal Highway Administration (FHWA) and the
Federal Aviation Administration (FAA). The third operating
administration, the Federal Transit Administration (FTA), did not
provide us with any data since FTA funds were not used to award
contracts related to Katrina reconstruction or recovery projects during
the time frame that we examined. For contracts awarded with FHWA funds,
we obtained contract data from each state department of transportation.
For contracts awarded with FAA funds, we obtained contract data from
FAA's Southern and Southwestern regional offices, which compiled data
from the various airports in the three states. The contract data we
obtained for contracts funded with FHWA and FAA funds included
information on DBE participation as either prime contractors or
subcontractors, and the amounts awarded to DBEs, among other data
fields. Overall, we obtained data on 120 contracts awarded with FHWA
and FAA funds. To assess the reliability of the data we collected, we
contacted a simple random sample of 29 contractors and verified
specific fields used in this report. We verified specific fields for
each of the contracts in the sample--contract award date, contract
amount, DBE participation, and amount awarded to DBEs. We determined
the data for contract award date and DBE participation to be
sufficiently reliable for the purposes of this report. We identified 3
contracts award amounts in the sample that contained minor
discrepancies. We estimated, at the 95 percent confidence level, that
these discrepancies would not exceed $50,000 in total error in the
population of 120 contracts. Based on this estimate we determined the
data to be sufficiently reliable to report aggregated information
rounded to the nearest $100,000. We chose to not report any figure
below $50,000. To obtain background information on the DBE program, we
interviewed DOT headquarters officials from each of the three operating
administrations. We also obtained documentation on the DBE program
goals, DBE certification procedures, and information on the overall
administration of the program.
[End of section]
Appendix II: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
January 24, 2007:
Mr. William B. Shear Director:
Financial Markets and Community Investment:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Shear:
Thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO's) draft report GAO 07-205 entitled
Hurricane Katrina: Agency Contracting Data Should Be More Complete
Regarding Subcontracting Opportunities for Small Businesses.
The Department of Homeland Security (DHS) concurs with the analysis and
recommendations provided in the draft report. This type of audit is
critical for DHS to continue to improve its acquisitions and bench mark
against more established executive agencies such as the Department of
Defense (DoD) and the General Services Administration (GSA). DHS
intends to implement the recommendations from the report, not just
within the Federal Emergency Management Agency, but apply the
recommendations as best practices across all of DHS.
With respect to Recommendation 1, the DHS Office of Small and
Disadvantaged Business Utilization (OSDBU) will issue guidance to all
acquisition personnel (program offices, contracting offices and field
personnel) reinforcing previously issued guidance from the DHS Chief
Procurement Officer (CPO) regarding the importance of awarding all
appropriate contracts to small businesses and encouraging large
business to subcontract all appropriate work to small businesses. As
the report indicates, DHS awarded 41 % of the Katrina actions and 24%
of the Katrina dollars to small businesses as prime contractors.
Primarily these awards were for commercial acquisitions in accordance
with simplified acquisition procedures. DHS components will be reminded
that simplified acquisitions should be set aside for small business and
other acquisitions should appropriately consider a small business set
aside where two or more small businesses are likely to submit proposals
in response to the requirement. These considerations are part of DHS
acquisition plans, and will continue to be monitored by the OSDBU
office.
Recommendation 2 suggests that DHS should consider requesting the DHS
Inspector General to review compliance with the OSDBU guidance one year
after the guidance is issued. DHS concurs with the recommendation to
review compliance with small business prime and subcontracting
requirements one year after additional guidance is provided. The DHS
acquisition oversight team will review the DHS Component acquisition
offices for compliance with federal and DHS, acquisition regulations,
policies and procedures. These reviews will monitor DHS's compliance
with subcontracting requirements pursuant to the OSDBU and CPO
guidance. In addition, the CPO is pursuing a review by the Defense
Contract Management Agency (DCMA) to benchmark DHS contract
administration, including subcontracting plan administration against
DCMA practices and procedures. As a result of the DCMA review, DHS will
implement practical improvements in contract administration.
The report highlights the fact that the DHS Federal Procurement Data
System (FPDS) information is incomplete or erroneous with regard to
subcontracting plans. DHS concurs that during FY 06, the information
was not always accurate. DHS is undertaking a process to improve the
quality of the data in FPDS and as part of the process will ensure that
contract specialists correctly input the subcontracting information in
the future.
