Hurricane Katrina
Agency Contracting Data Should Be More Complete Regarding Subcontracting Opportunities for Small Business Gao ID: GAO-07-698T April 12, 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 over 90 percent of the federal funds awarded for relief efforts via contracting as of March 2007. GAO initiated work and completed a report under the Comptroller General's authority last month describing the extent to which small businesses participated in these contracting opportunities. This testimony, which summarizes information from that report, discusses (1) the amounts that small and local businesses received directly from contracts with DHS, GSA, DOD, and the Corps for relief and recovery efforts related to Hurricane Katrina and (2) the extent to which small businesses received subcontracts for relief and recovery efforts.
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 between August 2005 and June 2006. 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). Small businesses in Alabama, Mississippi, and Louisiana received 66 percent of the $1.9 billion awarded to businesses in these states. Required information on small business subcontracting was not consistently available in official procurement data systems for the four agencies we reviewed. For example, the systems had no information on whether DHS or GSA required small business subcontracting plans for 70 percent or more of their contracting funds. In addition, the four agencies often did not provide or document reasons for their determinations that plans were not required, even though federal rules require such documentation when prime contracts meet criteria for having these plans. Incomplete information about subcontracting limited GAO's ability to determine the extent to which agencies complied with contracting rules and gave small businesses maximum opportunities to win subcontracts.
GAO-07-698T, Hurricane Katrina: Agency Contracting Data Should Be More Complete Regarding Subcontracting Opportunities for Small Business
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Testimony:
Before the Committee on Small Business, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 2:00 p.m. CDT:
Thursday, April 12, 2007:
Hurricane Katrina:
Agency Contracting Data Should Be More Complete Regarding
Subcontracting Opportunities for Small Businesses:
Statement of William B. Shear, Director,
Financial Markets and Community Investment:
GAO-07-698T:
GAO Highlights:
Highlights of GAO-07-698T, a testimony before the Committee on Small
Business, House of Representatives
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 over 90
percent of the federal funds awarded for relief efforts via contracting
as of March 2007.
GAO initiated work and completed a report under the Comptroller
General‘s authority last month describing the extent to which small
businesses participated in these contracting opportunities. This
testimony, which summarizes information from that report, discusses (1)
the amounts that small and local businesses received directly from
contracts with DHS, GSA, DOD, and the Corps for relief and recovery
efforts related to Hurricane Katrina and (2) the extent to which small
businesses received subcontracts for relief and recovery efforts.
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 between August 2005 and June 2006 (see
fig. below). 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). Small businesses in Alabama,
Mississippi, and Louisiana received 66 percent of the $1.9 billion
awarded to businesses in these states.
Required information on small business subcontracting was not
consistently available in official procurement data systems for the
four agencies we reviewed. For example, the systems had no information
on whether DHS or GSA required small business subcontracting plans for
70 percent or more of their contracting funds. In addition, the four
agencies often did not provide or document reasons for their
determinations that plans were not required, even though federal rules
require such documentation when prime contracts meet criteria for
having these plans. Incomplete information about subcontracting limited
GAO‘s ability to determine the extent to which agencies complied with
contracting rules and gave small businesses maximum opportunities to
win subcontracts.
Figure: Percentage of Katrina-Related Contract Dollars Awarded to Small
Business, 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 acting
awarded from August 1, 2005 to June 30, 2006.
[End of figure]
What GAO Recommends:
GAO recommended in its March 2007 report that DHS, GSA, and DOD take
steps designed to ensure compliance with federal contracting
regulations and more transparently disclose the extent to which
subcontracting opportunities are available to small businesses. These
agencies generally agreed with GAO‘s recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-698T].
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]
Madam Chairwoman and Members of the Committee:
I am pleased to be here in New Orleans to discuss small business
participation in the rebuilding of the Gulf Coast in the aftermath of
Hurricane Katrina. As of March 2007, the Departments of Homeland
Security (DHS) and Defense (DOD), the U.S. Army Corps of Engineers
(Corps), and the General Services Administration (GSA) accounted for
over 90 percent of the federal funds awarded for relief efforts through
contracting.[Footnote 1] The agencies were to use the funds to, among
other things, award contracts for a range of services related to
hurricane relief and recovery.
My statement today is based on a report we issued in March 2007, which
discussed the amounts that small businesses received through prime
contracts and subcontracts related to Hurricane Katrina.[Footnote 2] In
my testimony, I will discuss (1) the amounts that small and local
businesses received directly from federal agencies through contracts
for relief and recovery efforts related to Hurricane Katrina, and (2)
the extent of subcontracting by selected large prime contractors and
the lack of required information in official procurement data systems
on subcontracting accomplishments and plans.
To address these objectives, we analyzed data on contracts awarded or
used by DHS, GSA, DOD, and the Corps for Katrina-related projects
overall, and, specifically for projects in Alabama, Louisiana, and
Mississippi from August 1, 2005, through June 30, 2006. We identified
contracts that were used for activities related to Hurricane Katrina
and that required subcontracting plans. We also interviewed officials
from each of the four agencies, the Small Business Administration
(SBA), and the Office of Management and Budget (OMB). We conducted our
work between March 2006 and February 2007 in accordance with generally
accepted government auditing standards.
