Small Business Subcontracting: Oversight of Contractor Compliance with Subcontracting Plans Needs Improvement

Certain federal contracts must have a small business subcontracting plan if subcontracting opportunities exist. But recent Department of Defense Inspector General reports raised concerns about agency oversight of subcontracting requirements. GAO was asked to review oversight of subcontracting plans. Among its objectives, this report discusses (1) the extent to which selected agencies (DLA, GSA, NASA, and Navy) oversee small business subcontracting plans, and (2) how SBA encourages agency compliance with subcontracting plan requirements.

GAO reviewed data and documentation for a non-generalizable sample of 32 federal contracts (including 26 contracts with a subcontracting plan) at four agencies, selected to include contracts over $1.5 million at both civilian and military agencies awarded in fiscal years 2016–2018. GAO also reviewed the Federal Acquisition Regulation, SBA and selected agency documentation, and interviewed agency officials.

GAO found selected agencies did not consistently follow all required procedures for oversight of small business subcontracting plans, both before and after contracts were awarded. GAO reviewed 26 contracts with a subcontracting plan at four agencies—Defense Logistics Agency (DLA), General Services Administration (GSA), National Aeronautics and Space Administration (NASA), and the Department of the Navy (Navy).

For about half of the 26 contracts, agencies could not demonstrate that procedures for Procurement Center Representative (PCR) reviews were followed. These representatives may review small business subcontracting plans and provide recommendations for improving small business participation. When an agency is awarding a contract that includes a subcontracting plan, contracting officers are required to notify these representatives of the opportunity to review the proposed contract. Without taking steps to ensure these opportunities are provided, agencies may not receive and benefit from suggestions for increasing small business participation.

For 14 of the 26 contracts, contracting officers did not ensure contractors submitted required subcontracting reports. After a contract is awarded, contracting officers must review reports contractors submit that describe their progress towards meeting approved small business subcontracting goals. In some cases, contracting officers accepted reports with subcontracting goals different from those in the approved subcontracting plans, with no documentation explaining the difference. Without complete and accurate information about a contractor's subcontracting goals, an agency cannot adequately assess a contractor's performance in meeting its subcontracting plan responsibilities.

The Small Business Administration (SBA) encourages agency compliance with small business subcontracting plan requirements by providing training to contracting officers and contractors, and by conducting reviews. For instance, SBA Commercial Market Representatives conduct compliance reviews to evaluate a large prime contractor's compliance with subcontracting program procedures and goal achievement. However, SBA could not provide documentation or information on almost all compliance reviews conducted in fiscal years 2016–2018. SBA has developed new procedures for conducting compliance reviews, but as of mid-March 2020, had yet to fully implement them. SBA has conducted fiscal year 2019 compliance reviews that reflect a first phase of their new procedures. SBA has draft guidance on the new compliance review process, including some specific information regarding what Commercial Market Representatives are to record as part of the compliance review. SBA has begun to conduct compliance reviews in accordance with the guidance, but does not have clearly documented and maintained records for the first phase of these reviews. Without consistent, clear documentation and records that will be maintained going forward, SBA's ability to track contractor compliance and agency oversight efforts will be limited.

GAO is making 10 recommendations for ensuring procedures for PCR reviews are followed, contractor subcontracting reports are monitored and reviewed for accuracy, and SBA compliance reviews are clearly documented and maintained. DLA, GSA, NASA, and Navy concurred with our recommendations. SBA partially concurred with our recommendation. GAO maintains that its recommendation is warranted.

In fiscal year 2019, the federal government awarded more than 5,000  contracts requiring a small business subcontracting plan, and obligated  more than $300 billion to contracts with required small business  subcontracting plans. Small businesses are to be provided  subcontracting opportunities under certain contracts provided by federal  agencies. Specifically, contracts over $700,000 ($1.5 million for  construction) awarded to prime contractors that are not small businesses  must have a small business subcontracting plan, if there are  subcontracting opportunities.

Contractors required to have a subcontracting plan must report on their  subcontracting achievements and make a good-faith effort to comply with  the plan. When they are unable to meet the agreed-upon small business  subcontracting goal, they must explain why they did not and the relevant  agency contracting officer must determine if the contractor made a good- faith effort.

Recent reports by the Office of Inspector General (OIG) at the  Department of Defense (DOD) raised concerns about oversight related to  subcontracting opportunities and the extent to which agencies oversaw  subcontracting plans. For example, the reports raised concerns about  awarded contracts that did not have a subcontracting plan or a  determination that subcontracting possibilities did not exist. For contracts  with a subcontracting plan, the reports raised concerns about the lack of  monitoring on the part of contracting officers of contractor compliance  with the plan.

You requested that we evaluate oversight of subcontracting plans and  related activities in at least two military and two civilian agencies and  review how the Small Business Administration (SBA) encourages  agencies to conduct such oversight. This report examines (1) the extent  to which selected agencies conduct oversight related to small business  subcontracting plans in the pre-award phase of the federal contracting  process; (2) the extent to which selected agencies conduct oversight of  such subcontracting plans in the post-award phase; and (3) steps SBA  has taken to encourage agencies to conduct oversight related to small  business subcontracting plans.

To address the objectives on selected agency oversight of small business  subcontracting plans, we reviewed the Federal Acquisition Regulation  (FAR) and agency-specific procedures. We also reviewed requirements  for reports contractors submit on their subcontracting activities, and  corresponding agency oversight requirements for the submitted reports.  We reviewed documentation on agency training for contracting officers  related to subcontracting plans and requirements. We judgmentally  selected two military agencies—the Defense Logistics Agency (DLA) and  the Department of the Navy (Navy)—and two civilian agencies—the  General Services Administration (GSA) and the National Aeronautics and  Space Administration (NASA)—to review based on our analysis of  Federal Procurement Data System-Next Generation (FPDS-NG) data and  other factors.

More specifically, we selected the agencies based on (1) type (military or  civilian), (2) dollar amounts of federal contracts awarded in fiscal years  2016–2018, and (3) range of performance related to subcontracting  based on SBA’s annual procurement scorecard. We also reviewed  documentation for a non-generalizable sample of 32 contracts—eight per  agency—awarded in fiscal years 2016–2018 across the four agencies.  We randomly selected these 32 contracts from a set of contracts that met  several criteria, such as contract award amounts above $1.5 million, a  mix of subcontracting plans or reasons for not including plans, and  contract status (completed or active).

We first selected six contracts per agency (total of 24) that had a small  business subcontracting plan at the time of award. We then selected  another set of contracts—two per agency (total of eight)—that seemed to  meet criteria for requiring small business subcontracting plans—such as  exceeding the dollar threshold—but were coded in FPDS-NG as not  having a plan in place. For contracts we selected, we also obtained  reports on contractor submissions on small business subcontracting  activity, where applicable, and agency reviews of the submissions from  the Electronic Subcontracting Reporting System (eSRS). We interviewed  officials from each agency about their efforts related to oversight of small  business subcontracting plans.

We assessed the reliability of FPDS-NG data by reviewing available  documentation and prior GAO data reliability assessments and by  electronically testing for missing data, outliers, and inconsistent coding.  We found the data reliable for the purposes of selecting agencies and  contracts to review. We assessed the reliability of eSRS by reviewing  available documentation and verifying information with agencies. We  found the information in eSRS reliable for assessing the extent to which  agencies conduct oversight related to contractor submission reports in the  system.

To address the third objective, we reviewed documentation on several  types of SBA reviews, including compliance reviews, related to contractor  compliance with and agencies’ oversight of subcontracting plans. We also  reviewed SBA’s standard operating procedures and documentation on  SBA training programs for the small business subcontracting program.  We interviewed SBA officials regarding steps the agency takes to  encourage agency oversight of subcontracting plans.

For all the objectives, we reviewed relevant federal laws and regulations  and reviewed previous GAO reports and reports from the DOD OIG. We  also interviewed officials from the DOD OIG to obtain an understanding of  their work on DOD’s oversight of subcontracting plans at selected DOD  components and command centers. See appendix I for more information  on our scope and methodology.

We conducted this performance audit from January 2019 to May 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Contractors’ Subcontracting Pre- and Post-Award Responsibilities

Federal law and regulations require that contractors receiving a contract  with a value greater than the simplified acquisition threshold must ensure  that small businesses have the “maximum practical opportunity” to  receive subcontracting work. In addition, a prospective contractor  generally must submit a subcontracting plan for each solicitation or  contract modification with a value of more than $700,000—or $1.5 million  for construction contracts—whenever subcontracting opportunities exist.  Contractors with federal contracts typically use one of three types of  subcontracting plans:  Individual subcontracting plan, which applies to a specific contract,  covers the entire contract period including option periods, and  contains subcontracting goals;

Commercial subcontracting plan, which covers the company’s fiscal  year and the entire production of commercial items sold by either the  entire company or a portion of it (such as a division, plant, or product  line) and contains subcontracting goals; and

Comprehensive subcontracting plan, which is similar to a commercial  subcontracting plan and applies only to DOD contracts. Each  company reports on subcontracting goals and achievements for a  specific fiscal year on a plant, division, or corporate-wide basis. A  comprehensive plan may cover a large number of individual  contracts.

