Small Business Contracting:

Actions Needed to Demonstrate and Better Review Compliance with Select Requirements for Small Business Advocates

GAO-17-675: Published: Aug 25, 2017. Publicly Released: Sep 25, 2017.

Additional Materials:

Contact:

William B. Shear
(202) 512-8678
shearw@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Demonstrated compliance with selected section 15(k) requirements for the Office of Small and Disadvantaged Business Utilization (OSDBU) varied across the 24 agencies GAO surveyed. Five agencies demonstrated compliance with all the requirements, four agencies demonstrated compliance with all but one requirement, and 15 agencies did not demonstrate compliance with two or more requirements. Examples of GAO findings include the following:

  • Four OSDBU directors did not report directly to the agency head or deputy (the one requirement for which GAO reviewed only 10 agencies).
  • Five agencies did not demonstrate compliance with a requirement for collateral duties of OSDBU directors.
  • Six agencies did not demonstrate compliance with a requirement for compensation and seniority of OSDBU directors.
  • Twenty-three agencies demonstrated compliance for four requirements on OSDBU director experience, supervisory duties of the OSDBU director, identifying and addressing significant bundling of contracts (consolidation of two or more procurement requirements into a solicitation for a single contract), and providing assistance on payments.
  • Fifteen agencies demonstrated compliance with a requirement to respond to notifications that solicitations unduly restricted the ability of small businesses to compete for contracts.

Noncompliance with section 15(k) requirements may limit the extent to which an OSDBU can advocate for small businesses. For example, OSDBU influence in agencies might be limited if directors reported to lower levels of management. Directors with other duties might be less able to carry out all section 15(k) duties.

Results of the Small Business Procurement Advisory Council's (SBPAC) annual review of compliance with section 15(k) requirements differed from GAO's assessments. The Small Business Administration (SBA) chairs SBPAC, and its members are nearly all OSDBU directors. All agencies in the most recent review scored 94–98 percent. But where GAO's review considered the same section 15(k) requirements as the SBPAC review, GAO found some agencies had not demonstrated compliance with multiple requirements. Other than reviewing documentation agencies choose to provide, SBA's guidance for the review panel does not indicate any other means by which reviewers could obtain or clarify information. GAO's review included follow-up discussions with agency officials to obtain or clarify information. SBA has been developing a new review process, but preliminary information GAO reviewed indicates the process will be similar to the current one. According to federal standards for internal control, management should use quality information to make informed decisions. Under the new process, the review results (which SBA uses in another process that determines an agency's overall grade for small business contracting) also will carry twice as much weight as under the current process—underscoring the importance of the review results. A new review process substantially similar to the old one (especially in relation to guidance) may not provide a reliable indicator of OSDBU compliance with section 15(k) requirements.

Why GAO Did This Study

Section 15(k) of the Small Business Act requires federal agencies with procurement powers to establish an OSDBU to advocate for small businesses. The National Defense Authorization Act for Fiscal Year 2013 established additional requirements for OSDBUs and required SBPAC to review OSDBU compliance with section 15(k) requirements.

GAO was asked to review compliance with selected requirements of section 15(k). GAO examined (1) the extent to which selected federal agencies demonstrated compliance with 13 requirements for OSDBUs and (2) SBPAC review process results. GAO selected a sample of 10 agencies, based on contracting obligations, to review a reporting requirement for OSDBU directors. For the other 12 requirements, GAO surveyed OSDBU directors at 24 agencies, selected based on contracting obligations (100 percent response rate). To review and augment survey responses, GAO also analyzed guidance and documents and interviewed OSDBU directors.

What GAO Recommends

GAO makes 20 recommendations, including that agencies not demonstrating compliance with section 15(k) requirements comply or report to Congress on why they have not, and that SBA should provide more detailed guidance for the new SBPAC review process than exists for the current process. Agency responses to the recommendations varied. As discussed in the report, GAO maintains that implementation of its recommendations is warranted.

