Hurricane Katrina:

Agency Contracting Data Should Be More Complete Regarding Subcontracting Opportunities for Small Businesses

GAO-07-205: Published: Mar 1, 2007. Publicly Released: Mar 1, 2007.

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In response to Hurricane Katrina, the Departments of Homeland Security (DHS) and Defense (DOD), the General Services Administration (GSA), and the U.S. Army Corps of Engineers (Corps) were responsible for 94 percent of the federal funds awarded for relief efforts via contracting as of May 2006. This report, which GAO conducted under the Comptroller General's Authority, describes (1) the amounts that small businesses received from prime contracts with these agencies, (2) the extent of subcontracting, (3) and the extent to which Disadvantaged Business Enterprises (DBEs) received Department of Transportation funds for Katrina-related projects. In conducting this study, GAO analyzed agency contract data, reviewed federal acquisition regulations, and interviewed agency procurement officials.

Small businesses received a total of 28 percent of the $11 billion in contracting dollars that DHS, GSA, DOD, and the Corps directly awarded in response to Hurricane Katrina. Local businesses of all sizes in Alabama, Louisiana, and Mississippi received 18 percent, or $1.9 billion of these funds. Small businesses received 66 percent of the $1.9 billion awarded in these states. Required information on small business subcontracting is not consistently available in official procurement data systems for the four agencies. The systems had no information on whether DHS or GSA required subcontracting plans for 70 percent or more of their contracting funds. In addition, when data showed agencies determined that the plans were not required, the four agencies often did not document a reason for their determinations, even though federal rules require such documentation when prime contracts meet criteria for having these plans. Incomplete information about subcontracting limits determining the extent to which agencies complied with contracting rules and gave small businesses maximum opportunities to win subcontracts. DBEs were awarded about 4 percent, or about $53 million, of the almost $1.3 billion the Department of Transportation's Federal Highway Administration funded for Katrina-related contracts in Alabama, Louisiana, and Mississippi between August 1, 2005, and June 30, 2006. These contracts were awarded by the three state departments of transportation. DBEs also received about 10 percent of $24 million that airports in the three states awarded using Federal Aviation Administration funds for Katrina-related contracts.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
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    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure compliance with federal contracting regulations and to more transparently disclose the extent to which subcontracting opportunities are available to small businesses, the Secretaries of Homeland Security and Defense and the Administrator of General Services should consider asking their respective Inspectors General to conduct a review at an appropriate future date to ensure that this guidance and related requirements are being followed.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: DOD issued a policy memorandum in January 2008 that stated that all future Procurement Management Reviews or any other relevant internal oversight reviews should include subcontracting plan compliance as a special interest item. At an unspecified time in the future, DOD's Defense Procurement and Acquisition Policy office will request a review of the adequacy of the Military Departments and Defense Agencies oversight and management review processes and whether respective processes include small business subcontracting plan compliance as a review item.

    Recommendation: To ensure compliance with federal contracting regulations and to more transparently disclose the extent to which subcontracting opportunities are available to small businesses, the Secretaries of Homeland Security and Defense and the Administrator of General Services should consider asking their respective Inspectors General to conduct a review at an appropriate future date to ensure that this guidance and related requirements are being followed.

    Agency Affected: General Services Administration

    Status: Open

    Comments: DHS issued a chapter on its small business subcontracting program in its DHS Acquisition Manual in October 2009 and developed a subcontracting plan checklist that officials are to use when awarding a contract. In May 2010 DHS officials claimed that these documents are examples of progress they have made to address the recommendation on ensuring compliance with federal contracting regulations and other related requirements. After reviewing these documents we disagreed with the agency and do not believe that these documents constitute agency guidance on the contract administration duties to monitor contractor compliance with subcontracting plan reporting requirements.

