This is the accessible text file for GAO report number GAO-03-776R entitled 'Reporting of Small Business Contract Awards Does Not Reflect Current Business Size' which was released on May 07, 2003. This text file was formatted by the U.S. General Accounting Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. May 7, 2003: The Honorable Olympia J. Snowe: Chair, Committee on Small Business and Entrepreneurship: United States Senate: Subject: Reporting of Small Business Contract Awards Does Not Reflect Current Business Size: Dear Madam Chair: We have prepared this report in response to your concerns about whether large companies are receiving federal contracts intended for small businesses. As agreed with your staff, we reviewed awards to five large companies to determine: * how contracts awarded to the companies were reported in Federal Procurement Data System (FPDS),[Footnote 1] * why federal contract officials reported the contracts as small business awards, and: * what actions are being taken to address any identified problems. This report transmits information provided to your staff in earlier briefings and in our testimony given today before the Small Business Committee of the House of Representatives, which we have enclosed. We conducted our review between November 2002 and May 2003 in accordance with generally accepted auditing standards. A description of our scope and methodology is included in the enclosure. The five large companies that we reviewed received contracts totaling $1.1 billion in fiscal year 2001, including $460 million reported as small business awards. To understand why awards to these large companies were listed in FPDS as small business awards, we focused our review on 131 individual contract actions awarded to these companies by four federal buying activities. The predominant reason why these contract actions were reported as small business awards is because federal regulations generally permit a company to be considered as a small business over the life of the contract--even if they have grown into a large business, merged with another company, or been acquired by a large business. In today's federal contracting environment, contracts can extend up to 20 years. Additionally, agencies' reliance on various databases containing inaccurate information on current business size has led to misreporting of small business achievements. The General Services Administration, the Office of Federal Procurement Policy, and the Small Business Administration have each taken or proposed a number of actions aimed at requiring small businesses to re- certify and not retain their small business status for the life of the contract. While these proposed actions do not directly address the database problems we identified at the four federal buying activities, there are a number of initiatives under way designed to improve federal contract databases. We have not made recommendations; however, we have noted the need for accurate and consistent data on companies' business size in order to reliably report small business contract awards. We believe a coordinated effort between agencies is necessary to ensure that accurate and reliable small business data are reported. If you have any further questions concerning this report, please contact me on (617) 788-0500. Individuals making key contributions to this report include Robert Ackley, Penny Berrier, Chris Galvin, Julia Kennon, Judy Lasley, John Needham, Russ Reiter, Sylvia Schatz, and Karen Sloan. Sincerely yours, David E. Cooper: Signed by David E. Cooper: Director: Acquisition and Sourcing Management: Enclosure: FOOTNOTES [1] FPDS is the government's central repository of statistical information on federal contracting. The system contains detailed information on contract actions over $25,000 and summary data on procurements of less than $25,000.