The report indicated that DHS contractors did not input the
subcontracting information into the Electronic Subcontracting Reporting
System (eSRS). However, many of the DHS contracts did not require this
action. The eSRS is a new system which was voluntary for FY 06. The DHS
components did not have a standard clause available during Katrina to
alert contractors to eSRS availability. Training in eSRS is in process.
The training in the requirements and application of eSRS should resolve
this GAO finding.
In addition, the report demonstrated that DHS did not have sufficient
contract administration of all contracts that included subcontracting
plans during Katrina. As a corrective action, DHS is instituting Field
guides and Contract Administration Plans (CAPs) within FEMA to ensure
that all personnel participating in contract administration understand
their roles and responsibilities. Future field guides and CAPs will
include specific instructions on administering subcontracting plans
where applicable.
GAO could have highlighted the administration of the four Individual
Assistance Technical Assistance Contracts (IA TAC) as part of their
review. For these four critical contracts, the subcontract plans were
aggressively negotiated with Bechtel, Shaw, Fluor and CH2MHill. The DHS
OSDBU assigned staff who administered the subcontracting program. The
four companies reported the actual amounts subcontracted to small
businesses segregated by state each week. The companies worked closely
with DHS to ensure that small business had an opportunity to
participate on each subcontracting opportunity. In addition,
requirements for the maintenance and deactivation of Katrina temporary
housing units has been transitioned from these four contractors to
small and small disadvantaged businesses to perform this work as prime
contractors rather than as subcontractors.
Two other significant FEMA procurements transferred work from large
business prime contractors to multiple award small business prime
contractors. In the first instance, 19 contracts were awarded for
grounds maintenance to service disabled veteran owned small businesses
where the work was previously performed by large businesses. In
addition, the Mississippi Blocking, Leveling and Anchoring contracts
were awarded to six Hubzone-certified small businesses where work was
previously provided under the IA TAC contracts by large business prime
contractors.
DHS is leaning forward to be prepared for future disasters. By awarding
pre-positioned contracts prior to emergencies and establishing
contingency agreements with industry, DHS will be able to obtain
necessary supplies and services to respond to disasters, while
complying with all of the applicable federal regulations including
small business subcontracting requirements. Planning for the
acquisitions allows the government and industry to negotiate
appropriate guidelines that will maximize subcontracting opportunities
for future requirements.
Thank you again for the opportunity to comment on this draft report and
we look forward to working with you on future homeland security issues.
Sincerely,
Signed by:
Steven J. Pecinovsky:
Director:
Departmental GAO/OIG Liaison Office:
[End of section]
Appendix III: Comments from the General Services Administration:
GSA Administrator:
February 8, 2007:
The Honorable David M. Walker:
Comptroller General of the United States:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Walker:
Thank you for the opportunity to comment on the Government
Accountability Office (GAO) draft report, "Hurricane Katrina: Agency
Contracting Data Should Be More Complete Regarding Subcontracting
Opportunities for Small Businesses" (GAO-07-205).
Enclosed are GSA's specific comments on the draft report. If you have
any other concerns, please contact me. Staff inquiries may be directed
to Kevin Messner, Associate Administrator, Office of Congressional and
Intergovernmental Affairs, at (202) 501-0563.
Cordially,
Signed by:
Lurita Doan:
Administrator:
Enclosure:
Technical Corrections/comments specific to the content of the report:
1. Page 4 the sentence which begins with "These plans" should be
corrected as follows by inserting the following for accuracy ". large
prime contracts expected to exceed $500,000 and $1 M for construction".
2. Page 6, the second sentence under the same section contains the
definition of small business, which is incomplete. At a minimum, the
statement should be expanded to mention that a firm must meet the size
standards published by Small Business Administration (SBA), based on
annual revenue or number of employees.
3. Page 7, Small businesses are not required to have a net worth of
less than $750,000. Rather, this requirement applies to the owners of
Small Disadvantage Businesses (SDBs). As written it confuses small
businesses with SDBs.
4. Page 7, the third bullet defining women-owned Small businesses needs
to be clarified. Recommend changing the statement to say, "that women-
owned small businesses must be 51 % owned and controlled by one or more
women" and delete "publicly-owned businesses".
