# Presentation: 027708

## Contracting ActivitySmall Business Program:Preparing for a Surveillance Review

- Presented by SBA PCR

**Notes:**
Today, I’ll be giving you an overview of two review processes – surveillance reviews, which SBA performs at federal buying activities, and compliance reviews, which SBA performs at other-than-small prime contractor sites.

## Purpose	

***Surveillance Reviews***
- are performed to evaluate the overall effectiveness of a contracting activity’s small business program, to evaluate the program’s impact on small businesses, and to enable SBA to recommend changes to improve small business participation at the activity.

**Notes:**
First the surveillance reviews...determining how the contracting activity is doing & how they can improve.

## The SBA revitalized the surveillance review program in FY03.
Selected activities are notified and sent a preparation checklist & request for information to complete and return.
An on-site review lasting 3 to 5 days is followed by a formal report and rating.

- The SBA revitalized the surveillance review program in FY03.
- Selected activities are notified and sent a preparation checklist & request for information to complete and return.
- An on-site review lasting 3 to 5 days is followed by a formal report and rating.

***Background***

**Notes:**
A little background information.

## Final Report

***Final Report***

- Sent to the agency HQ
- Provides observations, deficiencies & recommendations.
- Assigns a rating.
- If marginal, includes follow-up reporting.

- Part 1: Statistical reporting over 3 years;
- Part 2: Small Business Program Management;
- Part 3: Regulatory Compliance;
- Part 4: Strengths & Weaknesses Observed

**Notes:**
After the team visits the contracting site, it reports through its area director to SBA HQ, which then reports to the agency and back to the contracting site.

There are 4 main parts to the report.

## Part 1: Awards

- Statistical reporting over a three year period noting any plans to increase awards in a specific category, including special initiatives.

**Notes:**
First, the team looks at statistics and related initiatives.

## Program Goals

| FY | Total $ | SB % | SDB % | WOB % | HUB  Zone %   | SDVOSB % | HBCU/MI % |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Goal |  |  |  |  |  |  |  |
| Actual |  |  |  |  |  |  |  |

-   How were your goals established?  Did you have input?
-   Are they realistic?  If not, what was done to correct that?
-   How do you publicize them within the activity?  How aware of the goals are your activity personnel?
-   Are there negative trends?  What action was taken?

**Notes:**
Specific items relating to program goals include the bullets noted here.  

We are aware that the numbers alone don’t always tell the story; this is where we look for creative ways a contracting activity works with the goals or targets they are given.

## Part 2: Program Management

- How the contracting activity’s small business program is managed;   and effectiveness of advance procurement planning relating to small business impact.

**Notes:**
Part two explores the small business specialist’s role at the contracting activity.

## Small Business Specialist

- Appointing Authority
- Reporting Authority
- Access to the HCA – regular briefings?
- Demonstrated support within the activity?
- Interaction with technical and program personnel.

**Notes:**
Specifics include the level of inclusion given to small business personnel, chain of command, and support received.

## Small Business Specialist

- Training & Outreach
- Interaction with PCR
- Advance Procurement Planning Participation
- Methods to find & use new sources
- Methods to evaluate internal compliance

**Notes:**
The team will look for specific examples of how these bullets are being accomplished at the site.
If the small business office isn’t included, or if the command isn’t allowing a PCR to participate, this is also the part of the report where it will be addressed.

## Small Business Specialist

- Use of Small Business Competitiveness Demonstration Program
- Other issues:  NAICS Codes, Size protests, Certificate of Competency Program

***Reviews:***
- Small Business Coordination Record
- Subcontracting Plans
- Market Research results
- Potential Bundling
- Opportunities for 8(a), HUBZone, SDVOSB

**Notes:**
Included here are the types of review records the team will expect to find in procurement files.  You may be asked to produce related documentation during the review, if it’s not already in the files.  Every review team is told to address the subject of bundling, so whether or not it is a current issue at your site – expect the question.

## HCA Support

- Demonstrated involvement to promote the small business program;
- Cross-series training;
- Technical advisor appointed for PCR;
- PCR granted access to appropriate information

**Notes:**
Do you get the support you need at your site?  This section addresses that as well as determining how well you offer support to any assigned SBA PCR.

