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The Department of Defense must increase efforts to ensure that prime contractors meet subcontracting goals, lawmakers suggested today during a Congressional hearing. The session examined the results of a DOD Inspector General Audit of two Army Contracting Command centers—one in Redstone, Alabama, the other in Warren, Michigan. The audit suggests that small businesses may have lost out on a number of subcontracting opportunities as the Contracting Centers did not follow protocols meant to boost small business participation in the federal marketplace. 

“This audit provides more evidence of a troubling trend we’ve seen across a number of federal agencies, namely that too often small businesses are an afterthought in the procurement process,” said Rep. Stephanie Murphy (D-FL), the Ranking Member of the Contracting and Workforce Subcommittee.  “When small businesses are denied their fair share of federal prime contracts and subcontracts, -our communities lose out on valuable opportunities for economic growth and job creation.”  

The IG’s audit found that two Army Contracting Command centers had failed to adhere to subcontracting plans, a mechanism designed to ensure that prime contractors make a good-faith effort to provide opportunities to small businesses. Twenty-three contracts valued at nearly $915 million—or nearly half of the contracts that the Inspector General examined – failed to meet these requirements, potentially costing small businesses millions of dollars in lost subcontracting opportunities.  

Specifically, the audit found that officials at the two contracting locations: 

• Awarded six contracts, valued at $330.7 million, without a subcontracting plan or a contracting officer’s determination that no subcontracting possibilities existed;

• Did not monitor prime contractors’ compliance with subcontracting plans for 11 contracts, valued at $480.3 million;

• Did not determine why prime contractors with individual subcontracting plans did not meet their small business subcontracting goals for five contracts, valued at $81.6 million; and

• Accepted an individual subcontracting report for one contract, valued at $22.1 million, that may have misreported subcontract awards.

“Whether it was a lack of training among procurement personnel or just a disregard for the appropriate procedures, it is clear that these two facilities failed to perform basic contracting functions,” Murphy added.  “I’m concerned this is indicative of larger, agency-wide problems.”  

As federal agencies have bundled contracts together, more small firms are increasingly winning federal work by serving as subcontractors to larger companies who bid on federal projects. However, the IG’s report suggests that, at least in some cases, the Department of Defense has not enforced requirements on prime contractors that are meant to ensure small businesses are employed as subcontractors.  

“The federal procurement process can be a powerful tool for stimulating growth and helping small businesses succeed,” added Murphy.  “On the Small Business Committee, I’ll continue working to ensure more entrepreneurs can access the federal marketplace and win their fair share of federal work, whether that’s working directly with the U.S. government or as a subcontractor for a larger firm.”

The Department of Defense oversees the vast majority of contracts among all federal agencies, obligating more than $270 billion on contracts for goods and services in a given fiscal year.  

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