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



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

Report 1: Since January 2017, the Navy has suffered four significant mishaps at sea that have resulted in serious damage to Navy ships and the loss of 17 sailors (see figure 1)  Three of the four at sea mishaps that have occurred—two collisions and one grounding—have involved ships homeported overseas in Yokosuka, Japan  Appendix II provides a summary of major mishaps for Navy ships at sea in fiscal years 2009 through 2017  The Navy currently has 277 ships, a 17 percent reduction from the 333 ships it had in 1998  Over the past two decades, as the number of Navy ships has decreased, the number of ships deployed overseas has remained roughly constant at about 100 ships; consequently, each ship is being deployed more to maintain the same level of presence  We reported in September 2016 that the Navy, along with the other military services, had been reporting persistently low readiness levels  The Navy attributes these, in part, to the increased deployment lengths needed to meet the continuing high demand for its aircraft carriers, cruisers, destroyers, and amphibious ships  For example, the deployment lengths for carrier strike groups had increased from an average of 6 4 months during the period of 2008 through 2011 to a less sustainable 9 months for three carrier strike groups that were deployed in 2015  In 2016, the Navy extended the deployments of the Harry S Truman and Theodore Roosevelt Carrier Strike Groups to 8 and 8 5 months, respectively  In addition, the Navy has had to shorten, eliminate, or defer training and maintenance periods to support these high deployment rates  These decisions have resulted in declining ship conditions across the fleet and have increased the amount of time required for the shipyards to complete maintenance on these ships  Lengthened maintenance periods, in turn, compress the time that ships are available for training and operations  As we previously reported, to help meet the operational demands using its existing inventory of ships, the Navy has assigned more of its surface combatants and amphibious ships to overseas homeports  Since 2006, the Navy has doubled the percentage of the fleet assigned to overseas homeports  In 2006, 20 ships were homeported overseas (7 percent of the fleet); today, 40 ships are homeported overseas (14 percent of the fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will be homeported in Yokosuka, Japan in 2018 (see figure 2)  According to the Navy, homeporting ships overseas is an efficient method for providing forward presence and rapid crisis response  Our prior work confirms that having ships homeported overseas provides additional presence, but it comes at a cost  For example, we found in May 2015 that homeporting ships overseas results in higher operations and support costs than homeporting ships in the United States  In addition, the operational schedules the Navy uses for overseas-homeported ships limit dedicated training and maintenance periods, resulting in difficulty keeping crews fully trained and ships maintained  In fact, the primary reason that Navy ships homeported overseas provide more deployed time than ships homeported in the United States is that the Navy reduces their training and maintenance periods in order to maximize their operational availability  Ships homeported overseas do not operate within the traditional fleet response plan cycles that apply to U S -based ships  Since the ships are in permanent deployment status during their time homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational schedules (see figure 3)  Navy officials told us that because the Navy expects these ships to be operationally available for the maximum amount of time, their intermediate and depot-level maintenance are executed through more frequent, shorter maintenance periods or deferred until after they return to a U S  homeport—generally after 7 to 10 years overseas  In May 2015, we also found that high operational tempo for ships homeported overseas limits the time for crew training when compared with training time for ships homeported in the United States  Navy officials told us that U S -based crews are completely qualified and certified prior to deploying from their U S  homeports, with few exceptions  In contrast, the high operational tempo of ships homeported overseas had resulted in what Navy personnel called a “train on the margins” approach, a shorthand way to say there was no dedicated training time set aside for the ships so crews trained while underway or in the limited time between underway periods  We found that, at the time of our 2015 review, there were no dedicated training periods built into the operational schedules of the cruisers, destroyers, and amphibious ships homeported in Yokosuka and Sasebo, Japan  As a result, these crews did not have all of their needed training and certifications  We recommended that the Navy develop and implement a sustainable operational schedule for all ships homeported overseas  DOD concurred with this recommendation and reported in 2015 that it had developed revised operational schedules for all ships homeported overseas  However, when we contacted DOD to obtain updated information in August 2017, U S  Pacific Fleet officials stated that the revised operational schedules for the cruisers and destroyers homeported in Japan were still under review and had not been employed  As of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews homeported in Japan had expired, and over two-thirds of the expired certifications—including mobility-seamanship and air warfare—had been expired for 5 months or more  