prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: The Small Business Act of 1953 (P L  83-163, as amended) authorized the U S  Small Business Administration (SBA) and justified the agency's existence on the grounds that small businesses are essential to the maintenance of the free enterprise system  In economic terms, the congressional intent was to assist small businesses as a means to deter monopoly and oligarchy formation within all industries and the market failures caused by the elimination or reduction of competition in the marketplace  Congress decided to allow the SBA to establish size standards to ensure that only small businesses were provided SBA assistance  Specifically, the Small Business Act of 1953 defines a small business as one that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U S  economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis  The business may be a sole proprietorship, partnership, corporation, or any other legal form  The SBA conducts an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, to determine its size standards  The analysis is designed to ensure that only small businesses receive SBA assistance and that these small businesses are not dominant in their field on a national basis  The SBA currently uses two types of size standards to determine SBA program eligibility: (1) industry-specific size standards and (2) alternative size standards based on the applicant's maximum tangible net worth and average net income after federal taxes  The SBA's industry-specific size standards are also used to determine eligibility for federal small business contracting purposes  The SBA's industry-specific size standards determine program eligibility for firms in 1,036 industrial classifications (hereinafter industries) in 23 sub-industry activities described in the 2017 North American Industry Classification System (NAICS)  Given its mandate to promote competition in the marketplace, the SBA includes an economic analysis of each industry's overall competitiveness and the competitiveness of firms within the industry in its size standards methodology  The size standards are based on four measures: (1) number of employees (505 industries), (2) average annual receipts in the previous three (may soon be the previous five) years (526 industries), (3) average asset size as reported in the firm's four quarterly financial statements for the preceding year (5 industries), or (4) a combination of number of employees and barrel per day refining capacity (1 industry)  Overall, about 97% of all employer firms qualify as small  These firms represent about 30% of industry receipts  In the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance  The size standards have also been challenged by Members of Congress concerned that the size standards may not adequately target federal assistance to firms that they consider to be truly small  This report provides a historical examination of the SBA's size standards and assesses competing views concerning how to define a small business  It also discusses P L  111-240 , the Small Business Jobs Act of 2010, which authorized the SBA to establish an alternative size standard using maximum tangible net worth and average net income after federal taxes for both the 7(a) and 504/CDC loan guaranty programs; established, until the SBA acted, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application; and required the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards every 18 months beginning on the new law's date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years  P L  112-239 , the National Defense Authorization Act for Fiscal Year 2013, which directs the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification  This provision addressed the SBA's practice of limiting the number of size standards it used and combining size standards within industrial groups as a means to reduce the complexity of its size standards and to provide greater consistency for industrial classifications that have similar economic characteristics  P L  114-328 , the National Defense Authorization Act for Fiscal Year 2017, which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes  Previously, the small business size standard for agricultural enterprises was set in statute as having annual receipts not in excess of $750,000  P L  115-324 , the Small Business Runway Extension Act of 2018, which directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts  Legislation introduced during the 112 th Congress ( H R  585 , the Small Business Size Standard Flexibility Act of 2011), 113 th Congress ( H R  2542 , the Regulatory Flexibility Improvements Act of 2013, and included in H R  4 , the Jobs for America Act), 114 th Congress ( H R  527 , the Small Business Regulatory Flexibility Improvements Act of 2015, and its Senate companion bill, S  1536 ), and 115 th Congress ( H R  33 , the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S  584 , and included in H R  5 , the Regulatory Accountability Act of 2017) to authorize the SBA's Office of Chief Counsel for Advocacy to approve or disapprove a size standard requested by a federal agency for purposes other than the Small Business Act or the Small Business Investment Act of 1958  The SBA's Administrator currently has that authority  In 2016 (the most recent available data), there were over 5 95 million employer firms and over 24 8 million nonemployer (self-employed) firms  As Table 1 indicates, there were 5,954,684 employer firms in the United States employing 126,752,238 people and providing total payroll of $6 43 trillion in 2016  Most employer firms (61 6%) had 4 or fewer employees, 78 6% had fewer than 10 employees, 89 1% had fewer than 20 employees, 98 1% had fewer than 100 employees, and 99 7% had fewer than 500 employees in 2016  The table also provides data concerning other economic factors that might be used to define a small business: an employer firm's number of employees as a share (cumulative percentage) of the total number of employer firms, as a share of employer firm total employment, and as a share of employer firm total annual payroll  As will be discussed, the SBA has traditionally applied economic factors to specific industries, not to cumulative statistics for all employer firms, to determine which firms are small businesses  Nonetheless, the data in Table 1 illustrate how the selection of economic factors used to define small business affects the definition's outcome  For example, for illustrative purposes only, if the mid-point (50%) for these three economic factors was used to define what is a small business, three different employee firm sizes would be used to designate firms as small: Businesses would be required to have no more than 4 employees to be defined as small if the definition for small used the mid-point (50%) share of the total number of employer firms (employer firms with no more than four employees accounted for 61 6% of the total number of employer firms in 2016)  Businesses would be required to have no more than 999 employees to be defined as small if the definition for small used the mid-point (50%) share of employer firm total employment (employer firms with no more than 999 employees accounted for 52 6% of employer firm total employment in 2016)  Businesses would be required to have no more than 1,999 employees to be defined as small if the definition for small used the mid-point (50%) share of employer firm total annual payroll (employer firms with no more than 1,999 employees accounted for 51 8% of employer firm total annual payroll in 2016)  Other economic factors that might be used to define a small business include the value of the employer firm's assets or its market share, expressed as a firm's sales revenue from that market divided by the total sales revenue available in that market or as a firm's unit sales volume in that market divided by the total volume of units sold in that market  The Small Business Act of 1953 (P L  83-163, as amended) authorized the SBA to establish size standards for determining eligibility for SBA assistance  More than sixty years have passed since the SBA established its initial small business size standards on January 1, 1957  Yet, decisions made then concerning the rationale and criteria used to define small businesses established precedents that continue to shape current policy  Moreover, as mentioned previously, the SBA relies on an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, in its size standards methodology to ensure that businesses receiving SBA assistance are not dominant in their field on a national basis  However, in the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance and by Members of Congress concerned that the size standards do not adequately target the SBA's assistance to firms that they consider to be truly small  Over the years, the SBA typically reviewed its size standards piecemeal, reviewing specific industries when the SBA determined that an industry's market conditions had changed or the SBA was asked to undertake a review by an industry claiming that its market conditions had changed  On five occasions, in 1980, 1982, 1992, 2004, and 2008, the SBA proposed a comprehensive revision of its size standards  The SBA did not fully implement any of these proposals, but the arguments presented, both for and against the proposals, provide a context for understanding the SBA's current size standards, and the rationale and criteria that have been presented to retain and replace them  As mentioned previously, P L  111-240 requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards during the 18-month period beginning on the date of enactment (September 27, 2010) and during every 18-month period thereafter  The act also requires the SBA to review each size standard at least once every five years  The SBA completed its first five-year review of all SBA industry size standards in 2016  As a result of its five-year review, the SBA estimates that more than 72,000 small businesses gained SBA eligibility  There is no uniform or accepted definition for a small business  Instead, several criteria are used to determine eligibility for small business spending and tax programs  This was also the case when Congress considered establishing the SBA during the early 1950s  For example, in 1952, the House Select Committee on Small Business reviewed federal statutes, executive branch directives, and the academic literature to serve as a guide for determining how to define small businesses  The Select Committee began its review by asserting that the need to define the concept of small business was based on a general consensus that assisting small business was necessary to enhance economic competition, combat monopoly formation, inhibit the concentration of economic power, and maintain "the integrity of independent enterprise " It noted that the definition of small businesses in federal statutes reflected this consensus by taking into consideration the firm's size relative to other firms in its field and "matters of independence and nondominance " For example, the War Mobilization and Reconversion Act of 1944 defined a small business as either "employing 250 wage earners or less" or having "sales volumes, quantities of materials consumed, capital investments, or any other criteria which are reasonably attributable to small plants rather than medium- or large-sized plants " The Selective Service Act of 1948 classified a business as small for military procurement purposes if "(1) its position in the trade or industry of which it is a part is not dominant, (2) the number of its employees does not exceed 500, and (3) it is independently owned and operated " The Select Committee also found that, for data-gathering purposes, the executive branch defined small businesses in relative, as opposed to absolute, terms within specific industries  For example, the Bureau of Labor Statistics "defined small business in terms of an average for each industry based on the volume of employment or sales  All firms which fall below this average are deemed to be small " The U S  Census Bureau also used different criteria for different industries  For example, manufacturing firms were classified as small if they had fewer than 100 employees, wholesalers were considered small if they had annual sales below $200,000, and retailers were considered small if they had annual sales below $50,000  According the Census Bureau, in 1952, small businesses accounted for "roughly 92 percent of all business establishments, 45 percent of all employees, and 34 percent of all dollar value of all sales " The Select Committee also noted that in 1951, the National Production Authority's Office of Small Business proposed defining all manufacturing firms with fewer than 50 employees as small and any with more than 2,500 employees as large  Manufacturers employing between these numbers of employees would be considered large or small depending on the general structure of the industry to which they belonged  The larger the percentage of total output produced by large firms, the larger the number of employees a firm could have to be considered small  Using this definition, most manufacturing firms with fewer than 50 employees would be classified as small, but others, such as an aircraft manufacturer, could have as many as 2,500 employees and still be considered small  For procurement purposes, the Select Committee found that executive branch agencies defined small businesses in absolute, as opposed to relative, terms, using 500 employees as the dividing line between large and small firms  Federal agencies defended the so-called 500 employee rule on the grounds that it "had the advantage of easy administration" across federal agencies  In reviewing the academic literature, the Select Committee reported that Abraham Kaplan's Small Business: Its Place and Problems defined small businesses as those with no more than $1 million in annual sales, $100,000 in total assets, and no more than 250 employees  Applying this definition would have classified about 95% of all business concerns as small, and would have accounted for about half of all nonagricultural employees  Based on its review of federal statutes, executive branch directives, and the academic literature, the Select Committee decided that it would not attempt "to formulate a rigid definition of small business" because "the concept of small business must remain flexible and adaptable to the peculiar needs of each instance in which a definition may be required " However, it concluded that the definition of small should be a relative one, as opposed to an absolute one, that took into consideration variations among economic sectors: This committee is also convinced that whatever limits may be established to the category of small business, they must vary from industry to industry according to the general industrial pattern of each  Public policy may demand similar treatment for a firm of 2,500 employees in one industry as it does for a firm of 50 employees in another industry  Each may be faced with the same basic problems of economic survival  Reflecting the view that formulating a rigid definition of small business was impractical, the Small Business Act of 1953 provided leeway in defining small businesses  It defined a small firm as "one that is independently owned and operated and which is not dominant in its field of operation " The SBA was authorized to establish and subsequently alter size standards for determining eligibility for federal programs to assist small business, some of which are administered by the SBA  The act specifies that the size standards "may utilize number of employees, dollar volume of business, net worth, net income, a combination thereof, or other appropriate factors " It also notes that the concept of small is to be defined in a relative sense, varying from industry to industry to the extent necessary to reflect "differing characteristics" among industries  The House Committee on Banking and Currency's report accompanying H R  5141, the Small Business Act of 1953, issued on May 28, 1953, provided the committee's rationale for not providing a detailed definition of small: It would be impractical to include in the act a detailed definition of small business because of the variation between business groups  It is for this reason that the act authorizes the Administration to determine within any industry the concerns which are to be designated small-business concerns for the purposes of the act  The report did not provide specific guidance concerning what the committee might consider to be small, but it did indicate that data on industry employment, as of March 31, 1948, "reveals that on the basis of employment, small business truly is small in size  Of the approximately 4 million business concerns, 87 4% had fewer than 8 employees and 95 2% of the total number of concerns, employed fewer than 20 people " Initially, the SBA created two sets of size standards, one for federal procurement preferences and another for the SBA's loan and management training services  At the request of federal agencies, the SBA adopted the then-prevailing small business size standard used by federal agencies for procurement, which was no more than 500 employees  The SBA retained the right to make exceptions to the no more than 500 employee procurement size standard if the SBA determined that a firm having more than 500 employees was not dominant in its industry  For the SBA's loan and management training services, the SBA's staff reviewed economic data provided by the Census Bureau to arrive at what Wendell Barnes, SBA's Administrator, described at a congressional hearing in 1956 as "a fairly accurate conclusion as to what comprises small business in each industry " Jules Abels, SBA's economic advisor to the Administrator, explained at that congressional hearing how the SBA's staff determined what constituted a small business: There are various techniques for the demarcation lines, but in a study of almost any industry, you will find a large cluster of small concerns around a certain figure     On the other hand, above a certain dividing line you will find relatively few and as you map out a picture of an industry it appears that a dividing line at a certain point is fair  On January 5, 1956, the SBA published a notice of proposed rulemaking in the Federal Register announcing its first proposed small business size standards  During the public comment period, representatives of several industries argued that the proposed standards were too restrictive and excluded too many firms  In response, Mr  Abels testified that the SBA decided to adjust its figures to make them "a little bit more liberal because there was some feeling on the part of certain industries that they were too tight and that they excluded too many firms " The SBA published its final rule concerning its small business size standards on December 7, 1956, and they became effective on January 1, 1957  The SBA decided to use number of employees as the sole criterion for determining if manufacturing firms were small and annual sales or annual receipts as the sole criterion for all other industries  Mr  Abels explained at the congressional hearing the SBA's rationale for using number of employees for classifying manufacturing firms as small and annual sales or annual receipts for all other firms: in the absence of automation which would give one firm in an industry a great advantage over another, roughly speaking if the firms were mechanized to the same extent, a firm with 400 employees would have an output which would be twice as large as the output of a firm with 200 employees     However when you depart from the manufacturing field and go into, say, a distributive field or trade, it then becomes necessary to discard the number of employees, because it is a matter of judicial notice, that one man for example in the distributive trades can sell as much as 100 men can sell  One small construction firm possibly can do a lot more business than one with a lot more employees  A service trade again has its volume geared to something other than the number of employees  So I think that one can say with reasonable certainty that it is only within the manufacturing field that the employee standard is the uniform yardstick, but that other than manufacturing the dollar volume is the appropriate yardstick  The SBA's initial size standards defined most manufacturing firms employing no more than 250 employees as small  In addition, the SBA considered manufacturing firms in some industries (e g , metalworking and small arms) as small if they employed no more