Federal contractors use these plans to document subcontracting goals as  a specific dollar amount planned for small business awards and as a  percentage of total subcontracting dollars available to small businesses  and socioeconomic categories of small businesses. Contractors also  may establish, for specific facilities, a master subcontracting plan that  contains all the required elements of an individual plan, except the  subcontracting goals. Because a master plan does not include specific  subcontracting goals, an individual subcontracting plan or an addendum  typically provides the goals for specific contracts associated with the  master subcontracting plan.

After a contract is awarded, the contractor must periodically submit to the  government a subcontracting report that describes progress towards  meeting these goals. Individual subcontracting plans require reporting on  a single contract and commercial and comprehensive subcontracting  plans allow for consolidated reporting of multiple contracts on a division-  or company-wide basis.

Contractors must report their subcontracting achievements through  eSRS, a web-based government-wide system that both contractors and  agency contracting officers can access. The FAR requires contractors to  submit individual subcontracting reports (ISR) and summary subcontract  reports (SSR) (see table 1). These reports show contractors’ progress  toward meeting their small business subcontracting goals.

Contracting Officers’ Subcontracting Program Pre- and Post-Award Responsibilities

Several regulations, processes, and procedures dictate contracting  officers’ responsibilities for oversight of subcontracting plans during the  pre-award and post-award phases of the acquisitions process. Before  making an award, the FAR requires that contracting officers review the  subcontracting plan to help ensure that the required information, goals,  and assurances—such as a contractor committing to submit periodic  reports to the government to determine the extent of compliance with the  subcontracting plan—are included. Additionally, the FAR requires  contracting officers to provide the SBA Procurement Center  Representative (PCR)—SBA staff whose responsibility includes  supporting agency contracting opportunities for small businesses—with  an opportunity to review the proposed contract, including the  subcontracting plan and supporting documentation.

After a contract or contract modification containing a subcontracting plan  is awarded or an existing subcontracting plan is amended, the FAR  requires that contracting officers monitor the prime contractor’s  compliance with its subcontracting plan. In carrying out their post-award  oversight responsibilities, the FAR requires contracting officers to (1)  ensure contractors file their subcontracting reports in eSRS within 30 days of the close of each reporting period (a report is also required for  each contract within 30 days of contract completion); (2) review ISRs, and  where applicable SSRs, in eSRS within 60 days of the reporting end date;  and (3) acknowledge receipt of, accept, or reject the reports in eSRS (see  fig.1).

The FAR requires agencies to perform annual evaluations of and report  on a contractor’s performance when work under the contract has been  completed. Small business subcontracting is one evaluation area for  which agencies rate a contractor’s performance. Agencies use the  Contractor Performance Assessment Reporting System to collect and  manage the library of Contractor Performance Assessment Reports.  Agency contracting officers are to consider information on a contractor’s  past performance from these reports when making future contract award  decisions, including a contractor’s actions for previously awarded  contracts that had a small business subcontracting plan.

The FAR also requires contractors to comply in good faith with the  agreed-upon subcontracting plan goals and requirements. When a  contractor fails to meet the small business goals in the subcontracting  plan, the contractor must provide a rationale for not being able to meet  the goals. In determining whether a contractor failed to make a good-faith  effort, a contracting officer must look at the totality of the contractor’s  actions, consistent with the information and assurances provided in its subcontracting plan, and consider the rationale the contractor provided.  The contractor’s failure to meet its subcontracting goals does not, in and  of itself, constitute failure to make a good-faith effort. Failure to submit  required subcontracting reports as required by the FAR also may factor  into contracting officers’ determinations. If a contracting officer  determined that a contractor failed to make a good-faith effort, the FAR  requires the contracting officer to assess liquidated damages (monetary  assessments for breaching the contract) against the contractor.

SBA’s Office of Government Contracting administers SBA’s  subcontracting assistance program. In this office, headquarters and field  staff have responsibilities to assist small businesses in meeting  requirements to receive government contracts as subcontractors. SBA  staff have related responsibilities in both the pre- and post-award  acquisition phases. For example, SBA’s PCRs and Commercial Market  Representatives (CMR) play a role in helping to ensure that small  businesses gain access to subcontracting opportunities. In particular, a  PCR’s key responsibilities include reviewing proposed agency contracts  and making recommendations to agency contracting officers. PCRs also  review proposed subcontracting plans and provide advice and  recommendations on them to contracting officers. Key responsibilities of  CMRs include counseling small businesses on obtaining subcontracts  and conducting reviews, including compliance reviews, of large prime  contractors with subcontracting plans. SBA’s standard operating  procedure (SOP) for the subcontracting assistance program provides  guidance for how CMRs conduct reviews.

Although SBA conducts monitoring activities, the awarding federal agency  remains responsible for overseeing and enforcing compliance with a  subcontracting plan throughout the life of the contract. In the case of  DOD, in addition to the components within the agency that award and  monitor contracts, the Defense Contract Management Agency (DCMA)  also provides contract administration services for certain DOD contracts.  SBA and DCMA may conduct compliance reviews jointly to evaluate  prime contractor subcontracting programs supporting specific DOD  contracts administered by DCMA. SBA is also authorized to enter into  agreements with other federal agencies to conduct compliance reviews  and further the objectives of the subcontracting program. We discuss  SBA oversight in more detail later in the report.

Agency Small Business Subcontracting Goals

Annually, SBA negotiates with agencies to establish individual small  business subcontracting goals based on recent subcontracting  achievement levels by each agency. Agencies awarding contracts with  small business subcontracting plans aim to provide opportunities to  promote the use of small businesses, veteran-owned small businesses,  service-disabled veteran-owned small businesses, Historically  Underutilized Business Zone small businesses, small disadvantaged  small businesses, and women-owned small businesses. These efforts  can help agencies achieve their individual small business subcontracting  goals.

Selected Agencies Could Not Demonstrate They Consistently Implemented All Required Pre-Award Procedures for Subcontracting Plans

The four agencies we reviewed—DLA, GSA, Navy, and NASA— demonstrated that contracting officers reviewed and approved  subcontracting plans in most of the contracts in our sample. However,  they could not demonstrate they followed procedures for making a  determination of subcontracting possibilities for all of the contracts we  reviewed without a subcontracting plan. Agencies also could not  demonstrate they followed procedures related to PCR reviews in about  half of the contracts reviewed.

Selected Agencies Generally Demonstrated That Contracting Officers Reviewed and Approved Subcontracting Plans

Review and Approval of Subcontracting Plans Mostly Documented

The four agencies provided documentation to show that contracting  officers reviewed and approved subcontracting plans in most of the 26  contracts that had subcontracting plans. FAR §§ 19.705-4 and 19.705-5  contain contracting officer responsibilities related to reviewing a proposed  subcontracting plan and determining its acceptability. For 25 of the 26  contracts we reviewed with a subcontracting plan, the agencies provided  documentation showing the contracting officer reviewed the  subcontracting plan. In some instances, we also found specific agency  guidance for, and checklists or memorandums documenting the reviews  of, subcontracting plans. For example:

GSA has guidance for its contracting officers when reviewing  subcontracting plans. Specifically, GSA’s Acquisition Manual includes  a checklist for reviewing subcontracting plans and ensuring the plans  meet FAR requirements. Contracting officers used the checklist in  their reviews for five of the six GSA contracts we reviewed with a  subcontracting plan. The checklist also documents whether the total  planned subcontracting dollars and percentages, the method for  developing these goals, and information about supplies or services  that will be subcontracted are acceptable to the contracting officer.

DOD’s guidance on subcontracting program business rules and  processes contains a specific DOD checklist for subcontracting plan  reviews. Contracting officers used the DOD checklist for three of 14  DLA and Navy contracts with a subcontracting plan that we  reviewed. In addition to documenting the extent to which a  subcontracting plan meets FAR and Defense Federal Acquisition  Regulation Supplement requirements, the checklist also reflects  certain requirements related to master and commercial subcontracting  plans. The checklist is optional for contracting officers to use when  reviewing subcontracting plans.