5. Page 8, seventh sentence and page 20 second sentence, please rewrite
for accuracy where it states "For individual contracts." change to read
"For contracts that are awarded with individual subcontracting plans,
contractors are required to report semi-annually for the periods ending
for subcontracting goals and achievements March 31St and September 30TH
with a separate report for each contract at contract completion. For
contracts that are awarded with commercial plans, contractors are
required to report annually"
6. Page 9, DD350 is not "the military equivalent of FPDS-NG" (pages 2
and 23), nor is it a "system" (page 9). The DD 350 is a form that
Department of Defense (DoD) has used to capture data for reporting to
FPDS-NG until all of their legacy systems were able to transition to
direct reporting.
7. *Page 19, table 4 compares Total Estimated Contract Value with the
Amount Each Prime Contractor Awarded to Small Business. This is
misleading, because GAO is using the term FPDS-NG uses called "Ultimate
Contract Value" - which is the total dollar amount awarded to the prime
contractor if all options are exercised. Instead, GAO should use what
FPDS-NG calls "Current Contract Value" - i.e., the current dollars
obligated as of March 31, 2006, the same data as the subcontracting
data in the next column. This is the only way the reader can draw any
meaningful conclusions from this table.
8. Page 22, the statement that the eSRS is not a useful tool for
providing transparency needs to be qualified with an additional
statement at the end of this paragraph that the eSRS would be extremely
useful if contracting officers entered the contract data in FPDS-NG
correctly.
9. Page 27, GAO discusses the Army Corps of Engineers' orders against
existing GSA supply schedule contracts. GSA schedule contracts have
commercial plans. Therefore, because subcontracting plans are already
negotiated and incorporated into the GSA schedule contracts,
subcontracting plans are not required for individual task orders. The
performance of the task order is subject to the underlying contract's
subcontracting plan. The FAR does not require orders under existing
contracts such as the schedule contracts, which have commercial plans,
to have separate subcontracting plans.
General Comment on eSRS:
eSRS_ was created to provide a central system for contractors to report
their accomplishments and eliminate redundant separate systems in each
agency. By linking it to FPDS-NG, it offers the ability to know which
contractors should be reporting and facilitate tracking. This link is
dependant on accurate data input by the contracting officer regarding
the contract terms. As agencies transition to these new, transparent,
integrated systems, the data quality becomes increasingly critical. GSA
and the Office of Federal Procurement Policy (OFPP) are partnering to
work with agencies to ensure the Acquisition workforce is trained and
aware of the importance of in reporting all required data in FPDS-NG
accurately.
Specific comments and responses to recommendations:
1. Issue Guidance to the appropriate procurement offices and personnel
reinforcing (1) the reasons for subcontracting plan requirements and
the importance of complying with them; (2) the necessity for
documenting in publicly available sources the agencies decisions,
particularly in instances when they determine not to require
subcontracting plans; and (3) where subcontracting plans are in place,
the need to adhere to the requirement for all prime contractors to
report semiannually on their small business subcontracting
accomplishments;
Generally concur. FAR 19.708(a) prescribes the clause at 52.219-8,
Utilization of Small business Concerns, in solicitations and contracts
when the contract amount is expected to exceed the simplified
acquisition threshold with some exceptions. The clause states, among
other things, that it is federal policy that small businesses have the
°maximum practicable opportunity to participate in the performance of
federal contracts." There is no statutory requirement to require small
businesses to subcontract to other small businesses, including awards
under a small business set-aside.
FAR 19.708(b) prescribes the clause at 52.219-9, Small Business
Subcontracting Plan, in solicitations and contracts that offer
subcontracting possibilities, and are expected to exceed $500,000
($1,000,000 for construction) and are required to include the clause at
52.219-8 (see above). The clause requires that the contractor must
provide a subcontracting plan that, as approved by the contracting
officer, is incorporated into the contract. In negotiated procurements,
the.successful offerors must submit a proposed plan and negotiate its
terms with the contracting officer. In sealed bid procurements, the
firm selected for award must submit its plan regarding subcontract
awards to small business. The plan is not subject to negotiation
because such negotiation would be inconsistent with sealed bidding.
Subcontracting plans are a matter of responsibility, not
responsiveness, and thus may be submitted after bids are received and
opened.
GSAM 519.705-5 requires that contracting officer submit a copy of.the
subcontracting plan to the SBTA (GSA employee) and SBA PCR at least 5
workdays before the anticipated award. However, during catastrophic
situations, it may be impossible to meet urgent contract performance
and/or delivery requirements and satisfy this standard.