This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since our May 2015 report  The Navy’s Surface Force Readiness Manual states that the high operational tempo and frequent tasking of ships homeported overseas requires that these ships always be prepared to execute complex operations and notes that this demand for continuous readiness also means that ships homeported overseas should maintain maximum training, material condition, and manning readiness  With respect to the material condition of the ships, we found in May 2015 that casualty reports—incidents of degraded or out-of-service equipment—nearly doubled over the 2009 through 2014 time frame, and the condition of overseas-homeported ships decreased even faster than that of U S -based ships (see figure 4)  The Navy uses casualty reports to provide information on the material condition of ships in order to determine current readiness  For example, casualty report data provide information on equipment or systems that are degraded or out of service, the lack of which will affect a ship’s ability to support required mission areas  In 2015, Navy officials acknowledged an increasing number of casualty reports on Navy ships and a worsening trend in material ship condition  They stated that equipment casualties require unscheduled maintenance and have a negative effect on fleet operations, because there is an associated capability or capacity loss  In our May 2015 report, we recommended that the Navy develop a comprehensive assessment of the long-term costs and risks to its fleet associated with the Navy’s increasing reliance on overseas homeporting to meet presence requirements; make any necessary adjustments to its overseas presence based on this assessment; and reassess these risks when making future overseas homeporting decisions  DOD concurred with this recommendation, but, as of August 2017, it has not conducted an assessment, even though it has continued to increase the number of ships homeported overseas  In the early 2000s, the Navy made several changes to its process for determining the size and composition of ship crews that may contribute to sailor overwork and create readiness and safety risks  These changes were intended to drive down crew sizes in order to save on personnel costs  However, as we reported in May 2017, these changes were not substantiated with analysis and may be creating readiness and safety risks  With fewer sailors operating and maintaining surface ships, the material condition of the ships declined, and we found that this decline ultimately contributed to an increase in operating and support costs that outweighed any savings on personnel (see figure 5)  The Navy eventually reassessed and reversed some of the changes it had made during this period—known as “optimal manning”—but it continued to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload—both of which may be leading to sailors being overworked  Additionally, we found that heavy workload does not end after ships return to port  Crews typically operate with fewer sailors while in port, so those crew members remaining must cover the workload of multiple sailors, causing additional strain and potential overwork  In 2014, the Navy conducted a study of the standard workweek and identified significant issues that could negatively affect a crew’s capabilities to accomplish tasks and maintain the material readiness of ships, as well as crew safety issues that might result if crews slept less to accommodate workload that was not accounted for  The Navy study found that sailors were on duty 108 hours a week, exceeding their weekly on-duty allocation of 81 hours  This on-duty time included 90 hours of productive work—20 hours per week more than the 70 hours that are allotted in the standard workweek  This, in turn, reduced the time available for rest and resulted in sailors spending less time sleeping than was allotted, a situation that the study noted could encourage a poor safety culture  Moving forward, the Navy will likely face manning challenges, especially given its current difficulty in filling authorized positions, as it seeks to increase the size of its fleet by as much as 30 percent over its current size  Navy officials stated that even with manpower requirements that accurately capture all workload, the Navy will be challenged to fund these positions and fill them with adequately trained sailors at current personnel levels  Figure 6 shows the Navy’s projected end strength and fleet size  In our May 2017 report, we found that the Navy’s guidance does not require that the factors it uses to calculate manpower requirements be reassessed periodically or when conditions change, to ensure that these factors remain valid and that crews are appropriately sized  We made several recommendations to address this issue, including that the Navy should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its manpower requirements process, and (4) update its ship manpower requirements  DOD concurred with our recommendations, stating that it is committed to ensuring that the Navy’s manpower requirements are current and analytically based and will meet the needs of the existing and future surface fleet  As of August 2017, DOD had not yet taken any actions to implement these recommendations  We believe that, until the Navy makes the needed changes, its ships may not have the right number and skill mix of sailors to maintain readiness and prevent overworking its sailors  To address its persistently low readiness levels, the Navy began implementing a revised operational schedule in November 2014, which it referred to as the optimized fleet response plan  This plan seeks to maximize the employability of the existing fleet while preserving