than 500 employees, and in some others (e g , sugar refining and tractors) as small if they employed no more than 1,000 employees  To be considered small, wholesalers were required to have annual sales volume of $5 million or less; construction firms had to have average annual receipts of $5 million or less over the preceding three years; trucking and warehousing firms had to have annual receipts of $2 million or less; taxicab companies and most firms in the service trades had to have annual receipts of $1 million or less; and most retail firms had to have annual sales of $1 million or less  Mr  Abels testified that the SBA experienced "continual" protests of its size standards by firms denied financial or support assistance because they were not considered small  He also testified that in each case, the SBA denied the protest and determined, in his words, that the standard was "valid and accurate " In 1977, the U S  General Accounting Office (GAO, now the U S  Government Accountability Office) was asked by the Senate Select Committee on Small Business to review the SBA's size standards  At that time, most of the SBA's size standards remained at their original 1957 levels, other than a one-time upward adjustment for inflation in 1975 for industries using annual sales and receipts to restore eligibility to firms that may have lost small-business status due solely to the effect of inflation  GAO's report, issued in 1978, found that the SBA's size standards "are often high and often are not justified by economic rationale " Specifically, GAO reported that many size standards may not direct assistance to the target group described in SBA regulations as businesses "struggling to become or remain competitive" because the loan and procurement size standards for most industries were established 15 or more years ago and have not been periodically reviewed; SBA records do not indicate how most standards were developed; and the standards often define as small a very high percentage of the firms in the industries to which they apply  GAO recommended that the SBA reexamine its size standards "by collecting data on the size of bidders on set-aside and unrestricted contracts, determining the size of businesses which need set-aside protection because they cannot otherwise obtain Federal contracts" and then consider reducing its size standards or "establishing a two-tiered system for set-aside contracts, under which certain procurements would be available for bidding only to the smaller firms and others would be opened for bidding to all businesses considered small under present standards " Citing the GAO report, several Members objected to the SBA's size standards at a House Committee on Small Business oversight hearing conducted on July 10, 1979  Representative John J  LaFalce, chair of the House Committee on Small Business Subcommittee on General Oversight and Minority Enterprise, stated that "what we have faced from 1953 to the present is virtually nothing other than acquiescence to the demands of the special interest groups  That is how the size standards have been set " Representative Tim Lee Carter, the subcommittee's ranking minority member, stated that "it seems to me that we may be fast growing into just a regular bank forum not just to small business but to all business " At that time, approximately 99% of all firms with employees were classified by the SBA as a small business  Roger Rosenberger, SBA's associate administrator for policy, planning and budgeting, testified at the hearing that the SBA would undertake a comprehensive economic analysis of industry data to determine if its size standards should be changed  However, he also defended the validity of the SBA's size standards, arguing that the task of setting size standards was a complicated and difficult one because of "how market structure and size distribution of firms vary from industry to industry " He testified that some industries are dominated by a few large firms, some are comprised almost entirely of small businesses, and others "can be referred to as a mixed industry " He argued that each market structure presents unique challenges for defining small businesses within that industry group  For example, he argued that it was debatable whether the SBA should provide any assistance to any of the businesses within industries where "smaller firms are flourishing " On March 10, 1980, the SBA issued a notice of proposed rulemaking designed to "reduce administrative complexity" by replacing its two sets of size standards, one for procurement preferences and another for its loan and consultative support services, with a single set of size standards for both purposes  The SBA also proposed to use a single factor, the firm's number of employees, for definitional purposes for nearly all industries instead of using the firm's number of employees for some industries, the firm's assets for others, and the firm's annual gross receipts for still others  The SBA argued that when size standards are denominated in dollars, i e , annual revenues, its ability to help the small business sector is undermined by inflation  Using employment, as opposed to dollar sales, will provide greater stability for SBA and its clients; will remove inter-industry distortions generated by differential inflation rates; and reduce the need for SBA to make frequent revisions in the size standards merely to reflect price increases  In setting its proposed new size standards for each industry (ranging from no more than 15 to no more than 2,500 employees), the SBA first placed each industry into one of three groups: concentrated (characterized by a highly unequal distribution of sales among the firms in the industry), competitive (characterized by a more equal distribution of sales in the industry), or mixed (industries that do not meet the criteria of competitive or concentrated industries)  The SBA determined that there were 160 concentrated industries, 317 competitive industries, and 249 mixed industries  The SBA argued that establishing a size standard for the 160 concentrated industries was a "straight-forward task—simply identify and exclude those few firms which account for a disproportionately large share of the industry's sales " For competitive industries, the SBA argued that the size standard should be set "relatively low, so as to support entry and moderate growth " The SBA argued that mixed industries require "relatively high size standards     to reinforce competition and offset the pressures to increase the degree of concentration in these industries " The proposed new SBA size standards would have had the net effect of reducing the number of firms classified as small by about 225,000  In percentage terms, the number of firms classified as small would have been reduced from about 99% of all employer firms to 96%  Over 86% of the more than 1,500 public comments received by the SBA concerning its proposed new size standards criticized it  Most of the criticism was from firms that would no longer be considered small under the new size standards  In addition, several federal agencies indicated that the proposed size standards in the services and construction industries were set too low, reducing the number of small firms eligible to compete for procurement contracts below levels they deemed necessary to ensure adequate competition to prevent agency costs from rising  On October 21, 1980, Congress required the SBA to take additional time to consider the consequences of the proposed changes to the size standards by adopting the Small Business Export Expansion Act of 1980 ( P L  96-481 )  It prohibited "the SBA from promulgating any final rule or regulation relating to small business size standards until March 31, 1981 " In the meantime, the Reagan Administration entered office, and, as is customary when there is a change in Administration, replaced the SBA's senior leadership  The SBA's new Administrator, Michael Cardenas, was sympathetic to the concerns of federal agencies that the proposed size standards in the services and construction industries were set too low to meet those agencies' procurement needs  As a result, he indicated that the SBA would modify its size standards proposal by (1) increasing the proposed size standards for 51 industries, mostly in the services and construction industries; (2) lowering the proposed size standards in 157 manufacturing industries (typically from no more than 2,500 employees to no more than 500 employees) to prevent one or more of the largest producers in those industries from being classified as small; and (3) increasing the SBA's proposed lowest size standard from no more than 15 employees to no more than 25 employees (affecting 93 service and trade industries)  The net effect of these changes would have restored eligibility for approximately 60,000 of the 225,000 firms expected to lose eligibility under the previous Administration's proposal  The SBA subsequently met with various trade organizations and federal agency procurement officials to discuss the proposal  As these consultations took place, the SBA experienced another turnover in its senior leadership  The SBA, headed by the new appointee, James C  Sanders, issued a notice of proposed rulemaking concerning its size standards on May 3, 1982  The proposal differed from its March 10, 1980, predecessor in three ways: First, the range of size standards was narrowed to a range of 25 employees to 500 employees  This reflected a widespread view that 15 employees was too low a cutoff while 2,500 employees was too high  Second, SBA proposed a 500-employee ceiling, focusing on smaller firms  Third, SBA responded to sentiments within many procurement-sensitive industries that the proposed size standards in some cases were too low to accommodate the average procurement currently being performed by small business  Therefore, SBA proposed higher size standards in a number of procurement-sensitive industries, while maintaining the 500-employee cap  The SBA received over 500 comments on the proposed rule, with about 72% of those comments opposing the rule  Taking those comments into consideration, the SBA reexamined its size standards once again, and, after a year of further consultation with various trade organizations and federal agency procurement officials, issued another notice of proposed rulemaking on May 6, 1983  The 1983 proposal (1) replaced the use of two sets of size standards, one for procurement and another for the SBA's loan and consultative support services, with a single set for all programs; (2) retained most of the size standards that were expressed in terms of average annual sales or receipts; (3) adjusted those size standards for inflation (an upward adjustment of 81%); (4) retained most of the size standards for manufacturing; and (5) made relatively minor changes to the size standards in other industries, with a continued emphasis on a 500-employee ceiling for most industries  The SBA received 630 comments on the proposed rule, with almost 70% supporting it  SBA Administrator Sanders characterized the SBA's revised size standard proposal as "a fine-tuning of current standards which has the basic support of both the private sector and the Federal agencies that use the basic size standards to achieve their set-aside procurement goals " He also added that "since almost no size standard is proposed to decrease, and most will in fact increase, very few firms will lose their small business status  We estimate that about 39,000 firms will gain small business status " He testified that in percentage terms, in 1983, 97 9% of the nation's 5 2 million firms with employees were classified by the SBA as small  Under the SBA's proposal, 98 6% of all firms with employees would be classified as small  The final rule was published in the Federal Register on February 9, 1984  Representative Parren J  Mitchell, chair of the House Committee on Small Business, expressed disappointment in the SBA's final rule, stating at a congressional oversight hearing on July 30, 1985, that "the government and the business community are still victimized by that same ad hoc, sporadic system that the SBA promised to fix some six years ago " He introduced legislation ( H R  1178 , a bill to amend the Small Business Act) that would have required the SBA to adjust its size standard for an industrial classification downward by at least 20% if small business' share of that market equaled or exceeded 60%, and at least 40% of the market share was achieved through the receipt of federal procurement contracts  The bill also mandated a minimum 10% increase in the SBA's size standard for an industrial classification if small business' share of that market was less than 20% and less than 10% of the market share was achieved through the receipt of federal procurement contracts  The bill was opposed by various trade associations, the SBA, and federal agency procurement officials, and was not reported out of committee  On December 31, 1992, the SBA issued a notice of proposed rulemaking "to streamline its size standards" by reducing the number of fixed size standard levels from 30 to 9  The nine proposed size standards were no more than 100, 500, 750, 1,000, or 1,500 employees; and no more than $5 million, $10 million, $18 million, or $24 million in annual receipts  The annual receipts levels reflected an upward adjustment of 43% for inflation  The SBA argued that the proposed changes would make the size standards more user-friendly for small business owners and restore eligibility to nearly 20,000 firms that were no longer considered small solely because of the effects of inflation  The proposed rule was later withdrawn as a courtesy to allow the incoming Clinton Administration time to review it  The SBA ultimately decided not to pursue this approach because it felt that converting "receipts based size standards in effect at that time to one of four proposed receipts levels created a number of unacceptable anomalies " Over the subsequent decade, the SBA reviewed the size standards for some industries on a piecemeal basis and, in 1994, adjusted for inflation its size standards based on firm's annual sales or receipts (an upward adjustment of 48 2%)  The SBA estimated that the adjustment would restore eligibility to approximately 20,000 firms that lost small-business status due solely to the effects of inflation  In 2002, the SBA adjusted for inflation its annual sales and receipts based size standards for the fourth time (an upward adjustment of 15 8%)  The SBA estimated that the adjustment would restore eligibility to approximately 8,760 firms that lost small-business status due solely to the effects of inflation  The rule also included a provision that the SBA would assess the impact of inflation on its annual sales and receipts based size standards at least once every five years  Then, on March 19, 2004, the SBA, once again, issued a notice of proposed rulemaking to streamline its size standards  The proposed rule would have established size standards based on the firm's number of employees for all industries, avoiding the need to adjust for inflation size standards based on sales or receipts  At that time, the SBA size standards consisted of 37 different size levels: 30 based on annual sales or receipts, 5 on the number of employees (both full- and part-time), 1 on financial assets, and 1 on generating capacity  Under the proposed rule, the SBA would use 10 size standards, 5 new employee size standards (adding no more than 50, 150, 200, 300, and 400 employees), and the existing 5 employee size standards (no more than 100, 500, 750, 1,000, and 1,500 employees)  The proposed rule would not have changed any existing size standards based on number of employees  The SBA argued that the use of a single size standard would "help to simplify size standards" and "tends to be a more stable measure of business size" than other measures  It added that the proposed rule would change 514 size standards and that, after the proposed conversion to the use of number of employees, of the "approximately 4 4 million businesses in the industries with revised size standards, 35,200 businesses could gain and 34,100 could lose small business eligibility, with the net effect of 1,100 additional businesses defined as small " A majority (51%) of the more than 4,500 comments on the proposed rule supported it, but with "a large number of comments opposing various aspects of SBA's approach to simplifying size standards " In addition, the chairs of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship opposed the proposed rule, largely because they were concerned about potential job losses resulting from more than 34,000 small businesses losing program eligibility  The SBA withdrew the proposed rule on July 1, 2004  In 2005, the SBA adjusted for inflation size standards based on firms' annual sales or receipts (an upward adjustment of 8 7%)  The SBA estimated that the adjustment restored eligibility to approximately 12,000 firms that lost small-business status due solely to inflation  In 2008, the SBA made another adjustment for inflation to its annual sales and receipts based standards (another upward adjustment of 8 7%)  The SBA estimated that the adjustment restored eligibility for approximately 10,400 firms that lost small-business status due solely to inflation  In June 2008, the SBA announced that it would undertake a comprehensive, two-year review of its size standards, proceeding one industrial sector at a time, starting with Retail Trade (NAICS Sector 44-45), Accommodations and Food Services (NAICS Sector 72), and Other Services (NAICS Sector 81)  The SBA argued that it was concerned that "not all of its size standards may now adequately define small businesses in the U S  economy, which has seen industry consolidations, technological advances, emerging new industries, shifting societal preferences, and other significant industrial changes