GSA is not aware of any issues related to the above requirements and
processes in standard procurements. The subcontracting compliance issue
addressed in the report addresses the government's response to
Hurricane Katrina. In response to such an emergency,. time is of the
essence in getting the necessary goods and services to the disaster
area immediately. GSA Acquisition Alert 2005-05 entitled "Emergency
Procurement Authority", dated September 06, 2005, and Acquisition
Letter V-05-17 entitled "Class Deviations Applicable to Acquisitions
for Hurricane Katrina Rescue and Relief Efforts, dated September 16,
2005, addressed the statutory and regulatory acquisition deviations and
waivers issued in order to respond to the emergency. . The statutory
subcontracting requirement was not addressed in those documents. GSA
believes in the future authority should clearly be given to agencies to
waive the subcontracting plan requirement in times of national
emergencies. GSA contracting officers and personnel worked around the
clock for weeks to meet the challenge and comply with all requirements.
The subcontracting requirement proved to be impossible to perform while
meeting the urgent needs resulting from Hurricane Katrina.
GSA's Office of the Chief Acquisition Officer (OCAO) will distribute an
acquisition alert reminding the acquisition community of the-importance
of subcontracting plan requirements for solicitations and resulting
contracts as they procure under normal conditions. The alert will also
remind the acquisition community of the need to document decisions in
all phases including subcontracting plan requirements. They will be
advised to take the appropriate steps during an emergency to procure
from small business and large business. If time permits, during
emergencies as they procure from large business they will be encouraged
to require subcontracting opportunities where possible. OCAO also will
recommend to the FAR council, as appropriate, to include emergency
processes where none currently exists for the acquisition community's
use in the newly created FAR part 18 Emergency Contracting. OCAO plans
to remind the acquisition community to document contract files where it
was determined that subcontracting'opportunities are not available. In
addition they will be reminded of their contract administration
responsibility to ensure they work with the contractors to report
subcontracting accomplishment as required. OCAO plans to discuss with
the SBA the need to develop process and procedures to expedite
solicitation and contract reviews for emergency procurements executed
for catastrophic situations because no procedures exists now.
To permit transparency in the reporting process GSA will review the
need for an additional data collection/reporting field for agencies in
FPDS-NG to include the reason a Subcontracting Plan was not required.
GSA will review the need where current guidance maybe lacking to remind
contracting officers as part of their contract administration efforts
to ensure their contractors are properly reporting their subcontracting
accomplishments. Additionally, eSRS will be able to assist when it
begins to monitor reporting by comparing its data to FPDS now that DoD
is fully integrated.
2. Consider asking their respective Inspectors General to conduct a
review at an appropriate future date to ensure that this guidance and
related requirements are being followed.
Generally concur. CAO has scheduled annual Procurement Management
Reviews (PMRs) and special reviews during major catastrophes to ensure
that procurement statutes, regulations, and guidance are being met. GSA
will ensure that this area is a special item for future PMRs. When
appropriate GSA will seek the assistance of the Inspector General in
support such reviews.
[End of section]
Appendix IV: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
3000 Defense Pentagon:
Washington, DC 20301-3000:
Acquisition, Technology And Logistics:
Jan 26 2007:
Mr. William B. Shear:
Director, Financial Markets and Community Investments:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Shear:
This is the Department of Defense (DoD) response to GAO Draft Report,
GAO-07-205, "Hurricane Katrina: Agency Contracting Data Should Be More
Complete Regarding Subcontracting Opportunities for Small Businesses,"
dated January 8, 2007 (GAO Code 250288).
The GAO report includes two recommendations for the Secretary of
Defense. The Department of Defense concurs with these recommendations
and provides more detailed comments in the attached response.
My staff point of contact for this matter is Ms. Susan Pollack, 703-
697-8336, susan.pollack@osd.mil.
Sincerely,
Signed by:
Shay D. Assad:
Director, Defense Procurement and Acquisition Policy:
Enclosure:
As stated:
GAO Draft Report - Dated January 8, 2007 GAO-07-205 (GAO Code 250288):
"Hurricane Katrina: Agency Contracting Data Should Be More Complete
Regarding Subcontracting Opportunities For Small Businesses:
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommended that the Secretary of Defense
issue guidance to the appropriate procurement offices and personnel
reinforcing (1) the reasons for subcontracting plan requirements and
the importance of complying with them; (2) the necessity for
documenting in publicly available sources the agencies' decisions,
particularly in instances when they determine not to require
subcontracting plans; and (3) where subcontracting plans are in place,
the need to adhere to the requirement for all prime contractors to
report semiannually on their small business subcontracting
accomplishments. (p. 33/GAO Draft Report):
DOD Response: Concur.