## HCA Support

- Participate in outreach efforts to identify new sources;
- Include SBS in advance procurement planning;
- Support initiatives to enhance small business subcontracting opportunities; include evaluation factors & sub-factors in large dollar value buys.

**Notes:**
Including small business personnel in procurement planning is key to effectively supporting some of the special evaluation factors and subcontracting initiatives.  The team will look for evidence of these items.

## Part 3: Deficiencies & Non-compliance

- Review of contract files, deficiencies found, regulatory criteria used, and corrective actions proposed.

**Notes:**
The next section of the report will detail specific contracting issues, FAR cites, and contract numbers, along with proposing corrective action for each deficiency.
Normally, an item does not become a deficiency unless the team finds 3 or more instances of it during the contracting file reviews. 

## Regulatory Compliance

**Market Research**:
- Is research used to make  set-aside decisions?
- Is it used to expand the source list and thereby solicit additional small businesses?
- Are the results included in the contract file or small business coordination record?

**Notes:**
One of the more common deficiency areas involves conducting and documenting market research, when required.

## Regulatory Compliance

**Source Lists**:
- Are they available at this site?
- Sorted by business size and type?
- Rotated?
- Include apparent use of CCR Dynamic Small Business Search Tool?

**Notes:**
The role of source lists has changed in our electronic posting age, but it’s still important to document the size and type of businesses being added to a proposed contract.  

## Regulatory Compliance

**Publicizing Acquisitions**:
- Use of FedBizOpps.
- Timing of synopses and length of time to respond.
- Availability of copies to small businesses.
- Use of electronic means to post opportunities.

**Notes:**
The team will check to see if your activity actions are being posted, where, for how long, and whether small firms can access the information.

## Regulatory Compliance

**Encouraging Participation**:
- Solicitations contain reasonably small lots to allow SBs to offer;
- Buys are restructured when possible to encourage SBs;
- Multi-award scenarios consider one to 8(a), one to HUBZone, etc.
- Delivery schedules are reasonable.

**Notes:**
Although these types of action are usually associated with unbundling, the team will consider any examples where you have tried to encourage creative small business participation and opportunities.

## Regulatory Compliance

- Did the PCR have 30 days to review and comment?
- Was market research conducted and considered?
- What efforts were made to mitigate adverse impact on SBs?

- Are evaluation factors &    sub-factors included to reduce adverse impact?
- Is bundling justified?
- Are benefits documented?
- Are personnel trained in bundling issues?

***Bundling Issues***

**Notes:**
Some of the bundling questions the team will ask are shown here.

## Procurement Reviews

-  Unrestricted procurements are documented – Competition Advocate reviews when needed.
-  Unilateral vs. Joint set-aside decisions.
-  Small Business Coordination Record                  is present & completed.
-  SBS and PCR review evident,                     when needed.
-  Set-aside disagreements                        properly processed and appealed.

**Notes:**
Basic small business review issues are included in the team report, with special focus on whether the contracting site properly includes the small business personnel.

## Procurement Reviews

-  SBS & PCR notified of FSS/GSA schedule buys;
- FSS/GSA schedule buys include evidence of small business participation;
-  8(a), HUBZone, SDVOSB programs considered and repeated on future buys when appropriate;
-  NAICS & Size standards properly assigned;

-  Size challenges are referred to the SBA for resolution.

**Notes:**
Some old and new issues are listed here as part of the procurement file review.  For example, at many sites, the small business personnel are being notified of federal supply schedule anticipated buys.  

## Procurement Reviews

-  Set-aside withdrawals properly processed;
-  Competitiveness Demonstration Program TICs and DIGs considered, for DOD activities;
-  Specs & drawings inclusive vs. restrictive, & made available when possible;

-  FAT schedules are reasonable;
-  Technical assistance is available to small businesses seeking help.

**Notes:**
The team will look for evidence that the small business program is considered throughout the procurement cycle, whenever the issues arise.