Report 2:  We also estimated that, given the additional time needed to do compliance inspections, the CFATS program would likely be implemented in 8 to 10 years  We did not make any recommendations for DHS to improve its procedures for reviewing facilities’ security plans because DHS officials reported that they were exploring ways to expedite the process, such as reprioritizing resources and streamlining inspection requirements  In July 2015, we reported that DHS had made substantial progress in addressing the backlog—estimating that it could take between 9 and 12 months for DHS to review and approve security plans for the approximately 900 remaining facilities  DHS officials attributed the increased approval rate to efficiencies in DHS’s review process, updated guidance, and a new case management system  Subsequently, DHS reported in its December 2016 semi-annual report to Congress that it had eliminated its approval backlog  Finally, we found in our 2017review that DHS also took action to implement an Expedited Approval Program (EAP)  The CFATS Act of 2014 required that DHS create the EAP as another option that tier 3 and tier 4 chemical facilities may use to develop and submit security plans to DHS  Under the program, facilities may develop a security plan based on specific standards published by DHS (as opposed to the more flexible performance standards using the standard, non-expedited process)  DHS issued guidance intended to help facilities prepare and submit their EAP security plans to DHS, which includes an example that identifies prescriptive security measures that facilities are to have in place  According to committee report language, the EAP was expected to reduce the regulatory burden on smaller chemical companies, which may lack the compliance infrastructure and the resources of large chemical facilities, and help DHS to process security plans more quickly  If a tier 3 or 4 facility chooses to use the expedited option, DHS is to review the plan to determine if it is facially deficient, pursuant to the reporting requirements of the CFATS Act of 2014  If DHS approves the EAP site security plan, it is to subsequently conduct a compliance inspection  In 2017, we found that DHS had implemented the EAP and had reported to Congress on the program, as required by the CFATS Act of 2014  In addition, as of June 2018 according to DHS officials, only 18 of the 3,152 facilities eligible to use the EAP opted to use it  DHS officials we interviewed attributed the low participation to several possible factors including: DHS had implemented the expedited program after most eligible facilities already submitted standard (non-expedited) security plans to DHS; facilities may consider the expedited program’s security measures to be too strict and prescriptive, not providing facilities the flexibility of the standard process; and the lack of an authorization inspection may discourage some facilities from using the expedited program because this inspection provides useful information about a facility’s security  We also found in 2017 that recent changes made to the CFATS program could affect the future use of the expedited program  As discussed previously, DHS has revised its methodology for determining the level of each facility’s security risk, which could affect a facility’s eligibility to participate in the EAP  DHS continues to apply the revised methodology to facilities regulated under the CFATS program and but it is too early to assess the impact on participation in the EAP  In our July 2015 report, we found that DHS began conducting compliance inspections in September 2013, and by April 2015, had conducted inspections of 83 of the 1,727 facilities that had approved security plans  Our analysis showed that nearly half of the facilities were not fully compliant with their approved site security plans and that DHS had not used its authority to issue penalties because DHS officials found it more productive to work with facilities to bring them in compliance  We also found that DHS did not have documented processes and procedures for managing the compliance of facilities that had not implemented planned measures by the deadlines outlined in the plans  We recommended that DHS document processes and procedures for managing compliance to provide more reasonable assurance that facilities implement planned measures and address security gaps  DHS agreed and has taken steps toward implementing this recommendation  DHS updated its CFATS Enforcement Standard Operating Procedure (SOP) and has made progress on the new CFATS Inspections SOP  Once completed these two documents collectively are expected to formally document the processes and procedures currently being used to track noncompliant facilities and ensure they implement planned measures as outlined in their approved site security plans, according to ISCD officials  DHS officials stated they expect to finalize these procedures by the end of fiscal year 2018  We are examining compliance inspections as part of our ongoing work and will report on the results of our work in our report later this summer  In April 2013, we reported that DHS took various actions to work with facility owners and operators, including increasing the number of visits to facilities to discuss enhancing security plans, but that some trade associations had mixed views on the effectiveness of DHS’s outreach  We found that DHS solicited informal feedback from facility owners and operators in its efforts to communicate and work with them, but did not have an approach for obtaining systematic feedback on its outreach activities  We recommended that DHS take action to solicit and document feedback on facility outreach consistent with DHS efforts to develop a strategic communication plan  DHS agreed and implemented this recommendation by developing a questionnaire to solicit feedback on outreach with industry stakeholders and began using the questionnaire in October 2016  Chairman Shimkus, Ranking Member Tonko, and Members of the Subcommittee, this completes my prepared statement  I would be pleased to respond to any questions that you may have at this time  If you or your staff members have any questions about this testimony, please contact me at (404) 679-1875 or curriec@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  Other individuals making key contributions to this work include John Mortin, Assistant Director; and Brandon Jones, Analyst-in-Charge; Michael Lennington, Ben Emmel, and Hugh Paquette  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: Technology companies are a major source of high-paying U.S. jobs, but some have questioned the sector's commitment to equal employment opportunity. EEOC provides federal oversight of nondiscrimination requirements by investigating charges of discrimination, and OFCCP enforces federal contractors' compliance with affirmative action requirements. GAO was asked to review workforce trends in the technology sector and federal oversight. This report examines (1) trends in the gender, racial, and ethnic composition of the technology sector workforce; and (2) EEOC and OFCCP oversight of technology companies' compliance with equal employment and affirmative action requirements. GAO analyzed workforce data from the American Community Survey for 2005-2015 and EEOC Employer Information Reports for 2007-2015, the latest data available during our analysis. GAO analyzed OFCCP data on compliance evaluations for fiscal years 2011-2016. GAO interviewed agency officials, researchers, and workforce, industry, and company representatives. The estimated percentage of minority technology workers increased from 2005 to 2015, but GAO found that no growth occurred for female and Black workers, whereas Asian and Hispanic workers made statistically significant increases (see figure). Further, female, Black, and Hispanic workers remain a smaller proportion of the technology workforce—mathematics, computing, and engineering occupations—compared to their representation in the general workforce. These groups have also been less represented among technology workers inside the technology sector than outside it. In contrast, Asian workers were more represented in these occupations than in the general workforce. Stakeholders and researchers GAO interviewed identified several factors that may have contributed to the lower representation of certain groups, such as fewer women and minorities graduating with technical degrees and company hiring and retention practices. Both the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) have taken steps to enforce equal employment and affirmative action requirements in the technology sector, but face limitations. While EEOC has identified barriers to recruitment and hiring in the technology sector as a strategic priority, when EEOC conducts investigations, it does not systematically record the type of industry, therefore limiting sector-related analyses to help focus its efforts. EEOC has plans to determine how to add missing industry codes but has not set a timeframe to do this. In addition, OFCCP's regulations may hinder its ability to enforce contractors' compliance because OFCCP directs contractors to set placement goals for all minorities as a group rather than for specific racial/ethnic groups. OFCCP also has not made changes to its establishment-based approach to selecting entities for review in decades, even though changes have occurred in how workplaces are structured. Without taking steps to address these issues, OFCCP may miss opportunities to hold contractors responsible for complying with affirmative action and nondiscrimination requirements. GAO makes 6 recommendations, including that EEOC develop a timeline to improve industry data collection and OFCCP take steps toward requiring more specific minority placement goals by contractors and assess key aspects of its selection approach. EEOC neither agreed nor disagreed with its recommendation, and OFCCP stated the need for regulatory change to alter placement goal requirements. GAO continues to believe actions are needed, as discussed in the report.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: The technology sector has major employment hubs across the country, including the San Francisco Bay area, the greater New York City region, and the Washington-Arlington-Alexandria region (see fig  1)  In addition, technology workers are employed at companies outside the technology sector, such as in the retail or financial services industries  For example, a large retail company may require technology workers to create and manage their online sales activities, but the company itself would be considered part of the retail industry  Private companies are generally prohibited by federal law from discriminating in employment on the basis of race, color, religion, sex, national origin, age, and disability status  Additionally, federal contractors and subcontractors are generally required to take affirmative action to ensure that all applicants and employees are treated without regard to race, sex, color, religion, national origin, sexual orientation, and gender identity, and to employ or advance in employment qualified individuals with disabilities and qualified covered veterans  EEOC is responsible for enforcement of federal antidiscrimination laws, and OFCCP enforces affirmative action and nondiscrimination requirements for federal contractors  EEOC and OFCCP have some shared activities and have established a memorandum of understanding (MOU) to minimize any duplication of effort  For example, under the MOU, individual complaints filed with OFCCP alleging discrimination under Title VII are generally referred to EEOC  In addition, on occasions when EEOC receives a complaint not within its purview, such as cases that involve veteran status, but over which it believes OFCCP has jurisdiction, it will refer the complaint to OFCCP  The EEOC, created by Title VII of the Civil Rights Act of 1964, enforces federal laws that prohibit employment discrimination on the basis of race, sex, color, religion, national origin, age, and disability  As the nation’s primary enforcer of antidiscrimination laws, EEOC investigates charges of employment discrimination from the public, litigates major cases, and conducts outreach to prevent discrimination by educating employers and workers  In fiscal year 2016, EEOC received about 91,500 charges, secured more than $482 million for victims of discrimination, and filed 114 lawsuits  According to EEOC, many states, counties, cities, and towns have their own laws prohibiting discrimination, usually similar to those EEOC enforces, as well as agencies responsible for enforcing those laws, called Fair Employment Practices Agencies  However, in some cases, these agencies enforce laws that offer greater protection to workers  An individual can file a charge with either the EEOC or with a Fair Employment Practices Agency  When an individual initially files with a Fair Employment Practices Agency that has a worksharing agreement with the EEOC, and the allegation is covered by a law enforced by the EEOC, the Fair Employment Practices Agency will dual file the charge with EEOC (meaning EEOC will receive a copy of the charge), but will usually retain the charge for processing  If the charge is initially filed with EEOC and the charge is also covered by state or local law, EEOC dual files the charge with the state or local Fair Employment Practices Agency (meaning the Fair Employment Practices Agency will receive a copy of the charge), but EEOC ordinarily retains the charge for processing  EEOC also pursues a limited number of cases each year designed to combat systemic discrimination, defined by the agency as patterns or practices where the alleged discrimination presented by a complainant has a broad impact on an industry, profession, company, or geographic location  EEOC can also initiate a systemic investigation under Title VII with the approval of an EEOC commissioner, called a “commissioner charge”, provided the commissioner finds there is a reasonable basis for the investigation  In addition, EEOC district directors can approve systemic investigations, called “directed investigations” which are initiated by EEOC field office directors under the Age Discrimination in Employment Act and the Equal Pay Act  Under Title VII, EEOC generally requires that large employers and non- exempt federal contractors file Employer Information Reports (EEO-1 reports) annually, which collect employees’ demographic data by business location on sex, race, and ethnic group for 10 occupational job categories  According to EEOC documentation, EEO-1 data are used in investigations of Title VII violations, litigation, research, comparative analyses, class action suits, and affirmative action plans  The OFCCP is responsible for ensuring that the nearly 200,000 federal contractor establishments comply with federal nondiscrimination and affirmative action requirements  Under Executive Order 11246 and other federal laws and regulations, covered federal contractors and subcontractors are prohibited from discriminating in employment on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin and are required to take affirmative action to help ensure that all applicants and employees are treated without regard to these factors  In general, OFCCP’s regulations require covered contractors to comply with certain recordkeeping and reporting requirements, and provide for enforcement procedures such as compliance evaluations and complaint investigations to assist OFCCP in ensuring federal contractor compliance with these regulations  Among other provisions, OFCCP’s regulations generally require that covered contractors prepare and maintain an affirmative action program (AAP)  Under OFCCP’s regulations, an AAP is a management tool that is designed to ensure equal employment opportunity, with an underlying premise that the gender, racial, and ethnic makeup of a contractor’s workforce should be representative of the labor pools from which the contractor recruits and selects  Companies must create an AAP for each business establishment—generally, a physical facility or unit that produces the goods or services, such as a factory, office, or store for the federal contractor  An AAP will also include any practical steps to address underrepresentation of women and minorities, such as expanding employment opportunities to underrepresented groups  Covered contractors must also comply with certain recordkeeping requirements, including records pertaining to hiring, promotion, lay off or termination, rates of pay, and applications, among other records  OFCCP’s enforcement program represents the majority of the agency’s activity and is carried out primarily by using compliance officers, who evaluate contractors’ compliance with various requirements, according to agency officials  In addition to conducting compliance evaluations, OFCCP also conducts investigations in response to complaints  In 2016, we reported that according to OFCCP officials, responding to complaints accounted for close to 16 percent of OFCCP’s enforcement activities  OFCCP selects contractor establishments for evaluations based on a number of neutrally applied factors, such as employee count at the establishment, contract value, or contract expiration date  We previously found that OFCCP reviews, on average, 2 percent of federal contractor establishments annually  As we previously reported, as part of its compliance evaluations, OFCCP is to review the selected contractor’s hiring, promotion, compensation, termination, and other employment practices to determine whether contractors are maintaining nondiscriminatory hiring and employment practices  OFCCP conducts evaluations at the establishment level  When a contractor establishment is selected for evaluation, OFCCP sends the contractor a “scheduling letter” requesting the AAP and supporting data, such as the percentage of women and minority staff at the workplace by job group  Then, a compliance officer is to conduct a desk audit, which is an off-site review of the submitted materials  If necessary, the compliance officer may also conduct an on-site review or further off-site analysis to make a final determination as to whether the contractor is in compliance  In addition to looking at whether federal contractors maintain nondiscriminatory hiring and employment practices, which can result in finding discrimination violations, OFCCP also frequently finds other types of violations, such as failure to keep necessary records or conduct annual reviews of equal employment and affirmative action efforts  These findings by the agency often require administrative changes on the part of the contractor, such as improved record-keeping  There are many different forms of remedies for discrimination violations, including financial, employment, and organizational change remedies  Although rare, under some circumstances, OFCCP may bar a contractor from doing business with the government  From 2005 to 2015, the estimated number of workers in the technology workforce—people who worked in mathematics, computing, or engineering occupations—increased at a higher rate (24 percent) than the estimated number of workers in the general workforce (9 percent), according to ACS data  In 2015, the technology workforce comprised an estimated 7 5 million workers, an increase of slightly over 1 4 million workers since 2005  (For a complete list of the occupations we include as technology occupations, see appendix II)  Most technology workers have a college degree and have a higher median income than workers in the general workforce  Specifically, in 2015, an estimated 69 percent of technology workers held at least a bachelor’s degree, compared to 31 percent of workers in the general workforce  In 2015, the estimated median income for technology workers was $81,000 compared to $42,000 for the general workforce  From 2005 to 2015, the percentage of women in the technology workforce remained flat and women remained a smaller proportion of the technology workforce compared to their representation in the general workforce  In 2015, women represented 22 percent (about 1 6 million workers) of workers in technology occupations, compared to 48 7 percent of workers in the general workforce (see fig  2)  Although the estimated percentage of minority technology workers as a whole had grown since 2005, we found that this trend did not apply to Black technology workers  Specifically, from 2005 through 2015, although the number of Black workers increased as the technology workforce grew, there was no statistically significant change in their representation as a percentage of the entire technology workforce  In contrast, from 2005 to 2015, Hispanic and Asian technology workers had statistically significant increases in their representation in the technology workforce  Even with the increase in their numbers in the technology workforce, Black and Hispanic technology workers remained a smaller proportion of these workers compared to their representation in the general workforce  In contrast, Asian workers were an increasing share of the technology workforce, where they remained more represented than they were in the general workforce (see fig  3)  We found that when we examined gender representation for each minority group, both Black and Hispanic men and women were less represented in the technology workforce compared to their representation in the general workforce  The same was true for White women, whereas White men, Asian men, and Asian women were more represented in the technology workforce compared to their representation in the general workforce (see fig  4)  We defined the technology sector as those companies that have the highest concentration of technology workers and are in such industries as computer systems design and software publishing  Companies categorized as outside the technology sector, for example, retail or finance companies, may still employ some technology workers  However, we found differences in median incomes for technology workers within and outside the technology sector  In 2015, technology workers employed in the technology sector earned an estimated median income of $89,000 compared to median incomes of $78,000 for those working outside the technology sector  We also compared the characteristics of technology workers within the technology sector and outside the technology sector, and found male and Asian technology workers were relatively more represented in the technology sector than outside the technology sector  Similar to the lower representation of female, Black, and Hispanic technology workers in technology occupations, we found technology workers from these groups were also more likely to work outside the technology sector than in the technology sector  For example, according to our analysis of 2015 ACS data, women represented an estimated 18 percent of all technology workers employed in the technology sector, compared to 25 percent of all technology workers employed outside the technology sector (see fig  5)  White technology workers were also more represented outside the technology sector than within the technology sector  Companies in the technology sector also employ non-technical workers such as sales people, and the lower representation of women and certain minorities in