In summary:
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). Small businesses
received approximately 66 percent of the $1.9 billion awarded by the
four agencies to businesses in Alabama, Mississippi, and Louisiana.
Information on whether DHS and GSA required subcontracting plans was
generally not available in the federal government's official
procurement database for more than 70 percent of the contracting
dollars each agency awarded for activities related to Hurricane
Katrina. This database should have contained information on whether or
not the agencies required subcontracting plans in these instances. When
the database did contain information on whether or not agencies
required the plans, we found additional information about them that was
incomplete. Specifically, the four agencies we reviewed varied in their
determinations that subcontracting plans were not required from their
large prime contractors, ranging from 12 percent (GSA) to 77 percent
(DOD) of their Katrina-related contracting dollars. Information on the
agencies' reasons for not requiring these plans, which should have been
readily available, was incomplete.
In order to more transparently disclose the extent to which
subcontracting opportunities are available to small businesses, we
recommended that DHS, GSA, and DOD (1) issue guidance reinforcing the
need for agencies to document in publicly available sources their
decisions regarding subcontracting plan requirements, and (2) consider
asking their Inspectors General to conduct reviews to ensure that this
guidance and related requirements are being followed. The agencies
generally agreed with our recommendations and described various steps
they are taking to implement them. We plan to follow up with the
agencies on their efforts to implement these recommendations.
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 federal agencies provide through contracts with private
businesses.[Footnote 3] Such activities include debris removal,
temporary housing assistance, reconstruction, and the provision of
supplies. These contracts are subject to federal procurement
regulations and to the Stafford Act, which, among other things, sets
forth requirements for the federal response to presidentially declared
disasters. A provision of the Stafford Act 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 4]
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 5] In addition, a
business must meet the size standards published by SBA to be considered
"small." 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 6]
The general rules governing procurement are set out in federal
procurement statutes and in the Federal Acquisition Regulation (FAR).
Among other things, these rules require that any business receiving a
prime contract for more than the simplified acquisition
threshold[Footnote 7] must agree to give small business the "maximum
practicable opportunity" to participate in the contract.[Footnote 8]
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 9] This plan must identify the types of work the prime
contractor believes it is likely to award as subcontracts and 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 10]
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 11] 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.
Small Businesses Received Varied Amounts of the Contracting Dollars
That DHS, GSA, DOD, and the Corps Awarded:
Our March 2007 report identified the extent to which DHS, GSA, DOD, and
the Corps awarded funds directly to small businesses; the extent to
which different types of small businesses received funds; and, the
extent to which small businesses located in Alabama, Mississippi, and
Louisiana received funds for Katrina-related projects. We found that
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 agencies (fig. 1).[Footnote 12]
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]
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 historically underutilized business zones
(HUBZones)[Footnote 13], received from 2 to 16 percent (fig. 2).
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 2: Dollar Amount of Katrina-Related Prime Contracts Awarded to
Small Businesses by Socioeconomic Group:
[See PDF for image]
Source: GAO analysis of FPDS-NG and DD-350 data on contracting actions
awarded from August 1, 2005 to June 20, 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]
Small businesses in Alabama, Mississippi, and Louisiana 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, the proportion of Katrina-related contracting dollars
awarded to small businesses was largest in Mississippi (75 percent),
followed by Alabama and Louisiana at 65 percent and 62 percent,
respectively, of the dollars awarded (table 1). While small businesses
in Louisiana received the smallest proportion of these Katrina-related
dollars, the actual amount the businesses received was nearly double
what small businesses received in Mississippi. 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 1: Small Businesses Received the Majority of Contracting Dollars
Awarded Directly to Local Businesses:
Dollars in millions.
Agency: 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%.
Agency: 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.
Agency: DOD;
Alabama: All businesses: Dollar amount: 10;
Alabama: Small businesses: Dollar amount: 10;
Alabama: Small businesses: Percent: 98;
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.
Agency: 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 million 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]
Information on Subcontracting Accomplishments and Plans Was Incomplete:
Our March 2007 report also included information on the extent to which
small businesses received subcontracts from DHS and GSA prime
contractors, and selected military prime contractors, that were awarded
Katrina-related contracts. The report described the accomplishments
that these prime contractors reported, identified certain instances
where accomplishment data was not available because contractors had not
submitted it, and also identified two key ways in which necessary
information on subcontracting plan requirements was incomplete.
Subcontracting Accomplishment Information Was Not Consistently
Available for Some DHS and GSA Contracts Related to Hurricane Katrina:
Contractors that have individual subcontracting plans are generally
required to report on their subcontracting goals and accomplishments
twice a year to the federal government. However, we found that this
information was not consistently available for some DHS and GSA
contracts. For the military contracts we analyzed, accomplishment data
were available.
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 a subcontracting plan 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 14] For these 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 15]
For GSA, information was generally unavailable on the subcontracting
accomplishments associated with the 11 contracts (worth a total of
about $9.6 million) that the agency awarded to large businesses for
Katrina-related activities and that included subcontracting plans.
