Democrats call for investigation of Defense subcontracting

Five House Democrats have called on the Government Accountability Office to investigate a little-known Defense Department program designed to increase subcontracting opportunities for small businesses.

The lawmakers, led by Rep. Yvette Clarke of New York, said the Pentagon's Comprehensive Subcontracting Plan Test Program has not been formally reviewed since it was established 20 years ago.

"Until the program is evaluated and audited there is no way of knowing whether these small businesses actually received their due contracts, or whether the money went to other large contractors," Clarke said.

The investigation would determine if the program has led to an increase in small business opportunities and whether prime contractors are meeting the annual goals they establish. It also would include a detailed accounting of the use of small firms on these contracts, according to the GAO request letter.

Reps. Bennie Thompson of Mississippi, Carolyn Maloney of New York, Lynn Woolsey of California, and Chellie Pingree of Maine also signed on.

The Defense Department said it is in process of conducting its own study of the effectiveness of the subcontracting program. "At this point, it would be premature to discuss a still ongoing and incomplete study," spokeswoman Cheryl Irwin said. "The study should be complete in about 12 months."

The program allows 14 large Defense contractors, including industry goliaths such as BAE Systems, Boeing Co., Lockheed Martin Corp., Northrop Grumman Corp. and Raytheon Co., to consolidate their small business subcontracting plans into one companywide document, rather than submitting them on a contract-by-contract basis.

Typically, prime contractors are required to submit an Individual Subcontracting Report for every contract over a certain dollar threshold. The report, which includes the company's small business subcontracting plans and dollar goals, allows the government to track a company's progress in meeting those objectives.

Under the program, however, participants need to turn in only a Summary Subcontracting Report once every six months. Critics suggest the diminished reporting makes it more difficult to determine if the large prime contractors are meeting their small business subcontracting goals.

"Federal contracting data calls into question whether the 14 large prime contractors who are participants in the CSPTP are actually meeting their small business subcontracting goals," the letter stated.

The goal of the program is to increase the overall percentage of subcontracts awarded to small businesses, specifically to small disadvantaged businesses. But, some small business advocates suggest it actually serves as a loophole for participating firms to circumvent small business subcontracting goals.

"Clearly this program wasn't designed to help small businesses; it was designed to help prime contractors avoid paying liquidated damages for noncompliance with their small business subcontracting goals," said Lloyd Chapman, president of the California-based American Small Business League. "The elimination of this program would force prime contractors to award billions more in subcontracts to small businesses and create jobs across the country."

Chapman said ASBL has requested numerous documents on the subcontracting program through the Freedom of Information Act, but Defense has yet to provide them.

To be eligible for the program, a prime contractor must have performed at least three Defense contracts worth more than a combined $5 million in the preceding year and have achieved a small disadvantaged business subcontracting rate of 5 percent or more.

Participants must offer a broad range of subcontracting opportunities and accept -- or at least work toward -- a small disadvantaged business goal of 5 percent or more every fiscal year. The Defense Contract Management Agency must approve the plans annually.

Congress first authorized the Comprehensive Subcontracting Plan Test Program in October 1990, and it has been reauthorized three times since.