the technology sector was also present in such non-technical job categories  According to our analysis of EEO-1 data, women were less represented across the full range of management and non- management positions at companies within the technology sector, including at leading technology companies, compared to their representation in companies outside the technology sector  We determined this by comparing specific occupations at companies both within and outside the technology sectors using 2015 EEO-1 data  For example, women held about 19 percent of senior-level management positions at companies in the technology sector compared to nearly 31 percent of such positions at companies outside the technology sector in 2015  Women were also less represented in all of the remaining job categories (mid-level managers, professionals, technicians, and all other jobs) in the technology sector  (See fig  6 ) Comparing EEO-1 data at three points in time for 2007, 2011, and 2015, we found women’s representation in management positions as well as among professionals and technicians at companies within the technology sector remained at about the same level, and decreased for “all other jobs” (see table 1)  Similar to women, Black and Hispanic workers were less represented across multiple job categories in companies within the technology sector compared to those outside the technology sector (see fig 7)  For example, 1 8 percent of senior level managers in the technology sector were Black compared to 3 4 percent of senior level managers in all other sectors  Appendix IV provides percentages for each minority group in different job categories within and outside the technology sector  The lower representation of Black workers in the technology sector relative to their representation in other sectors was consistent across all job categories (mid-level managers, professionals, technicians, and “all other jobs”)  Hispanic workers were less represented in the technology sector compared to outside the technology sector across all job categories (senior and mid-level managers, professionals, technicians, and “all other jobs”)  Compared to their representation across job categories within the technology sector in general, Black and Hispanic workers had slightly greater representation at the leading technology companies in senior management and technician categories, and lower representation among mid-level managers, professionals, and holders of “all other jobs ” Asian workers comprised a greater proportion of managerial and professional roles in the technology sector than in other sectors, according to our analysis of 2015 EEO-1 data  Asian workers represented 11 0 percent of senior level managers in the technology sector compared to 4 3 percent in industries outside the technology sector  This higher representation of Asian workers in the technology sector was consistent among mid-level managers, professionals and technicians  Asian workers were more represented in the same categories at the leading technology companies  However, a lower proportion of Asian workers held senior management positions compared to their representation in professional positions in both the technology sector and leading technology companies  Further, the proportion of Asian workers in mid-level management positions was also lower than their representation in professional positions, from which mid-level managers might be selected, in both the technology sector and leading technology companies  In contrast, a higher proportion of White workers were in senior and mid- level management positions compared to their representation in professional positions in both the technology sector and leading technology companies  Comparing EEO-1 data at three points in time—2007, 2011, and 2015— we saw varied representation across job categories in the technology sector by race/ethnicity  For example, Black workers decreased in their representation in all job categories in the technology sector from 2007 to 2015  In contrast, Hispanic and Asian workers increased in their representation in all job categories we examined from 2007 to 2015 (see table 2)  Several factors may contribute to the lower representation of female, Hispanic, and Black workers in the technology workforce and at companies in the technology sector, based on research and interviews with researchers and representatives from workforce and industry organizations and technology companies  These include the lower diversity of degree earners in technology-related fields, and company- based factors such as hiring practices and retention of women and underrepresented minorities  The smaller proportion of women in the technology workforce may reflect the number of women earning technology-related degrees  Slightly over two-thirds of technology workers report having earned their bachelor’s degree in a computer, engineering, mathematics, or technology field  However, according to our analysis of 2014 IPEDS data, the percentage of technology-related bachelor’s and master’s degrees earned by women is far less than for men, although women were comparable to men in their receipt of science, technology, engineering, and math (STEM) degrees, and surpassed men in obtaining degrees in all other fields  In 2014, about 60,000 women were awarded technology-related bachelor’s or master’s degrees (compared to about 50,000 in 2004) and about 190,000 men were awarded such degrees (compared to about 147,000 in 2004)  (See fig  8 ) An estimated 218,000 technology workers were added to the technology workforce in 2015, according to our analysis of 2015 American Community Survey data from the U S  Census Bureau  In addition, technology degrees are also issued at the associate’s level  Two researchers told us that women often have the academic preparation to enter into technology-related degree programs, but they may choose not to pursue such degrees because of instances of gender bias within technology classes  Our prior work reported on studies that found women leave STEM fields at a higher rate than their male peers, citing one study that found women leave STEM academic positions at a higher rate than men in part due to dissatisfaction with departmental culture, faculty leadership, and research support  Further, a 2012 consulting firm report found that businesses viewed as male-dominated tended to attract fewer women at the entry level  In addition, according to our analysis of 2014 IPEDS data, three minority racial or ethnic groups each constituted 10 percent or fewer of bachelor’s and master’s degree earners in a technology-related field  Specifically, among the 202,200 earners of degrees in a technology-related field in 2014, there were about 20,000 Hispanic recipients, 13,000 Black recipients, and 18,000 recipients who were Multiracial or other race, which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i e  respondents who selected one or more racial designations  Among all minority groups, Asian students, including Pacific Islander, earned the highest proportion of technology- related degrees (about 24,000 individuals)  (See fig  9)  One barrier to entry into technology degree paths for Black and Hispanic students may be lower likelihood of access to preparatory academic programs in secondary school  In 2016, we reported that the K-12 public schools in the United States with students who are mostly Black or Hispanic offered disproportionately fewer math and science classes for their students  One researcher told us some colleges and universities, to help these students be academically successful, provide additional academic support such as tutoring to help bridge knowledge gaps  To address the uneven access to preparatory math and science classes, representatives from five technology companies told us they have started to invest in exposing Black and Hispanic children to technology occupations by, for example, developing online resources targeted to them and their parents and creating partnerships with secondary schools to improve their academic preparation in computer science  However, we have previously also reported that the number of students graduating with STEM degrees may not be a good measure of the supply of STEM workers because students often pursue careers in fields different from the ones they studied  For example, a lower percentage of women who obtained technology-related degrees became technology workers compared to men who earned the same degrees, according to our analysis of 2015 ACS data  Specifically, among women who earned technology degrees, an estimated 33 percent worked as a technology worker compared to 45 percent of men who earned technology degrees  Several representatives we interviewed from workforce and industry organizations and technology companies told us that recruitment practices may also have affected diversity in the technology workforce  For example, representatives from three workforce and industry organizations said technology companies tend to recruit from a select number of universities and colleges, thereby limiting their pool of potential applicants  To address this, representatives from several of the technology companies we interviewed told us they had changed recruitment practices and offered internships targeted to underrepresented groups  For example, representatives of four technology companies told us that their companies had expanded recruitment to include more schools  Representatives from two companies told us they offer programs such as summer and semester internships for which the company actively recruits from Historically Black Colleges and Universities and other specific schools to increase its pool of diverse candidates  In addition, representatives from workforce organizations and technology companies discussed concerns and strategies to address companies’ hiring practices and internal cultures that may limit workforce diversity  For example, one of these representatives said that technology companies often offer financial incentives to current employees to make referrals for new hires, which can result in reliance on social networks  These networks may be largely comprised of the same race and this practice therefore makes it harder for potential candidates from demographically different groups to have their resumes reviewed  Another workforce organization representative reported that some hiring managers filter out eligible candidates if their background and qualifications are not the same as those of previously successful employees  To address these concerns, representatives from one technology company told us that they had moved away from depending on referrals since this practice may result in leaders hiring people within their own networks, which generally does not increase diversity of gender or race/ethnicity  In addition, representatives from another company said they plan to begin reviewing resumes with names removed to limit bias by the reviewer  Further, representatives we interviewed from three technology companies told us they offer training to employees to help employees identify their own, unconscious biases  Other factors may affect retention of women and underrepresented minorities  For example, a representative from a workforce organization said that women leave technology occupations at a higher rate than men because they feel as if they have not been given the same opportunities for promotion and advancement within the company  A 2016 study that examined women in engineering and science found that women’s concerns about pay and promotion are often an issue in male-dominated fields regardless of the industry  Further, this study found that retention difficulties become more severe as the share of men in the workforce increased and that affected women’s pay and promotion  Representatives from one company told us another challenge is the lack of Black workers at the top levels, which might make it more difficult for Black employees in particular to see a leadership path  Representatives we interviewed from five technology companies told us they had implemented efforts to increase retention and promotion rates among minority and female workers, for example, by developing a diversity and inclusion newsletter, employee resource groups with executive sponsors, and internal training and classes for employees to improve their readiness to be promoted  Representatives from five technology companies told us that commitment of top leadership is an important factor that can help women and underrepresented minorities in the technology sector  For example, representatives from one company told us that top management support for diversity efforts, such as setting hiring goals, can help move a company in the direction of achieving representation goals and that leadership is very important to this effort  Representatives from several companies told us that there is often a business case for such changes: These companies work in a diverse, global environment and strive to make better products for diverse users  However, our prior work on workforce diversity in the financial services sector found that some diversity initiatives faced challenges gaining the "buy-in" of key employees, such as the middle managers who are often responsible for implementing such programs  According to EEOC officials, EEOC primarily oversees compliance with equal employment opportunity requirements by investigating workers’ individual charges of employment discrimination filed against companies  EEOC has publicly acknowledged the low levels of diversity in the technology sector  However, we were unable to identify a specific number of charges received by EEOC against companies in industries that are part of this sector because EEOC does not require investigators to record the industry of the charged company  EEOC’s database of charges and enforcement actions—the Integrated Mission System (IMS)—has a data field for the North American Industry Classification System (NAICS) industry code, the standard used by federal statistical agencies in classifying business establishments  However, we found that it is completed for only about half the entries in the system  EEOC officials in both the San Francisco and New York district offices told us that, while they cannot readily identify individual charges against technology companies, they believe they have received far fewer charges against technology companies than they would have expected given the public attention to the issue of diversity in the technology sector  In terms of systemic cases, according to EEOC, as of June 2017, the commission had 255 systemic cases pending since fiscal year 2011 involving technology companies (13 of these were initiated as commissioner charges and 8 were directed investigations involving age discrimination or pay parity issues)  Officials from the New York region reported that they had seen an increase in systemic cases against technology companies in the past 3 years, largely involving practices of information technology staffing firms  Several EEOC officials we interviewed noted that technology workers may be initiating few complaints at the federal level due to factors such as fear of retaliation from employers or the availability of other employment or legal options  According to EEOC officials, fear of retaliation can affect charges across sectors and, given the growth in the technology workforce, an individual who feels discriminated against may simply leave the company because there are many other opportunities for individuals with technical skills  They also said that technology workers may generally have greater wealth and can afford to hire private attorneys to sue in state court rather than go through the EEOC  Moreover, they said that some states, including California, have stronger employment discrimination laws that allow for better remedies than federal laws, which could lead employees to file charges at the state level rather than with the EEOC  In addition, EEOC has acknowledged in a 2016 report that binding arbitration policies, which require individuals to submit their claims to private arbiters rather than courts, can also deter workers from bringing discrimination claims to the agency, leaving significant violations in entire segments of the workforce unreported  The report stated that an increasing number of arbitration policies have added bans on class actions that prevent individuals from joining together to challenge practices in any forum  The report concluded that the use of arbitration policies hinders EEOC’s ability to detect and remedy potential systemic violations  Researchers report that the use of such clauses has grown and data on federal civil filings for civil rights employment cases reflect a marked reduction in the number of such filings  Beyond pursuing charges, EEOC has taken some steps to address diversity in the technology sector including research and outreach efforts  In May 2016, citing the technology sector as a source for an increasing number of U S  jobs, EEOC released a report analyzing EEO-1 data on diversity in the technology sector in tandem with a commission meeting raising awareness on the topic  In addition, EEOC’s fiscal year 2017- 2021 Strategic Enforcement Plan identified barriers to hiring and recruiting in the technology sector as a strategic priority  EEOC has also been involved in outreach efforts with the technology sector  For example, the EEOC Pacific Region described more than 15 in-person or webinar events since 2014 in collaboration with OFCCP and local organizations focused on diversity in the technology sector  The topics of these events included equity in pay and the activities of these two agencies in enforcing nondiscrimination laws  Finally, in fall 2016, EEOC initiated an internal working group to identify practices to help improve gender and racial diversity in technology, but as of June 2017 had no progress to report  OFCCP’s regulations require covered federal contractors to take proactive steps to ensure equal employment opportunity  OFCCP annually conducts routine evaluations of selected federal contractors, which includes those in the technology sector, for compliance with federal nondiscrimination and affirmative action requirements  To the extent that technology contractors are selected for evaluation through OFCCP’s normal selection process, these contractors are assessed for compliance with nondiscrimination and affirmative action laws as are other selected contractors  While evaluation of technology contractors occurs in the course of OFCCP’s routine activities, OFCCP does not currently use type of industry as a selection factor, according to officials  We also found that few (less than 1 percent) of OFCCP’s 2,911 closed technology contractor evaluations from fiscal years 2011 through 2016 resulted in discrimination violations, though 13 percent resulted in other violations, such as record- keeping violations and failure to establish an affirmative action program (AAP)  An AAP is a key tool OFCCP requires contractors to complete to ensure equal employment opportunity  The remaining 86 percent of evaluations either found no violations or ended in administrative closure  Technology contractor evaluations that had discrimination violations resulted in back pay, salary adjustments, or other benefits totaling more than $4 5 million for 15,316 individuals (averaging about $300 per award) for fiscal years 2011 through 2016  The vast majority of discrimination violations were on the basis of gender or race/ethnicity rather than disability or veteran status  Corrective actions OFCCP identified for federal technology contractors over this timeframe also included requiring contractors to fill a total of 410 job vacancies as they arise with applicants who had been denied employment on the basis of discrimination  In addition, OFCCP recently filed three complaints against technology companies  According to our analysis, OFCCP conducted evaluations on 36 of the 65 leading technology companies from fiscal year 2011 through fiscal year 2016  During this timeframe there were 272 reviews of establishments— physical business locations—affiliated with these 36 companies  Based on these evaluations, 15 of the 36 companies had administrative violations, and 2 of the 36 also had discrimination violations  As a result of the discrimination findings against these leading technology companies, 541 individuals received monetary benefits totaling $783,387 (an average of $1,448 per award)  In terms of other steps to conduct oversight of the technology sector, OFCCP officials in the Pacific Region said they are hiring compliance officers