Establishing Goals for and Subcontracting With Small and Disadvantaged Businesses Under Public Law 95-507

Gao ID: PLRD-82-95 June 30, 1982

In response to a congressional request, GAO reviewed the small and disadvantaged business subcontracting program under Public Law 95-507, which essentially requires that all government contracts in excess of $500,000, or $1 million for construction contracts, contain a contractor's plan for subcontracting with small and disadvantaged businesses. In addition, GAO reviewed agency procedures for establishing small business prime contracting and subcontracting goals.

GAO found that contracting officers are generally obtaining subcontracting plans. However, Department of Defense (DOD) contracting officers did not require 18 prime contractors to submit such plans. Of these, two contractors were granted exemptions because of longstanding contractual relationships with their suppliers. This exemption is allowed by Defense Acquisition Regulations (DAR). Small Business Administration (SBA) determinations that subcontracting plans were not acceptable were questionable for 23 of the 161 cases reviewed. In addition, cases which SBA considered unacceptable are acceptable when reviewed using DAR guidance. SBA determinations that some prime contractors did not comply with subcontracting plans were valid. However, SBA did not always send contract administrators its determination reports. Because SBA did not attribute contractors' failure to achieve plans to a lack of good faith, contracting officers took no adverse actions against the contractors. DOD and the General Services Administration (GSA) used sound estimating procedures and methodology in establishing small business prime contracting goals. Likewise, the DOD small and disadvantaged business subcontracting goals were soundly based. However, because of unclear guidance, the GSA small and disadvantaged business subcontracting goals for fiscal years 1981 and 1982 did not consider subcontracting opportunities for prime contractors under $500,000.

Recommendations

Our 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: Paul F. Math Team: General Accounting Office: Procurement, Logistics, and Readiness Division Phone: (202) 512-4587


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