DOD’s Office of Small Business Programs  (OSBP) manages the program, including developing and overseeing the  policies and procedures for the program. DOD’s Procedures Do Not Provide Reasonable Assurance That Mentor-Protégé Agreements Contain All Required Elements

DOD components have the authority to approve mentor-protégé  agreements, and they are required to follow the regulations, policies, and  procedures DOD has established for the program. Specifically, based on our review, we estimate that 27 percent of the  agreements did not address all required elements. Federal internal control standards state that management should  implement control activities through policies, and that this principle may  be applied by, among other things, periodically reviewing control activities  for continued relevance and effectiveness in achieving the entity’s  objective or addressing related risks. As a result, OSBP cannot ensure that the program  requirements are serving their intended purposes—for example, as  previously discussed, missing industry codes are used to determine  whether protégés are eligible to participate in the program, and the  signatures of the mentor and protégé are required for the agreement to  meet the program requirements. DOD Lacks Performance Goals and Measures to Facilitate Effective Program Assessment

Although DOD has established some performance measures for its Pilot  Mentor-Protégé Program, the department lacks performance goals and  other measures needed to fully assess the program. We  have previously identified performance measurement as a best practice  that allows organizations to track progress in achieving their goals and  gives managers crucial information to identify gaps in program  performance and plan any needed improvements. While DOD collects and reports information on protégés’  annual revenue, employment levels, and prime contract and subcontract  awards, it has not established goals for these measures. In addition, DOD has not established measures for one part of the  program’s statutory purpose. However, DOD does not include this information in its annual  report for the program, and it has not developed performance measures  or goals related to this information. However, DOD had yet  to establish any such measures as of January 2017. However, we found that program participants did not  consistently include all of the required elements in these agreements and  that DOD’s OSBP does not review the procedures that DOD components  use to approve the agreements, as suggested by federal internal control  standards. Conduct periodic reviews of the processes DOD components follow to  approve agreements and take oversight actions, as appropriate. DOD also concurred with our recommendation to complete actions to  develop performance goals and related measures that are consistent with  the program’s stated purpose. Finally, DOD stated that it  collects information from mentors on how they have enhanced the  capabilities of protégés and plans to begin including these data in the  annual report to Congress once performance measures and goals have  been established. Appendix I: Objectives, Scope, and Methodology

This report examines (1) the Department of Defense’s (DOD) procedures  for approving mentor-protégé agreements; (2) DOD’s performance  measures for the program; and (3) differences between DOD’s Pilot  Mentor-Protégé Program and the Small Business Administration’s (SBA)  All Small Mentor-Protégé Program and the agencies’ efforts to harmonize  the two programs. We also reviewed a randomly selected  probability sample of 44 of the 78 active DOD mentor-protégé  agreements in place as of June 2016 to assess how well DOD’s  procedures provide reasonable assurance that mentor-protégé  agreements meet program requirements. This review  included the annual reports prepared by the Defense Contract  Management Agency (DCMA) for fiscal years 2011 through 2015 that  provide aggregate data on protégé firms’ annual revenues, number of  employees, and awards of prime contracts and subcontracts during their  tenure in the program and for 2 years after they leave the program. Appendix III: Selected Changes to DOD’s Pilot Mentor-Protégé Program in the NDAA for Fiscal Year 2016

The National Defense Authorization Act (NDAA) for Fiscal Year 2016  made a number of changes to the Department of Defense’s (DOD) Pilot  Mentor-Protégé Program. Department of Defense (DOD) Pilot Mentor-Protégé Program

A mentor, among other  requirements, must be: (1) not  affiliated with the protégé firm  prior to the approval of the  agreement; (2) demonstrate that  it is qualified to provide  assistance that will contribute to  the purpose of the program and  is in good financial health and  character and does not appear  on a federal list of debarred or  suspended contractors; (3) an  entity other than small business  that is a DOD prime contractor  with an active subcontracting  plan (unless a waiver to the  small business exception has  been obtained from the Director,  Small Business Programs,  Office of the Undersecretary of  Defense for Acquisition,  Technology, and Logistics); or  (4) a graduated 8(a) firm that  provides documentation of its  ability to serve as a mentor; and  (5) approved to participate as a  mentor.
Why GAO Did This Study

DOD's Pilot Mentor-Protégé Program, was first authorized as a pilot program in 1990, and has been repeatedly renewed as a pilot program, most recently through September 30, 2018. For fiscal year 2016, total funding for this program was $28.3 million.
The joint explanatory statement to accompany the National Defense Authorization Act for Fiscal Year 2016 includes a provision for GAO to report on DOD's pilot program. This report examines, among other things, (1) DOD's procedures for approving mentor-protégé agreements and (2) DOD's performance measures for the program. GAO analyzed DOD guidance, reviewed a randomly selected probability sample of active DOD mentor-protégé agreements and estimated their completeness at a 95 percent confidence interval, reviewed DOD's annual program reports for fiscal years 2011 through 2015, and interviewed agency officials.

What GAO Found

The Department of Defense (DOD) relies on military services and agencies (DOD components) to approve the agreements that establish relationships between participants in its Pilot Mentor-Protégé Program. This program provides incentives for major defense contractors (mentors) to provide assistance to small disadvantaged firms (protégés) in an effort to enhance their capability to compete for federal and commercial contracts. However, DOD does not have reasonable assurance that approved agreements include all elements required by the program's regulations and policies. These elements include, among others, the protégé's industry code and the signature and date of the mentor and protégé. These elements serve a variety of purposes—for example, the industry code is used to determine the protégé's eligibility to participate in the program, and the signature and date of mentor and protégé are required in order for the agreement to be legally bindingto meet program requirements. Based on a review of a randomly selected probability sample of 44 of the 78 active mentor-protégé agreements in place as of June 2016, GAO estimates that 27 percent of agreements were missing required elements. For example, GAO estimates that 25 percent of agreements were not signed by both the mentor and protégé. Federal internal control standards state that management should implement control activities through policies and practices, including periodically reviewing control activities for continued effectiveness. DOD's Office of Small Business Programs (OSBP) manages the program and oversees program policies and procedures. However, OSBP does not review the DOD components' processes for approving mentor-protégé agreements and therefore has not taken appropriate oversight actions to provide reasonable assurance that agreements meet all requirements. As a result, the components have approved agreements that do not include required elements, and OSBP cannot ensure that the requirements are serving their various purposes.
DOD's fiscal year 2011 through 2015 annual reports on its Pilot Mentor-Protégé Program include performance measures for several areas, but DOD lacks performance goals and other measures needed to effectively assess the program. Some of these measures show that during this period, protégés' revenue, number of employees, and DOD prime and subcontract awards increased while protégés participated in the program, but revenues and employment levels decreased in the 2 years after their participation ended. GAO found that DOD has not established any measurable goals for these measures. In addition, DOD collects information from mentors on how they have enhanced the capabilities of protégés, but DOD does not include this information in the program's annual report and has not developed performance measures or goals related to this information. GAO has previously identified performance measurement as a best practice that allows organizations to track progress and gives managers information to plan needed improvements. DOD officials told GAO they are working to develop measures that better indicate program outcomeseffectiveness, but as of January 2017 they had not established such measures. Without performance goals and related measures, DOD may be limited in its ability to analyze the effectiveness of the program, and Congress may not have information needed to inform future decisions regarding the program.

What GAO Recommends

GAO recommends that DOD (1) conduct periodic reviews of the components' processes for approving agreements and address identified deficiencies, as appropriate, and (2) develop performance goals and related measures that are consistent with the program's stated purpose. DOD concurred with GAO's recommendations.