For more information, contact William B. Shear at (202) 512-8678 or shearw@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: For section 15(k)(2), related to the compensation and seniority of the person heading the OSDBU office, DOD concurred with this part of the recommendation. Agency officials stated that the agency requested that DOD seek Congressional approval to authorize a new Senior Executive Service position for the OSDBU director, and the agency has been waiting for this authorization to make this change. An agency official said that DLA recently hired a new Office of Small Business Programs director at the GS-15 equivalent level. This hire is not consistent with the requirements of section 15(k)(2). We will continue to monitor DOD's efforts to address this recommendation. For section 15(k)(7), related to supervisory duties, DOD did not concur with this part of the recommendation. An agency official said that the management structure of DLA and its subordinate elements precludes assigning supervisory authority by the DLA OSBP over all agency personnel involved in small business functions. The official said that DOD OSDP is working to submit legislative proposals for the fiscal year 2020 National Defense Authorization Act. These proposals may address DLA's compliance with section 15(k)(7). For section 15(k)(11), related to advise on insourcing, DOD concurred with this part of the recommendation and said that future insourcing actions will be coordinated with the DLA OSBP as required. The agency official said that as of August 10, 2018, there have not been any insourcing actions. DOD provided a memo documenting that a future update of DOD policy will include language about complying with section 15(k)(11) requirement. The information provided is sufficient to close this part of the recommendation. For section 15(k)(17), related to responding to undue restrictions on the ability of small businesses to compete, DOD concurred with this part of the recommendation. DOD provided a memo that includes information on how the agency will comply with the section 15(k)(17) requirements and that these procedures will be included in a future DOD policy update. The information provided is sufficient to close this part of the recommendation as implemented.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Director of the Defense Logistics Agency should comply with sections 15(k)(2), (k)(7), (k)(11), and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Defense: Defense Logistics Agency

  2. Status: Open

    Comments: For section 15(k)(2), related to the compensation and seniority of the person heading the OSDBU office, and for section 15(k)(15), related to collateral duties, on September 13, 2018, an agency official stated that the agency currently does not have an OSDBU director. The official stated that the agency does not have an estimate for when this would occur because the director is appointed by the White House. We will continue to monitor USDA's efforts to address this part of the recommendation. For section 15(k)(17), related to undue restriction on the ability of small businesses to compete, an agency official stated that the OSDBU is working on an internal policy which will include guidelines for action. The official stated that the estimated completion date is January 2019. We will continue to monitor USDA's efforts to address this part of the recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Agriculture should comply with sections 15(k)(2), (k)(15), and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Agriculture

  3. Status: Open

    Comments: DOD did not concur with this recommendation, related to assigning small business technical advisors, because it said that the Defense Federal Acquisition Regulation Supplement delegates the authority to appoint small business technical advisers to the head of the contracting activity. We continue to believe that the recommendation is valid because when a statutory provision such as section 15(k) and regulations such as the acquisition regulation conflict, the statute controls. An agency official said that the DOD OSBP recommended, as part of the legislative proposal process, changes to the National Defense Authorization Act to align with the DOD OSBP's interpretation of the statute, but it did not make it out of DOD. We will continue to monitor DOD's efforts to address this recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of the Army should comply with section 15(k)(8) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Open

    Comments: For section 15(k)(2), related to the compensation and seniority of the person heading the OSDBU office, an agency official stated on July 27, 2018 that the department has initiated the planning process to change the position of OSDBU director from a General Schedule-15 to a Senior Executive Service. According to the official, this action is projected to be completed by September 30, 2018. We will continue to monitor the Department of Commerce's efforts to address this part of the recommendation. For section 15(k)(8), related to assigning small business technical advisors, on July 27, 2018, an agency official provided a Small Business Program Policy 2018-01 Action Memorandum to take further action to comply with the section 15(k)(8) provision. The official also provided 3 memorandums in which the OSDBU director appointed small business technical advisors (2 appointment memorandums for the National Oceanic and Atmospheric Administration and 1 appointment memorandum for the National Institute for Standards and Technology) to assist the Small Business Administration procurement center representatives. On September 6, 2018, the agency official also confirmed that the technical advisers' principal duty is to assist the Small Business Administration procurement center representative in the representative's duties and functions related to sections 8 and 15 of the Small Business Act. The information provided is sufficient to close this part of the recommendation. For section 15(k)(11), related to advise on insourcing, on July 27, 2018, an agency official provided a Small Business Program Policy 2018-01 Action Memorandum to take further action to comply with the section 15(k)(11) provision. On September 12, 2018, the official also stated that the Department is developing a Commerce Small Business Program Manual (CSBPM) to provide guidance to offices and operating units including guidance on section 15(k)(11). The official further stated that the CSBPM is going through the Department's administrative clearance process. We will continue to monitor the Department of Commerce's efforts to address this part of the recommendation. For section 15(k)(17), related to responding to undue restrictions on the ability of small businesses to compete, on July 27, 2018, an agency official provided a Small Business Program Policy 2018-01 Action Memorandum to take further action to comply with the section 15(k)(17) provision. The policy memo outlines the steps that the OSDBU director shall take and states that the OSDBU director shall coordinate the implementation of section 15(k)(17) on behalf of the Department. The information provided is sufficient to close this part of the recommendation as implemented.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Commerce should comply with sections 15(k)(2), (k)(8), (k)(11), and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Commerce