## Required Clauses

- Representations & Certifications
- Set-asides
- Subcontracting Limitations
- Utilization of SBs
- Subcontracting Plan
- Liquidated Damages – Subcontracting
- 8(a) contract conditions

- 8(a) special conditions
- Reps for Comp Demo Program (DOD)
- SDB Price Evaluation Preference
- SDB Participation
- HUBZone Price Evaluation Preference
- Equal Low Bids

**Notes:**
While not every clause applies to every buy, here are some of the small business related clauses the team will look for in a solicitation.

## Protests – Terminations

**Protests**
- Protests handled fairly and promptly;
- Size protests referred to SBA;
- Pre-award notices sent on set-asides to allow size challenges.

**Terminations**
- Cure notices and ‘show cause’ letters include copy to SBS and PCR;
- Termination process includes efforts to assist small businesses.

**Notes:**
Special situations are reviewed as well.  The team will look for protest and termination cases to ensure that small businesses are being treated in a fair, objective manner; that size protests are handled properly, and that those pre-award notices are being sent out when small business set-asides are ready for award.

## Subcontracting Plans

- Plans are required, submitted, negotiated, reviewed by SBS & PCR, approved, incorporated into the contract, distributed to the cognizant CAO & SBA Area Office.
- “No opportunities” determinations are documented and approved.

-   Low and zero goals are challenged.
-   SDB goals less than 5% are challenged.

**Notes:**
This is a big area of interest and a big area of deficiencies for many of the review sites.  In most cases, the team ultimately recommends refresher training be given to procurement personnel on all phases of the subcontracting program.

## Subcontracting Plans

- Large businesses commit to using SUB-Net and CCR tools to publicize opportunities and identify sources.
- Compliance with past plans is considered.
- Approved plans are monitored for future compliance.

-   SF 294s are obtained and retained in the contract file.
-   Optional Form 312 is obtained for completed contracts
-     with SDB incentive.

**Notes:**
Bringing the program full circle, the contracting activity will be reviewed to see whether past performance in meeting existing subcontracting plans is considered before accepting and approving a new plan.  And, if the contracting activity delegates administration, the team will look for procurement file documentation showing that feedback was obtained from the monitoring authority. 

## Subcontracting Plans

- Commercial plans are renewed annually;
- Comprehensive plans are renewed annually;
- Liquidated damages or contract termination are considered for non-compliance with plans;
- Plans are revised when mods exceed $500,000;
- Training & workshops are presented to acquisition personnel.

**Notes:**
Using currently approved plans, carrying out post-award responsibilities and obtaining revisions to accommodate mods have been common areas of concern during the first two-years of surveillance reviews.  As noted earlier, in most surveillance review reports refresher training is recommended.

## Contract Award

-   Were small businesses evaluated fairly?
-   Was the COC process used if a low small business offer was disregarded?
-   Were awards valued over $25,000 publicized in FedBizOpps in a timely manner?
-   Is abstract information available in the contract file – is business size and type indicated?

**Notes:**
This slides shows some of the award issues – of particular note is that many sites are either not posting award notices on FedBizOpps, or are not documenting the files that the notice was posted.  

## Part 4: Strengths  & Weaknesses

- Special initiatives the contracting activity uses; weaknesses identified but not discussed elsewhere.

**Notes:**
Part 4 of the report is both a place to shine and an area where weaknesses can be noted.

## Strengths & Weaknesses

-   What special initiatives are used to promote the program?
-   Are contracting personnel aware of the small business program?
-   Is there effort to educate all personnel?
-   Do contracting personnel independently use small businesses?
-   Is there resistance to supporting the small business program?

**Notes:**
The team will look for and note evidence of small business training, program awareness, and a positive atmosphere for including small businesses in the procurement process.

## What’s Next?

-   After the on-site review:
- Final report with an overall rating is sent to the contracting activity via agency channels;
- Response to the report is requested – actions planned to alleviate deficiencies;
- Follow-up reviews may be planned for marginal ratings.

*Questions?*

**Notes:**
After the review, the team has a short time-frame to submit a report to it’s area office, when the sends it on to SBA HQ.  After release, the report goes to the review activity via their agency channels.  A response is requested to address actions to address deficiencies or to challenge and correct any misinterpretations on the part of the review team.  If an activity is rated marginal, a follow-up review may be planned.
After two years of conducting 24 surveillance reviews per year, the SBA intends to cut back on the number of on-site visits.  Instead, this basic training package will be presented to the contracting and small business personnel at contracting activities across the nation.  Of those sites, at least 6 will be selected each year for an on-site review and report.

