The Business Opportunity Development Reform Act of 1988 amended the Small Business Act to require the President to establish an annual government-wide goal of awarding not less than 20 percent of prime contract dollars to small businesses. SBA is responsible for coordinating with executive branch agencies to ensure that the federal government meets the mandated goal. Department of Energy Was Directed to Change Its Method of Calculating Small Business Achievements

In a memorandum to the agencies, the SBA Associate Deputy Administrator cited a significant change in the way the Department of Energy calculates its small business achievements as a key reason for the difficulties in setting the fiscal year 2000 goal and a primary justification for SBA’s decision to unilaterally assign goals. SBA officials explained that the excluded contracts fall into three broad categories of contract actions: (1) those for which small businesses’ chances to compete are limited or nonexistent, (2) those using non-appropriated funds, and (3) those made by agencies that are not subject to the Federal Acquisition Regulation or are otherwise exempt from federal procurement regulations. Exclusions Represent About 10 Percent of Total Procurements

From fiscal year 1998 through 2000, the excluded contracts that we could quantify accounted for about 10 percent of all federal procurement dollars. The vast majority of the exclusions are for Department of Defense contracts for foreign sales and contracts performed outside the United States. SBA Guidance Is Unclear and Incomplete

Although SBA’s annual guidance on goal-setting lists the types of contracts that FPDC excludes in its annual calculations of small business achievements, the guidance is confusing and incomplete. The guidance is the only source of information available to Congress, the small business community, and federal agencies on the contracts excluded from the small business achievement calculations. SBA’s failure to document the reasons for excluding certain types of contracts precludes a clear picture of how small business achievements are calculated. The General Services Administration’s Office of Enterprise Development concurred with our findings and recommendations. Scope and Methodology

To identify the process by which small business prime contract goals are established, we reviewed the Small Business Reauthorization Act of 1997 and other pertinent legislation; guidance issued by the Office of Federal Procurement Policy, SBA, and FPDC; prior GAO reports; and FPDC’s final reports on small business achievements for fiscal years 1998, 1999, and 2000.
Why GAO Did This Study

The Small Business Reauthorization Act of 1997 directed the President to set a goal of awarding not less than 23 percent of the federal government's prime contracting dollars to small business for each fiscal year. The Small Business Administration (SBA) is charged with working with federal agencies to ensure that agency goals, in the aggregate, meet or exceed the overall goal. To help SBA determine if agency goals are being met, the Federal Procurement Data Center (FPDC)--part of the General Services Administration--collects data on all federal contract actions and calculates the government's annual small business achievements on the basis of procurement information received from the agencies. This report reviews (1) SBA's process for establishing annual small business prime contract goals and the reasons for recent changes to the process; (2) the types of contracts that are excluded when achievements are calculated, as well as SBA's rationale for excluding them; and (3) the dollar value of the excluded contracts.

What GAO Found

GAO found that in fiscal year 2000, SBA began assigning goals directly to individual agencies because the goals that agencies proposed did not in the aggregate reach the mandated 23-percent governmentwide goal. When calculating the percentage of federal procurements awarded to small businesses, FPDC must exclude (a) those contracts for which small businesses' chances to compete are limited or nonexistent, (b) those using non-appropriated funds, and (c) those made by agencies which are subject to the Federal Acquisition Regulation or are otherwise exempted by statute. The excluded contracts total about 10 percent of federal procurement dollars and are usually military contracts for foreign sales and contracts performed outside the United States. SBA's annual guidance is the only source of information to which federal agencies, the small business community, and Congress can turn for information on the contracts that are excluded from the small business baseline. However, the guidance is unclear and incomplete, precluding a clear picture of the universe of contracts reflected in FPDC's annual reports of small business achievements.