(1) DoD concurs with issuing guidance to the appropriate procurement
offices and personnel to reinforce the reasons for subcontracting plan
requirements and the importance of complying with them. It is
anticipated a DoD policy memorandum will be issued in 2007.
(2) DoD concurs with the necessity for documenting in publicly
available sources the agencies' decisions, particularly in instances
when they determine not to require subcontracting plans. DoD will issue
a policy memorandum in 2007 to the appropriate procurement offices and
personnel to reinforce the reasons for subcontracting plan
requirements, including the requirements for documenting the contract
file in instances when a contracting officer determines a
subcontracting plan is not required. The policy will reinforce the
requirement in Federal Acquisition Regulation (FAR) Subpart 19.705-2(c)
that when a contracting officer determines that there are no
subcontracting possibilities, the determination must be approved at a
level above the contracting officer and the determination must be
placed in the contract file. The determination becomes part of the
official contract file in accordance with FAR Subpart 4.8 and 19.705-
2(c). The contract file documentation is subject to Freedom of
Information Act and contracting officers may process FOIA requests from
the public in accordance with FAR Subpart 24.2.
(3) DoD concurs with issuing guidance to the appropriate procurement
offices and personnel to reinforce where subcontracting plans are in
place, the need to adhere to the requirement for all prime contractors
to report semiannually on their small business subcontracting
accomplishments. It is anticipated a DoD policy memorandum will be
issued by the end of 2007.
Recommendation 2: The GAO recommended that the Secretary of Defense
consider asking Office of the Inspector General DoD to conduct a review
at an appropriate future date to ensure that this guidance and related
requirements are being followed. (p. 33/GAO Draft Report):
DOD Response: Concur.
In the policy memo discussed in the response to recommendation 1, DoD
will direct review officials for each Military Department (MILDEP) and
Other Defense Agency (ODA) to include subcontracting guidance and
compliance as a special interest item in their oversight reviews. The
offices designated to perform oversight and management reviews in each
MILDEP and ODA are responsible for preparing and maintaining a schedule
of reviews, conducting reviews of subordinate organizations, and
following up with actions taken for recommendations from reviews. In
addition, the Defense Management Contract Agency conducts surveillance
reviews of subcontracting plans, and the Small Business Administration
is the principal Federal agency responsible for conducting reviews to
monitor the performance of buying activities which would include the
degree of compliance with small business contracting policies and
programs. DoD will ask the respective MILDEP Inspector Generals and the
DoD Inspector General to review the adequacy of the MILDEP and ODA
oversight and management review processes.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
William B. Shear, (202) 512-8678, shearw@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Bill MacBlane, Assistant
Director; Jim Ashley; Emily Chalmers; Julia Kennon; Tarek Mahmassani;
Alison Martin; Marc Molino; Lisa Moore; Rhonda Rose; Paul Thompson; and
Myra Watts-Butler made key contributions to this report.
FOOTNOTES
[1] GAO, Disaster Relief: Governmentwide Framework Needed to Collect
and Consolidate Information to Report on Billions in Federal Funding
for the 2005 Gulf Coast Hurricanes, GAO-06-834 (Washington, D.C.: Sept.
6, 2006).
[2] We are reporting on the Corps and the rest of DOD separately
because of the four supplemental appropriations measures for Department
of Defense activities relating to Hurricane Katrina relief (Pub. L.
Nos. 109-61, 109-62, 109-148, and 109-234), the latter three
specifically directed certain funds to the Corps for its disaster
relief activities.
[3] The definition of a DBE is set forth in DOT Regulation 49 C.F.R. §
26.5. In general terms, DBEs are small businesses owned and controlled
by socially and economically disadvantaged individuals.
[4] For the purposes of this report, we refer to "contract dollars"
that agencies have awarded when, to be precise, agencies do not award
dollars but instead award contracts or enter into contract actions that
are either valued at certain dollar amounts or which, for example,
might have a range of possible values, depending on how much work the
contractor ultimately performs. We discuss the agencies' activities in
terms of contract dollars because the dollar amount or value of
contract actions is one of the key factors in deciding whether agencies
must require a subcontracting plan and also is the measure used to
gauge small business participation in federal procurement.
[5] For acquisitions related to construction, the amount is $1 million
unless a statutory exception applies. See Federal Acquisition
Regulation (FAR) § 19.702(a).
[6] Under FAR § 19.702, a contractor receiving a contract for more than
the simplified acquisition threshold (generally $100,000 for contracts
in the United States) must agree to give small businesses "the maximum
practicable opportunity to participate in contract performance
consistent with (the contract's) efficient performance."