with legal training to be better able to address needs for reviews in the technology sector, such as responding to lawyers representing technology contractors  Officials in both the Pacific and Northeast regions work closely with statisticians and labor economists on their cases, an effort officials said has increased over the past few years  OFCCP has also requested funding in its fiscal year 2018 congressional budget justification to establish centers in San Francisco and New York that would develop expertise to handle large, complex compliance evaluations in specific industries, including information technology  We found that by not requiring an industry code in its investigations data, EEOC cannot analyze charge data by industry to help identify investigation and outreach priorities, in contradiction to EEOC strategic planning documents and EEOC Inspector General reports, which have emphasized the importance of doing so  By not requiring the use of the NAICS code for each entry in IMS, EEOC is limited in its ability to use these data for the purposes of identifying charges by industry sector and conducting sector-related analyses  Officials were aware of substantial gaps in coding of charges by industry and acknowledged limitations in the commission’s ability to analyze its investigations data by industry  However, officials expressed concern that routinely creating more complete records of the companies against which charges had been filed would require investigators to divert attention from their efforts to investigate charges  EEOC officials explained that the charging party provides initial information on the respondent company and requiring EEOC personnel to generate this information would slow down the process  They said their priority is to investigate individual charges, not to address larger trends or target specific industries  “The Strategic Enforcement Plan recommends using EEOC data to allow our enforcement and outreach efforts to focus on areas of significant concern  This might include tailoring outreach efforts for industries that experience greater likelihood of certain charges or informing enforcement decisions based on knowledge that certain industries have persistent problems, such as harassment  The data maintained in IMS provide a rich resource of information that can be used to explore the characteristics of industries that appear to have higher levels of certain allegations than comparative industries ” In addition, reports completed by the Urban Institute for the EEOC Office of Inspector General in 2013 and 2015 similarly recommended analysis of charge data, including by industry, to help identify priorities and measure performance  While EEOC has plans to review a year of IMS data to clean it and determine how best to add missing industry codes, among other objectives, officials could not provide a specific timeframe for when this review would begin and end  Standards for internal control in the federal government state that management should use quality information to achieve the agency’s objectives and objectives should be defined in specific terms so they are understood at all levels of the entity  This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement  Efforts to scrub these data and identify missing codes could help EEOC determine how to collect industry information on an ongoing basis for all entries  Doing so would also help EEOC determine the level of NAICS code that would be feasible and useful for investigators to identify and input into IMS  Without analyzing its data on charges across industries, EEOC’s ability to proactively identify priorities for its outreach and enforcement resource use is limited  We found that OFCCP also faces challenges that may hinder the agency’s oversight of technology companies  Specifically, OFCCP reported facing delays in receiving information from federal contractors, including technology companies, but has not yet evaluated whether its own policies and practices also impede its efforts to hold federal technology contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups  In addition, OFCCP regulations do not require federal contractors to disaggregate data for the purpose of determining placement goals for hiring, which may hinder contractors’ efforts to implement effective affirmative action programs  OFCCP has not analyzed delays in obtaining information from contractors OFCCP officials told us that they face delays in obtaining complete, accurate, and timely documentation from federal contractors, including technology companies, as part of the compliance review process  They said this limited their access to critical information and hindered OFCCP’s ability to determine whether discrimination had occurred  Officials in the Pacific Region reported that when issues are identified during OFCCP’s initial review that will require additional data, the data requests can be extensive  Consequently, technology contractors are taking longer to submit complete and accurate data that are needed to conduct analyses of the contractor’s workforce  In addition, officials in both the Pacific and Northeast regions reported that companies may not provide raw data as requested, or provide access to employees for OFCCP to interview, which is part of the compliance review process  Using 2015 OFCCP compliance evaluation data, we previously reported that close to 85 percent of contractor establishments across all sectors did not submit an AAP within 30 days of being scheduled for an OFCCP compliance evaluation, as required by OFCCP policy  Officials told us of the potential need for a more flexible set of investigatory tools or sanctions, such as subpoena power to speed up data-gathering or penalties for delays in providing information, in order to obtain accurate and timely information  In the case of incomplete data, OFCCP officials said one option is to enter into an agreement with the contractor whereby the contractor will gather the missing data, and OFCCP will monitor the contractor’s efforts and review detailed records at a later date  However, they said that such an agreement could give the contractor an opportunity to modify the data in the contractor’s favor  Currently, OFCCP’s primary sanction is the threat of debarment, which makes a company ineligible to receive future federal contracts  At the same time, OFCCP officials acknowledged there may additionally be delays in their own review processes  In prior work, we’ve reported concerns by contractors and industry groups about lengthy and expansive OFCCP evaluations  However, OFCCP has not analyzed its data on closed evaluations to assess the cause of delays, which would help determine whether changes should be made to its internal processes or if stronger sanctions to obtain information from contractors are needed  Internal control standards state that management should identify, analyze, and respond to risks related to achieving its objectives  Further, it states that management should design appropriate mechanisms to enforce its directives to achieve those objectives and address related risks  Without more information on the root cause of the delays, these delays may continue, straining resources and inhibiting OFCCP’s efforts to identify potential discrimination  “An affirmative action program is a management tool designed to ensure equal employment opportunity  A central premise underlying affirmative action is that, absent discrimination, over time a contractor’s workforce, generally, will reflect the gender, racial and ethnic profile of the labor pools from which the contractor recruits and selects  Affirmative action programs contain a diagnostic component which includes a number of quantitative analyses designed to evaluate the composition of the workforce of the contractor and compare it to the composition of the relevant labor pools  Affirmative action programs also include action- oriented programs  If women and minorities are not being employed at a rate to be expected given their availability in the relevant labor pool, the contractor’s affirmative action program includes specific practical steps designed to address this underutilization ” “The placement goal-setting process       contemplates that contractors will, where required, establish a single goal for all minorities  In the event of a substantial disparity in the utilization of a particular minority group or in the utilization of women or women of a particular minority group, a contractor may be required to establish separate goals for those groups ” According to OFCCP officials, a contractor may be required to establish separate goals for particular minority groups as part of a compliance review  We found, however, that OFCCP’s regulations do not require federal contractors to disaggregate demographic data for the purpose of establishing placement goals in their AAP  This may hinder their efforts to implement effective AAPs, which are designed to assist the company in achieving a workforce that reflects the gender, racial, and ethnic profile of the labor pools from which the contractor recruits and selects  OFCCP officials in headquarters and in the field said, based on their experience evaluating companies’ compliance, it was not common for companies to have placement goals disaggregated by race and ethnicity in their AAPs  A diversity and inclusion officer we interviewed from one large technology contractor noted that the requirement in the AAP to identify the need for placement goals for minorities as a whole does not address underrepresentation in certain minority groups  According to the officer, the company does not count Asian workers in setting the company’s diversity goals because Asians are well represented and the company believes it should set a placement goal for groups for which the company knows it needs to make progress  Citing comments received during development of other regulations, OFCCP officials cautioned that an analysis of utilization disaggregated by race/ethnicity may be more challenging for smaller companies with fewer employees  Further, looking at trends in diversity for minorities as a whole may not assist a company’s affirmative action efforts to identify groups that need particular outreach or support  Specifically, our analysis of workforce data found differences in representation for Black and Hispanic workers in the technology workforce compared to Asian workers  Under the current AAP regulations, companies may opt not to detect and address underrepresentation of particular minority groups since OFCCP does not require placement goals disaggregated by race/ethnicity  While OFCCP may be able to detect underrepresentation of particular minority groups during its reviews, the office reviews only 2 percent of federal contractor establishments each year  OFCCP officials said that they would need to amend their regulations in order to require disaggregated race/ethnicity information for placement goals on AAPs  The officials said disaggregating race in placement goals could help an establishment determine how to tailor outreach accordingly or better identify impediments to its equal employment opportunity efforts  However, they have not pursued this regulatory change because of competing priorities on their regulatory agenda  OFCCP’s mission includes holding federal contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups  However, not requiring contractors to set placement goals for each minority group may hinder OFCCP’s ability to effectively achieve this mission  OFCCP has not reviewed key aspects of its current approach to evaluations OFCCP officials report the agency intends to incorporate additional information on gender, racial, and ethnic disparities by industry into its compliance evaluation selection process, but we found the methodology to determine the disparities may have weaknesses  We have previously reported on the challenges OFCCP faces with its enforcement efforts, and identified additional areas that may limit OFCCP’s enforcement of federal contractors’ equal employment and affirmative action efforts  For example, our 2016 report found that OFCCP’s weak compliance evaluation selection process, reliance on voluntary compliance, and lack of staff training create several challenges to its enforcement efforts  This report found that because OFCCP was not able to identify which factors are associated with risk of noncompliance, the agency does not have reasonable assurance that it is focusing its efforts on those contractors at greatest risk of not following nondiscrimination or affirmative action requirements  OFCCP agreed with recommendations we made to address these areas and detailed steps the agency would take  In particular, to strengthen its compliance evaluation process to select contractors at greatest risk of potential discrimination, the agency stated that it planned to incorporate information on pay disparities and employment disparities  OFCCP officials indicated this information would be based on analysis of gender and race/ethnicity by industry using ACS data and EEO-1 compensation data that was to be collected beginning March 2018  However, in August 2017, the Office of Management and Budget issued a memo suspending the pay-related data collection aspects of the EEO-1 form  Despite this change, OFCCP officials said they are exploring other options for focusing on compensation disparities by industry, including through the use of ACS data, administrative data, a previous study conducted by the Department of Labor, as well as options proposed by contractors  We also found OFCCP’s current methodology for identifying disparities by industry with the ACS data may have some weaknesses that could affect the accuracy of the outcomes  For example, its reliance on the broadest industry level available may not sufficiently identify specific industries at elevated risk  Further, the methodology includes future plans to conduct the analysis for metropolitan areas  Given the importance of regional and local labor markets for assessing affirmative action efforts, regional and local analysis should also be completed before OFCCP incorporates this analysis into its selection process  It is important that OFCCP use reliable information in modifying its basic processes and setting priorities  For the reasons cited earlier regarding the importance of using quality information to make management decisions, it is important that OFCCP assess the quality of the methods for its analysis of employment disparities among industries  Without doing so, OFCCP may not accurately identify industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements so it can focus its limited investigation resources most effectively  Further, according to OFCCP officials, although the agency has made slight changes to various thresholds and factors for its selection process, the agency has not made any significant changes to the selection process for about 10 years, and has made no changes to its establishment-based approach since OFCCP was founded in 1965  While OFCCP currently grounds its review of a contractor in a particular physical establishment, OFCCP officials acknowledged the changing nature of a company’s work can involve multiple locations and corresponding changes in the scope of hiring and recruitment  Officials we interviewed from five of our eight selected technology companies discussed their work spread across locations, including the United States or overseas, and the related challenges they face with OFCCP’s establishment-based approach to reviews  One company representative said the AAP is not useful because site specific plans do not connect to business decisions  However, OFCCP has not reviewed the implications for the effectiveness of its mission of continuing with its establishment-based approach to conducting compliance evaluations  In addition, OFCCP officials acknowledged their inability, in identifying establishments for review, to consistently identify and include all subcontractors to which OFCCP rules should apply  They said the agency has not assessed the potential significance of any omissions of subcontractors from the oversight process  Internal control standards state that management should identify risks throughout the entity related to achieving its defined objectives to form a basis for designing risk responses, as well as the importance of periodically reviewing policies, procedures and related control activities for continued relevance and effectiveness in achieving the agency’s objectives  OFCCP officials said they have informally discussed how to adjust their work based on how work is performed in today’s economy—with virtual sites, workplace flexibilities, and nontraditional forms of employment  However, due to competing priorities, they have not conducted a formal review of these key aspects of its current approach to selecting entities for review  They acknowledged such a review would be useful  Without assessing its current approach to its establishment-based reviews and identification of all relevant subcontractors, OFCCP does not have reasonable assurance that its approach can identify discrimination occurring within the companies it oversees and may be missing opportunities to identify more effective practices or adjust its methods to external changes  While OFCCP has offered an option—the Functional Affirmative Action Program (FAAP)—for companies to move away from establishment- based reviews and which may be more appropriate for some multi– establishment contractors, uptake has been low and the agency has not conducted an evaluation of this program  Since 2002, OFCCP has allowed companies to create FAAPs, with OFCCP approval, which are based on a business function or unit that may exist at multiple establishments  As of May 2017, 73 companies across all industries had FAAPs in place  Further, some of the companies we interviewed were unaware that the FAAP was an option or believed it was cumbersome to establish given the complexity of their workforce  Asked why the FAAP has not been more broadly adopted, OFCCP officials hypothesized it could have to do with a requirement intended to ensure that companies with FAAPs would be reviewed at least as often as others, but that may result in these companies being reviewed more often than most  Standards for internal control for government agencies state that management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives  Reviewing and refining the FAAP program could help OFCCP improve its ability to achieve its objectives and may provide broader insight for OFCCP’s overall enforcement approach  Jobs in the high paying technology sector are projected to grow in coming years  Female, Black, and Hispanic workers, however, comprised a smaller proportion of technology workers compared to their representation in the general workforce from 2005 through 2015, and have also been less represented among technology workers inside the technology sector than outside it  Both EEOC’s and OFCCP’s mission is to combat discrimination and support equal employment opportunity for U S  workers; however, weaknesses in their processes impact the effectiveness of their efforts  When conducting investigations, EEOC has not been consistently capturing information on industry codes  This impedes its ability to conduct industry sector analysis that could be used to more effectively focus its limited enforcement resources and outreach activities  Similarly, OFCCP faces delays in its compliance review process but it has not analyzed its closed evaluations to understand the causes of these delays and whether its processes need to be modified to reduce them  In addition, as part of their affirmative action programs federal contractors are only required to set placement goals for all minorities in general  By not requiring contractors to disaggregate demographic data for the purpose of establishing placement goals, OFCCP has limited assurance that these contractors are setting goals that will address potential underrepresentation in certain minority groups  Further, OFCCP plans to incorporate information on disparities by industry into its process for selecting establishments for compliance evaluations, but has not fully assessed its planned methods  Without such assessment, OFCCP may use a process that does not effectively identify the industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements  In addition, key aspects of OFCCP’s approach to compliance reviews of contractors’ affirmative action efforts have not changed in over 50 years, whereas the structure and locations of these companies’ work have changed  