Federal Advertising:

Federal Use of Small Disadvantaged Subcontractors Is Minimal

RCED-89-54: Published: Jun 30, 1989. Publicly Released: Aug 3, 1989.

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Pursuant to a congressional request, GAO reviewed the extent to which the Department of Defense (DOD) used minority-owned media and advertising companies in developing its advertisements and conducting campaigns, focusing on whether DOD prime contractors complied with the national policy to use small disadvantaged firms for subcontracts.

GAO found that: (1) DOD contracts totaled about $160 million of the $166 million federal advertising budget for fiscal year 1986, and included six contracts that were subject to the subcontracting provisions of the Small Business Act and the Federal Acquisition Regulation (FAR); (2) DOD did not use small disadvantaged advertising firms as prime contractors and only minimally used them as subcontractors; (3) DOD and its contractors often did not comply with the act, since they did not develop subcontracting plans or did not develop subcontracting plans that included all the mandated elements, did not keep records of the amount subcontracted to small disadvantaged subcontractors, set small-disadvantaged-business spending goals substantially less than the subcontracting dollar amount, or counted some advertising geared to minority audiences as meeting subcontracting goals; and (4) DOD and its prime contractors may not have complied in good faith with the policies or required subcontracting, which could constitute in a material breach of contract.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD took action on this recommendation prior to report issuance. DOD identified weaknesses and deficiencies in the subcontracting program for advertising contracts and requested that military departments address these deficiencies and closely monitor this area. Contracts awarded during fiscal year (FY) 1987 and after have been closely reviewed to ensure compliance with section 211 of P.L. 95-507.

    Recommendation: In order to comply with the Small Business Act of 1958, as amended, and FAR, the Secretary of Defense should require prime contractors to develop and implement subcontracting plans to make maximum use of small disadvantaged advertising firms.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD took action on this recommendation prior to report issuance. Contracts awarded during FY 1987 and after have been closely reviewed to ensure compliance with section 211 of P.L. 95-407. All DOD advertising contracts awarded to large businesses have subcontracting plans that contain the mandatory elements.

    Recommendation: In order to comply with the Small Business Act of 1958, as amended, and FAR, the Secretary of Defense should enforce the requirement that prime contractors keep the appropriate records and meet reporting requirements to comply with section 211.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD identified several deficiencies in the subcontracting program for advertising, and requested that military departments address these deficiencies and closely monitor this area. DOD has not denied small disadvantaged businesses an opportunity to participate in DOD advertising contracts as prime contractors. They had the opportunity to compete for these contracts just as any other firm.

    Recommendation: In order to comply with the Small Business Act of 1958, as amended, and FAR, the Secretary of Defense should disallow the purchase of media space and time geared to minority audiences as subcontracting with small disadvantaged advertising firms unless it is actually purchased from a small disadvantaged firm.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: Prior to issuance of this report, DOD identified several deficiencies in the subcontracting program for advertising contracts and requested that military departments address these deficiencies and closely monitor this area. For whatever reasons, small disadvantaged businesses have not pursued opportunities to participate as prime contractors.

    Recommendation: In order to comply with the Small Business Act of 1958, as amended, and FAR, the Secretary of Defense should ensure that prime contractors set small disadvantaged spending goals on the total dollars planned to be subcontracted.

    Agency Affected: Department of Defense

 

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