Report finds gaps in Gulf Coast small biz contracting

Gulf Coast small business might have missed out on billions of dollars in prime and subcontracting opportunities after hurricanes Katrina and Rita in 2005, according to a new study by the Government Accountability Office.

The report, which the Senate Committee on Small Business and Entrepreneurship requested, found that federal agencies awarded $20.5 billion nationwide between August 2005 and September 2009 to clean up and recover from the devastating storms. But small businesses in Alabama, Louisiana, Mississippi and Texas -- the four states hit hardest by the 2005 hurricanes -- combined to receive nearly $2.9 billion in contracts, or less than 14 percent of the total awards, GAO found.

Small businesses in the rest of the country received about $2.7 billion in post-hurricane work while large firms won the remainder of the contracts -- nearly 73 percent. The annual governmentwide goal for awarding contracts to small businesses is 23 percent.

Louisiana small businesses fared the best among Gulf Coast states, receiving about $1.5 billion in contracts. Alabama small businesses, meanwhile, trailed far behind with only $325 million in contracts, according to federal data.

Among the small business categories, small disadvantaged businesses and Historically Underutilized Business Zone companies found the most procurement opportunities, combining to take in more than half of the $2.9 billion. Small businesses owned by women and veterans were less successful, earning 13 percent and 10 percent of the total, respectively, the report said.

GAO released the study less than two weeks from the five-year anniversary of Hurricane Katrina, which devastated the Gulf Coast, causing billions of dollars in damage and displacing thousands of Gulf Coast residents.

The watchdog also raised questions about the use and oversight of small business subcontractors.

GAO reviewed 57 post-hurricane construction contracts awarded to large businesses by the Defense and Homeland Security departments, Army Corps of Engineers and General Services Administration in which a subcontracting plan was required. The four agencies awarded the majority of contracts for hurricane recovery.

Federal regulations mandate that prime contractors on large construction projects detail to the government how they plan to use subcontractors. Agencies monitor contractor performance under subcontracting plans based on these reports. Investigators found that in 13 of the contracts, Defense and the Army Corps of Engineers could not demonstrate they consistently oversaw the subcontracting accomplishment data.

"Without such monitoring, the Corps and the rest of DoD are limited in their ability to determine the extent to which contractors are following their subcontracting plans," the report said.

The Corps awarded 29 large construction contracts but was unable to provide a subcontracting accomplishment report for 11 contracts, according to GAO. Defense awarded 14 contracts but subcontracting data was missing for two of those awards, the report said.

GAO recommended Defense take steps to ensure that contracting officials comply regularly with requirements to monitor subcontracting plan goals.

But Linda Oliver, acting director of the Office of Small Business Programs at Defense, argued GAO exaggerated the problems and an administrative error had prevented the Corps from locating paper copies of many of the subcontracting plans. The Corps later discovered some of the plans but 11 still remain unaccounted for, GAO said.

"DoD's inability to provide us subcontracting accomplishment reports for 13 of the 43 contracts included in our review raises concerns with DoD's process to consistently collect, maintain and review such information," the report said.

As of 2005, all contractors with subcontracting reporting requirements for civilian agencies typically were required to submit their reports into a Web-based governmentwide database. Defense did not begin regularly using the Electronic Subcontracting Reporting System until 2009.