## Prime ContractorSmall Business Program:Preparing for a Compliance Review

**Notes:**
As noted at the beginning, the second part of my brief will be an overview of compliance reviews.  While I’ve participated in several surveillance reviews, I have only observed one compliance review.  Therefore, I want to invite any of you who have experience in this area to help me to answer questions.

## Purpose	

***Subcontracting Compliance Reviews***
- are performed to evaluate the overall effectiveness of a large* prime contractor’s small business program, to evaluate the program’s impact on small businesses, and to enable SBA to recommend changes to improve small business participation.

** Includes non-profit and foreign companies doing work in US.*

**Notes:**
SBA performs compliance reviews at the site of “other than small” businesses to evaluate their subcontracting program.  

## The Small Business Act makes the SBA responsible for monitoring subcontracting.
The FAR makes DCMA responsible for monitoring subcontracting when they administer a contract.
An MOU between SBA & DCMA clarifies which will perform compliance reviews to eliminate duplication of effort.

- The Small Business Act makes the SBA responsible for monitoring subcontracting.
- The FAR makes DCMA responsible for monitoring subcontracting when they administer a contract.
- An MOU between SBA & DCMA clarifies which will perform compliance reviews to eliminate duplication of effort.

***Background***

**Notes:**
If a contractor has DOD work, most likely it will be DCMA who performs the review, although the SBA may do it jointly; if your work is non-DOD-federal, the SBA will perform the review.

## The Reports

***The Reports***

- One for each eligible federal contract.
- Submitted to ACO semi-annually & at contract completion.
- 1st tier reporting only.
- Report planned subcontract % and $ plus goal progress.
- Accumulates over time.

- One to each federal agency for all applicable contracts.
- Consolidate all DOD awards except for  construction & related work.
- Non-DOD: submit annually.
- DOD: submit semi-annually.
- Commercial plans: annually.
- All 1st tier subcontracts related to federal work are reported.

**SF 294            vs.          ****SF 295**

**Notes:**
294:
Eligible = over $500,000 ($1 million for construction) with subcontracting possibilities.
Report only the subcontracts awarded by the prime contractor to the first tier subcontractor.
Report negotiated plan goals as dollars and percent along with progress made toward achieving those goals during the reporting period.
One 294 submitted for the life of a contract; if multi-year the dollars will accumulate over time.
295:
Ex., all GSA work is in one report, all DOD work is in a separate report.
Army, Navy, Air force, Marine Corps, DLA work is consolidated except for the work considered to be construction or related.
Annual submission of 295 for federal civilian activity contracts; Semi-annual submission of 295 for DOD contracts.
All commercial plans – DOD and non-DOD – require annual submission, only.  
Include on 295 all first tier federal subcontracting, even on those awards for which a plan is not required.
Commercial reports include all federal and commercial subcontracting activity, including indirect dollars, for a 12-month period.

## Types of Reviews

***Types of Reviews***

**Compliance:** All aspects of the Small Business Program, including 7 mandatory elements and an assigned rating after physical visit;
**Performance:** Single contract focus via SF 294 and SF 295 information, no rating & no visit;
**SOAR:**  Subcontracting Orientation & Assistance visit to offer advice or tools;
**Follow-up:** Review the implementation of SBA recommendations or use of sources.

**Notes:**
Although the SBA does four different types of subcontracting program reviews, this presentation will focus on the mandatory elements of the Compliance Reviews.

## Compliance	

- Includes background information;
- Sourcing questions;
- Validation of SF 294 & SF 295 reports;
- Five-year trend analyses;
- Management support of the program;
- Training & outreach efforts;

- Assistance provided to small businesses;
- Success stories;
- Sampling of contracts containing plans;
- Purchase orders awarded to large businesses;
- Action taken to follow-up previous SBA recommendations.

***Before the Review: Preparation Checklist***

**Notes:**
A preparation checklist will be sent to the review site outlining the information requested to be made available.

