• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Federal Study Criticizes Department of Energy Over Contracting Goals

Posted on: Friday, 9 September 2005, 21:00 CDT

(This article originally ran in the Journal Record Legislative Report, OKC, OK, another Dolan Media publication.)

Small businesses haven't been getting their fair share of subcontracts from contractors working with the federal Department of Energy, according to a study by the U.S. Government Accountability Office.

Misleading data has created the false impression that DOE is meeting its small business subcontracting goals, undermined DOE's oversight of subcontracting efforts, and generated mistrust among members of the small business community, reads the study. Furthermore, DOE actions to date have not adequately addressed problems with misleading data.

The DOE is the largest civilian contracting agency in the federal government, spending $22.4 billion on contracts in fiscal 2004. The majority of that amount, nearly $19 billion, went for large facility management contracts for managing DOE's laboratories, production facilities and environment restoration sites.

Federal regulations stipulate that DOE's facility management contractors in turn subcontract with small businesses as much as possible. Working with the Small Business Administration, DOE's Small Business Office set a goal of having 50 percent of its total subcontracting dollars be directed to small businesses each year.

In fiscal year 2004, DOE's 34 facility management contractors worldwide subcontracted out about $6.5 billion, $3.3 billion of which went to small businesses, according to the report.

Though on first blush it appears the contractors are meeting their 50 percent goal, the GAO study found that a number of contractors are artificially limiting the number of subcontracts they include in their reports, thereby inflating the percentage of subcontracts for small businesses. The study also found DOE wasn't verifying that the contractors were following the proper reporting guidelines.

Of 13 facilities management contractors examined in the study, 12 contractors reported they had achieved the agency's goal for subcontracting with small businesses. However, the study found that eight of the 12 did not include all appropriate subcontracts in their reporting. When the reporting guidelines were followed properly, only four contractors were found to have met the goal.

Because the data showed that the department was meeting its subcontracting goals, DOE officials were not inclined to closely monitor contractors' practices for calculating their subcontracting goals and achievements, reads the study.

When problems came to light in 2002, DOE's Small Business Office issued information to clarify the reporting requirements, but the department never followed up to see if the guidelines were being followed, the report shows.

These oversight problems occurred, in part, because DOE has not clearly defined the roles, responsibilities, and needed interaction of the various headquarters and field organizations, reads the study.

But the regional offices of the Small Business Administration are closely monitoring the situation, said John Bateman, area director for government contracts for the SBA region that includes Oklahoma, Texas, Louisiana, Arkansas, New Mexico and Colorado.

I have enforcement people that go out and call on them and say, 'Let's see your books and see how you're doing on your goals, said Bateman. We do have a what we call a procurement center representative out in Albuquerque, and one of her responsibilities is to check on DOE and this new mandate that they've got. So we'll be watching them to see how they do on that.

If they don't do what we think they ought to do, we will help them - in the kindest way, of course.

The goal of 50 percent is a bit high, said Bateman. And some contractors doom themselves to failure by bidding contracts so low they can't make a profit and meet all of their obligations.

SBA has set out additional guidelines to help ensure that small businesses are getting the money the federal government intended them to have. SBA's Office of Advocacy recommends that prime contractors be required, at the time of solicitation, to provide a list of subcontractors, their size and their portion of the contract.

In addition, prime contractors should not be allowed to force subcontractors to sign 'hold harmless clauses' that indemnify prime contracts from loss or injury, reads the agency's goals and strategies for small business contracting. This type of strong- arming weakens small businesses' position and ultimately hurts government contracting practices.

Source: St. Louis Daily Record / St. Louis Countian

More News in this Category