adequate time for maintenance and training, providing continuity in ship leadership and carrier strike group assignments, and restoring operational and personnel tempos to acceptable levels  The Navy’s implementation of the optimized fleet response plan—and readiness recovery more broadly—is premised on adherence to deployment, training, and maintenance schedules  However, in May 2016, we found that the Navy was having difficulty in implementing its new schedule as intended  Both the public and private shipyards were having difficulty completing maintenance on time, owing primarily to the poor condition of the ships after more than a decade of heavy use, deferred maintenance, and the Navy’s inability to accurately predict how much maintenance they would need  We reported that in 2011 through 2014 only 28 percent of scheduled maintenance for surface combatants was completed on time and just 11 percent was completed on time for aircraft carriers  We updated these data as of August 2017 to include maintenance availabilities completed through the end of fiscal year 2016 and found continued difficulty completing maintenance on time for key portions of the Navy fleet (see figure 7): Aircraft Carriers (CVNs): In fiscal years 2011 through 2016, maintenance overruns on 18 of 21 (86 percent) aircraft carriers resulted in a total of 1,103 lost operational days—days that ships were not available for operations—the equivalent of losing the use of 0 5 aircraft carriers each year  Surface Combatants (DDGs and CGs): In fiscal years 2011 through 2016, maintenance overruns on 107 of 169 (63 percent) surface combatants resulted in a total of 6,603 lost operational days—the equivalent of losing the use of 3 0 surface combatants each year  Submarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011 through 2016, maintenance overruns on 39 of 47 (83 percent) submarines resulted in a total of 6,220 lost operational days—the equivalent of losing the use of 2 8 submarines each year  Navy officials are aware of the challenges faced by both the public and private shipyards and have taken steps to address the risks these pose to maintenance schedules, including hiring additional shipyard workers and improving their maintenance planning processes  However, Navy officials have told us that it will take time for these changes to bring about a positive effect  For example, as of May 2016, data on the public shipyards’ workforce showed that 32 percent of all employees had fewer than 5 years of experience  According to Navy officials, this workforce inexperience negatively affects the productivity of the shipyards, and it will take several years for them to attain full productivity  Just last week, we issued another report, prepared in response to direction from this committee, examining the ability of the Navy’s public shipyards to support the Navy’s readiness needs  We found that capacity limitations as well as the poor condition of the shipyards’ facilities and equipment contributed to the maintenance delays we discussed earlier and were hindering the shipyards’ ability to support the Navy  Specifically, we found that the shipyards will be unable to support 73—or about one-third—of 218 maintenance periods planned over the next 23 years  In addition, this estimate did not factor in planned increases to the fleet  We made three recommendations, with which the Navy agreed to take steps to improve its management of capital investment in the shipyards  However, we noted that at current average funding levels it would take at least 19 years and a Navy-estimated $4


Report 2: 86 billion to clear the backlog of restoration and modernization projects at the shipyards  Furthermore, this estimate does not include the $9 billion that the Navy estimates it will need for capacity and capability upgrades over the next 12 years to support maintenance operations for the current fleet  In September 2016, we found that although DOD has stated that readiness rebuilding is a priority, implementation and oversight of department-wide readiness rebuilding efforts did not fully include key elements of sound planning, and the lack of these elements puts the overall rebuilding efforts at risk  The Navy states that its overall goal for readiness recovery is to reach a predictable and sustainable level of global presence and surge capacity from year to year  The Navy identified carrier strike groups and amphibious ready groups as key force elements in its plan for readiness recovery and had set 2020 for reaching a predictable and sustainable level of global presence and surge capacity by implementing the optimized fleet response plan  However, we found in 2016 that the Navy faced significant challenges, such as delays in completing maintenance and emerging demands, in achieving its readiness recovery goals for carrier strike groups and amphibious ready groups, and projections show that the Navy will not meet its time frames for achieving readiness recovery  As a result, we recommended that DOD and the services establish comprehensive readiness goals, strategies for implementing them, and associated metrics that can be used to evaluate whether readiness recovery efforts are achieving intended outcomes  DOD generally concurred with our recommendations and, in November 2016, issued limited guidance to the military services on rebuilding readiness; it has also started to design a framework to guide the military services in achieving readiness recovery but has not yet implemented our recommendations  The Navy has since extended its time frame for readiness recovery to at least 2021, but it still has not developed specific benchmarks or interim goals for tracking and reporting on readiness recovery  Navy officials