## Review Element 1

- Validate the methodology for preparing reports of contracts awarded to all categories;
- examine the purchase order journal or computerized process
- and verify a sampling of purchase orders to small businesses in all categories, including certifications.

**Notes:**
There are 7 review elements.  This is the first one.

## Element 1 Details

- Spot-check small business status & frequency of updates.
- Check how self-certifications are obtained, used, verified, and tracked.
- Explain how a proportionate share of indirect costs is applied to 294/295s.

- Identify any costs excluded from reports.
- Do 294s include all purchases & subcontracts, including purchase card?
- Were subcontractors informed of the penalty for false misrepresentatives?

**Notes:**
A spot check of certifications and cost allocations will be done.

(Explain how a proportionate share of indirect costs is applied to 294/295s – NOTE: Commercial Plans applied at 100 percent.)

## Review Element 2

- Five-year trend analysis of how the contractor has utilized all categories of small businesses.

**Notes:**
The second element is a 5 year trend analysis.

## Element 2 Details

- Did awards to small business groups improve, stagnate or decrease?  Explain any  negative trends.
- Is there evidence of Maximum Practicable Opportunity?

- Are there any apparent barriers to small business participation?  If so, what’s being done to assist small businesses?

**Notes:**
The reviewer will look for both positive and negative trends, evidence of opportunities and barriers.

## Review Element 3

- Overall evaluation of the contractor’s Small Business Program which determines the contractor’s overall internal dedication and commitment to its program.

**Notes:**
The third element covers how the small business program is perceived and supported at your company.

## Element 3 Details

***Management Support***
-   Is there a policy letter from current CEO?
-   Is the correct SBLO identified in the plan?
-   Can the SBLO spend time on the small business program?
-   Look for an organization chart showing how SBLO can access management personnel.
-   Is cooperation from departments & program managers apparent?
-   Is management briefed on program status?
-   Are there adequate policies & procedures in place?

**Notes:**
Is there evidence of management support?

## Element 3 Details

***Assistance to Small Businesses***
-   How is a small business treated when approaching your firm?
-   Is technical, qualification, financial or other assistance provided?
***Training***
-   What types of training is provided?
-   Any recognition or incentives for buyers?

**Notes:**
Can you show how you help small firms which contact you?  What about training?

## Element 3 Details

***Outreach***
-   What events were attended?
-   List active organizations and councils.
-   List workshops & symposiums hosted.
-   Any mentor-protégé participation?
-   How are small businesses counseled when they contact the prime contractor?
-   Any SBA nominations, e.g., Subcontractor of the Year?

**Notes:**
Did your company support your outreach efforts?  Do you have a protégé?  Did you nominate any subcontractors for one of the annual awards?

## Element 3 Details

***Success Stories***
*Did your firm...*
-   Remove an obstacle to small business participation?
-   Award a contract to a small business met in an outreach event?
-   Award to an 8(a) firm referred by SBA?
-   Redirect work from large business to small business?

**Notes:**
Don’t forget to document success stories.

## Review Element 4

- categories and to ensure that the contractor has implemented specific provisions contained in the other elements of the Subcontracting Plan.

-   Sampling of contracts with subcontracting goals to determine actual achievements in all

**Notes:**
The 4th element involves reviewing files with subcontracting goals in them.

## Element 4 Details

- How are goals formulated?
- What input does the SBLO have?
- Who are the ACOs?
- Are goals realistic, challenging and being met?
- Is there evidence of maximum utilization of small businesses?

_**Commercial Plans**_**:**
- Are annual goals realistic, challenging?
- Evidence of maximum use of small businesses?
_**Comprehensive**_**:**
- Were current goals met?
- Are yearly goals realistic & challenging?
- Evidence of maximum small business utilization?

**Notes:**
How goals are set, and how they are achieved or not achieved is the focus of this element.

## Review Element 5

- Purchase order analysis of awards made to non-small businesses to identify possible small business opportunities;
- Make certain that small businesses are being solicited in every instance possible for purchases over $100K;

- Assure adequate documentation exists in cases where small businesses are not solicited;
- Determine if flow-down Subcontracting Plans have been required when subcontracts are over $500,000 ($1 million for construction of a public facility).

