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Small businesses continue to look for new opportunities to expand their ventures, especially by competing for contracts in the federal procurement marketplace.  In Fiscal Year 2017, the federal government was involved in contracting actions worth over $508 billion dollars, making it one of the largest buyers of goods and services in the world.  

Prime contracts are generally viewed as the most lucrative way for small businesses to participate in this marketplace.  However, as contract bundling has become more prevalent, subcontracts have become a more common entry point for small businesses to work with the federal government. Therefore, it is critical that we ensure there is a level playing field for small firms as they pursue subcontracts. 

During today’s hearing, we will discuss the Department of Defense Inspector General’s recent audit of two Army Contracting Command centers—one in Redstone, Alabama, the other in Warren, Michigan.  I share Chairman Knight’s concerns that the audit findings are troubling. 

The audit concluded that the preparation and enforcement of subcontracting plans must be improved to ensure that small businesses are not losing out on subcontracting opportunities that could be critical to strengthening their bottom line and supporting many jobs. 

Subcontracting plans serve as an important accountability mechanism, ensuring that prime contractors make a good-faith effort to provide opportunities to small businesses. It was disappointing to learn that contracting officials at ACC-Redstone and ACC-Warren did not make certain that prime contractors provided small businesses with adequate subcontracting opportunities for 23 contracts valued at nearly $915 million—or nearly half of the contracts that the Inspector General examined. 

In these cases, there seemed to be a lack of knowledgeable contracting personnel and proper transition protocols—both of which are basic functions of a contracting office.  With more than 22 million contracting actions each year, every federal agency should make proper review of subcontracting plans a top priority.  

This is particularly important in the case of the Department of Defense, which oversees the vast majority of government contracts. 

The audit also revealed that contracting officers at these ACCs lacked the proper training to successfully administer subcontracting plans.  Furthermore, the IG’s audit found that ACC-Redstone and ACC-Warren may have neglected to follow up on reports showing that contractors were not meeting their small business goals. Overall, small businesses seemed to have been an afterthought rather than a primary focus for these contracting offices. 

Encouraging more small business participation in the federal marketplace remains a priority for this Committee, and subcontracting will continue to be a vital pathway for small businesses to obtain government contracts.  Today, we have an opportunity to examine what went wrong at these ACCs and how we can implement solutions to increase access to subcontracting opportunities for small businesses. 

I thank the witnesses for being here and look forward to your testimony as we delve into the audit findings and its recommendations.