Finally, although OFCCP has developed an alternative affirmative action program for multi-establishment contractors, few contractors participate in this program  Because OFCCP has not evaluated the program, it does not have information to determine why there has not been greater uptake and whether it provides a more effective alternative to an establishment-based AAP  We are making a total of six recommendations, including one to EEOC and five to OFCCP  Specifically: The Chair of the EEOC should develop a timeline to complete the planned effort to clean IMS data for a one-year period and add missing industry code data  (Recommendation 1) The Director of OFCCP should analyze internal process data from closed evaluations to better understand the cause of delays that occur during compliance evaluations and make changes accordingly  (Recommendation 2) The Director of OFCCP should take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities, incorporating any appropriate accommodation for company size  For example, OFCCP could provide guidance to contractors to include more specific goals in their AAP or assess the feasibility of amending their regulations to require them to do so  (Recommendation 3) The Director of OFCCP should assess the quality of the methods used by OFCCP to incorporate consideration of disparities by industry into its process for selecting contractor establishments for compliance evaluation  It should use the results of this assessment in finalizing its procedures for identifying contractor establishments at greatest risk of noncompliance  (Recommendation 4) The Director of OFCCP should evaluate the current approach used for identifying entities for compliance review and determine whether modifications are needed to reflect current workplace structures and locations or to ensure that subcontractors are included  (Recommendation 5) The Director of OFCCP should evaluate the Functional Affirmative Action Program to assess its usefulness as an effective alternative to an establishment-based program, and determine what improvements, if any, could be made to better encourage contractor participation  (Recommendation 6) We provided a draft of this report to the Departments of Labor (DOL), Commerce, the Equal Employment Opportunity Commission (EEOC) and the National Science Foundation (NSF)  We received written comments from DOL that are reproduced in appendix V  In addition, DOL, Commerce, EEOC, and NSF provided technical comments which we incorporated into the report as appropriate  DOL agreed with 4 of the 5 recommendations we made to improve oversight of federal contractors, and identified some steps it plans to take to implement them  Specifically, the department agreed with our recommendations to analyze internal process data to better understand the cause of delays that occur during compliance evaluations, assess the quality of methods used to incorporate consideration of disparities by industry into the process to select contractors for review, and to evaluate its current approach to identifying entities for review in light of changes in workplace structures, as well as its Functional Affirmative Action Program  DOL stated that it appreciated, but neither agreed nor disagreed, with our recommendation to take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities  The department said this would require a regulatory change with little immediate benefit as contractors are already required to collect demographic data on each employee and applicant, and must conduct in- depth analyses of their total employment processes to identify where impediments to equal opportunity exist  While we acknowledge these data collection requirements for federal contractors, we remain concerned that without requiring contractors to also establish placement goals to address any underrepresentation for specific minority groups, contractors may not develop objectives or targets to make affirmative action efforts work  We maintain, therefore, that DOL should take steps toward requiring contractors to develop placement goals disaggregated by race/ethnicity  EEOC provided us a memo that it characterized as technical comments on the draft report  In these comments, EEOC neither agreed nor disagreed with our recommendation to develop a timeline to complete its planned effort to clean IMS data for a one-year period, which would include adding missing industry codes, but stated that it was taking some actions to enhance these data  We continue to maintain a timeline should be developed to complete this review, which is needed for the commission to conduct industry sector analysis that could be used to more effectively focus its limited resources and outreach activities  EEOC also emphasized the importance of systemic investigations, noting that while outreach may be somewhat useful in generating charges, individual charges are unlikely to make a substantial impact on a systemic practice affecting an entire employment sector  We maintain that the ability to analyze IMS data by industry could help EEOC to focus its resource use, including for systemic investigations  EEOC also noted staffing and resource constraints as issues faced by the commission  As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the appropriate congressional committees, the Secretary of Labor, the Chair of the Equal Employment Opportunity Commission, the Secretary of Commerce, and the Director of the National Science Foundation  In addition, the report will be available at no charge on GAO’s website at http://www gao gov  If you or your staff should have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix VI  Our two objectives were to: (1) identify the demographic trends in the technology workforce over the past 10 years, and (2) assess the efforts by the U S  Equal Employment Opportunity Commission (EEOC) and the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) to oversee technology companies and technology contractors’ compliance with equal employment opportunity and affirmative action requirements  This appendix provides details of the data sources used to answer these questions, the analyses we conducted, and any limitations we encountered  There is no commonly accepted definition of the technology sector or technology-oriented occupations  To arrive at our definition for the technology sector, we identified industries with the highest concentration of technology-oriented occupations, a similar approach to what other federal agencies have used recently to analyze trends within this sector  To identify technology-oriented occupations, we reviewed relevant research and interviewed researchers and other individuals knowledgeable about the technology sector  Based on this research, we defined technology-oriented occupations to include all computer, engineering and mathematical occupations, including managers  We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and crosswalked those occupations to the corresponding U S  Census Bureau occupation codes to conduct our analysis  (For a complete list of the occupations we included as technology occupations, see appendix II)  We defined the technology sector as a group of industries with the highest concentration of technology workers  Using data from the American Community Survey, an ongoing national survey conducted by the U S  Census Bureau that collects information from a sample of households, we identified the 15 industries with the highest concentration of technology workers  For this analysis, we used Census industry codes since we used this dataset for many of our analyses  The concentration of technology workers in these industries ranged from a high of 62 2 percent in the computer systems design and related services industry to a low of 19 33 percent in the wired telecommunications carriers industry (see table 3)  Companies in the technology sector also employ non-technical workers, such as sales people  We cross-walked the industries we identified in the American Community Survey with corresponding industry codes from the North American Industry Classification System (NAICS), which is the standard used by federal statistical agencies in classifying business establishments  The other data sets used in this review use NAICS codes to identify industry  The NAICS system has six levels of industry classification, with the smallest level (2-digit code) providing the most general industry classification, and the largest (6-digit) providing the most specific classification  In total, we identified 55 6-digit NAICS industry codes that comprise the technology sector using this method  (See appendix III for a list of the 6-digit NAICS codes and industry names that correspond to the Census industries we identified ) We compared our list of industries to those included in the 2016 reports by EEOC and the BLS on the technology sector  While each report includes a somewhat different set of industries depending on the authors’ particular definition of technology occupations, most of the 15 industries we selected overlap with industries selected in these other reviews  Stemming from their particular focus, these reports included some additional industries and/or occupations excluded from our analysis, such as those in the life sciences  We also compared our findings on the demographic trends in the technology workforce to 2016 EEOC and Census Bureau reports that reviewed diversity in the technology sector  Despite the definitional and methodological variations, the demographic trends found in these other reports were generally comparable to our findings  To determine the demographic trends in the technology workforce over the past decade, we analyzed quantitative data on technology workers within and outside the technology sector from 2005 through 2015 from the Census Bureau’s Public Use Microdata Sample of the American Community Survey (ACS) for the years 2005, 2007, 2009, 2011, 2013, and 2015  ACS is an ongoing national survey that collects information from a sample of households  We analyzed trend data for gender, race, and ethnicity, and median salary by occupation and sector, and analyzed point-in-time data on educational background by occupation  We analyzed the percentage of technology workers who earned bachelor’s degrees in computer, engineering, mathematics, and technology fields  For median salary, we analyzed data for workers who were employed full-time, which included those who, over the past 12 months, reported usually working 35 hours or more per week and 50 weeks or more per year, and those with wages greater than zero  To account for the sample representation and design used in the ACS, we used the person weight present in the ACS data  We used the successive difference replication method to estimate the standard errors around any population estimate  For each comparison, we tested the statistical significance of the difference for men and women and for specific racial and ethnic groups at the p-value <0 05 level  In addition, we tested the statistical significance of the change between 2005 and 2015 for each gender and racial/ethnic group  For race categories using ACS data in this report, we included only non- Hispanic members of White, Black, Asian, and Other categories  For the Asian category, we included Asian American, Native Hawaiian or Other Pacific Islander  The Hispanic category incorporated Hispanics of all races  Our analysis included American Indian or Alaskan Native, and Two or More Races, in the category reported as “Other ” We assessed the reliability of the ACS generally and of data elements that were critical to our analyses and determined that they were sufficiently reliable for our analyses  Specifically, we reviewed documentation on the general design and methods of the ACS and on the specific elements of the ACS data that were used in our analysis  We interviewed Census Bureau officials knowledgeable about the ACS data and completed our own electronic data testing to assess the accuracy and completeness of the data used in our analyses  To determine workforce trends in companies within the technology sector and at leading information technology companies, we analyzed data from EEOC’s Employer Information Reports (EEO-1) for the years 2007, 2011, and 2015  We report EEO-1 data starting in 2007 because EEOC made significant changes to its requirements related to the reporting of EEO-1 data over time  For example, beginning in 2007, EEOC changed its requirements related to the reporting of data on managers and changed its practices for collecting certain racial/ethnicity information  EEO-1 reports contain firm-level data that is annually submitted to EEOC, generally by private-sector firms with at least 100 employees or federal contractors with at least 50 employees that have a contract, subcontract or purchase order amounting to $50,000 or more  Companies that fit the above criteria submit separate EEO-1 reports for their headquarters as well as each establishment facility  EEOC requires employers to use the North American Industry Classification System (NAICS) to classify their industry  To identify trends using EEO-1 data for workers, we analyzed data for companies with the NAICS codes we initially identified as technology industries  We selected the leading information technology companies using Standard & Poor’s (S&P) 500 Information Technology Index list, which identifies the largest public information technology companies at a given time  In October 2016, this list consisted of 67 companies in the world that have stocks trading with the United States, and we analyzed EEO-1 data from 65 of these companies  For both analyses, we analyzed EEO-1 data from all job categories by gender, race and ethnicity, and industry sectors  For job categories, the EEO-1 form collects data on 10 major job categories including 1) Executives, Senior Level Officials and Managers; 2) First/Mid-Level Officials and Managers; 3) Professionals; 4) Technicians; 5) Sales Workers; 6) Administrative Support Workers; 7) Craft Workers; 8) Operatives; 9) Laborers and Helpers; and 10) Service Workers  In our analysis, “all other jobs” combines sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers  We used the race/ethnicity categories used by the EEOC as follows: White, Black or African American, Asian (including Native Hawaiian or Other Pacific Islander), Hispanic or Latino, and “Two or more Races” (including American Indian or Alaska Native)  We assessed the reliability of the EEO-1 data and determined that despite limitations, they were sufficiently reliable for our analyses  To determine the reliability of the EEO-1 data that we received from EEOC, we interviewed knowledgeable EEOC officials, reviewed relevant documents provided by agency officials and obtained on its website, and performed manual data testing for missing variables  For our analysis of technology degree earners, we used degree completion data tabulated by the National Science Foundation from the National Center for Education Statistics’ Integrated Postsecondary Education Data System (IPEDS) for the year 2014  Using a variety of sources, such as academic research and interviews with representatives from academia, we defined technology-related fields as degree programs in computer science, engineering, and mathematics  We analyzed IPEDS data by race and gender and who had obtained a bachelor’s or master’s degree in technology-related fields  We determined that the potential external candidates for technology positions generally had obtained either a bachelor’s or a master’s degree in a technology-related field  We used the race/ethnicity categories used by IPEDS as follows: White, Black, Asian (including Pacific Islander), Hispanic, and Multiracial or other (which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i e  respondents who selected one or more racial designations)  Race and ethnicity breakouts are for U S  citizens and permanent residents only, and thus do not include data on temporary residents  The analysis by gender includes temporary residents  To determine the reliability of IPEDs data, we reviewed relevant documents obtained on the National Center for Education Statistics website, such as annual methodology reports and the handbook of NCES survey methods  We determined that data from IPEDs were sufficiently reliable for our purposes  To identify how EEOC and OFCCP have overseen technology companies’ compliance with federal equal opportunity and affirmative action requirements, we reviewed relevant federal statutes and regulations, EEOC and OFCCP policies, strategic planning documents, and operational manuals  We interviewed EEOC and OFCCP officials in headquarters, and in two regional locations selected based on the large proportion of technology companies in those areas  At EEOC, we met with officials from the San Francisco and New York district offices  At OFCCP, we met with officials from the Pacific and Northeast regional offices  To explore charges of discrimination filed with the EEOC against technology companies, we planned to analyze data from the EEOC Integrated Mission System (IMS), which contains records on EEOC charges and enforcement activities  However, since industry code is not a mandatory field for investigators to complete, roughly half the entries did not have an industry code  Therefore, we could not reliably identify technology companies that have faced charges or enforcement  We attempted to match information we had developed on federal technology contractors with charges filed in the IMS database  Depending on the matching method we used, this yielded very different results and we determined this was not a sufficiently reliable method  Further, any matching method we used would have excluded technology companies that did not hold a federal contract  To obtain information on evaluations of technology contractors completed by OFCCP and complaints received against technology contractors, we took a two-step approach  First, using the Federal Procurement Data System–Next Generation (FPDS-NG), we developed a list of company establishments and their subsidiaries that received federal contract obligations in fiscal years 2011-2015 under any of the 55 NAICS codes we included above as technology industries  We selected only company establishments that received 50 percent or more of their total federal contract obligations under these NAICS codes  Each establishment was counted only once regardless of how many federal contracts it received during the time period  Using this method, we identified 43,448 establishments in our pool of “technology contractors ” To identify subsidiaries, which are also subject to OFCCP requirements and evaluations, we identified any other establishments that shared the global vendor code with the contractors we identified, regardless of their NAICS code  This yielded 2,116 additional contractors  Second, we matched the names (removing suffixes) of the technology contractors and their subsidiaries that we identified in FPDS-NG against OFCCP’s data on their evaluations of contractors to identify the evaluations of technology contractors that OFCCP opened and completed from fiscal year 2011 through fiscal year 2016  We conducted a similar matching exercise to identify the complaints OFCCP received against technology companies  In addition, we identified which of the leading technology companies had completed evaluations between fiscal year 2011 through 2016  We obtained information during interviews with researchers, and representatives of workforce and industry organizations and associations  In addition, we interviewed diversity and compliance representatives of eight of the leading information technology companies located in the San Francisco Bay area which were also federal contractors to discuss their efforts to increase diversity and to gain their perspectives on the federal role in overseeing compliance with nondiscrimination laws  These companies were: Cisco Systems, Inc  Facebook, Inc  Google Inc  Hewlett Packard Enterprise Company Intuit Inc  Oracle America, Inc  This is the list of technology occupations that we used in our analyses  We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and cross- walked those occupations to the corresponding U S  Census Bureau occupation codes  This is the list of the 55 6-digit North American Industry Classification System (NAICS) codes we identified as technology-related industries  To develop this list, we identified the 15 industries with the highest concentration of technology workers using U S  Census Bureau industry codes and then used the U S  Census Bureau’s 2012 Industry Code List for Household Surveys to crosswalk the Census codes with NAICS codes  In addition to the contact named above, Betty Ward-Zukerman (Assistant Director), Kate Blumenreich (Analyst-in-Charge), Sheranda Campbell, Julianne Hartmann Cutts, Clarita Mrena, Moon Parks, Alexandra Rouse, and John Yee made significant contributions to all phases of the work  Also contributing to this report were Rachel Beers, James Bennett, Hedieh Fusfield, Julia Kennon, Jean McSween, Jessica Orr, Dae Park, James Rebbe, Almeta Spencer, and Alexandra Squitieri 