**Notes:**
The fifth element is to look at purchase orders for evidence of that maximum practicable participation.

## Element 5 Details

*Review randomly-selected awards not going to small businesses.  Look for:*
- Justification for large business purchase orders;
-  Evidence that 52.219-8 and –9 requirements flow down;
-  When required, are subcontracting plans obtained, reviewed, monitored and reported on?

**Notes:**
When awards don’t go to small businesses, is there justification for it?

## Review Element 6

- Follow-up on sourcing efforts to determine the status of small business sources in all categories referred to the contractor by the CMR since the last review.

**Notes:**
The 6th element checks small business status.

## Element 6 Details

*Review contracts for which the prime is not meeting plan goals.  Look for:*
-   How is the firm identifying small businesses?
-   Are potential suppliers identified?
-   Does the firm use CCR’s Dynamic Small Business Search tool and SUB-Net?
-   What other resources are used to expand small business database?
-   Are there potential SBA support areas in sourcing?

**Notes:**
How does your company determine who is small?  Is there any help SBA can lend in this area?

## Review Element 7

- Follow-up prior recommendations made by the CMR to improve the contractor’s Small Business Program.

**Notes:**
The 7th element checks progress against prior recommendations from past reviews.

## Element 7 Details

-   Was a timely implementation plan submitted to address past deficiencies?
-   Were prior findings taken seriously and corrected?

**Notes:**
What has been done since the last review?

## Final Ratings

- _Outstanding_ – **Exceeded** all negotiated goals or exceeded at least one goal and met all of the others...exceptional success in working with small businesses...an exemplary program that could be a model for others.
- _Highly Successful_ – **Met** all of its negotiated goals in the traditional socio-economic categories and met at least one of the newer socio-economic goals...significant success working with small businesses...goes above and beyond required elements of the program.

**Notes:**
According to the most recent MOU, the SBA and DCMA are using the same ratings and criteria.  Here are the first two of five possible ratings.

## Final Ratings

- _Acceptable_ – **Demonstrated a good-faith effort** to meet all of its goals, but not eligible for Highly Successful or Outstanding rating...complete and accurate 294/295 Forms.
- _Marginal_ – **Deficient** in meeting key subcontracting plan elements...incorrect 294/295 forms...interest in improving...corrective action plan required.
- _Unsatisfactory_ – **Noncompliant** with the contractual requirements of DFARS and FAR...little interest in improving...corrective action plan required.

**Notes:**
The other three ratings...

## Rewarding Success

- _Award of Distinction_: Recognizes prime           contractors for  “Outstanding” review ratings.
- _Dwight D. Eisenhower Award for Excellence_:  Recognizes prime contractors for superior accomplishments in subcontracting to small firms in areas of construction, manufacturing, research and development, service, and utilities.
- _Francis Perkins Vanguard Award_:  Honors government agencies & officials, & private corporations for awards to women-owned small businesses.

**Notes:**
There are several types of awards out there to reward your effort and successes in subcontracting.

## Rewarding Success

- _Small Business Subcontractor of the Year_:  Annual nominations submitted by prime contractors to recognize outstanding small business subcontractors. Nominees first compete on a regional basis; regional winners compete for the national title. Every small business that is nominated receives SBA’s Award of Excellence.

**Notes:**
And, there is the opportunity for you to recognize one of your subcontractors for the good job they do for your company.  SBA is gearing up now to request subcontractor of the year nominations – watch your mail for further details.

## Points of Contact

*For additional information & assistance, contact your SBA CMR – Commercial Market Representative:*
- 		Pennsylvania – Terry.Budge@sba.gov
- 		Delaware – Terry.Budge@sba.gov
- 		Maryland – Vincent.Rice@sba.gov

*Questions?*

- Area Director and current POC for Virginia &
- Washington DC – John.Campbell@sba.gov

**Notes:**
This slide shows the currently assigned SBA personnel for the surrounding states.  
For the time being, Jack Campbell is taking information and questions for the state of Virginia and District of Columbia – I expect a CMR will be assigned in the near future to replace the CMR who moved into a different job area.