cited several challenges to rebuilding readiness, chief among them the continued high demand for its forces, the unpredictability of funding, and the current difficulty with beginning and completing ship maintenance on time  In January 2017, the President directed the Secretary of Defense to conduct a readiness review and identify actions that can be implemented in fiscal year 2017 to improve readiness  DOD and Navy officials told us that, as part of this readiness review, the Navy prioritized immediate readiness gaps and shortfalls  These officials added that this review would guide the Navy’s investment decisions in future budget cycles, with the intention to rebuild readiness and prepare the force for future conflicts  However, high demand for naval presence will continue to put pressure on a fleet that is already stretched thin across the globe  Looking to the future, the Navy has plans to grow its fleet by as much as 30 percent, but it has not yet shown the ability to adequately man, maintain, and operate the current fleet  These readiness problems need to be addressed and will require the Navy to implement our recommendations—particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, managing investments in its shipyards, and applying sound planning and sustained management attention to its readiness rebuilding efforts  In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges  Chairmen McCain, Ranking Member Reed, and Members of the Committee, this concludes my prepared statement  I would be pleased to respond to any questions you may have at this time  If you or your staff have questions about this testimony, please contact John Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao gov  Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this statement  GAO staff who made key contributions to this testimony are Suzanne Wren, Assistant Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne Landesman, Amie Lesser, Felicia Lopez, Tobin McMurdie, Shari Nikoo, Cody Raysinger, Michael Silver, Grant Sutton, and Chris Watson  Over the past three years, we issued several reports related to Navy readiness cited in this statement  Table 1 summarizes the status of recommendations made in these reports, which contained a total of 14 recommendations  The Department of Defense generally concurred with all of these recommendations but has implemented only one of them to date  For each of the reports, the specific recommendations and their implementation status are summarized in tables 2 through 5  The Navy defines a class A mishap as one that results in $2 million or more in damages to government or other property, or a mishap that resulted in a fatality or permanent total disability  We analyzed data compiled by the Naval Safety Center for fiscal years 2009 through 2017 to provide a summary of major Navy mishaps at sea (see table 6)  Report numbers with a C or RC suffix are Classified  Classified reports are available to personnel with the proper clearances and need to know, upon request  Naval Shipyards: Actions Needed to Improve Poor Conditions that Affect Operation  GAO-17-548  Washington, D C : September 12, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet  GAO-17-798T  Washington, D C : September 7, 2017  Department of Defense: Actions Needed to Address Five Key Mission Challenges  GAO-17-369  Washington, D C : June 13, 2017  Military Readiness: Coastal Riverine Force Challenges  GAO-17-462C  Washington, D C : June 13, 2017  (SECRET) Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews  GAO-17-413  Washington, D C : May 18, 2017  Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan  GAO-16-841  Washington, D C : September 7, 2016  Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness  GAO-16-481RC  Washington, D C : May 25, 2016  (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan  GAO-16-466R  Washington, D C : May 2, 2016  Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports  GAO-15-329  Washington, D C : May 29, 2015  Military Readiness: Navy Needs to Assess Risks to Its Strategy to Improve Ship Readiness  GAO-12-887  Washington, D C : September 21, 2012  Force Structure: Improved Cost Information and Analysis Needed to Guide Overseas Military Posture Decisions  GAO-12-711  Washington, D C : June 6, 2012  Military Readiness: Navy Needs to Reassess Its Metrics and Assumptions for Ship Crewing Requirements and Training  GAO-10-592  Washington, D C : June 9, 2010  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: Medicare covered over 58 million people in 2017 and has wide-ranging impact on the health-care sector and the overall U.S. economy. However, the billions of dollars in Medicare outlays as well as program complexity make it susceptible to improper payments, including fraud. Although there are no reliable estimates of fraud in Medicare, in fiscal year 2017 improper payments for Medicare were estimated at about $52 billion. Further, about $1.4 billion was returned to Medicare Trust Funds in fiscal year 2017 as a result of recoveries, fines, and asset forfeitures. In December 2017, GAO issued a report examining how CMS managed its fraud risks overall and particularly the extent to which its efforts in the Medicare and Medicaid programs aligned with GAO's Framework. This testimony, based on that report, discusses the extent to which CMS's management of fraud risks in Medicare aligns with the Framework. For the report, GAO reviewed CMS policies and interviewed officials and external stakeholders. In its December 2017 report, GAO found that the Centers for Medicare & Medicaid Services' (CMS) antifraud efforts for Medicare partially align with GAO's 2015 A Framework for Managing Fraud Risks in Federal Programs (Framework). The Fraud Reduction and Data Analytics Act of 2015 required OMB to incorporate leading practices identified in this Framework in its guidance to agencies on addressing fraud risks. Consistent with the Framework, GAO determined that CMS had demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts; the Center for Program Integrity (CPI) serves as this entity for fraud, waste, and abuse issues in Medicare. CMS also promoted an antifraud culture by, for example, coordinating with internal stakeholders to incorporate antifraud features into new program design. To increase awareness of fraud risks in Medicare, CMS offered and required training for stakeholder groups such as providers of medical services, but it did not offer or require similar fraud-awareness training for most of its workforce. CMS took some steps to identify fraud risks in Medicare; however, it had not conducted a fraud risk assessment or designed and implemented a risk-based antifraud strategy for Medicare as defined in the Framework. CMS identified fraud risks through control activities that target areas the agency designated as higher risk within Medicare, including specific provider types, such as home health agencies. Building on earlier steps and conducting a fraud risk assessment, consistent with the Framework, would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy. CMS established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with an antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare. For example, CMS used return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities. In developing an antifraud strategy, consistent with the Framework, CMS could include plans for refining and building on existing methods such as return-on-investment, to evaluate the effectiveness of all of its antifraud efforts. In its December 2017 report, GAO made three recommendations, namely that CMS (1) require and provide fraud-awareness training to its employees; (2) conduct fraud risk assessments; and (3) create an antifraud strategy for Medicare, including an approach for evaluation. The Department of Health and Human Services agreed with these recommendations and reportedly is evaluating options to implement them. Accordingly, the recommendations remain open.

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



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

Report 1: Medicare is one of four principal health-insurance programs administered by CMS; it provides health insurance for persons aged 65 and over, certain individuals with disabilities, and individuals with end-stage renal disease  See table 1 for information about Medicare’s component programs  Medicare is the largest CMS program, at $702 billion in fiscal year 2017  As discussed earlier, according to CBO, Medicare outlays are projected to rise to $1 5 trillion in 2028 (see fig  1)  Fraud involves obtaining something of value through willful misrepresentation  There are no reliable estimates of the extent of fraud in the Medicare program, or in the health-care industry as a whole  By its very nature, fraud is difficult to detect, as those involved are engaged in intentional deception  Further, potential fraud cases must be identified, investigated, prosecuted, and adjudicated—resulting in a conviction— before fraud can be established  As I mentioned earlier, we designated Medicare as a high-risk program in 1990 because its size, scope, and complexity make it vulnerable to fraud, waste, and abuse  Similarly, the Office of Management and Budget (OMB) designated all parts of Medicare a “high priority” program because they each report $750 million or more in improper payments in a given year  We also highlighted challenges associated with duplicative payments in Medicare in our annual report on duplication and opportunities for cost savings in federal programs  Improper payments are a significant risk to the Medicare program and may include payments made as a result of fraud  However, I would note that improper payments are not a proxy for the amount of fraud or extent of fraud risk in a particular program as improper payment measurement does not specifically identify or estimate such payments due to fraud  Improper payments are those that are either made in an incorrect amount (overpayments and underpayments) or those that should not have been made at all  Our December 2017 report found that CMS manages its fraud risks as part of a broader program-integrity approach working with a broad array of stakeholders  CMS’s program-integrity approach includes efforts to address waste, abuse, and improper payments as well as fraud across its four principal programs  In Medicare, CMS collaborates with contractors, health-insurance plans, and law-enforcement and other agencies to carry out its program-integrity responsibilities  According to CMS officials, this broader program-integrity approach can help the agency develop control activities to address multiple sources of improper payments, including fraud  According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks  Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives  The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks  Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level  In July 2015, GAO issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way  The Fraud Risk Framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt, as depicted in figure 2  The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires OMB to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities  The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines  In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies  Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework  Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of the controls established under OMB guidelines, among other things  CMS’s antifraud efforts partially aligned with the Fraud Risk Framework  Consistent with the framework, CMS has demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts  It has also taken steps to establish a culture conducive to fraud risk management, although it could expand its antifraud training to include all employees  CMS has taken some steps to identify fraud risks in Medicare; however, it has not conducted a fraud risk assessment or developed a risk-based antifraud strategy for Medicare as defined in the Fraud Risk Framework  CMS has established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with a risk-based antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare  The commit component of the Fraud Risk Framework calls for an agency to commit to combating fraud by creating an organizational culture and structure conducive to fraud risk management  This component includes establishing a dedicated entity to lead fraud risk management activities  Within CMS, the Center for Program Integrity (CPI) serves as the dedicated entity for fraud, waste, and abuse issues in Medicare, which is consistent with the Fraud Risk Framework  CPI was established in 2010, in response to a November 2009 Executive Order on reducing improper payments and eliminating waste in federal programs  This formalized role, according to CMS officials, elevated the status of program-integrity efforts, which previously were carried out by other parts of CMS  As an executive-level Center—on the same level with five other executive-level Centers at CMS, such as the Center for Medicare—CPI has a direct reporting line to executive-level management at CMS  The Fraud Risk Framework identifies a direct reporting line to senior-level managers within the agency as a leading practice  According to CMS officials, this elevated organizational status offers CPI heightened visibility across CMS, attention by CMS executive leadership, and involvement in executive-level conversations  The commit component of the Fraud Risk Framework also includes creating an organizational culture to combat fraud at all levels of the agency  Consistent with the Fraud Risk Framework, CMS has promoted an antifraud culture by, for example, coordinating with internal and external stakeholders  Consistent with leading practices in the Fraud Risk Framework to involve all levels of the agency in setting an antifraud tone, CPI has worked collaboratively with other CMS Centers  In addition to engaging executive-level officials of other CMS Centers through the Program Integrity Board, CPI has worked collaboratively with other Centers within CMS to incorporate antifraud features into new program design or policy development and established regular communication at the staff level  For example: Center for Medicare and Medicaid Innovation (CMMI)  When developing the Medicare Diabetes Prevention Program, CMMI officials told us they worked with CPI’s Provider Enrollment and Oversight Group and Governance Management Group to develop risk-based screening procedures for entities that would enroll in Medicare to provide diabetes-prevention services, among other activities  The program was expanded nationally in 2016, and CMS determined that an entity may enroll in Medicare as a program supplier if it satisfies enrollment requirements, including that the supplier must pass existing high categorical risk-level screening requirements  Center for Medicare (CM)  In addition to building safeguards into programs and developing policies, CM officials told us that there are several standing meetings, on monthly, biweekly, and weekly bases, between groups within CM and CPI that discuss issues related to provider enrollment, FFS operations, and contractor management  A senior CM official also told us that there are ad hoc meetings taking place between CM and CPI: “We interact multiple times daily at different levels of the organization  Working closely is just a regular part of our business ” CMS has also demonstrated its commitment to addressing fraud, waste, and abuse to its stakeholders  Representatives of CMS’s extensive stakeholder network whom we interviewed—contractors and officials from public and private entities—generally recognized the agency’s commitment to combating fraud  In our interviews with stakeholders, officials observed CMS’s increased commitment over time to address fraud, waste, and abuse and cited examples of specific CMS actions  CMS contractors told us that CMS’s commitment to combating fraud is incorporated into contractual requirements, such as requiring (1) data analysis for potential fraud leads and (2) fraud-awareness training for providers  Officials from entities that are members of the Healthcare Fraud Prevention Partnership (HFPP), specifically, a health-insurance plan and the National Health Care Anti-Fraud Association, added that CMS’s effort to establish the HFPP and its ongoing collaboration and information sharing reflect CMS’s commitment to combat fraud in Medicare  The Fraud Risk Framework identifies training as one way of demonstrating an agency’s commitment to combating fraud  Training and education intended to increase fraud awareness among stakeholders, managers, and employees serve as a preventive measure to help create a culture of integrity and compliance within the agency  The Fraud Risk Framework discusses requiring all employees to attend training upon hiring and on an ongoing basis thereafter  To increase awareness of fraud risks in Medicare, CMS offers and requires training for stakeholder groups such as providers, beneficiaries, and