NASA also has guidance that includes steps contracting officers  should take when conducting subcontracting plan reviews. For two of  the six NASA contracts with a subcontracting plan that we reviewed,  we found a checklist that the contracting officer used or a  memorandum the contracting officer prepared that detailed the  subcontracting plan review, including proposed subcontracting goals.

For almost all the contracts we reviewed that did not have a specific  checklist or memorandum to document the contracting officer’s review,  we found other evidence, such as a contracting officer’s signature on the  subcontracting plan, acknowledging review of the plan. Additionally, for one Navy contract with a contract award value of more than $13 million  and with an individual subcontracting plan, we found evidence that, after  reviewing the subcontracting plan, the contracting officer requested that  the contractor make corrections to it. For one DLA contract we reviewed,  based on the limited documentation provided, we were unable to  determine the extent to which the subcontracting plan was reviewed. DLA  officials stated at the time of our review that they were unable to  determine if the subcontracting plan was reviewed.

We also obtained documentation that demonstrated the subcontracting  plan was approved for most of the contracts—21 of 26—we reviewed with  a subcontracting plan. For example, we obtained documentation with the  contracting officer’s signature on the subcontracting plan (approving the  plan), the contracting officer’s signature approving the contract (which  included the subcontracting plan), or a signed memorandum that  documented approval of the plan.

However, we identified five contracts across DLA, Navy, and GSA that  had limited documentation (three contracts) for approval of the  subcontracting plan, or for which we could not determine whether the  subcontracting plan was approved (two contracts).

For one DLA contract with an award amount of $15 million and with  an individual subcontracting plan, we were unable to determine if the  subcontracting plan was approved. Documentation we reviewed,  including DLA emails, did not indicate whether the subcontracting plan  was approved. In our review of the subcontracting plan, the section of  the plan documenting its approval was not completed. Additionally,  according to DLA officials, the contract file does not contain any  record of the contracting officer’s signature on the subcontracting  plan.

For two Navy contracts with award amounts of about $17 million and  about $32 million and both with individual subcontracting plans, we  found limited documentation demonstrating approval of the  subcontracting plan for the first contract and, based on the lack of  documentation, were unable to determine if the second contract was  approved. For the first contract, we found a checklist with signatures  demonstrating review of the subcontracting plan by the contracting  officer and other officials. However, the subcontracting plan was not  signed by the contracting officer as the approval/signature field in the  subcontracting plan was empty. For the other contract, Navy officials  could not provide any documentation showing approval of the  subcontracting plan. The subcontracting plan was not signed by a  Navy contracting officer or other Navy staff, and according to Navy  officials, they were unable to find a signed subcontracting plan in the  pre-award contract file.

For two GSA contracts with individual subcontracting plans, we also  found limited documentation approving the subcontracting plan.  Similar to one of the Navy contracts discussed above, we found  checklists with signatures demonstrating reviews of the  subcontracting plan by the contracting officer and other officials.  However, in both of these instances, the contracting officer did not  sign the approval section of the subcontracting plan.

Additionally, for one DLA contract we reviewed with an individual  subcontracting plan and contract award amount of about $18 million,  while we found documentation indicating that the contract had been  approved, DLA could not provide documentation for a DOD requirement  related to a socioeconomic subcontracting goal. Specifically, the  subcontracting plan for this contract listed the small disadvantaged  business goal at less than 1 percent. According to Defense Federal  Acquisition Regulations Supplement § 219.705-4, a small disadvantaged  business goal of less than 5 percent must be approved one level above  the contracting officer. In our review of this contract, DLA could not  provide documentation specifically showing a higher-level approval for the  goal of less than 1 percent. DLA provided an interoffice record and a  signed price negotiation memorandum approval document, but these  documents did not reference the small disadvantaged business  subcontracting goal of less than 1 percent. As a result, we were unable to  determine that this subcontracting goal was approved at the appropriate  level.

Subcontracting Possibilities Determination Not Properly Documented

In addition to the 26 contracts with subcontracting plans, we also  reviewed another six contracts that initially appeared to require a  subcontracting plan (based on data in FPDS-NG) but did not have one.

For three of the six contracts, the contracting officer or relevant official did  not document why a subcontracting plan had no subcontracting  possibilities, or prepared the required documentation years after the  contract award. For contracts over $700,000, the FAR generally requires  contracting officers to award the contract with a subcontracting plan or to  make a determination that no subcontracting possibilities exist. If the  contracting officer determines that there are no subcontracting  possibilities, the determination should include a detailed rationale, be  approved at one level above the contracting officer, and be in the contract  file. GSA accounted for one of the three contracts and NASA for the  remaining two.

A subcontracting plan was not included in a GSA construction  contract with an award amount of about $7 million (which met  requirements for a small business subcontracting plan based on the  award amount and type of contract). GSA did not have any  documentation and could not tell us why the contract did not require a  subcontracting plan or had no subcontracting possibilities, or why a  subcontracting plan was not included in the contract. Specifically,  GSA provided a response explaining the agency did not have  documentation to support why the contracting officer (who is no longer  with the specific contracting center that awarded the contract)  determined there were no subcontracting possibilities.

For two NASA contracts, NASA officials provided documentation  signed by one level above the contracting officer, but the  documentation was prepared years after the contract award. For the  first contract, with an award value of almost $8 million and awarded in  March 2016, the determination providing the rationale for no  subcontracting possibilities was created and signed in March 2019,  about 3 years after the contract was awarded instead of when the  award was made.

For the second NASA contract, awarded in September 2017 with a  contract award amount of about $2 million, NASA officials explained  that in 2017, the initial procurement was estimated at a dollar amount  below the threshold for a subcontracting plan and therefore no  subcontracting plan was required in the solicitation. The contract  value was later changed to add two option periods, which put the  estimate over the subcontracting plan threshold. NASA officials said  the contracting officer’s documentation to determine the need for a  subcontracting plan was inadvertently omitted from the file. As a result of our document request, the reviewing contracting officer noted that  the file did not properly address the issue of the increased estimate  relative to subcontracting plan requirements. NASA then conducted a  review to determine if the award met the requirements for a  subcontracting plan or if it would have been waived in 2017. Based on  the recent review, NASA officials determined that a requirement for a  subcontracting plan would have been waived in 2017 based on,  among other factors, the specific product purchased through the  contract and the structure of the contract, and they prepared a  memorandum (in July 2019) documenting this review and conclusion.

A 2018 DOD OIG report on small business subcontracting at two Army  contracting command locations found similar issues. Specifically, the  report found that of 50 contracts the DOD OIG reviewed, the two  contracting command locations awarded six contracts, valued at $330.7  million, without a subcontracting plan or a contracting officer’s  determination that no subcontracting possibilities existed.

The three other contracts we reviewed—two at DLA and one at GSA— had appropriate documentation directly explaining or a rationale  supporting why no subcontracting plan was in place. For example, for one  contract, DLA officials provided a memorandum signed at one level above  the contracting officer that documented the specific nature of the contract  for a particular type of metal, the work required, and ability of the  contractor to perform the work in-house. For the second contract, DLA  officials provided information that the contract was awarded through the  AbilityOne Program—which does not require a subcontracting plan. The  GSA contract was an automotive contract in which the vendor initially  represented itself as a large business and had submitted a subcontracting  plan. However, after the contract award, GSA documented a modification  to the contract that reclassified the vendor as a small business, based on  size standards for the North American Industry Classification System  codes for the specific acquisition. Therefore, the subcontracting plan was  no longer required.

Agencies Could Not Demonstrate They Followed Procedures Related to PCR Reviews in Half of the Contracts We Reviewed

For half of the contracts we reviewed with a small business  subcontracting plan (individual or commercial), the agencies could not  demonstrate that procedures related to PCR reviews were followed for  one or more contracts. According to FAR § 19.705-5(a)(3), when an  agency is making a contract award that includes a subcontracting plan,  contracting officers should notify the appropriate PCR of the opportunity  to review the proposed contract, including the associated subcontracting  plan and supporting documentation.

More specifically, for 12 of 24 contracts we reviewed with an individual or  commercial subcontracting plan, the agencies could not provide  documentation or we were unable to determine from the documentation  provided whether the contracting officer gave the SBA PCR a review  opportunity and whether the PCR may have conducted a review. Of these  12 contracts, DLA and Navy accounted for 10, while GSA and NASA  accounted for one each.