Report 2: " It added that its reliance on an ad hoc approach "scrutinizing the limited number of specific industries during a year, while worthwhile, leaves unexamined many deserving industries for updating and may create over time a set of illogical size standards " The SBA announced that it would begin its analysis of its size standards by assuming that "$6 5 million [later increased to $7 5 million] is an appropriate size standard for those industries with receipts size standards and 500 employees for those industries with employee size standards " It would then analyze the following industry characteristics: "average firm size; average asset size (a proxy for startup costs); competition, as measured by the market share of the four largest firms in the industry; and, the distribution of market share by firm size—that is, are firms in the industry generally very small firms, or dominated by very large firms " Then, before making its final determination on the size standard, it would "examine the participation of small businesses in federal contracting and SBA's guaranteed loan program at the current size standard level  Depending on the level of small business participation, additional consideration may be given to the level of the current size standard and the analysis of industry factors " In April 2009, the SBA announced that was simplifying the administration and use of its size standards by reducing the number of receipts based size standards from 31 to 8 when establishing a new size standard or reviewing an existing size standard: For many years, SBA has been concerned about the complexity of determining small business status caused by a large number of varying receipts based size standards (see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December 31, 1992))  At the start of current comprehensive size standards review, there were 31 different levels of receipts based size standards  They ranged from $0 75 million to $35 5 million, and many of them applied to one or only a few industries  The SBA believes that to have so many different size standards with small variations among them is unnecessary and difficult to justify analytically  To simplify managing and using size standards, SBA proposes that there be fewer size standard levels  This will produce more common size standards for businesses operating in related industries  This will also result in greater consistency among the size standards for industries that have similar economic characteristics  Under the current comprehensive size standards review, SBA is proposing to establish eight "fixed-level" receipts based size standards: $5 0 million, $7 0 million, $10 0 million, $14 0 million, $19 0 million, $25 5 million, $30 0 million, and $35 5 million  These levels are established by taking into consideration the minimum, maximum and the most commonly used current receipts based size standards  These eight receipts based size standards were increased to $5 5 million, $7 5 million, $11 0 million, $15 0 million, $20 5 million, $27 5 million, $32 5 million, and $38 5 million in 2014 to account for inflation  The SBA also announced that it would use eight employee based size standards when establishing a new size standard or reviewing an existing size standard (no more than 50, 100, 150, 200, 250, 500, 750, and 1,000 employees) instead of seven (no more than 50, 100, 150, 500, 750, 1,000, and 1,500 employees); and continue to use one asset based size standard, one megawatt hours size standard (based on electrical output over the preceding fiscal year), and one size standard based on a combination of the number of employees and barrel per day refining capacity  The SBA also announced that "to simplify size standards further" it "may propose a common size standard for closely related industries " The SBA argued although the size standard analysis may support a separate size standard for each industry, SBA believes that establishing different size standards for closely related industries may not always be appropriate  For example, in cases where many of the same businesses operate in the same multiple industries, a common size standard for those industries might better reflect the Federal marketplace  This might also make size standards among related industries more consistent than separate size standards for each of those industries  Because SBA size standards remain in force until after they are reviewed, the number of size standards did not immediately drop from 41 to 19 in 2009  Instead, the number of size standards began to decline gradually as new size standard final rules were issued  In addition, from 2010 through 2016, the SBA decided, in most instances, not to lower size standards (which would have made it more difficult for businesses to qualify) even if the data supported lowering them because unemployment at that time was relatively high and doing so would "run counter to numerous Congressional and Administration's initiatives and programs to create jobs and boost economic growth " As a result of this policy decision, several size standards that would have otherwise been eliminated remained in place  Also, in 2016, the SBA added a new employee based size standard (no more than 1,250 employees) and reinstated the use of another (no more than 1,500 employees) when establishing a new, or revising an existing, size standard  The SBA's decisions in 2009 to reduce the number of receipts based size standards and to propose a common size standard for closely related industries were opposed by some industry groups  They argued that these policies could lead to the SBA to classify an industry "for the sake of convenience" into a size standard that the agency's own economic analysis indicates should be in a different (easier to qualify) size standard  Congress adopted legislation in 2013 ( P L  112-239 , National Defense Authorization Act for Fiscal Year 2013) that included provisions directing the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification  The SBA currently has 27 SBA industry size standards in effect (16 receipts based size standards, 9 employee based sized standards, 1 asset based size standard, and 1 size standard based on a combination of the number of employees and barrel per day refining capacity)  That number is expected to increase given the SBA's directive not to limit the number of size standards  As mentioned previously, P L  111-240 requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards during the 18-month period beginning on the date of enactment (September 27, 2010) and during every 18-month period thereafter  The act directs the SBA to "make appropriate adjustments to the size standards" to reflect market conditions, and to report to the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship and make publicly available "not later than 30 days" after the completion of each review information regarding the factors evaluated as part of each review, the criteria used for any revised size standard, and why the SBA did, or did not, adjust each size standard that was reviewed  The act also requires the SBA to ensure that each industry size standard is reviewed at least once every five years  On July 7, 2011, the SBA announced that its "comprehensive review of all small business size standards" would begin with the following six industries: Educational Services (final rule was issued on September 24, 2012); Health Care and Social Assistance Services (final rule was issued on September 24, 2012); Real Estate Rental and Leasing (final rule was issued on September 24, 2012); Administrative and Support, Waste Management and Remediation Services (final rule was issued on December 6, 2012); Information (final rule was issued on December 6, 2012); and Utilities (final rule was issued on December 23, 2013)  The SBA subsequently completed size standard reviews for all industries in January 2016 (listed by when the final rule was issued): Professional, Scientific and Technical Services (final rule was issued on February 24, 2012); Transportation and Warehousing (final rule was issued on February 24, 2012); Agriculture, Forestry, Fishing and Hunting (final rule was issued on June 20, 2013); Arts, Entertainment, and Recreation (final rule was issued on June 20, 2013); Finance and Insurance (final rule was issued on June 20, 2013); Management of Companies (final rule was issued on June 20, 2013); Support Activities for Mining (final rule was issued on June 20, 2013); Construction (final rule was issued on December 23, 2013); Wholesale Trade (final rule was issued on January 25, 2016); Industries with Employee Based Size Standards not Part of Manufacturing, Wholesale Trade, or Retail Trade (final rule was issued on January 26, 2016); and Manufacturing (final rule was issued on January 26, 2016)  A summary of the final rules issued for each industry is provided in Table A-1   During the first five-year review cycle, the SBA increased 621 size standards, decreased 3 (to exclude potentially dominant firms from being considered small), and retained 388 at their pre-existing levels  Of the 388 retained size standards, 214 were retained based on the results of the SBA's economic analysis and 174 were retained based on the SBA's policy of generally not lowering any size standard, even though the results of the economic analysis supported lowering them, due to national economic conditions  The SBA has started its second five-year review of its size standards and anticipates issuing its first final rules in the second five-year review cycle in 2019, using new size standard methodology announced in April 2018 (discussed in the next section)  The SBA also announced in April 2018 that its policy of generally not lowering size standards when the analysis indicates that a lower standard is justified would no longer be in force, at least initially, during the second five-year review cycle: the decision to raise, lower, or retain a size standard will primarily be driven by analytical results, with due considerations of public comments, impacts of changes on the affected businesses, and other factors SBA considers important  All of these decisions will be detailed in individual rulemakings  It will take several years to complete the five-year review of all size standards … during which the state of the economy may change  It is, therefore, not possible to state now … what impact, if any, the future economic environment would have on the SBA's policy decision regarding size standards  As mentioned earlier, the SBA, relying on statutory language, defines a small business as a concern that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis  The business may be a sole proprietorship, partnership, corporation, or any other legal form  The SBA uses two measures to determine if a business is small: industry specific size standards or a combination of the business's net worth and net income  For example, the SBA's Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the SBA's size standard for the industry in which the applicant is primarily engaged, or an alternative net worth and net income based size standard which has been established for the SBIC program  The SBIC's alternative size standard is currently set as a maximum net worth of not more than $19 5 million and average after-tax net income for the preceding two years of not more than $6 5 million  All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard  The SBA decided to apply the net worth and net income measures to the SBIC program "because investment companies evaluate businesses using these measures to decide whether or not to make an investment in them " Businesses participating in the SBA's 504/Certified Development Company (504/CDC) loan guaranty program are to be deemed small if they did not have a tangible net worth in excess of $8 5 million and did not have an average net income in excess of $3 million after taxes for the preceding two years  As discussed below, P L  111-240 increased these threshold amounts on an interim basis to not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes for the two full fiscal years before the date of the application  All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard  Also, before May 5, 2009, businesses participating in the SBA's 7(a) loan guaranty program, including its express programs, were deemed small if they met the SBA's size standards for firms in the industries described in NAICS  Using authority provided under P L  111-5 , the American Recovery and Reinvestment Act of 2009, the SBA temporarily applied the 504/CDC program's size standards as an alternative for 7(a) loans approved from May 5, 2009, through September 30, 2010  Firms applying for a 7(a) loan during that time period qualified as small using either the SBA's industry size standards or the 504/CDC program's size standard  The provision's intent was to enhance the ability of small businesses to access the capital necessary to create and retain jobs during the economic recovery  P L  111-240 made the use of alternative size standards for the 7(a) program permanent  The act directs the SBA to establish an alternative size standard for both the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards  The act also establishes, until the date on which the alternative size standard is established, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application  The SBA Administrator has the authority to establish and modify size standards for particular industries  Overall, about 97% of all employer firms qualify as small under the SBA's size standards  These firms account for about 30% of industry receipts  The SBA generally "prefers to use average annual receipts as a size measure because it measures the value of output of a business and can be easily verified by business tax returns and financial records " However, historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small  Before a proposed change to the size standards can take effect, the SBA's Office of Size Standards (OSS) undertakes an analysis of the change's likely impact on the affected industry, focusing on the industry's overall degree of competition and the competitiveness of the firms within the industry  The analysis includes an assessment of the following four economic factors: "average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms " The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors "as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses " The specifics of SBA's size standards methodology have evolved over the years with the availability of new industry and federal procurement data and staff research  For example, the SBA previously presumed less than $7 0 million (increased to less than $7 5 million in 2014 to account for inflation) as an appropriate "anchor" size standard for the services, retail trade, construction, and other industries with receipts based size standards; 500 or fewer employees as an appropriate anchor size standard for the manufacturing, mining and other industries with employee based size standards; and 100 or fewer employees as an appropriate anchor size standard for the wholesale trade industries  These three anchor size standards were used as benchmarks or starting points for the SBA's economic analysis  To the extent an industry displayed "differing industry characteristics," a size standard higher, or in some cases lower, than an anchor size standard was used  In April 2018, the SBA replaced the "anchor" approach with a "percentile" approach, primarily because the anchors were no longer representative of the size standards being used (just 24% of industries with receipt-based size standards and 22% of those with employee based size standards have the anchor size standards) and the anchor approach entails "grouping industries from different NAICS sectors thereby making it inconsistent with section 3(a)(7) of the [Small Business] Act," which limits the SBA's ability to create common size standards by grouping industries below the 4-digit NAICS level  Specifically, when assessing the appropriateness of the current size standards, the SBA now evaluates the structure of each industry in terms of four economic characteristics or factors, namely average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms using the Gini coefficient  For each size standard type     SBA ranks industries both in terms each of the four industry factors and in terms of the existing size standard and computes the 20 th percentile and 80 th percentile values for both  SBA then evaluates each industry by comparing its value for each industry factor to the 20 th percentile and 80 th percentile values for the corresponding factor for industries under a particular type of size standard  If the characteristics of an industry under review within a particular size standard type are similar to the average characteristics of industries within the same size standard type in the 20 th percentile, SBA will consider adopting as an appropriate size standard for that industry the 20 th percentile value of size standards for those industries  For each size standard type, if the industry's characteristics are similar to the average characteristics of industries in the 80 th percentile, SBA will assign a size standard that corresponds to the 80 th percentile in the size standard rankings of industries  A separate size standard is established for each factor based on the amount of differences between the factor value for an industry under a particular size standard type and 20 th percentile and 80 th percentile values for the corresponding factor for all industries in the same type  Specifically, the actual level of the new size standard for each industry factor is derived by a linear interpolation using the 20 th percentile and 80 th percentile values of that factor and corresponding percentiles of size standards  Each calculated size standard will be bounded between the minimum and maximum size standards levels [see Table 2 ]     the calculated value for a receipts based size standard for each industry factor is rounded to the nearest $500,000 and the calculated value for an employee based size standard is rounded to the nearest 50 employees for Manufacturing and industries in other sectors (except Wholesale and Retail Trade) and to the nearest 25 employees for employee based size standards for Wholesale Trade and Retail Trade  The SBA anticipates that its shift from using the anchor approach to the percentile approach will have minimal impact, both in terms of the direction and magnitude of changes, to its industry size standards  Any changes to size standards must follow the rulemaking procedures of the Administrative Procedure Act  A proposed rule changing a size standard is first published in the Federal Register , allowing for public comment  It must include documentation establishing that a significant problem exists that requires a revision of the size standard, plus an economic analysis of the change  Comments from the public, plus any other new information, are reviewed and evaluated before a final rule is promulgated establishing a new size standard  The SBA currently uses employment size to determine eligibility for 505 of 1,036 industries (48 6%), including all 360 manufacturing industries, 24 mining industries, and 71 wholesale trade industries  As of October 1, 2017, 98 manufacturing industries have an upper limit of 500 employees (27 2%); 91 have an upper limit of 750 employees (25 2%); 89 have an upper limit of 1,000 employees (24 7%); 56 have an upper limit of 1,250 employees (15 6%); and 26 have an upper limit of 1,500 employees (7 2%)  3 of the 24 mining industries have an upper limit of 250 employees (12 5%), 7 have an upper limit of 500 employees (29 2%), 7 have an upper limit of 750 employees (29 2%), 2 have an upper limit of 1,000 employees (8 3%), 3 have an upper limit of 1,250 employees (12 5%), and 2 have an upper limit of 1,500 employees (8 3%)  25 of the 71 wholesale trades industries have an upper limit of 100 employees (35 2%), 16 have an upper limit of 150 employees (22 5%), 21 have an upper limit of 200 