  5. Status: Open

    Comments: For section 15(k)(5), related to identifying and addressing bundling of contract requirements, DOD did not concur with this part of the recommendation because it said that no contracting or bundling occurs at the level of the Office of the Secretary of Defense. We continue to believe that the recommendation is valid because if DOD believes that the situation of this office supports that it is in compliance with section 15(k)(5), the agency should report to Congress on how it believes it is in compliance, and seek any statutory flexibilities or exceptions believed appropriate. We will continue to monitor DOD's efforts to address this part of the recommendation. For section 15(k)(8), related to assigning small business technical advisors, DOD did not concur with this part of the recommendation because it said that the Defense Federal Acquisition Regulation Supplement delegates the authority to appoint small business technical advisers to the head of the contracting activity. We continue to believe that the recommendation is valid because when a statutory provision such as section 15(k) and regulations such as the acquisition regulation conflict, the statute controls. An agency official said that the DOD OSBP recommended, as part of the legislative proposal process, changes to the National Defense Authorization Act to align with the DOD OSBP's interpretation of the statute, but it did not make it out of DOD. We will continue to monitor DOD's efforts to address this part of the recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Defense should comply with sections 15(k)(5) and (k)(8) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Defense

  6. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Education should comply with sections 15(k)(3) and (k)(11) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Education

  7. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Energy should comply with sections 15(k)(3), (k)(8), and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Energy

  8. Status: Closed - Implemented

    Comments: For section 15(k), related to director experience, an agency official stated that the previous OSDBU director was no longer with the agency and that a new director was appointed to the OSDBU director position in July 2017. The agency official provided some additional information on the background and experience of the new OSDBU director. The information provided is sufficient to close as implemented this part of the recommendation. For section 15(k)(11), related to advise on insourcing, an agency official stated that the OSDBU director had finalized a policy to ensure collaboration with the program office and OSDBU before any insourcing decisions are finalized. The official provided a copy of the small business policy, dated January 31, 2018, which states that the OSDBU, in accordance with 15 U.S.C. ? 644(k), will review and advise on any decision to convert an activity performed by a small business concern to an activity performed by a federal employee. The information provided is sufficient to close as implemented this part of the recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Housing and Urban Development should comply with sections 15(k) and (k)(11) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Housing and Urban Development

  9. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of the Interior should comply with sections 15(k)(11) and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of the Interior

  10. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Labor should comply with sections 15(k)(2) and (k)(15) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Labor

  11. Status: Open

    Comments: DOD did not concur with this recommendation, related to assigning small business technical advisors, because it said that the Defense Federal Acquisition Regulation Supplement delegates the authority to appoint small business technical advisers to the head of the contracting activity. We continue to believe that the recommendation is valid because when a statutory provision such as section 15(k) and regulations such as the acquisition regulation conflict, the statute controls. An agency official said that the DOD OSBP recommended, as part of the legislative proposal process, changes to the National Defense Authorization Act to align with the DOD OSBP's interpretation of the statute, but it did not make it out of DOD. We will continue to monitor DOD's efforts to address this recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of the Navy should comply with section 15(k)(8) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Defense: Department of the Navy

  12. Status: Open

    Comments: For section 15(k)(8), related to assigning small business technical advisors, on August 17, 2018, an agency official stated that in consultation with the Office of the Procurement Executive and the Office of Small and Disadvantaged Business Utilization, the Office of Acquisitions Management (AQM) will hire a senior GS-14 1102 contract specialist who shall be assigned as a small business technical advisor. According to the official, AQM expects to have this position in place by the end of the 1st QTR of FY 2019. We will continue to monitor State's efforts to address this part of the recommendation. For section 15(k)(17), related to responding to undue restrictions on the ability of small businesses to compete, on August 17, 2018, an agency official stated that the Department has adopted a policy to escalate all claims of unduly restrictive acquisitions to the competition advocate. The official stated that this policy has been distributed to OSDBU staff and provided a copy to GAO. The information provided is sufficient to close as implemented this part of the recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of State should comply with sections 15(k)(8) and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of State

  13. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of the Treasury should comply with sections 15(k)(8) and (k)(11) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of the Treasury