Five of the six DLA contracts we reviewed did not have any  documentation or lacked sufficient documentation to determine if the  contracting officer or other official provided the PCR with an  opportunity to review the contract, and whether a PCR review  occurred. More specifically, DLA was unable to provide any  documentation related to the PCR review process for three contracts  with a subcontracting plan and told us they could not locate such  documentation in the contract file. For one of these three contracts,  DLA referred us to DCMA for additional documentation, but the  documentation DCMA provided did not confirm whether the PCR had  an opportunity to review the contract. For the remaining two of five  contracts, DLA provided documentation, including a review by  DCMA’s Small Business Office for one of the contracts, but this  documentation did not demonstrate the contract was provided to an  SBA PCR for review.

Five of six Navy contracts we reviewed that had individual  subcontracting plans also lacked this documentation. Specifically,  Navy was unable to provide documentation specific to the PCR review  process for three contracts. For two other contracts, Navy provided  documentation of various internal reviews. For example, Navy  provided a checklist for one contract showing that the contract was  reviewed and signed by the contracting officer and a small business  specialist. However, the section of the checklist where the PCR would  sign indicating review of the contract and subcontracting plan was left  blank. For the other contract, Navy provided documentation that an  Assistant Deputy Director for the procuring contracting command  center had reviewed and signed the subcontracting plan, but the PCR  signature field was blank. In both cases, no other documentation  indicated whether the contract was sent to the PCR for review.  Therefore, we were unable to determine if a PCR reviewed the plan or  was provided the opportunity to review the plan.

GSA and NASA each had one contract (of the six we reviewed for  each) for which they could not provide any documentation related to  the PCR review process. Both of these contracts had an individual  subcontracting plan.

For the remaining 12 contracts across the four agencies, the agencies  provided documentation demonstrating that the PCR was given the  opportunity to and had reviewed the contract and associated  subcontracting plan. For these contracts, we obtained documentation  such as a memorandum, checklist, or email showing the PCR had  reviewed and provided concurrence with the subcontracting plan, or  commented on the proposed goals in the plan. According to officials from  three of the four agencies we reviewed, contracting officers have a large  workload with responsibility for a large number of processes and reviews,  which may result in a specific process or task—such as coordinating the  PCR review—being missed. Additionally, according to NASA officials, the  PCR review process may occur but not be documented for some NASA  contracts.

Most of the Contracts We Reviewed Had Limited Post-Award Oversight of Compliance with Subcontracting Plans

The selected agencies provide some training to contracting officers on  monitoring subcontracting plans. But, for most of the 26 contracts we  reviewed with a subcontracting plan, contracting officers did not ensure  contractors met their subcontracting reporting requirements. Contracting  officers also accepted subcontracting report submissions with erroneous  subcontracting goal information for several contracts. For more than half  of the 26 contracts, contractors reported that they met or were meeting  their small business subcontracting goal.

Agencies Provide Some Training to Contracting Officers on Subcontracting Plans

Officials from all four agencies told us that they provide periodic training  to contracting officers related to monitoring subcontracting plans, as  illustrated in the following examples:

NASA: According to a NASA official, NASA conducted training at the  Kennedy Space Center in October 2018 and October 2019 that  focused on whether contracting officers should accept or reject an  ISR, and how to assign a Compliance Performance Assessment  Report rating. The agency also conducted training at the Goddard  Space Flight Center in October 2018.

GSA: GSA’s Office of Small Business Utilization provided a refresher  on eSRS reporting, including how to review the report in eSRS, for  contracting officers in May 2018. They also provided training to  contracting officers in October 2019 on reviewing ISRs and SSRs,  including understanding how to review an ISR and ensuring timely  submissions of SSRs.

DLA: According to DLA staff with the DLA Contracting Services  Office, when a contract requires a subcontracting plan, the office’s  eSRS coordinator recommends that contracting personnel  responsible for administering subcontracting plans take the Defense  Acquisition University online course about eSRS.

Navy: According to a Navy official, DOD has conducted extensive  training to address eSRS known issues and data collection and  guidance on the proper review of ISRs. Additionally, Navy contracting  officers can enroll in a 5-day course on subcontracting offered by the  Defense Acquisition University.

According to Defense Acquisition University staff, in addition to the 5-day  classroom course, the university also offers other training online related to  subcontracting.

Contracting Officers Did Not Ensure Contractors Met Their Reporting Requirements for Many Contracts We Reviewed

For more than half of the 26 contracts we reviewed with a subcontracting  plan, agency contracting officers did not ensure contractors met their  reporting requirements. Specifically, 14 of 26 contracts with  subcontracting plans did not have all required ISR or SSR submissions.  Three of the four agencies—DLA, NASA, and Navy—accounted for the  14 contracts without all the required submissions. For the remaining 12  contracts we reviewed, the agencies provided documentation showing  that contractors submitted all required ISR or SSR submissions for these  contracts.

FAR § 19.705-6(f) requires contracting officers to monitor the prime  contractor’s compliance with subcontracting plans to ensure that  subcontracting reports (ISRs and, where applicable, SSRs) are submitted  in eSRS in the required time frames. The contracting officer is also to  review the reports in the required time frames, acknowledge receipt of,  and accept or reject the reports.

Limited Monitoring of Contractor Report Submissions

Our review of 26 contracts with subcontracting plans found limited  monitoring of contractor report submissions. Specifically, we found the  following for each agency (see table 2):

DLA. Five of the six DLA contracts we reviewed did not have all of the  required ISR or SSR contractor submissions. For example, for a $6.6  million contract, with a commercial subcontracting plan that was  awarded in fiscal year 2016, we could not locate any SSRs in eSRS.  Based on limited documentation DLA provided, the contractor  submitted only one SSR for the duration of the contract and did so by  email to the contracting officer in November 2018. This document was  not an official SSR and it did not include required information such as  the vendor’s number, information on who submitted the report from  the contractor, a self-certification statement attesting to the accuracy  of the report, or acceptance or sign off by a DLA official. Four other  DLA contracts with individual subcontracting plans had multiple  missing submissions. For two of these contracts, the agency could not  explain why the reports were missing, and for the other two contracts,  the contractors were not aware of the SSR reporting requirement,  according to a DLA official.

NASA. Similar to DLA, five of the six NASA contracts we reviewed did  not have all of the required ISR or SSR submissions. For example, for  a $4.6 million contract with an individual subcontracting plan awarded  in fiscal year 2016, the contractor submitted ISRs for 2016 and 2017  and the SSR for 2016. However, according to information we  reviewed in eSRS and a NASA official, the contractor did not submit  any ISRs for 2018 and 2019, and did not submit any SSRs for 2017 or  2018. The official stated that there was contracting officer turnover  during this contract, and the contracting officer monitoring the contract  at the time of our review could not find any documented explanation  for the reports not being submitted. The same agency official  explained that for another contract, the contractor experienced issues  submitting documents in the electronic system initially and that there  were personnel changes around the time the missing report was due.  Additionally, for another contract awarded in 2017 for $3.8 million, the  contractor did not submit any SSRs. We discuss the two remaining  NASA contracts in our discussion of contracts with subcontracting  report submissions that were submitted well past their due dates.

Navy. Four of the eight Navy contracts we reviewed did not have all  the required report submissions. For example, for one contract  awarded for $16.6 million, the contractor submitted the first two  required ISRs and an SSR for fiscal year 2016, the year in which the  contract was awarded. However, we did not locate any other required  submissions in eSRS for subcontracting activity in fiscal year 2017,  the year in which the contract ended. A Navy official told us it is not  unusual for information related to monitoring and compliance of  subcontracting plans to be missing from the contract files. Three  remaining contracts with individual subcontracting plans also had  missing SSRs. However, the agency did not explain why these  submissions were missing.

GSA. The six GSA contracts all had the required report submissions.

Additionally, contractors submitted ISRs or SSRs well past their required  due dates for at least four contracts. For example, for one Navy contract  and one DLA contract, we found that the contractors submitted an ISR  more than 125 days late, and almost 50 days late, respectively. For two  NASA contracts, contractors submitted reports after they were due. For  one of these NASA contracts, we found that the March 2016 and  September 2016 ISRs were submitted well past their due dates—more  than 400 days and more than 150 days, respectively. For the second  NASA contract, the contractor did not submit any of the required reports  during the life of the contract and only submitted one final ISR when the  contract ended. This contract was awarded in fiscal year 2016 and ended  in August 2018. According to a NASA official, failure to submit the  required subcontract report was an error by the contractor and insufficient  contracting officer oversight. Additionally, the contractor did not submit  any SSRs for this contract as required by the FAR.

