Establishing Goals for and Subcontracting With Small and Disadvantaged Businesses Under Public Law 95-507

PLRD-82-95: Published: Jun 30, 1982. Publicly Released: Jul 6, 1982.

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In response to a congressional request, GAO reviewed the small and disadvantaged business subcontracting program under Public Law 95-507, which essentially requires that all government contracts in excess of $500,000, or $1 million for construction contracts, contain a contractor's plan for subcontracting with small and disadvantaged businesses. In addition, GAO reviewed agency procedures for establishing small business prime contracting and subcontracting goals.

GAO found that contracting officers are generally obtaining subcontracting plans. However, Department of Defense (DOD) contracting officers did not require 18 prime contractors to submit such plans. Of these, two contractors were granted exemptions because of longstanding contractual relationships with their suppliers. This exemption is allowed by Defense Acquisition Regulations (DAR). Small Business Administration (SBA) determinations that subcontracting plans were not acceptable were questionable for 23 of the 161 cases reviewed. In addition, cases which SBA considered unacceptable are acceptable when reviewed using DAR guidance. SBA determinations that some prime contractors did not comply with subcontracting plans were valid. However, SBA did not always send contract administrators its determination reports. Because SBA did not attribute contractors' failure to achieve plans to a lack of good faith, contracting officers took no adverse actions against the contractors. DOD and the General Services Administration (GSA) used sound estimating procedures and methodology in establishing small business prime contracting goals. Likewise, the DOD small and disadvantaged business subcontracting goals were soundly based. However, because of unclear guidance, the GSA small and disadvantaged business subcontracting goals for fiscal years 1981 and 1982 did not consider subcontracting opportunities for prime contractors under $500,000.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: According to the new FAR, the wording has been changed, but the intent remains the same. OFPP, DOD, and SBA officials are still negotiating over the DOD position on the DOD/contractor relationship.

    Recommendation: The Administrator of OFPP and the Secretary of Defense should resolve the differences between OFPP policy and DAR on whether contractors can be exempted from submitting plans when they have longstanding contractual relationships with their suppliers.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: According to the new FAR, the wording has been changed, but the intent remains the same. OFPP, DOD, and SBA officials are still negotiating over the DOD position on the DOD/contractor relationship.

    Recommendation: The Administrator of OFPP and the Secretary of Defense should resolve the differences between OFPP policy and DAR on whether contractors can be exempted from submitting plans when they have longstanding contractual relationships with their suppliers.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  3. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Administrator of OFPP and the Secretary of Defense should resolve the differences between OFPP policy and DAR on prime contractors' responsibilities when subcontractors are required to submit plans for contracting with small and disadvantaged businesses.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Administrator of OFPP and the Secretary of Defense should resolve the differences between OFPP policy and DAR on prime contractors' responsibilities when subcontractors are required to submit plans for contracting with small and disadvantaged businesses.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  5. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Administrator, SBA, should make certain that final noncompliance reports are sent to contract administration officers.

    Agency Affected: Small Business Administration

  6. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Administrator, SBA, should clarify guidelines on the dollar value of prime contracts that should be included in establishing small and disadvantaged business subcontracting goals.

    Agency Affected: Small Business Administration

 

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