  14. Status: Open

    Comments: For section 15(k)(3), related to reporting requirement (head of agency or deputy head), a VA official stated that the agency has changed the reporting relationship of the OSDBU director. The official stated that the Deputy Secretary will now act as rating Official for the Executive Director, OSDBU, and will sign the initial draft rating. The official also provided a Senior Executive Leaders FY 2018 Rating Scheme (dated January 2018) which shows that the Deputy Secretary rates and reviews the OSDBU director. The information provided is sufficient to close as implemented this part of the recommendation. For section 15(k)(8), related to assigning small business technical advisors, an agency official stated that VA has circulated a draft Memorandum of Understanding for concurrence which would address among other things, the extent of supervisory authority to be exercised over the Small Business Technical Advisor personnel by the Executive Director, OSDBU, while the advisor personnel remain employees of the contracting activity. The official stated that VA's revised target completion date for this effort is September 30, 2019. We will continue to monitor VA's efforts to address this part of the recommendation. For section 15(k)(11), related to advise on in-sourcing, as of January 18, 2018, VA updated its Small Business Procurement Review Program Policy to include language about the role of the OSDBU as it relates to the requirements for section 15(k)(11). A VA official also stated that the policy was distributed by email to VA's acquisition workforce and was also posted to the agency's intranet on February 12, 2018. The official stated that this policy has been distributed to OSDBU staff and provided a copy to GAO. The information provided is sufficient to close as implemented this part of the recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Secretary of Veterans Affairs should comply with sections 15(k)(3), (k)(8), and (k)(11) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Department of Veterans Affairs

  15. Status: Open

    Comments: For section 15(k)(15), related to collateral duties, on September 10, 2018, an agency official stated that the agency is in the process of transferring responsibility of the Disadvantaged Business Enterprise Program from the OSDBU to the Office of Grants and Debarment. The official stated that the estimated completion date for the transfer is October 1, 2018. We will continue to monitor EPA's efforts to address this recommendation.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Administrator of Environmental Protection Agency should comply with section 15(k)(15) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Environmental Protection Agency

  16. Status: Closed - Implemented

    Comments: NASA has amended NASA Policy Directive (NPD 5119.1), "Small Business Program", section 5b(16), to ensure agency compliance with section 15(k)(17), related to responding to notification of an undue restriction of a small business to compete. The directive establishes a process that includes notifying the Agency's Competition Advocate. According to agency officials, the directive was modified on August 8, 2017.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Administrator of the National Aeronautics and Space Administration should comply with section 15(k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: National Aeronautics and Space Administration

  17. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Director of the Office of Personnel Management should comply with sections 15(k)(2), (k)(8), and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Office of Personnel Management

  18. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Commissioner of the Social Security Administration should comply with sections 15(k)(2), (k)(3), (k)(6), (k)(8), (k)(11), and (k)(15) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: Social Security Administration

  19. Status: Closed - Implemented

    Comments: According to USAID staff, the agency has complied with section 15(k)(15), on collateral duties, by re-delegating oversight authority for the Minority Serving Institutions program from the Office of Small and Disadvantaged Business Utilization (OSDBU) Director to the OSDBU Deputy Director. This change was effective on December 1, 2017. According to USAID staff, the agency has complied with section 15(k)(17), on responding to notification of an undue restriction on ability of small business to compete, by establishing a process that includes notifying the Agency's Competition Advocate (ACA), the Contracting Officer, and the Ombudsman simultaneously when a notification of undue restriction is received. The process includes the option of convening a larger group of relevant staff (the OSDBU Director, the ACA, the Ombudsman, the Contracting Officer, the Senior Procurement Executive and a representative from the Agency's Contract Review Board).

    Recommendation: To address demonstrated noncompliance with section 15(k) of the Small Business Act, as amended, the Administrator of the U.S. Agency for International Development should comply with sections 15(k)(15) and (k)(17) or report to Congress on why the agency has not complied, including seeking any statutory flexibilities or exceptions believed appropriate.

    Agency Affected: United States Agency for International Development

  20. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: As SBA continues to enhance the SBPAC peer review process, the SBA Administrator in her capacity as head of SBPAC should include more detailed guidelines than those used for the current process to facilitate a more in-depth review of agencies' compliance with section 15(k) requirements.

    Agency Affected: Small Business Administration

 

Explore the full database of GAO's Open Recommendations »

Sep 27, 2018

Sep 24, 2018

Aug 23, 2018

Jun 5, 2018

May 14, 2018

Jan 31, 2018

Jan 4, 2018

Dec 19, 2017

Oct 25, 2017

Jun 30, 2017

Looking for more? Browse all our products here