In another four instances, contractors began submitting the required  reports (ISRs and SSRs) after we inquired about the specific contracts  with the respective agencies. For example, the contractor for one NASA  contract, which also had some missing subcontracting reports, submitted  its 2017 SSR more than 600 days after it was due, and after we inquired  with NASA about the SSR. We also found that while contractors for two  DLA contracts submitted the required ISRs, they did not submit the  required SSRs. In one of these two instances, an agency official told us  that the contracting officer was unaware of the need for the contractor to  submit both an ISR and SSR, and did not inform the contractor of this  requirement. For this contract, which was awarded in fiscal year 2017, the  contractor submitted its first SSR in October 2019, after we inquired with  DLA officials about the lack of SSR submissions. For the second of these  two contracts, which also was awarded in fiscal year 2017, the contractor  informed the agency that they had not submitted SSR reports in the past  because they were unaware of this requirement, and did not submit an  SSR until October 2019. Finally, for one other DLA contract, the only ISR  we found in eSRS was submitted by the contractor in October 2019, after  we inquired about the ISR and more than 2 years after the contract was  awarded. This contractor submitted reports outside of eSRS for two of the  four prior reporting periods. These reports did not have acceptance or  sign off by the accepting DLA official. In addition, while a DCMA staff  member told us that the contractor did not submit its September 2017 and  March 2018 ISR reports, the staff member did not provide an explanation  why these reports were not submitted.

Reviews Selected Agencies Conducted Also Found Limited Monitoring of Contractor Report Submissions

Additionally, officials from all four agencies told us they conduct some  type of periodic review related to oversight of subcontracting plans, which  can include determining compliance with the subcontracting plan and  related reporting requirements. In some of these reviews, the agencies  had similar findings to ours. For example,

NASA: According to an agency official, NASA’s Office of Small  Business Programs conducts procurement management reviews of  subcontracting plans every 2–3 years. The official told us that these  reviews serve to monitor whether (1) prime contractors submitted the  required ISRs and (2) contracting officers assessed the  subcontracting plans and reviewed the ISRs, among other things. The  results of a review conducted in May 2017 identified missing ISRs and  reports that were accepted with incomplete information.

Navy: According to a Navy official, the Navy Office of Small Business  Programs conducts Procurement Performance Management  Assessment Program reviews. The official stated that these reviews  are conducted every 3 years at each of Navy’s command centers that  conduct buying activities. If a command center receives an  unsatisfactory or marginal rating, then the Deputy Assistant Secretary  of the Navy for Acquisition and Procurement will perform follow-up  reviews every 6–12 months until the issues are addressed. As part of  the review process, Navy reviews subcontracting plans and data in  eSRS to determine how subcontracting plans are monitored and  evaluated. A review conducted in June 2018 concluded that  monitoring of prime contractor’s subcontract reporting and compliance  was inadequate.

GSA: According to agency officials, GSA’s Office of Small Business  Utilization, in conjunction with GSA’s Procurement Management  Review team, conducts Small Business Compliance Reviews.  Annually, the agency selects 4–6 regions from which to select a  sample of contracts to review for both pre-award and post-award  compliance. According to agency officials, these reviews are designed  to help determine if subcontracting goals were met, among other  subcontracting-related requirements. A review GSA conducted in  March 2019 for one contract noted that the subcontracting plan could  not be located in the contract file and that there was a lack of post- award subcontracting plan oversight, including contractor reports on  subcontracting activities.

DLA: According to a DLA official, various DLA offices, including the  DOD Office of Small Business Programs, monitor eSRS regularly to  ensure contracting officers are reviewing and processing contractor  submissions through the system. The official stated that these reviews  happen at various times throughout the year. For example, the Small  Business Director at DLA Distribution—an organization within DLA— checks eSRS on a biweekly basis and DLA Aviation—another  organization within DLA—conducts semi-annual reviews of eSRS.

The DOD OIG had similar findings regarding oversight of contractor  compliance with subcontracting plan requirements, including contractor  reporting requirements. For example, in 2018 the DOD OIG reported that  contracting officers at two Army contracting commands did not monitor  prime contractors’ compliance with subcontracting plans. The DOD OIG  made three recommendations to address the findings, which have been  implemented according to the DOD OIG.

As previously mentioned, contracting officers are responsible for a large  number of processes and reviews, which may result in a specific process  or task being missed. According to officials from Navy and NASA, other  factors also contributed to the existence of limited documentation for  certain post-award requirements for the contracts we reviewed. For  example, the agency officials stated that contracting officers focus more  on the award process than on contract administration and fail to properly  consider the requirement that subcontracting plans become a material  part of the contract on award, resulting in a lack of due diligence after the  award. Officials from NASA and Navy also cited eSRS not providing  notifications to contracting officers and contractors when reports are not  submitted, among other things, as a contributing factor in missing ISR  reports. Additionally, according to NASA officials, eSRS does not  generate a list of prime contractors who are delinquent in submitting their  SSRs.

Contracting Officers Accepted Several Subcontracting Report Submissions with Erroneous Information

For the 26 contracts we reviewed with a subcontracting plan, contracting  officers accepted several report submissions containing incorrect  information about subcontracting goals. According to FAR § 19.705-6(j),  after a contract containing a subcontracting plan is awarded, the  contracting officer must reject a contractor’s subcontracting report  submission if it is not properly completed—for example, if it has errors,  omissions, or incomplete data.

In fulfilling their responsibilities related to FAR § 19.705-6(j), contracting  officers can identify omissions that a contractor may need to address. For  example, in reviews of ISRs for a $31.8 million Navy contract awarded in  fiscal year 2017, the contracting officer noted concerns about the  contractor not meeting its socioeconomic goals and asked the contractor  to provide an explanation for why the goal was not being met. The  contracting officer rejected the September 2018 ISR and later rejected the  September 2019 ISR twice because the contractor either did not provide  an explanation for not meeting certain socioeconomic goals or failed to  describe good-faith efforts to do so. The contractor submitted a revised  ISR in December 2019, which included a description of its good-faith  efforts to meet the socioeconomic goals. Upon review, the contracting  officer accepted the submission stating that it seemed clear from the  information provided that the contractor put forth a good-faith effort to  meet the goals.

However, for the 21 contracts we reviewed in total that required  contractor ISR submissions (which provide information on approved  subcontracting goals and achievements towards them), we found that for  nine contracts, the contracting officers accepted one or more submissions  with errors or unexplained conflicting information related to subcontracting  plan goals (see table 3). Specifically, all nine contracts lacked  explanations of the discrepancies in the ISR or other documentation we  reviewed. We discuss the nine contracts in more detail below:

NASA: Contracting officers accepted multiple ISRs with errors or  unexplained conflicting information for three NASA contracts. In one  of the three contracts, awarded in fiscal year 2017 for $3.8 million, the  contractor combined small business subcontracting goals (listed as  whole dollars and percent of total subcontracting dollars) from two  different subcontracting plans associated with the contract into one  ISR. However, the dollar amount reported in the ISR as the  subcontracting goal—about $177,000—reflected the small business  goal from only one of the subcontracting plans, rather than the two  subcontracting plans, which would have been a total of about  $309,000. As a result, the actual percentage of subcontracting to  small businesses of total subcontracting and of the total amount of the  contract value was incorrect. In the second contract, awarded in 2016  for $4.6 million with a planned small business subcontracting total of  about $2 million, the contractor listed an overall small business  subcontracting goal different from the approved subcontracting goal in  three ISRs, and there was no documentation explaining the  difference. For the third contract, awarded in fiscal year 2016 for  $45.2 million with a planned small business subcontracting goal of 10  percent of total subcontracting dollars, the contractor listed this goal  incorrectly in two ISRs. According to a NASA official, at the time of our  review, the contracting officer was working with the contractor to  correct the error.

DLA: For one contract awarded in 2017 for $34.1 million with a  planned subcontracting total of about $11 million, a DLA contracting  officer accepted a September 2019 ISR that listed the small business  goal at 90 percent of the total subcontracting dollars for the contract  instead of the 87.4 percent (base) or 87.6 percent (option years) in the  contract addendum. The actual cumulative subcontracting percentage  reported in the ISR was 88.1 percent, which met the goal in the  addendum, but not the 90 percent goal in the accepted September  2019 ISR. We could not identify any information in the ISR explaining  the conflicting information. Additionally, when calculating the amount  of cumulative dollars awarded to small business concerns, the  contractor appeared to have excluded about $54,000 in  subcontracting, which was included in a separate line item in the ISR  for women-owned small business concerns. As a result, we were  unable to determine whether this contractor had been meeting its  small business goal. For a second contract also awarded in 2017 for  $74.9 million with a planned subcontracting total of about $23 million,  the contractor reported the approved small business goal of 96  percent of total subcontracting dollars in the March 2018 and  September 2018 reports. However, in March 2019 and September  2019 ISR submissions for this contract, the contractor reported a  small business goal of 98.5 percent and 74.8 percent, respectively.  We found no documentation explaining why the contractor reported  goals in the 2019 ISRs that were different from the approved 96  percent goal.

