Defense Department can't show small business program is working

The Defense Department cannot prove that its model program for helping small, disadvantaged businesses win federal contracts is working, according to the General Accounting Office. Credited with opening the world of federal contracting to dozens of small, disadvantaged businesses, the Pentagon Mentor-Protégé program matches prime contractors that offer subcontracting opportunities with small, disadvantaged businesses as defined in the 1953 Small Business Act. Mentors provide their protégés with training on how to do business with the Pentagon, ranging from contract management to long-term project design. In exchange, mentors are reimbursed for the cost of the training and get credit toward the subcontracting requirements of big Pentagon contracts. In May, Sen. Christopher "Kit" Bond, R-Mo., introduced a bill (S. 861) that would create a governmentwide version of the program. But Defense has little data showing how protégés actually benefit from the program, according to GAO. In a new report, "Contract Management: Benefits of the DoD Mentor-Protégé Program are not Conclusive" (GAO-01-767), GAO suggested that Bond and other legislators press the Pentagon to conduct a wider study of the program before extending it to other agencies. The study found that Defense has not adequately tracked former protégés that have left the program or compared protégés with disadvantaged businesses that are not in the program to see which is more successful. While the Pentagon has met its statutory goals for buying from small, disadvantaged firms since 1992, it did not track its purchases from former protégés until fiscal 2000. The Pentagon does require mentor firms to report if their protégés have added employees or increased their revenue, but these figures could be influenced by many factors besides the program. Further, mentor firms are often late in providing this information to Defense, according to GAO. GAO also disputed a December 2000 study by the Logistics Management Institute, a Virginia-based think tank, which found that 70 percent of mentor firms would leave the program if Defense stopped giving them financial incentives to participate. Once a business has started to receive federal funds, it is unlikely to say it doesn't need federal money, according to GAO. "Beneficiaries would not be inclined to report that they did not need government funds after receiving them," said the report. "Accordingly, it is unknown how the absence of funding would…discourage [mentors] from establishing business relationships with small disadvantaged businesses." While pledging to improve data on the program, Pentagon officials told GAO that it is impossible to show a direct cause-and-effect relationship between participation in the program and business success. "When a teacher mentors a pupil, the pupil's success can never be established to be directly attributable to the mentor," said Curtis Wright, acting director of the Office of Small and Disadvantaged Business Utilization at the Pentagon. "The nature of mentoring will never enable the department to make a conclusive assessment of the direct impact of the program upon the participant."
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