Small Business Contracting:
DOD Should Take Actions to Ensure That Its Pilot Mentor-Protégé Program Enhances the Capabilities of Protégé Firms
GAO-17-172: Published: Apr 11, 2017. Publicly Released: Apr 11, 2017.
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What GAO Found
The Department of Defense (DOD) relies on military services and agencies (DOD components) to approve the agreements that establish relationships between participants in its Pilot Mentor-Protégé Program. This program provides incentives for major defense contractors (mentors) to provide assistance to small disadvantaged firms (protégés) in an effort to enhance their capability to compete for federal and commercial contracts. However, DOD does not have reasonable assurance that approved agreements include all elements required by the program's regulations and policies. These elements include, among others, the protégé's industry code and the signature and date of the mentor and protégé. These elements serve a variety of purposes—for example, the industry code is used to determine the protégé's eligibility to participate in the program, and the signature and date of mentor and protégé are required in order for the agreement to be legally bindingto meet program requirements. Based on a review of a randomly selected probability sample of 44 of the 78 active mentor-protégé agreements in place as of June 2016, GAO estimates that 27 percent of agreements were missing required elements. For example, GAO estimates that 25 percent of agreements were not signed by both the mentor and protégé. Federal internal control standards state that management should implement control activities through policies and practices, including periodically reviewing control activities for continued effectiveness. DOD's Office of Small Business Programs (OSBP) manages the program and oversees program policies and procedures. However, OSBP does not review the DOD components' processes for approving mentor-protégé agreements and therefore has not taken appropriate oversight actions to provide reasonable assurance that agreements meet all requirements. As a result, the components have approved agreements that do not include required elements, and OSBP cannot ensure that the requirements are serving their various purposes.
DOD's fiscal year 2011 through 2015 annual reports on its Pilot Mentor-Protégé Program include performance measures for several areas, but DOD lacks performance goals and other measures needed to effectively assess the program. Some of these measures show that during this period, protégés' revenue, number of employees, and DOD prime and subcontract awards increased while protégés participated in the program, but revenues and employment levels decreased in the 2 years after their participation ended. GAO found that DOD has not established any measurable goals for these measures. In addition, DOD collects information from mentors on how they have enhanced the capabilities of protégés, but DOD does not include this information in the program's annual report and has not developed performance measures or goals related to this information. GAO has previously identified performance measurement as a best practice that allows organizations to track progress and gives managers information to plan needed improvements. DOD officials told GAO they are working to develop measures that better indicate program outcomeseffectiveness, but as of January 2017 they had not established such measures. Without performance goals and related measures, DOD may be limited in its ability to analyze the effectiveness of the program, and Congress may not have information needed to inform future decisions regarding the program.
Why GAO Did This Study
DOD's Pilot Mentor-Protégé Program, was first authorized as a pilot program in 1990, and has been repeatedly renewed as a pilot program, most recently through September 30, 2018. For fiscal year 2016, total funding for this program was $28.3 million.
The joint explanatory statement to accompany the National Defense Authorization Act for Fiscal Year 2016 includes a provision for GAO to report on DOD's pilot program. This report examines, among other things, (1) DOD's procedures for approving mentor-protégé agreements and (2) DOD's performance measures for the program. GAO analyzed DOD guidance, reviewed a randomly selected probability sample of active DOD mentor-protégé agreements and estimated their completeness at a 95 percent confidence interval, reviewed DOD's annual program reports for fiscal years 2011 through 2015, and interviewed agency officials.
What GAO Recommends
GAO recommends that DOD (1) conduct periodic reviews of the components' processes for approving agreements and address identified deficiencies, as appropriate, and (2) develop performance goals and related measures that are consistent with the program's stated purpose. DOD concurred with GAO's recommendations.
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Recommendations for Executive Action
Comments: The Department of Defense (DOD) concurred with this recommendation and stated that it would implement a new standard operating procedure for DOD's Mentor-Protege Program component program managers. According to DOD, the new standard operating procedure would require each component program manager to provide quarterly program management review reports to DOD's Office of Small Business Programs, in addition to annual and monthly reporting, as required by Appendix I of DOD's policies and procedures for the Mentor-Protege Program. DOD's new Standard Operating Procedure would also centralize the implementation of the Mentor Protege Program and, according to DOD, would create process efficiency, and enhanced oversight of the program. The new Standard Operating Procedure would also include a new standardized checklist each Mentor-Protege Program component would utilize to approve mentor protege agreements. The standardized checklist would also include the company North American Industry Classification System code, a mentor approval letter, and a fully completed copy of the mentor protege agreement signed by both parties. Last, DOD would then determine program improvement, once the aforementioned controls are implemented and monitored for effectiveness. As of August 2018, DOD had not provided GAO with documentation of the new standard operating procedure. GAO will continue to monitor the department's progress in implementing this recommendation.
Recommendation: To provide reasonable assurance that DOD's Pilot Mentor-Protege Program meets its mission, the Director, DOD's Office of Small Business Programs, should conduct periodic reviews of the processes DOD components follow to approve agreements and take oversight actions, as appropriate.
Agency Affected: Department of Defense: Office of Small Business Programs
Comments: The Department of Defense (DOD) concurred with this recommendation and stated that Mentor-Protege Program components would establish goals for the Mentor Protege Program and those goals would be focused on the Industrial Base and Technology Transfer categories. In addition, DOD stated that it would establish additional surveillance requirements to ensure prime and subcontract opportunities are afforded to the proteges and that instituting a baseline performance goal for all components will ensure the Program achieves the intent desired by Congress. As of August 2018, DOD had not provided GAO with documentation of the new goals or standard operating procedure. GAO will continue to monitor the department's progress in implementing this recommendation.
Recommendation: To provide reasonable assurance that DOD's Pilot Mentor-Protege Program meets its mission, the Director, DOD's Office of Small Business Programs, should complete actions to develop performance goals and related measures that are consistent with the program's stated purpose.
Agency Affected: Department of Defense: Office of Small Business Programs