[7] The Robert T. Stafford Disaster Relief and Emergency Assistance
Act, Pub. L. 93-288, as amended, defines an emergency as "any occasion
or instance for which, in the determination of the President, federal
assistance is needed to supplement State and local efforts and
capabilities to save lives and to protect property and public health
and safety, or to lessen or avert the threat of a catastrophe in any
part of the United States." 42 U.S.C. § 5122(1).
[8] Public Law 85-536, as amended, 15 U.S.C. § 632(a).
[9] 15 U.S.C. § 644(g). Under this provision, the President must
annually establish governmentwide goals for, among other things,
procurement contracts awarded to small business concerns. The
governmentwide goal for participation by small business concerns must
be not less than 23 percent of the total value of all prime contract
awards for each fiscal year. As stipulated in the Small Business Act,
procurement goals are established as a percentage of the total value of
all contracts directly awarded by the federal government in a fiscal
year.
[10] See Goaling Guidelines for the Small Business Preference Programs
For Prime and Subcontract Federal Procurement Goals and Achievements,
SBA Office of Government Contracting (July 3, 2003) (SBA Goaling
Guidelines).
[11] 15 U.S.C. § 644(g).
[12] The small business regulations implementing the Small Business Act
further define these businesses. See 13 C.F.R. §§ 121.401 - 121.413.
[13] These classifications are set forth at 15 U.S.C. § 632.
[14] 42 U.S.C. § 5150. In this report we do not assess agency
compliance with Stafford Act requirements.
[15] FAR section 201.1 defines "simplified acquisition threshold" to
mean $100,000, except when the acquisition of supplies or services is
used to support a contingency operation or facilitate defense against
nuclear, biological, chemical, or radiological attack. In those
instances, the term means $250,000 for contracts to be awarded and
performed inside the United States and $1 million for contracts to be
awarded and performed outside the United States.
[16] FAR §§ 19.702, 2.101.
[17] Id. The dollar threshold was changed to $550,000 on September 28,
2006. 71 Fed. Reg. 57363 (Sept. 28, 2006).
[18] These and other aspects of the small business subcontracting plan
requirement are set forth at FAR Part 19.7.
[19] The FPDS-NG reporting threshold in FAR 4.602(c) was raised from
$2,500 to $3,000. 71 Fed. Reg. 57,364 (Sept. 28, 2006).
[20] DOT Regulation 49 C.F.R. § 26.1. Congress most recently
reauthorized the DBE Program under the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy For Users, Pub. L. No.
109-59 § 1101(b) (2005).
[21] For fiscal years 2005 and 2006, the state DOTs of Alabama,
Louisiana, and Mississippi set annual DBE goals at about 10 percent for
contracts awarded with FHWA dollars. For the same fiscal years,
airports across the three states that set an annual DBE goal and
awarded contracts that we reviewed had goals that ranged from about 7
percent to 20 percent.
[22] See C.F.R. Parts 23, 26.
[23] While the MOU between DOT and SBA has expired, according to DOT
officials, DOT's regulations, specifically 49 CFR §26.84 and §26.85,
prescribe the same requirements as contained in the MOU. Among other
requirements, DOT recipients must accept SBA certification applications
in lieu of requiring an applicant to complete their own application
documents.
[24] Each of the agencies we reviewed establishes annual goals for
small business participation. Among the agencies, these goals ranged
from 23 to 45 percent in fiscal years 2005 and 2006, as we note in the
background section of this report. The agencies, and SBA, track their
progress in meeting these goals on an annual (federal fiscal year)
basis--that is, in terms of all of an agency's contract actions in a
year rather than on a case-by-case basis. Because of this, and because
the agencies did not set Katrina-specific small business participation
goals, the data we report in this section should not be used to assess
the agencies' accomplishments with respect to their fiscal years 2005
or 2006 small business participation goals.
[25] Contract actions include actions resulting in a new contract, as
well as actions for additional supplies or services. We excluded
contract modifications that were administrative, or did not adjust the
dollar amount of the contract in order to focus our analysis on
modifications of dollar values.
[26] FAR § 4.803 (a)(2), (14).
[27] Because DOD does not electronically aggregate information on the
subcontracting accomplishments of all military contractors, we chose to
look at the top 10 military contractors. This is a nonprobability
sample of military contractors because we did not consider including
contractors other than the top 10.