employees (29 6%), and 9 have an upper limit of 250 employees (12 7%)  The SBA currently has nine employee based industry size standards in effect (no more than 100, 150, 200, 250, 500, 750, 1,000, 1,250, and 1,500 employees)  The SBA uses average annual receipts over the three (soon to be five) most recently completed fiscal years to determine program eligibility for most other industries (526 of 1,036 industries, or 50 8%)  The SBA also uses average asset size as reported in the firm's four quarterly financial statements for the preceding year to determine eligibility for five finance industries, and a combination of number of employees and barrel per day refining capacity for petroleum refineries  The SBA currently has 16 receipts based industry size standards in effect  In some instances, there is considerable variation in the size standards used within each industrial sector  For example, the SBA uses 11 different size standards to determine eligibility for 66 industries in the retail trade sector  In general, most administrative and support service industries have an upper limit of either $15 0 million or $20 5 million in average annual sales or receipts; most agricultural industries have an upper limit of $0 75 million in average annual sales or receipts; most construction of buildings and civil engineering construction industries have an upper limit of $36 5 million in average annual sales or receipts, and most construction specialty trade contractors have an upper limit of $15 0 million in average annual sales or receipts; most educational services industries have an upper limit of either $7 5 million or $11 0 million in average annual sales or receipts; most health care industries have an upper limit of either $7 5 million or $15 0 million in average annual sales or receipts; most social assistance industries have an upper limit of $11 0 million in average annual sales or receipts; there is considerable variation within the professional, scientific, and technical service industries, ranging from an upper limit of $7 5 million in average annual sales or receipts to $38 5 million; there is considerable variation within the transportation and warehousing industrial sector, ranging from an upper limit of $7 5 million in average annual sales or receipts to $38 5 million for 43 industries and from an upper limit of 500 employees to 1,500 employees for 15 industries); and most finance and insurance industries have an upper limit of $38 5 million in average annual sales or receipts  The SBA also applies a $550 million average asset limit (as reported in the firm's four quarterly financial statements for the preceding year) to determine eligibility in five finance industries: commercial banks, saving institutions, credit unions, other depository credit intermediation, and credit card issuing  Many federal statutes provide special considerations for small businesses  For example, small businesses are provided preferences through set-asides and sole source awards in federal contracting and pay lower fees to apply for patents and trademarks  In most instances, businesses are required to meet the SBA's size standards to be considered a small business  However, in some cases, the underlying statute defines the eligibility criteria for defining a small business  In other cases, the statute authorizes the implementing agency to make those determinations  Under current law, a federal agency that decides that it would like to exercise its authority to establish its own size standard through the federal rulemaking process is required to, among other things, (1) undertake an initial regulatory flexibility analysis to determine the potential impact of the proposed rule on small businesses, (2) transmit a copy of the initial regulatory flexibility analysis to the SBA's Chief Counsel for Advocacy for comment, and (3) publish the agency's response to any comments filed by the SBA's Chief Counsel for Advocacy in response to the proposed rule and a detailed statement of any change made to the proposed rule in the final rule as a result of those comments  In addition, the federal agency must provide public notice of the proposed rule and an opportunity for the public to comment on the proposed rule, typically through the publication of an advanced notice of proposed rulemaking in the Federal Register and notification of interested small businesses and related organizations  Also, prior to issuing the final rule, the federal agency must have the approval of the SBA's Administrator  Under current practice, the SBA's Administrator, through the SBA's Office of Size Standards, consults with the SBA's Office of Advocacy prior to making a final decision concerning such requests  The Office of Advocacy is an independent office within the SBA  During the 112 th Congress, H R  585 , the Small Business Size Standard Flexibility Act of 2011, was reported by the House Committee on Small Business on November 16, 2011, by a vote of 13 to 8  The bill would have retained the SBA's Administrator's authority to approve or disapprove size standards for programs under the Small Business Act of 1953 (as amended) and the Small Business Investment Act of 1958 (as amended)  The Office of Chief Counsel for Advocacy would have assumed the SBA Administrator's authority to approve or disapprove size standards for purposes of any other act  Similar legislative provisions have been introduced during the 113 th Congress ( H R  2542 , the Regulatory Flexibility Improvements Act of 2013, and included in H R  4 , the Jobs for America Act), 114 th Congress ( H R  527 , the Small Business Regulatory Flexibility Improvements Act of 2015, and its Senate companion bill, S  1536 ), and 115 th Congress ( H R  33 , the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S  584 , and included in H R  5 , the Regulatory Accountability Act of 2017)  Advocates of splitting the SBA Administrator's small business size standards' authority between the Office of Chief Counsel for Advocacy and the SBA's Administrator have argued that Should an agency wish to draft a regulation that adopts a size standard different from the one already adopted by the Administrator in regulations implementing the Small Business Act, the agency must obtain approval of the Administrator  However, that requires the Administrator to have a complete understanding of the regulatory regime of that other act—knowledge usually outside the expertise of the SBA  However, the Office of the Chief Counsel for Advocacy, an independent office within the SBA, represents the interests of small businesses in rulemaking proceedings (as part of its responsibility to monitor agency compliance with the Regulatory Flexibility Act, 5 U S C  601-12, (RFA)) does have such expertise  Therefore, it is logical to transfer the limited function on determining size standards of small businesses for purposes other than the Small Business Act and Small Business Investment Act of 1958 to the Office of the Chief Counsel for Advocacy…  the Administrator is not the proper official to determine size standards for purposes of other agencies' regulatory activities  The Administrator is not fluent with the vast array of federal regulatory programs, is not in constant communication with small entities that might be affected by another federal agency's regulatory regime, and does not have the analytical expertise to assess the regulatory impact of a particular size standard on small entities  Furthermore, the Administrator's standards are: very inclusive, not developed to comport with other agencies' regulatory regimes, and lack sufficient granularity to examine the impact of a proposed rule on a spectrum of small businesses  Opponents have argued that When an agency is seeking to use a size standard other than those approved by the SBA, the agency may consult with the Office of Advocacy  Such consultation is sensible, as the Office of Advocacy has significant knowledge of the regulatory environment outside of the canon of SBA law  However, the SBA's Office of Size Standards, with its historical involvement, expertise, and staff resources in this area, remains the appropriate entity to approve such size standards…  While the legislation permits the SBA to continue to approve size standards for its enabling statutes, it removes SBA's authority to do so for other statutes  The result would be to create a duplicate size standard authority in both the SBA and the Office of Advocacy  Both the SBA and the Office of Advocacy would have personnel who would analyze and evaluate size standards  Through the bifurcation of these responsibilities, taxpayers would effectively be forgoing the economies of scale that are currently enjoyed by the operation of a single Office of Size Standards in the SBA…  Having two such entities that have the same mission is not a transfer of function, but an inefficient and duplicative reorganization … Instead of having one central office, there will now be two—further muddling small businesses' relationship with the federal government  Two bills were introduced during the 114 th Congress ( H R  3714 , the Small Agriculture Producer Size Standards Improvements Act of 2015, and H R  4341 , the Defending America's Small Contractors Act of 2016) to authorize the SBA to establish size standards for agricultural enterprises not later than 18 months after the date of enactment  The size standard for agricultural enterprises was, at that time, set in statute as having annual receipts not in excess of $750,000  H R  4341 , among other provisions, would have also limited an industry category to a greater extent than provided under the North American Industry Classification codes for small business procurement purposes if further segmentation of the industry category is warranted  H R  4341 was introduced on January 7, 2016, and ordered to be reported with amendment by the House Committee on Small Business on January 13, 2016  H R  3714 was introduced on October 8, 2015, considered by the House under suspension of the rules on April 19, 2016, and agreed to by voice vote  P L  114-328 , the National Defense Authorization Act for Fiscal Year 2017, includes a provision which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes  Also, as mentioned previously, P L  115-324 , the Small Business Runway Extension Act of 2018, directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts  The SBA has not announced if it will continue to use the average annual gross receipts over three years to determine receipts-based size standards or if it will use the average annual gross receipts from the previous five years  Historically, the SBA has relied on economic analysis of market conditions within each industry to define eligibility for small business assistance  On several occasions in its history, the SBA attempted to revise its small business size standards in a comprehensive manner  However, because (1) the Small Business Act provides leeway in how the SBA is to define small business; (2) there is no consensus on the economic factors that should be used in defining small business; (3) federal agencies have generally opposed size standards that might adversely affect their pool of available small business contractors; and (4) the SBA's initial size standards provided program eligibility to nearly all businesses, the SBA's efforts to undertake a comprehensive reassessment of its size standards met with resistance  Firms that might lose eligibility objected  Federal agencies also objected  As a result, in each instance, the SBA's comprehensive revisions were not fully implemented  The SBA's congressionally mandated requirement to conduct a detailed review of at least one-third of the SBA's industry size standards every 18 months was imposed by P L  111-240 , the Small Business Jobs Act of 2010, to prevent small business size standards from becoming outdated  More frequent reviews of the size standards were expected to increase their accuracy and, generally speaking, result in (1) increased numbers of small businesses found to be eligible for SBA assistance and (2) an increase in the number and amount of federal contracts awarded to small businesses (primarily by preventing large businesses from being misclassified as small and by increasing the number of small businesses eligible to compete for federal contracts)  As expected, the SBA's economic analyses during the recent five-year review cycle often supported an increase in the size standards for many industries  However, the SBA's economic analyses also occasionally supported a decrease in the size standards for some industries  Despite the SBA's decision to, in most circumstances, make no changes when their economic analyses indicated that a decrease was warranted, it could be argued that the increased frequency of the reviews has generally prevented the SBA's size standards from becoming outdated  This, in turn, has, at least to a certain extent, improved the accuracy of the size standards (as measured by the extent to which the size standard is in alignment with the SBA's economic analyses)  In a related matter, the SBA continues to adjust its receipts based size standards for inflation at least once every five years, or more frequently if inflationary circumstances warrant, to prevent firms from losing their small business eligibility solely due to the effects of inflation  The most recent adjustment for inflation took place on July 14, 2014  Prior to that, the last adjustment for inflation took place in 2008  The SBA also continues to review size standards within specific industries whenever it determines that market conditions within that industry have changed  Congress has several options related to the SBA's ongoing review of its size standards  For example, as part of its oversight of the SBA, Congress can wait for the agency to issue its proposed rule before providing input or establish a dialogue with the agency, either at the staff level or with Members involved directly, prior to the issuance of its proposed rule  Historically, Congress has tended to wait for the SBA to issue proposed rules concerning its size standards before providing input, essentially deferring to the agency's expertise in the technical and methodological issues involved in determining where to draw the line between small and large firms  Congress has then tended to respond to the SBA's proposed rules concerning its size standards after taking into consideration current economic conditions and input received from the SBA and affected industries  Waiting for the SBA to issue its proposed rule concerning its size standards before providing congressional input has both advantages and disadvantages  It provides the advantage of insulating the proposed rule from charges that it is influenced by political factors  It also has the advantage of respecting the separation of powers and responsibilities of the executive and legislative branches  However, it has the disadvantage of heightening the prospects for miscommunication, false expectations, and wasted effort, as evidenced by past proposed rules concerning the SBA's size standards that were either rejected outright, or withdrawn, after facing congressional opposition  Another policy option that has not received much congressional attention in recent years, but which Congress may choose to address, is the targeting of the SBA's resources  When the SBA reviews its size standards, it focuses on the competitive nature of the industry under review, with the goal of removing eligibility of firms that are considered large, or dominant, in that industry  There has been relatively little discussion of the costs and benefits of undertaking those reviews with the goal of targeting SBA resources to small businesses in industries that are struggling to remain competitive  GAO recommended this approach in 1978 and Roger Rosenberger, then SBA's associate administrator for policy, planning, and budgeting, testified at a congressional hearing in 1979 that it was debatable whether the SBA should provide any assistance to any of the businesses within industries where "smaller firms are flourishing " Revising the SBA's size standards using this more targeted approach would likely reduce the number of firms eligible for assistance  It would also present the possibility of increasing available benefits to eligible small firms in those industries deemed "mixed" or "concentrated" by the SBA without necessarily increasing overall program costs  Perhaps because previous proposals that would result in a reduction in the number of firms eligible for assistance have met with resistance, this alternative approach to determining program eligibility has not received serious consideration in recent years  Nonetheless, it remains an option available to Congress should it decide to change current policy 

ground_truth: Small business size standards are of congressional interest because they have a pivotal role in determining eligibility for Small Business Administration (SBA) assistance as well as federal contracting and, in some instances, tax preferences. Although there is bipartisan agreement that the nation's small businesses play an important role in the American economy, there are differences of opinion concerning how to define them. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards to ensure that only small businesses receive SBA assistance. The SBA currently uses two types of size standards to determine SBA program eligibility: industry-specific size standards and alternative size standards based on the applicant's maximum tangible net worth and average net income after federal taxes. The SBA's industry-specific size standards determine program eligibility for firms in 1,036 industrial classifications in 23 sub-industry activities described in the 2017 North American Industry Classification System (NAICS). The size standards are based on one of four measures: (1) number of employees, (2) average annual receipts in the previous three (may soon be the previous five) years, (3) average asset size as reported in the firm's four quarterly financial statements for the preceding year, or (4) a combination of number of employees and barrel per day refining capacity. Overall, about 97% of all employer firms qualify as small under the SBA's size standards. These firms represent about 30% of industry receipts. The SBA conducts an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, to determine its size standards. However, in the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance and by Members concerned that the size standards may not adequately target assistance to firms that they consider to be truly small. This report provides a historical examination of the SBA's size standards and assesses competing views concerning how to define a small business. It also discusses P.L. 111-240, the Small Business Jobs Act of 2010, which authorized the SBA to establish an alternative size standard using maximum tangible net worth and average net income after federal taxes for both the 7(a) and 504/CDC loan guaranty programs; established, until the SBA acted, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application; and required the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards every 18 months beginning on the new law's date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years. P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, which directed the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification. This provision addressed the SBA's practice of limiting the number of size standards it used and combining size standards within industrial groups as a means to reduce the complexity of its size standards and to provide greater consistency for industrial classifications that have similar economic characteristics. P.L. 114-328, the National Defense Authorization Act for Fiscal Year 2017, which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes. Previously, the small business size standard for agricultural enterprises was set in statute as having annual receipts not in excess of $750,000. P.L. 115-324, the Small Business Runway Extension Act of 2018, which directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts. Legislation introduced during recent Congresses (including H.R. 33, the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S. 584, during the 115th Congress) to authorize the SBA's Office of Chief Counsel for Advocacy to approve or disapprove a size standard requested by a federal agency for purposes other than the Small Business Act or the Small Business Investment Act of 1958. The SBA's Administrator currently has that authority.