Navy: For one Navy contract, which was awarded for $13.5 million in  fiscal year 2018 with a planned subcontracting total of $2.7 million, the  contracting officer notified the contractor in the September 2018 and  March 2019 ISRs that the small disadvantaged business goal of 0  percent of total subcontracting dollars in these submissions did not  match the 25 percent goal in the approved subcontracting plan. The  contractor corrected the error and the contracting officer accepted the  revised reports. In the September 2019 submission, the contractor  once again reported that particular goal as 0 percent, but the  contracting officer did not note the recurring error in this submission.  For another contract, awarded for $16.6 million in fiscal year 2016  with a planned subcontracting total of about $5.9 million, the March  2016 ISR listed a small business goal of 693 percent (the goal in the  approved subcontracting plan was 69.3 percent) of total  subcontracting dollars. The contracting officer did not address the  incorrect percentage. Moreover, in the September 2016 submission,  the goal was reduced to 61.8 percent, which was less than the goal in  the approved subcontracting plan. There was no explanation for the  discrepancies in either submission.

GSA: For one GSA Public Building Service contract, which was  awarded in fiscal year 2018 for $7.5 million, we found discrepancies  between the goals listed in multiple accepted ISRs and the approved  subcontracting plan. This contract involved janitorial services  performed at two locations. Each location had a different approved  small business goal—96 percent and 87 percent of total  subcontracting dollars. However, the contractor reported only one  small business goal in the three ISRs submitted for September 2018,  March 2019, and September 2019, and this reported goal varied from  89 to 97 percent in the three ISRs. According to a GSA official, the  contractor submitted one ISR in each reporting period to convey the  combined progress toward meeting its subcontracting goals for both  locations, but the small business goal the contractor reported in each  ISR did not accurately reflect the combined goals for both locations.  The GSA official told us the combined goal the contractor should have  reported for this contract was about 91 percent. According to the GSA  official, these submissions contained data entry errors by the  contractor, perhaps due to the contractor not knowing how to properly  report its subcontracting data. For one GSA Federal Acquisition  Service contract awarded in fiscal year 2017 for $3.6 million, we found  a discrepancy between the small business goal reported in multiple  ISR submissions—5 percent of total subcontracting dollars—and the  25 percent goal of total subcontracting dollars in the approved  subcontracting plan, and we notified the agency of the discrepancy.  However, none of these submissions included an explanation for the  discrepancy and the agency’s reviewing official accepted the  submissions without addressing the conflicting information.

We also found one instance involving unclear oversight responsibilities  among the 26 contracts we reviewed. We were unable to determine  which agency actively monitored one DLA contract, which was awarded  in fiscal year 2017 for $23.3 million. According to DLA staff, DCMA is  responsible for monitoring, evaluating, and documenting performance of  the contractor for the associated small business subcontracting plan.  However, DCMA officials provided responses that DLA is the entity that  should be conducting oversight of the subcontracting plan. If oversight  responsibility of contracts involving two agencies is not apparent, it is  unlikely that the contractor’s compliance with their subcontracting plans is  being properly monitored.

According to agency officials, several factors contributed to contracting  officers accepting subcontracting reports with erroneous information. For  example, as previously stated, agency officials told us that contracting  officers’ large workload and focus on the award process (rather than on  contract administration) can contribute to not always considering  subcontracting plans as material parts of contracts and, thus, not  conducting related due diligence after the contract award. GSA officials  also noted that contracting officers may not have read or understood FAR  requirements for oversight of contracts.

Contractors Reported They Met or Were Meeting Their Small Business Subcontracting Goal

For 16 of the 26 contracts we reviewed with a subcontracting plan,  contractors reported that they met their small business subcontracting  goal or were meeting the goal in situations where the contract had not yet  ended. For the remaining 10 contracts, three ended without the contractor  meeting the small business goal, five were not meeting the small  business goal but the contract had not yet ended, and two had limited  documentation available and we were unable to determine whether the  goal was met.

For the three contracts that ended without the contractor meeting the  small business goal, two contracts had documentation that included a  rationale for why the goal was not met. For one NASA contract, the  contracting officer documented in a memorandum that a decision was  made that there was no longer any subcontracting possibilities. The other  instance involved a GSA Federal Acquisition Service contract, in which  the assessing official documented in the final Compliance Performance  Assessment Report that the low goal achievement was due to the nature  of the automotive manufacturing industry. We could not identify a  rationale for one Navy contract for why the small business subcontracting  goal was not met and the agency could not provide documentation  explaining why the goal was not met.

The FAR requires contracting officers to assess liquidated damages  against a contractor if a contracting officer determined the contractor  failed to make a good-faith effort to comply with the subcontracting plan.  However, a contractor’s failure to meet its subcontracting plan goals does  not, in and of itself, constitute a failure to make a good-faith effort. Of the  three contracts we reviewed that did not meet their small business  subcontracting goal, we found no instances in which a contracting officer  pursued liquidated damages or other actions against a contractor. As  previously mentioned, two of these three contracts had a documented  rationale for not meeting the small business subcontracting goal. Agency  officials told us that contracting officers rely on Compliance Performance  Assessment Reports or other performance assessment measures to rate  a contractor’s performance relative to their subcontracting goals. Officials  from three of the four agencies also told us a contractor’s past  performance could affect their future ability to obtain government  contracts, which can incentivize contractors to take steps to meet their  subcontracting goals.

SBA Conducts Training and Reviews for Its Subcontracting Program, but Has Very Limited Documentation of Recent Reviews

SBA provides training to federal agencies’ contracting officers and  contractors to assist in complying with small business subcontracting plan  requirements. As part of its Small Business Subcontracting Program, SBA  conducts certain reviews to assess overall effectiveness of small  business subcontracting, including compliance reviews that are designed  to assess contractor compliance with small business subcontracting  plans. However, SBA could only provide limited documentation on  compliance reviews it conducted from fiscal years 2016 through 2018,  and limited information on compliance reviews conducted in fiscal year  2019.

SBA Provides Training to Agencies and Conducts Certain Reviews of Its Small Business Subcontracting Program

SBA provides training for contracting officers yearly to assist them in their  reviews of subcontracting plans, including training related to pre-and post- award subcontracting activities for contracting officers. Beginning in 2017,  SBA made available annual training for contracting officers to assist them  in reviewing subcontracting plans. SBA also provides training to  contractors, which provides them with information on meeting  subcontracting plan requirements. If a prime contractor receives a less  than satisfactory rating on a compliance review, the prime contractor must  attend a mandatory training to address the issues found in the initial  rating.

According to SBA officials, the agency also has been developing new  electronic-based training to coincide with new compliance review  processes. According to the officials, the training is intended to educate  prime business contractors with a subcontracting plan and federal  agencies awarding contracts with a subcontracting plan on how to comply  with post-award subcontract program requirements. SBA plans to make  this training available in July 2020 in an electronic format that will provide  information and require the participant to answer a series of questions to  ensure they comprehend and retain the information.

In addition to providing training, SBA’s CMRs conduct reviews related to  SBA’s Small Business Subcontracting Program. In particular, SBA’s  Standard Operating Procedure (SOP) 60 03 6, which was effective from  December 4, 2006 through July 17, 2018, identified CMR responsibilities  and included guidance for conducting reviews related to the Small  Business Subcontracting Program. According to this SOP, CMRs were to  conduct different types of reviews:  In Performance Reviews (also referred to as desk reviews), CMRs  were to review ISRs and SSRs that contractors submitted to  determine which large business contractors in their portfolios they  should visit, and what type of compliance review would be most  effective.

In Small Business Program Compliance Reviews (compliance  reviews), CMRs were to evaluate a contractor’s compliance with  subcontracting program procedures and goals in a contractor’s small  business subcontracting plan. CMRs also were to conduct follow-up  compliance reviews on areas found deficient during a compliance  review or previous follow-up review.

SOP 60 03 6 also described some orientation or outreach activities as  reviews. In Subcontracting Orientation and Assistance Reviews,  CMRs were to visit a large business contractor’s facility or telephone  the contractor to introduce them to the Small Business Subcontracting  Program and provide an overview of the roles and responsibilities of a  prime contractor. According to SBA, the agency conducted 417 of  these reviews from fiscal years 2016–2018.

According to SBA, the agency’s CMRs conducted hundreds of various  reviews in fiscal years 2016 through 2018, and a total of 118 compliance  reviews specifically during that period (see table 4).

