Reporting of Small Business Contract Awards Does Not Reflect Current Business Size
Gao ID: GAO-03-776R May 7, 2003
We have prepared this report in response to concerns about whether large companies are receiving federal contracts intended for small businesses. We reviewed awards to five large companies to determine (1) how contracts awarded to the companies were reported in Federal Procurement Data System (FPDS), (2) why federal contract officials reported the contracts as small business awards, and (3) what actions are being taken to address any identified problems.
The five large companies that we reviewed received contracts totaling $1.1 billion in fiscal year 2001, including $460 million reported as small business awards. To understand why awards to these large companies were listed in FPDS as small business awards, we focused our review on 131 individual contract actions awarded to these companies by four federal buying activities. The predominant reason why these contract actions were reported as small business awards is because federal regulations generally permit a company to be considered as a small business over the life of the contract--even if they have grown into a large business, merged with another company, or been acquired by a large business. In today's federal contracting environment, contracts can extend up to 20 years. Additionally, agencies' reliance on various databases containing inaccurate information on current business size has led to misreporting of small business achievements. The General Services Administration, the Office of Federal Procurement Policy, and the Small Business Administration have each taken or proposed a number of actions aimed at requiring small businesses to re-certify and not retain their small business status for the life of the contract. While these proposed actions do not directly address the database problems we identified at the four federal buying activities, there are a number of initiatives under way designed to improve federal contract databases.
GAO-03-776R, Reporting of Small Business Contract Awards Does Not Reflect Current Business Size
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May 7, 2003:
The Honorable Olympia J. Snowe:
Chair, Committee on Small Business and Entrepreneurship:
United States Senate:
Subject: Reporting of Small Business Contract Awards Does Not Reflect
Current Business Size:
Dear Madam Chair:
We have prepared this report in response to your concerns about whether
large companies are receiving federal contracts intended for small
businesses. As agreed with your staff, we reviewed awards to five large
companies to determine:
* how contracts awarded to the companies were reported in Federal
Procurement Data System (FPDS),[Footnote 1]
* why federal contract officials reported the contracts as small
business awards, and:
* what actions are being taken to address any identified problems.
This report transmits information provided to your staff in earlier
briefings and in our testimony given today before the Small Business
Committee of the House of Representatives, which we have enclosed. We
conducted our review between November 2002 and May 2003 in accordance
with generally accepted auditing standards. A description of our scope
and methodology is included in the enclosure.
The five large companies that we reviewed received contracts totaling
$1.1 billion in fiscal year 2001, including $460 million reported as
small business awards. To understand why awards to these large
companies were listed in FPDS as small business awards, we focused our
review on 131 individual contract actions awarded to these companies by
four federal buying activities.
The predominant reason why these contract actions were reported as
small business awards is because federal regulations generally permit a
company to be considered as a small business over the life of the
contract--even if they have grown into a large business, merged with
another company, or been acquired by a large business. In today's
federal contracting environment, contracts can extend up to 20 years.
Additionally, agencies' reliance on various databases containing
inaccurate information on current business size has led to misreporting
of small business achievements.
The General Services Administration, the Office of Federal Procurement
Policy, and the Small Business Administration have each taken or
proposed a number of actions aimed at requiring small businesses to re-
certify and not retain their small business status for the life of the
contract. While these proposed actions do not directly address the
database problems we identified at the four federal buying activities,
there are a number of initiatives under way designed to improve federal
contract databases.
We have not made recommendations; however, we have noted the need for
accurate and consistent data on companies' business size in order to
reliably report small business contract awards. We believe a
coordinated effort between agencies is necessary to ensure that
accurate and reliable small business data are reported.
If you have any further questions concerning this report, please
contact me on (617) 788-0500. Individuals making key contributions to
this report include Robert Ackley, Penny Berrier, Chris Galvin, Julia
Kennon, Judy Lasley, John Needham, Russ Reiter, Sylvia Schatz, and
Karen Sloan.
Sincerely yours,
David E. Cooper:
Signed by David E. Cooper:
Director:
Acquisition and Sourcing Management:
Enclosure:
FOOTNOTES
[1] FPDS is the government's central repository of statistical
information on federal contracting. The system contains detailed
information on contract actions over $25,000 and summary data on
procurements of less than $25,000.
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