According to agency officials, subcontracting accomplishment
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.
We reviewed 4 of the top 10 recipients of prime contracting dollars
from DOD and the Corps for projects related to Hurricane
Katrina.[Footnote 16] 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 17] 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 18] 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.[Footnote 19] 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.
Information on Subcontracting Plan Requirements Was Missing or
Incomplete:
In two respects, key information on small business subcontracting plans
was not consistently available in official procurement data systems for
the four agencies. First, primarily with respect to DHS and GSA
contract actions, the official procurement data system had no
information at all on whether or not they required subcontracting plans
for 70 percent or more of their contracting funds. For DOD and the
Corps, this system lacked information on whether they required
subcontracting plans for one percent of their contracting funds. Table
2 shows the total amounts each agency awarded to large businesses for
contracts valued over $500,000 and the extent to which no information
was available in the official procurement data system on whether the
agencies required subcontracting plans for those contracts (column 6).
Table 2: 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]
Second, the four agencies' systems showed that the agencies had
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. Agencies are required to
document their reasons for these determinations. However, information
on the four agencies' reasons for not requiring these plans, which
should have been readily available, was incomplete.
Overall, procurement officials from the four agencies were able to
explain some of the missing or incomplete subcontracting plan
information by, for example, identifying data entry errors or providing
evidence of reasons for not requiring the subcontracting plans. For
example, DHS officials determined that $545 million of the DHS
contracting funds the procurement data system showed as not requiring a
plan had been miscoded and should have been entered in the procurement
system under a different category, showing that the contracts offered
"no subcontracting possibilities." In another instance, GSA officials
did not require a subcontracting plan for a $26 million contract for
ice because they believed the urgency of the situation required buying
and shipping the ice faster than normal procedures would allow.
Nonetheless, at the time we issued our report contracting dollars
remained for each agency with incomplete subcontracting plan
information and which agency officials had not been able to explain.
These amounts ranged from $3.3 million for DOD (excluding the Corps) to
$861 million for DHS.
In our report, we concluded there was little doubt that Hurricane
Katrina posed challenges to the agencies to award contracts quickly
while still following government procurement rules, especially those
regarding subcontracting plans. Certain choices, such as documenting
compliance with these requirements at a later date (something GSA and
DOD officials indicated was the case), might have been understandable.
Nonetheless, more than a year after the hurricane, we reported that a
substantial amount of information about the four agencies'
subcontracting requirements remained incomplete. 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, remained 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.
Therefore, to ensure compliance with federal contracting regulations
and more transparently disclose the availability of subcontracting
opportunities for small businesses, we recommended that the Secretaries
of Homeland Security and Defense and the Administrator of General
Services issue guidance reinforcing, among other things, the necessity
for documenting in publicly available sources the agencies' decisions,
particularly in instances when the agencies decided not to require
subcontracting plans. Moreover, we recommended that the agencies
consider asking their respective Inspectors General to conduct a review
to ensure that this guidance and related requirements were being
followed.
The agencies generally agreed with our recommendations and are taking
steps to address them. For example, GSA officials recently told us the
agency's Chief Acquisition Officer will soon issue two "acquisition
alerts" reminding contracting officers of the importance of
subcontracting plan requirements as well as the documentation
associated with complying with the requirements. Army Corps of
Engineers officials told us they are currently developing a new
training module on these topics and expect to deliver it to their
contracting officers this summer.
Madam Chairwoman, this concludes my prepared statement. I would be
happy to answer any questions at this time.
Contacts and Acknowledgments:
For further information on this testimony, please contact William B.
Shear at (202) 512-8678 or shearw@gao.gov. Individuals making key
contributions to this testimony included Bill MacBlane, Assistant
Director; Emily Chalmers; Julia Kennon; Tarek Mahmassani; Lisa Moore;
Paul Thompson; and, Bill Woods.
FOOTNOTES
[1] 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.
[2] GAO, Hurricane Katrina: Agency Contracting Data Should Be More
Complete Regarding Subcontracting Opportunities for Small Businesses,
GAO-07-205 (Washington, D.C., Mar. 1, 2007).
[3] See Robert T. Stafford Disaster Relief and Emergency Assistance Act
(Stafford Act), Pub. L. No. 93-288, as amended, 42 U.S.C. §§ 5121 -
5204c.
[4] 42 U.S.C. § 5150.
[5] Public Law 85-536, as amended, 15 U.S.C. § 632(a).
[6] 15 U.S.C. § 644(g).
[7] 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.
[8] FAR § 19.702.
[9] Id. The dollar threshold was changed to $550,000 on September 28,
2006. 71 Fed. Reg. 57363 (Sept. 28, 2006).
[10] These and other aspects of the small business subcontracting plan
requirement are set forth at FAR Part 19.7.
[11] 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).
[12] 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.
[13] HUBZones 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 those zones.
See 15 U.S.C. § 632.
[14] 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.
[15] 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.
[16] 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.
[17] 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.
[18] 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.
[19] 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.
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