SBA staff said SBA also conducts surveillance reviews to evaluate the  overall effectiveness of an agency procurement center’s small business  program by reviewing contract files and procedures. According to SBA  documentation, these reviews allow SBA to recommend changes to  improve small business participation at procurement centers. A  surveillance review also examines the procurement center’s  subcontracting program. SBA staff examine subcontracting files to  determine if procurement center staff routinely perform subcontracting  plan reviews, route the subcontracting plans to the PCR for review during  the contract award process, incorporate approved subcontracting plans  into contracts, and ensure that prime contractors submit the  subcontracting plan ISRs into eSRS. For example, in a 2019 surveillance  review (for which we obtained a copy) SBA found the center that conducted the procurements did not have a subcontracting plan in the file  for two contracts and the subcontracting plan was not sent to the  appropriate SBA Area Director for four contracts.

In July 2018, SBA issued a new SOP entitled Subcontracting Assistance  Program Post Award, which revised SBA’s compliance review process.  According to SBA officials and a high-level outline SBA provided, SBA  intends to have the following three phases for the new review processes  that will implement the new SOP:  1.  Subcontract Reporting Compliance – In this phase, CMRs are to  review and rate a prime contractor’s compliance with subcontracting  reporting requirements (that is, the contractor’s ISR and SSR  reporting requirements). According to SBA officials, SBA also intends  to inform contract awarding and administering agencies of their  findings.  2.  Subcontracting Plan Goal Attainment Compliance – In this phase,  CMRs are to review whether a prime contractor has met or is on track  to meet the goals listed in the subcontracting plan.  3.  Subcontract Regulation Compliance – In this phase, CMRs are to  review the prime contractor’s actions in adhering to all the elements in  the subcontracting plan and meeting subcontracting plan goals,  among other related actions.

According to SBA officials, the new compliance review process is  intended to standardize compliance reviews based on the new SOP. SBA  developed a broad outline of the three-phase compliance review process,  and to implement this process, developed a CMR portfolio tracking  document, in the form of a spreadsheet, and a draft compliance review  guidance document, both of which SBA is currently using for the first  phase of the process. However, SBA officials told us they could not  provide detailed procedures for implementing the second and third  phases and they continue to refine the compliance review spreadsheet in  conjunction with the compliance review guidance. As of mid-March 2020,  they stated that they intend to complete phase 2 guidance by July 30,  2020, and phase 3 guidance by October 30, 2020.

SBA Has Very Limited Documentation of Fiscal Year 2016–2018 Compliance Reviews and Documentation for 2019 Is Not Clear

SBA could not provide us with requested information and almost no  documentation on the compliance reviews its CMRs conducted in fiscal  years 2016–2018. SBA could not provide basic information such as the  list of contractors reviewed, the specific type of compliance reviews (such  as reviews conducted individually or conducted jointly with another  agency), which agencies may have assisted in the reviews (in the case of  any joint reviews), and contractor ratings resulting from the reviews.

SBA could only provide one CMR compliance review and two follow-up  compliance reviews for this time frame, and all three were conducted in  fiscal year 2017. The one CMR compliance review SBA provided included  general observations from the review, specific findings, follow-up actions  required, best practices for the contractor, and the rating provided to the  contractor. The follow-up compliance reviews from fiscal year 2017  identified steps that contractors took to address deficiencies found in the  initial compliance review and steps to enhance their subcontracting  program.

According to SBA officials, the agency’s CMRs conducted 680  compliance reviews in fiscal year 2019 and SBA was able to provide  some documentation related to these reviews. To conduct these reviews,  SBA officials explained that they selected about 4,000 prime contracts  from FPDS-NG with individual subcontracting plans that ended in fiscal  year 2019 or later. From these approximately 4,000 contracts, SBA  officials told us that CMRs randomly selected 680 for review during fiscal  year 2019. The CMRs assessed the selected sample of contracts  against the first phase of the new compliance review process—the extent  to which contractors complied with their reporting requirements. In our  review of the documentation SBA provided, we could not clearly identify  how many reviews they conducted. For example, the summary  information from the reviews was not documented or maintained in a  single document, but was in multiple spreadsheets with some  inconsistencies, making it difficult to determine how reviews were  counted. Additionally, one spreadsheet contained a summary tab for  many contracts, but a count of the unique contracts did not add up to 680.

Other spreadsheets did not have a summary tab, and contained  information on the reviewed contracts in tabs organized by contractor.

According to its latest SOP, SBA conducts compliance reviews to  determine whether prime contractors that are not small businesses  complied with their post-award subcontracting responsibilities outlined in  the subcontracting plan to ensure small business subcontracts are being  properly awarded and reported. However, based on our review of the  limited documentation provided, SBA lacks specific guidance in its SOP  on how CMRs should maintain information for compliance reviews they  conduct. SBA has draft guidance on the new compliance review process,  including some specific information regarding what CMRs are to record  as part of the compliance review. However, SBA does not have clearly  documented and maintained records on the first phase of these  compliance reviews.

Requirements for small business subcontracting plans in certain contracts  enhance opportunities for small businesses to participate in federal  contracting. However, weaknesses in selected agencies’ oversight of  subcontracting plans—such as not following all procedures and not  reviewing contractor submissions for errors or omissions—can reduce  those opportunities and limit agencies’ knowledge about the extent to  which contractors fulfill obligations to small businesses. The frequency  with which issues arose in our sample suggests agencies can do more to  improve oversight. For contracts we reviewed which used checklists or  memorandums to document the PCR review process, we found that  those contracts generally demonstrated compliance with the requirement  for the opportunity for a PCR review. Taking steps to ensure that  contracting officers provide PCRs the opportunity to review contracts with  subcontracting plans would help agencies identify subcontracting  opportunities and benefit from suggestions for increasing small business  participation. In turn, such efforts could help agencies achieve their small  business subcontracting goals.

Similarly, improved monitoring of submitted contractor reports on  subcontracting activities would identify errors in the submissions and  increase agencies’ ability to assess contractor performance. Without  complete and accurate information on a contractor’s subcontracting  goals, agencies cannot adequately assess a contractor’s performance in  meeting its subcontracting plan responsibilities. Given the many  responsibilities of contracting officers, steps to ensure that contractor  report submissions on meeting subcontracting goals are accurate would  assist agencies’ oversight efforts.

SBA also has opportunities to significantly enhance oversight related to  its subcontracting program. It lacks documentation for almost all  compliance reviews conducted in three of the four fiscal years from 2016  through 2019, has not fully implemented revisions to the compliance  review process, and has not yet developed procedures for ensuring clear  and consistent records of all compliance reviews are documented and  maintained. By having clear and consistent documentation for compliance  reviews and maintaining those records, SBA would better position itself to  track contractor compliance for contracts it reviews and would be able to  use this information to inform subsequent reviews. Additionally,  contracting agencies would be able to leverage the information from SBA  for their own reviews of contractor performance and subcontracting plans.

We are making a total of 10 recommendations to five agencies (three to  DLA, one to GSA, two to NASA, three to Navy, and one to SBA):  The Director of DLA should include a step for the opportunity for PCR  review of the proposed contract and subcontracting plan in agency  procedures and memorandums, and develop a mechanism for  documenting whether the opportunity for PCR review was provided.  (Recommendation 1)

The Secretary of the Navy should include a step for the opportunity for  PCR review of the proposed contract and subcontracting plan in agency  procedures and memorandums, and develop a mechanism for  documenting whether the opportunity for PCR review was provided.  (Recommendation 2)

The Director of DLA should take steps to fulfill the requirement that  contracting officers ensure that subcontracting reports are submitted by  contractors in a timely manner. For example, the agency could require  contracting officers to verify that prior reports were submitted when  reviewing current submissions. (Recommendation 3)

The NASA Administrator should take steps to fulfill the requirement that  contracting officers ensure that subcontracting reports are submitted by  contractors in a timely manner. For example, the agency could require  contracting officers to verify that prior reports were submitted when  reviewing current submissions. (Recommendation 4)

The Secretary of the Navy should take steps to fulfill the requirement that  contracting officers ensure that subcontracting reports are submitted by  contractors in a timely manner. For example, the agency could require  contracting officers to verify that prior reports were submitted when  reviewing current submissions. (Recommendation 5)

The Director of DLA should take steps to ensure contracting officers  compare subcontracting goals in contractor report submissions to goals in  the approved subcontracting plan and address any discrepancies.  (Recommendation 6)

The Administrator of the GSA should take steps to ensure contracting  officers compare subcontracting goals in contractor report submissions to  goals in the approved subcontracting plan and address any  discrepancies. (Recommendation 7)

The NASA Administrator should take steps to ensure contracting officers  compare subcontracting goals in contractor report submissions to goals in  the approved subcontracting plan and address any discrepancies.  (Recommendation 8)

The Secretary of the Navy should take steps to ensure contracting  officers compare subcontracting goals in contractor report submissions to  goals in the approved subcontracting plan and address any  discrepancies. (Recommendation 9)

The SBA Administrator should ensure Commercial Market  Representatives clearly and consistently document compliance reviews  and maintain these records. (Recommendation 10)

We provided a draft of this report to DOD, GSA, NASA, and SBA for  review and comment. DOD provided a written response, reproduced in  appendix II, in which it concurred with our recommendations. DOD  described steps that DLA and Navy intend to take to address the  recommendations, including actions to remind contracting officers or to  provide additional guidance related to giving the PCR an opportunity to  review the proposed contract and subcontracting plan. DOD also  described actions that DLA and Navy intend to take to remind contracting  officers of the requirement to ensure that subcontracting reports are  submitted in a timely manner and to remind contracting officers to  compare subcontracting goals in contractor report submissions to goals in  the approved subcontracting plan and address any discrepancies.

