Obscure Pentagon Small Business Program Gets a Boost from GAO

Defense Department reluctantly agrees to work with Congress on making it permanent.

A mysterious Defense Department research project designed to test ways to encourage large contractors to hire small businesses earned a recommendation for permanent reauthorization from the Government Accountability Office on Monday, a move that surprised some inside the Pentagon and the small business community.

The 25-year-old Test Program for Negotiation of Comprehensive Small Business Subcontracting Plans, results for which the Pentagon has never reported to Congress or the public, in 2013 helped 12 participating companies avoid “about $18.5 million in costs through the use of single comprehensive subcontracting plans rather than multiple individual subcontracting plans,” the GAO said in a report mandated by the fiscal 2015 National Defense Reauthorization Act.

GAO found after reviewing contracting activities of a dozen firms, including defense giants Lockheed Martin Corp. and Northrop Grumman Corp., the companies had made “acceptable progress” toward enhancing small business opportunities 87 percent of the time, GAO found. “Participants also achieved a 72 percent success rate in increasing small business subcontracts in areas such as integrated circuits and information technology, thus addressing a concern among some small businesses that high-end technical work was not being subcontracted under the program.”

Interviews with company managers and DoD officials also showed that the program “resulted in non-financial benefits, including greater companywide awareness of small business subcontracting opportunities.”

If the program were terminated—as some Defense officials have recommended—a one-time administrative cost of about $22 million could result, GAO said, adding that it had confirmed earlier Pentagon studies estimating that the program avoided $45 million in administrative costs in fiscal 2005. The number of years in which the program has remained in “test” status “creates uncertainty and inhibits further expansion,” the report added.

GAO acknowledged that little is known about the program’s effectiveness. And DoD officials balked at the auditor’s recommendation that it draft legislation to make the program permanent, noting that it has provided GAO with a chart the department said shows that small business opportunities under the program have declined.

Defense officials did agree to work with Congress on finalizing the program’s status.

One of the program’s most persistent critics, Lloyd Chapman, founder of the Petaluma-Calif.-based American Small Business League, who has brought lawsuits seeking data on the program, told Government Executive on Wednesday that there has been no evidence the program has worked. “The Pentagon has said it actually reduces the small-business base, and small business contracting has dropped dramatically,” said Chapman, who views the program as a “sham” that allows large contractors to dodge their obligations if they fail to meet small business contracting goals.

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