Small and Disadvantaged Businesses:
Some Agencies' Advocates Do Not Report to the Required Management Level
GAO-03-863, Sep 4, 2003
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Section 15(k) of the Small Business Act requires that all federal agencies with procurement powers establish an Office of Small and Disadvantaged Business Utilization (OSDBU). This law is one of many designed to enhance the participation of small and disadvantaged businesses in federal procurement. Section 15(k)(3) of the act requires that OSDBU directors, who are intended to be advocates for small and disadvantaged businesses, be responsible only to and report directly to agency heads or deputy agency heads. GAO was asked to determine compliance with section 15(k)(3) across the government, review to whom the OSDBU director at the Office of the Secretary of Defense has reported since the office was exempted from that provision, and determine whether section 15(k) applies to the Office of Administration (OA), which is the central procurement arm of the Executive Office of the President (EOP).
Almost half of the federal agencies that GAO reviewed were not in compliance with section 15(k)(3) of the Small Business Act. Thirteen of the 24 agencies were in compliance--that is, the OSDBU director reported directly to and was responsible only to the agency head or deputy head (see table). Eleven agencies were not in compliance with the provision. At these 11 agencies, the OSDBU director (1) reported to officials below the level of agency head or deputy head, (2) was not responsible only to the agency head or deputy head but also to a lower level agency official, or (3) had delegated the responsibilities of the OSDBU director to officials who did not report to the agency head or the deputy head. Since Congress granted the Office of the Secretary of Defense an exemption from the section 15(k)(3) reporting requirement in 1988, the organizational reporting level of the OSDBU director has changed twice--in both cases to lower levels. From 1989-96, the director reported to officials on the Under Secretary of Defense level, one level below Deputy Secretary. Since 1996 (except in 1999), the director has reported to officials on the Deputy Under Secretary of Defense level, two reporting levels below Deputy Secretary. OA likely is a "Federal agency with procurement powers" subject to the OSDBU requirements of section 15(k) of the Small Business Act. OA has procurement powers deriving from its authority to contract on behalf of EOP. OA is a "federal agency" by virtue of its being an "agency" under the Administrative Procedure Act (APA), which the Small Business Act adopts by reference, and OA is an APA agency because it possesses the requisite "substantial independent authority."
Status Legend:
- Review Pending
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: The Attorney General should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of Justice
Status: Closed - Not Implemented
Comments: On June 9, 2005, the audit liaison advised that the agency does not plan to implement the regulation.
Recommendation: The Commissioner of the Social Security Administration should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Social Security Administration
Status: Closed - Not Implemented
Comments: On June 8, 2005, the audit liaison advised that the agency will not implement the recommendation. The agency closed out the recommendation in 2004.
Recommendation: The EPA Administrator should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Environmental Protection Agency
Status: Closed - Implemented
Comments: On September 14, 2004, EPA's OSDBU director stated to GAO staff that she currently reports to the Deputy Administrator. The OSDBU director stated that she meets frequently with the Deputy Administrator to discuss EPA small business programs. Moreover, the OSDBU director the Deputy Administrator conducted her recent mid-year performance evaluation.
Recommendation: The Secretary of Agriculture should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of Agriculture
Status: Closed - Not Implemented
Comments: On July 6, 2005, the audit liaison advised me that USDA believes that the response submitted on October 21, 2003, still reflects its position. USDA believes that our organization is in compliance with section 15(k)(3) of the Small Business Act. According to the audit liaison officer, the organizational structure used at USDA has been highly successful in meeting the goals of the program and it is in compliance with the need to hold the Assistant Secretary for Administration directly responsible and accountable to the Secretary of Agriculture for these duties.
Recommendation: The Secretary of Commerce should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of Commerce
Status: Closed - Not Implemented
Comments: On July 13, 2005, the liaison officer advised me that the Department continues to believe that the reporting line for the OSDBU director is in compliance with the statute. The Department believes that the organizational structure is efficient and effective. For these reasons, the reporting relationship of the OSDBU Director has not been changed since the issuance of the final GAO report. The liaison officer suggested that GAO close out this recommendation.
Recommendation: The Secretary of Education should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of Education
Status: Closed - Not Implemented
Comments: On June 17, 2005, I talked with the GAO Liaison officer and she told me that the Department believes that it is in compliance with Section 15(k)(3) of the Small Business Act. On January 6, 2004, the Department sent a letter to GAO stating this fact. According to the audit liaison officer, the OSDBU director reporting relationship has not changed since the 2003 report and the department does not plan to make any changes to the reporting relationship since it believes it is in compliance.
Recommendation: The Secretary of Health and Human Services should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of Health and Human Services
Status: Closed - Implemented
Comments: On 9/25/07, an Oversight Analyst in the Office of the Assistant Secretary for Legislation at HHS informed us that the Office of Small and Disadvantaged Business Utilization was re-organized and the Director is reporting to the Deputy Secretary.
Recommendation: The Secretary of State should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of State
Status: Closed - Not Implemented
Comments: On 2/26/07, the Assistant Secretary of Administration advised us that the agency did not concur with the recommendation at the time of report issuance and continue to disagree with the recommendation. They will not be implementing the recommendation.
Recommendation: The Secretary of the Interior should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of the Interior
Status: Closed - Not Implemented
Comments: I have made several attempts to contact the liasion official at the Department of Interior inquiring whether the agency had implemented the recommendation. The official has not returned any of my phone calls. I last contacted the liaison official on 7/9/07 and left a message advising the official that if we did not hear from the agency within in the next week the recommendation would be closed, but not implemented. We have not heard back from the agency as 7/26/07.
Recommendation: The Secretary of the Treasury should take steps as necessary to comply with the requirement in section 15(k)(3) of the Small Business Act that the Office of Small and Disadvantaged Business Utilization director be responsible only to and report directly to the head or deputy head of the agency.
Agency Affected: Department of the Treasury
Status: Closed - Not Implemented
Comments: We were advised on 2/26/07 that Treasury would not be implementing the recommendation.