[28] Four prime contractors were not required to identify
subcontracting opportunities because they were small businesses or the
contract lacked subcontracting possibilities. Under FAR, a contract is
not required to have a subcontracting plan if, among other things, the
contract is with a small business or if no subcontracting possibilities
exist. See FAR §§ 19.702(b)(1), 19.705-2(b). Of the remaining six
contractors, two had contracts for both Katrina and other activities,
and we excluded these contractors from our analysis because we could
not isolate only the Katrina-related subcontracting accomplishments
using the information that was available.
[29] The four contractors received a total of 15 contracts from the
Corps, but we excluded 7 from our analysis because they either had non-
Katrina-related actions against them or were not required to include
subcontracting plans.
[30] We analyzed subcontracting awards to small businesses as of a
specific point in time. However, these contracts may extend past March
31, 2006. Subcontracting accomplishments may vary over time if the
amount prime contractors award to all businesses, and small businesses
specifically, changes over the life of a contract.
[31] See, e.g., FAR §§ 19.704(a)(10), 52.219-9(d); see also GSA Form
294.
[32] GAO, Department of Energy: Improved Oversight Could Better Ensure
Opportunities for Small Business Subcontracting, GAO-05-459
(Washington, D.C.: May 13, 2005).
[33] The FPDS-NG data for DHS initially showed that a subcontracting
plan was required for two contracts the department awarded for Katrina-
related activities which we could not find in eSRS. DHS officials
subsequently researched these contracts and determined that neither
required a subcontracting plan--one was an award to a small business
(for which the requirement does not apply) and the other indicated that
there were no subcontracting possibilities.
[34] One of the contracts DHS awarded was for a commercial item. For
commercial item contracts, contractors are only required to annually
report on their subcontracting activities for all of their government
contracts. These annual reports do not identify subcontracting
activities by individual contracts.
[35] Data in eSRS that are in "draft" form means that a contractor has
started creating a subcontracting accomplishment report, but has not
yet submitted it to the government.
[36] As we previously noted, the dollar threshold was changed to
$550,000 on September 28, 2006. 71 Fed. Reg. 57363 (Sept. 28, 2006).
[37] In July 2006, the Civilian Agency Acquisition Council and the
Defense Acquisition Regulations Council published, with a request for
comments, interim rules establishing Part 18 of FAR, which are intended
"to provide a single reference to acquisition flexibilities that may be
used to facilitate and expedite acquisitions of supplies and services
during emergency situations." 71 Fed. Reg. 38247 (July 5, 2006).
According to GSA officials, these interim rules do not specifically
address the subcontracting plan requirements discussed in this report.
The FAR is available at [Hyperlink,
http://acquisition.gov/far/index.html].
[38] See FAR § 4.601(a); see also FPDS-NG User's Manual, SBA Goaling
Guidelines.
[39] The FAR states that agencies must transmit procurement information
into FPDS-NG in accordance with the system's procedures. The FPDS-NG
User Guide states that contracting officers shall submit complete and
accurate data on contract actions to FPDS-NG within 3 business days
after contract award. Moreover, under FAR subpart 4.8, agency contract
files are to contain specified information about the contract and
agencies should be able to locate them promptly. See FAR §§ 4.801 -
4.803.
[40] FAR § 19.705-2. According to the FAR, in determining whether
subcontracting possibilities exist, a contracting officer must
determine relevant factors such as: (1) whether firms engaged in the
business of furnishing the types of items to be acquired customarily
contract for performance of part of the work or maintain sufficient in-
house capability to perform the work; and (2) whether there are likely
to be product prequalification requirements (a qualification
requirement means a requirement for testing or other quality assurance
demonstration that must be completed before award of a contract).
[41] Id.
[42] Of the other dollars for which information was missing, DHS stated
that some were awarded through purchase orders, to small businesses, or
had no subcontracting opportunities--all of which would exclude the
contracts from subcontracting plan requirements. As noted previously in
this report, FAR does not require subcontracting plans for contracts
with small businesses and when no subcontracting possibilities exist.
FAR does not contain an explicit exception for purchase orders. Under
FAR, a purchase order is a type of contract that, by definition,
involves the use of simplified acquisition procedures. See FAR § 2.101
(definitions of "Contract" and "Purchase Order"). The simplified
acquisition procedures apply where the contract amount does not exceed
the simplified acquisition threshold. See FAR § 13.000.
[43] Additionally, according to GSA officials, data entry errors
explain some of the information missing from their procurement systems.