    Recommendation: To ensure compliance with federal contracting regulations and to more transparently disclose the extent to which subcontracting opportunities are available to small businesses, the Secretaries of Homeland Security and Defense and the Administrator of General Services should issue guidance to the appropriate procurement offices and personnel reinforcing (1) the reasons for subcontracting plan requirements and the importance of complying with them; (2) the necessity for documenting in publicly available sources the agencies' decisions, particularly in instances when they determine not to require subcontracting plans; and (3) where subcontracting plans are in place, the need to adhere to the requirement for all prime contractors to report on their small business subcontracting accomplishments.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DHS issued a revised Acquisition Manual (HSAM) in October 2009 that reinforced the reasons for subcontracting plan requirements; outlined the steps that should be taken to document decisions related to the need for a subcontracting plan; and documented the requirements for prime contractors to report their small business subcontracting accomplishments. DHS also issued a subcontracting plan review checklist for contracting officers to use to ensure that prime contractors have satisfactorily addressed the 11 elements of FAR 19.704 and demonstrates a good faith effort in utilizing small businesses as subcontractors.

    Recommendation: To ensure compliance with federal contracting regulations and to more transparently disclose the extent to which subcontracting opportunities are available to small businesses, the Secretaries of Homeland Security and Defense and the Administrator of General Services should issue guidance to the appropriate procurement offices and personnel reinforcing (1) the reasons for subcontracting plan requirements and the importance of complying with them; (2) the necessity for documenting in publicly available sources the agencies' decisions, particularly in instances when they determine not to require subcontracting plans; and (3) where subcontracting plans are in place, the need to adhere to the requirement for all prime contractors to report on their small business subcontracting accomplishments.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: The agency issued two Acquisition Alerts to its contracting officers in March of 2007. These alerts reinforced the reasons for subcontracting plan requirements, the importance of documenting decisions related to these requirements, and the need for prime contractors to report their small business subcontracting accomplishments. The agency issued an additional memorandum in 2009 requiring contracting officers to monitor prime contractors' subcontracting plan achievements. This monitoring includes: (1) checking to determine if the contractors' are reporting subcontracting plan achievements in accordance with the due dates, (2) following up on those contractors that have not reported in accordance to the due date requirements, (3) reviewing the subcontracting achievements to determine if the contractors are making their best efforts to achieve the subcontracting goals as laid out in the subcontracting plans, and (4) contacting those contractors whose achievements are low when compared to the goals to find out why.

    Recommendation: To ensure compliance with federal contracting regulations and to more transparently disclose the extent to which subcontracting opportunities are available to small businesses, the Secretaries of Homeland Security and Defense and the Administrator of General Services should issue guidance to the appropriate procurement offices and personnel reinforcing (1) the reasons for subcontracting plan requirements and the importance of complying with them; (2) the necessity for documenting in publicly available sources the agencies' decisions, particularly in instances when they determine not to require subcontracting plans; and (3) where subcontracting plans are in place, the need to adhere to the requirement for all prime contractors to report on their small business subcontracting accomplishments.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD issued a policy memorandum on November 7, 2007. The guidance was issued to DOD's contracting and procurement workforce to ensure that they complied with small business subcontracting plan requirements. The guidance reinforced the reasons for subcontracting plan requirements, the importance of documenting decisions related to these requirements, and the need for prime contractors to report their small business subcontracting accomplishments.

    Recommendation: To ensure compliance with federal contracting regulations and to more transparently disclose the extent to which subcontracting opportunities are available to small businesses, the Secretaries of Homeland Security and Defense and the Administrator of General Services should consider asking their respective Inspectors General to conduct a review at an appropriate future date to ensure that this guidance and related requirements are being followed.

    Agency Affected: General Services Administration

    Status: Closed - Implemented

    Comments: GSA sent a letter to Senator John Kerry in May 2007 stating that the agency will seek the assistance of its IG when it conducts Procurement Management Reviews of its acquisition activities. Also, in a March 2007 Acquisition Alert to GSA contracting officers the agency stated that annual and special Procurement Management Reviews will include a review of compliance with subcontract plan requirements. GSA issued detailed guidance to its contractors on reporting requirements for subcontracts in a December 2009 Acquisition Letter.

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