Procurement:

Public Utilities' Compliance With Subcontracting Plan Requirements

GGD-89-32: Published: Jan 26, 1989. Publicly Released: Feb 27, 1989.

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In response to a congressional request, GAO compared the efforts of the General Services Administration (GSA), the Department of Energy (DOE), and the Department of Defense (DOD) in ensuring public utilities' compliance with federal laws and regulations requiring subcontracting plans for the maximum practicable use of small and small disadvantaged businesses.

GAO found that: (1) federal regulations required formal written contracts for all purchases exceeding $25,000; (2) GSA used formal contracts whenever appropriate, but some utility companies declined to enter into formal contracts; (3) although GSA made progress in increasing the number of utilities under contract, it did not have formal contracts with 23 utilities; and (4) although GSA awarded 26 contracts that contained a modified clause requiring large subcontractors to prepare subcontracting plans, it stopped using the modified clause in its negotiations and planned to correct those contracts containing the clause. GAO also found that: (1) all of the 12 GSA single-point contracts contained plans; (2) of the 67 areawide contracts, 2 fell below the value threshold, 52 contained plans and 15 had valid reasons for not containing plans, of which 12 were in effect prior to legislation and were scheduled for renewal; (3) 6 utilities refused to enter into contracts with DOE, 3 signed contracts but had plan requirements removed, and 1 signed the contract but refused to submit the plan; and (4) most of the DOD utility contracts did not contain subcontracting plans because guidelines predated the law requiring them and many contracting officials were not aware of the requirement. GAO believes that: (1) utilities that decline to enter into formal contracts are subject to statutory subcontracting plan requirements; and (2) the government should seek judicial enforcement of plan requirements when a utility declines a formal contract.

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