Specifically, GSA reported that about $18 million were awarded through
purchase agreements, against existing contracts, and to a small
business that was miscoded as a large business--and therefore were not
required to have subcontracting plans.
[44] According to GSA officials, under GSA Acquisition Letter V-05-17
(effective September 9, 2005) certain contracts for amounts not
exceeding $10 million were subject to simplified acquisition procedures
that did not require submission of a subcontracting plan. They referred
to the following paragraph in the Sept. 9 letter:
In accordance with section 101(1) of Pub. L. 109-62, the threshold in
FAR 13.500(e) ($10 million) is applicable to procurements in support of
Hurricane Katrina rescue and relief operations. In addition, under
section 101(2), the micro-purchase threshold for actions in support of
Hurricane Katrina rescue and relief efforts is $250,000.
The GSA officials did not provide a clear explanation of the extent to
which GSA relied on the threshold amount. One official stated that
subcontracting plans were not required for acquisitions of commercial
items in which the contract amount was $10 million or less.
Subsequently, another official indicated that GSA relied on the
threshold amount for Katrina-related contracts generally, without
referring specifically to contracts for commercial items.
[45] The dollar amount for which it is unclear why GSA did not require
subcontracting plans may be greater than $16 million. As we indicated
earlier, GSA officials were unclear whether its increase in the
threshold for requiring the plans applied to all contract actions under
the $10 million or just those involving commercial items. If the
threshold increase applied to all contract actions, $16 million in GSA
contract dollars remains unexplained. If the threshold increase only
applied to commercial items (a subset of all contract actions), then
the dollar amount for which we do not have information on why GSA did
not require a subcontracting plan is likely greater than $16 million.
[46] The state DOTs of Alabama, Louisiana, and Mississippi set annual
goals for DBE participation in FHWA-assisted contracts at about 10
percent for fiscal years 2005 and 2006, as we note in the background
section of this report. Because these goals are based on DBE
participation on an annual basis using data from all FHWA-assisted
contracts in each state, and because DOT did not set Katrina-specific
overall DBE participation goals, the data we present in this section do
not represent noncompliance or the failure of any of the states to meet
annual DBE participation goals.
[47] Airports receiving FAA funds set annual DBE participation goals.
The airports' FAA-assisted contracts that we reviewed had goals that
ranged from about 7 percent to 20 percent, as we note in the background
section of this report. Because these goals are based on DBE
participation on an annual basis using data from all FAA-assisted
contracts, and because DOT did not set Katrina-specific DBE
participation goals, the data we present in this section do not
represent noncompliance or the failure of any of the airports to meet
annual DBE participation goals.
[48] Repairs to transit for damage caused by Hurricane Katrina have
been paid for with FEMA funds that were administered by FTA. According
to FTA officials, DBE participation requirements do not apply to the
funds they provided transit agencies in the affected states because the
funds were FEMA's, not FTA's.
[49] According to an Alabama DOT official, the Alabama DOT indirectly
awarded 11 additional Katrina-related contracts totaling about $800,000
through various counties in the state. The counties awarded the
contracts and the Alabama DOT reimbursed them. DBE information was not
readily available on these 11 contracts and we excluded them from our
analysis.
[50] The FAR Council oversees the development and maintenance of the
FAR. Its chair is the Administrator of OMB's Office of Federal
Procurement Policy, who is responsible for providing overall direction
for governmentwide procurement policies, regulations, and procedures.
The Council's members also include the DOD Director of Defense
Procurement and Acquisition Policy and the GSA Chief Acquisition
Officer. The Office of Federal Procurement Policy chairs quarterly
meetings to discuss and resolve significant or controversial FAR
changes.
[51] We are reporting DOD and the Corps separately because three of the
four supplemental appropriations specifically directed certain funds to
the Corps for its disaster relief activities.
[52] A Katrina-related action is one that had the National Interest
Action code of "H05K" or for DOD the System Code of "ZHK" or had some
variation of the name "Katrina" in the Description of Requirement field
or the Major Program field.
[53] Identifying the top 10 contractors is a nonprobability sample
because we did not consider including contractors other than the top
10.
[54] During the period of our analysis, each solicitation of offers to
perform a contract or contract modification over $500,000 ($1 million
for construction) and that had subcontracting possibilities required
the contractor to submit a subcontracting plan. The dollar threshold
was changed to $550,000 on September 28, 2006. 71 Fed. Reg. 57363
(Sept. 28, 2006).
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