Army Told to Improve Monitoring of Small Business Subcontracts

Pentagon watchdog finds high turnover and poor training among contracting officials.

Staff at two Army Contracting Command locations sometimes neglected to assure that contractors gave appropriate subcontracts to small businesses, the Pentagon watchdog found.

Though most of the officials located at Redstone Arsenal in Alabama and Army Contracting Command in Warren, Michigan, were given a clean bill of health, officials working on 23 contracts valued at $918 million “did not ensure that prime contractors provided small businesses with adequate subcontracting opportunities,” the Defense Department inspector general said in a report dated March 19.

The review of 80 Army contracts completed in fiscal 2015-2016 found that prime contractors provided adequate subcontracting opportunities for 27 contracts valued at $694 million.

But a subset worth $331 million were signed without a subcontracting plan or a contracting officer’s determination that no subcontracting possibilities existed. Those contracting officials:

  • Did not monitor prime contractors’ compliance with subcontracting plans for 11 contracts, valued at $480 million;  
  • Did not determine why prime contractors with individual subcontracting plans did not meet their small business subcontracting goals for five contracts, valued at $82 million; and
  • Accepted an individual subcontracting report for one contract, valued at $22 million, that may have misreported subcontract awards.

The Army contracting officials at Redstone and Warren told auditors that some staff did not understand requirements or make subcontracting plans an administrative priority. Some failed to obtain subcontracting reports required under the Federal Acquisition Regulation and did not follow up on reports about whether contractors were meeting the mandatory small-business hiring goals.

They also cited high turnover among contracting staff, worsened by a lack of guidance for transferring duties from an outgoing officer to an incoming staffer. There also was a shortage of adequate training and standard operating procedures, the IG added.

“As a result, small businesses may have been denied subcontracting opportunities that prime contractors were required to make a good-faith effort to provide,” the IG said. The Army Contracting Command may have missed opportunities to recoup liquidated damages (the amount paid by contractors who fail to make a good-faith effort to comply with a subcontracting plan) of up to $82 million.

The IG recommended that the two offices go back and determine whether contractors made a good-faith effort for 16 contacts and assess any liquidated damages.

It also recommended that the deputy assistant secretary of the Army for procurement, with the director of the Army Office of Small Business Programs, improve training in FAR responsibilities, issue a policy alert and revise guidance on subcontracting plans.

The command managers agreed, having already implemented some of the corrective actions.

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