GSA provided a written response, reproduced in appendix III, in which it  concurred with our recommendation.

NASA provided a written response, reproduced in appendix IV, in which it  concurred with our recommendations. NASA described steps it intends to  take, such as requiring procurement offices to monitor contracting officer  reviews of contractor report submissions and comparisons of  subcontracting goals for consistency with the subcontracting plan. NASA  also provided technical comments on the draft report that we incorporated  where appropriate.

SBA provided a written response, reproduced in appendix V, in which the  agency partially concurred with our recommendation. SBA also asked us  to consider rewording a few statements that it considered to have  appeared for the first time in the draft report. In the draft report we sent to  SBA, we provided additional information about how we could not clearly  identify how many reviews the CMRs conducted. SBA stated in its written  response that it has comprehensive documents and records for fiscal  year 2019 compliance reviews and while its CMRs maintain a separate  workbook of spreadsheets for reviews they conduct, the agency  maintains a summary document that combines the compliance reviews  performed collectively by its CMRs. During our audit and as part of its  written response to our draft report, SBA did not provide a summary  document that showed all reviews conducted by its CMRs for fiscal year  2019.

SBA also acknowledged in its written response that it could not provide  requested documentation for compliance reviews conducted during fiscal  years 2016 through 2018. SBA stated it has developed detailed  procedures for maintaining consistent records for compliance reviews and  that while CMRs are using these procedures currently, the agency  intends to finalize the procedures on May 29, 2020 to ensure that SBA  continues to fully document its compliance reviews. Based on the  documentation we reviewed and analyzed during our audit, we maintain  that SBA does not have clearly documented and maintained records of  compliance reviews and should clearly and consistently document its  compliance reviews and maintain these records. We will review any  additional documentation of records of compliance reviews when SBA  provides it in response to this recommendation.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to appropriate  congressional committees and members, the Secretary of DOD, the  Administrator of GSA, the Administrator of NASA, the Administrator of  SBA, and other interested parties. This report will also be available at no  charge on our website at http://www.gao.gov.

If you or your staff have any questions concerning this report, please  contact 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 VI.

Appendix I: Objectives, Scope, and Methodology

Our objectives in this report were to examine (1) the extent to which  select agencies conduct oversight related to small business  subcontracting plans in the pre-award phase of the federal contracting  process; (2) the extent to which select agencies conduct oversight of such  subcontracting plans in the post-award phase; and (3) steps the Small  Business Administration (SBA) has taken to encourage agencies to  conduct oversight activities related to small business subcontracting  plans.

To address the first two objectives, we reviewed the Federal Acquisition  Regulation (FAR) and agency-specific procedures. We also reviewed  requirements for contractor submissions on subcontracting activity related  to subcontracting plans, and corresponding agency oversight  requirements for the submissions. We reviewed documentation on  agency training for contracting officers related to subcontracting plans  and requirements. We judgmentally selected two military agencies—the  Defense Logistics Agency (DLA) and the Department of the Navy  (Navy)—and two civilian agencies—the General Services Administration  (GSA) and the National Aeronautics and Space Administration (NASA)— to review based on our analysis of Federal Procurement Data System- Next Generation (FPDS-NG) data and other factors. More specifically,  we selected the agencies because they (1) included a mix of military and  civilian agencies, (2) had relatively high dollar amounts of federal  contracts awarded in fiscal years 2016–2018, and (3) included a range of  performance related to subcontracting based on SBA’s annual  procurement scorecard.

We also reviewed documentation for a nongeneralizable sample of 32  contracts—eight per agency—awarded in fiscal years 2016–2018 across  the four agencies. We randomly selected these 32 contracts from a set of  contracts that met several criteria. Specifically, the criteria were contracts  with dollar amounts above $1.5 million, that had a mix of subcontracting  plans (individual, commercial, and comprehensive) or reasons for not  including subcontracting plans in a contract (such as no subcontracting  possibilities for the contract or the contract not requiring a subcontracting  plan), and a mix of their current status at the time of our selection  (completed or active). We selected contracts as follows:

We first randomly selected six contracts per agency (total of 24) that  had a small business subcontracting plan at the time of award. To do  this, we used a random number generator for the universe of  contracts meeting the above criteria and selected contracts in the  order of the random number generator, but skipped a contract if it was  too similar to already-selected contracts (for example, same type of  subcontracting plan or similar dollar amount).

We then selected another set of contracts—two per agency (total of  eight)—that seemed to meet criteria for requiring small business  subcontracting plans, such as exceeding the dollar threshold, but  were coded in FPDS-NG as not having a plan in place.

We also obtained reports on contractor submissions on small business  subcontracting activity, where applicable, and agency reviews of the  submissions from the Electronic Subcontracting Reporting System  (eSRS). Specifically, we searched eSRS for any contractor-submitted  individual subcontracting reports (ISR) or summary subcontract reports  (SSR), where applicable, for each contract with a subcontracting plan and  reviewed the reports along with agency contracting officer comments,  approvals, or rejections related to the reports. If we were unable to locate  any ISRs or SSRs in eSRS, we asked the procuring agency to provide  copies of the reports. We also requested agency documentation for any  actions contracting officers took, if applicable, for each contract where the  contractor had not met the small business subcontracting goal. We also  interviewed officials from each agency about their efforts related to  oversight of small business subcontracting plans and these contractor  submissions.

We assessed the reliability of FPDS-NG data by reviewing available  documentation and prior GAO data reliability assessments and by  electronically testing for missing data, outliers, and inconsistent coding.  We found the data to be reliable for the purposes of selecting agencies  and contracts to review. We assessed the reliability of eSRS by reviewing  available documentation and verifying information with agencies. We  found the information in eSRS to be reliable for purposes of assessing the  extent to which agencies conduct oversight related to contractor  submission reports in the system.

To address the third objective, we reviewed documentation on several  types of SBA reviews, including compliance reviews, related to contractor  compliance with and agencies’ oversight of subcontracting plans.  Specifically, we reviewed documentation on reviews SBA conducted  related to its subcontracting program during fiscal years 2016–2019. We  also reviewed SBA’s standard operating procedures for the  subcontracting program, documentation on processes implementing the  new procedures, and documentation on SBA training programs for the  small business subcontracting program. We interviewed SBA officials  regarding steps the agency takes to encourage agency oversight of  subcontracting plans.

For all the objectives, we reviewed relevant federal laws and regulations  and reviewed previous GAO reports and reports from the Department of  Defense Office of Inspector General (DOD OIG).  We also interviewed  officials from the DOD OIG to obtain an understanding of their work on  DOD’s oversight of subcontracting plans at selected DOD components  and command centers.

We conducted this performance audit from January 2019 to May 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: Comments from the Department of Defense

Appendix III: Comments from the General Services Administration

Appendix IV: Comments from the National Aeronautics and Space Administration

Appendix V: Comments from the Small Business Administration

Appendix VI: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Andrew Pauline (Assistant  Director), Tarek Mahmassani (Analyst in Charge), Suellen Foth, Jonathan  Harmatz, Julia Kennon, Jill Lacey, Yola Lewis, John McGrail, Marc  Molino, and Barbara Roesmann made key contributions to this report.

Certain federal contracts that go to large businesses must have small business subcontracting plans. Under these plans, contractors have to make a good-faith effort to offer subcontracting opportunities to small businesses.

Agencies are supposed to notify Small Business Administration representatives about proposed contracts with these plans for possible review. But for about half of the 26 contracts we examined, agencies couldn’t show whether that happened. Agencies also didn’t ensure that contractors submitted subcontracting reports, or that the reports were accurate.

We made 10 recommendations to strengthen oversight of these plans.