Report small business subcontracting achievements. As a result,  the percent of total subcontracting dollars going to small businesses  appeared larger than if the contractors had been following SBA’s reporting  guidelines. Because contractor-reported data does  not provide a true picture of the contractors’ performance, the department  cannot meaningfully use the data to monitor performance and determine  whether the contractors are providing small business subcontractors with  the maximum practicable opportunity to provide goods and services to the  facility management contractors, as required by the policy set out by the  Small Business Act. Contractor-Reported Data on Small Business Subcontracting Achievements Frequently Overstated Performance

The contractor-reported data that DOE uses to monitor facility  management contractors’ performance in small business subcontracting  generally showed that contractors exceeded their annual small business  subcontracting goals in fiscal years 2001 through 2004. However, in fiscal year 2004, all 34 of the contractors’ reported  achievements incorrectly excluded other types of subcontracts, beyond  what SBA guidelines allow (see table 2). As a result, the percentage of total  subcontracted dollars going to small businesses appeared larger than it  actually was. False impression that DOE was meeting its small business  subcontracting goals. As a  result, DOE officials were not inclined to closely monitor facility  management contractors’ subcontracting practices or to fully address  known problems with the achievement data. Oversight Responsibilities for the Small Business Subcontracting Program Were Not Clearly Defined or Integrated

DOE officials did not address problems with the small business  subcontracting program, in part, because the various headquarters and  field organizations that must work together to provide oversight of the  small business subcontracting program did not do so effectively. Effective oversight was not  happening, in part, because DOE guidance does not clearly define the  roles, responsibilities, and needed interaction of the various headquarters  and field organizations involved. The guidance also states that the contracting  officer is responsible for ensuring that facility management contractors  comply with the SBA guidelines on which subcontracts may be excluded  from their subcontracting goals and achievements. To ensure that DOE has useful data for managing its small business  subcontracting program and for measuring and comparing contractors’  performance in pursuing the maximum practicable opportunity for small  business subcontracting, we recommend the Secretary of Energy direct  the appropriate officials responsible for DOE’s Small Business Office and  procurement organizations to use, for internal management purposes, data  on facility management contractors’ annual small business subcontracting  achievements calculated as a percentage of the obligated dollars facility  management contractors received that year on their contract with DOE. Appendix II: Scope and Methodology

We determined (1) the usefulness of the data reported by the Department  of Energy’s (DOE) facility management contractors for monitoring  contractor performance in small business subcontracting and (2) the  actions that DOE has taken to address any problems identified with its  facility management contractors’ small business subcontracting efforts. Of that amount, over  $2.1 billion went to small businesses, accounting for nearly two-thirds of  the almost $3.3 billion in subcontract dollars that the 34 contractors  directed to small businesses that year. We acknowledge in the draft report and highlights page that DOE had  taken steps to address the problems with contractor-reported data,  including issuing clarifying information in 2002 and additional  guidance in March 2005.
Why GAO Did This Study

Federal policy requires that small businesses receive the maximum practicable subcontracting opportunity for providing goods and services to large businesses that contract directly with federal agencies. The Department of Energy (DOE) annually directs almost $20 billion to the 34 "facility management contractors" of which $3.3 billion was redirected to small business subcontractors in fiscal year 2004. DOE negotiates annual small business subcontracting goals with individual contractors and monitors their achievements. GAO was asked to (1) determine the usefulness of the data that DOE uses to monitor subcontracting performance and (2) discuss the actions that DOE has taken to address any problems with the contractors' subcontracting efforts.

What GAO Found

DOE's facility management contractors' small business subcontracting achievements--reported as a percentage of their total subcontracted dollars--are not useful for monitoring purposes because the reported data overstates subcontracting achievements in two ways: (1) All of the contractor-reported data incorrectly excluded some large-business subcontracts, beyond what federal reporting guidelines allow. Excluding these subcontracts made the percentage of subcontracted dollars going to small businesses appear larger than it would have, if such subcontracts were not incorrectly excluded. If these subcontracts had been included, some contractors said it was likely they would have requested lower goals. (2) Even when all relevant subcontracts are included, the contractor-reported data can still overstate contractors' subcontracting achievements. Because a contractor could decide to subcontract only a small amount of its total federal contract, the portion of subcontracted dollars going to small businesses could, by comparison, appear misleadingly large. As a result, contractor-reported data is not useful to DOE in determining its contractors' actual small business subcontracting achievements or adequately assessing whether small businesses are receiving maximum practicable subcontracting opportunities. DOE has not taken adequate steps to address known problems with the contractor-reported data. Because the data showed that the department was meeting its subcontracting goals, DOE officials were not inclined to closely monitor contractors' practices for calculating their subcontracting goals and achievements. DOE officials were aware in 2002 that the contractors were not following federal guidelines on which subcontracts to include when developing goals. DOE's Small Business Office did provide clarifying information on the requirements, but DOE officials failed to ensure that the guidelines were being followed, and problems continued. In March 2005, DOE issued additional guidance, but it is uncertain whether DOE will ensure that the guidance is followed. These oversight problems occurred, in part, because DOE has not clearly defined the roles, responsibilities, and needed interaction of the various headquarters and field organizations that collectively oversee the contractors' small business subcontracting efforts.