health-insurance plans  Specifically, through its National Training Program and Medicare Learning Network, CMS makes available training materials on combating Medicare fraud, waste, and abuse  These materials help to identify and report fraud, waste, and abuse in CMS programs and are geared toward providers, beneficiaries, as well as trainers and other stakeholders  Separately, CMS requires health- insurance plans working with CMS to provide annual fraud, waste, and abuse training to their employees  However, CMS does not offer or require similar fraud-awareness training for the majority of its workforce  For a relatively small portion of its overall workforce—specifically, contracting officer representatives who are responsible for certain aspects of the acquisition function—CMS requires completion of fraud and abuse prevention training every 2 years  According to CMS, 638 of its contracting officer representatives (or about 10 percent of its overall workforce) completed such training in 2016 and 2017  Although CMS offers fraud-awareness training to others, the agency does not require fraud-awareness training for new hires or on a regular basis for all employees because the agency has focused on providing process-based internal controls training for its employees  While fraud-awareness training for contracting officer representatives is an important step in helping to promote fraud risk management, fraud- awareness training specific to CMS programs would be beneficial for all employees  Such training would not only be consistent with what CMS offers to or requires of its stakeholders and some of its employees, but would also help to keep the agency’s entire workforce continuously aware of fraud risks and examples of known fraud schemes, such as those identified in successful HHS OIG investigations  Such training would also keep employees informed as they administer CMS programs or develop agency policies and procedures  Considering the vulnerability of Medicare and Medicaid programs to fraud, waste, and abuse, without regular required training CMS cannot be assured that its workforce of over 6,000 employees is continuously aware of risks facing its programs  In our December 2017 report, we recommended that the Administrator of CMS provide fraud-awareness training relevant to risks facing CMS programs and require new hires to undergo such training and all employees to undergo training on a recurring basis  In its March 2018 letter to GAO, HHS stated that CMS is in the process of developing Fraud, Waste, and Abuse Training for all new employees, to be presented at CMS New Employee Orientations  Additionally, CMS is also developing training to be completed by current CMS employees on an annual basis  As of July 2018, this recommendation remains open  The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile  Identifying fraud risks is one of the steps included in the Fraud Risk Framework for assessing risks to determine a fraud risk profile  In our December 2017 report, we discussed several examples of steps CMS has taken to identify fraud risks as well as control activities that target areas the agency has designated as higher risk within Medicare, including specific provider types and specific geographic locations  These examples include data analytics to assist investigations in Medicare FFS, including Medicare’s Fraud Prevention System (FPS ), prior authorization for Medicare FFS services or supplies, revised provider screening and enrollment processes for Medicare FFS, and temporary provider enrollment moratoriums for certain providers and geographic areas for Medicare FFS  CMS officials told us that CPI initially focused on developing control activities for Medicare FFS and consider these activities to be the most mature of all CPI efforts to address fraud risks  CMS Has Not Conducted a Fraud Risk Assessment for Medicare The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and assess risks to determine a fraud risk profile  Furthermore, federal internal control standards call for agency management to assess the internal and external risks their entities face as they seek to achieve their objectives  The standards state that, as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks  The Fraud Risk Framework states that, in planning the fraud risk assessment, effective managers tailor the fraud risk assessment to the program by, among other things, identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process  Fraud risk assessments that align with the Fraud Risk Framework involve (1) identifying inherent fraud risks affecting the program, (2) assessing the likelihood and impact of those fraud risks, (3) determining fraud risk tolerance, (4) examining the suitability of existing fraud controls and prioritizing residual fraud risks, and (5) documenting the results (see fig  3)  Although CMS had identified some fraud risks posed by providers in Medicare FFS, the agency had not conducted a fraud risk assessment for the Medicare program as a whole  Such a risk assessment would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy  According to CMS officials, CMS had not conducted a fraud risk assessment for Medicare because, within CPI’s broader approach of preventing and eliminating improper payments, its focus has been on addressing specific vulnerabilities among provider groups that have shown themselves particularly prone to fraud, waste, and abuse  With this approach, however, it is unlikely that CMS will be able to design and implement the most-appropriate control activities to respond to the full portfolio of fraud risks  A fraud risk assessment consists of discrete activities that build upon each other  Specifically: Identifying inherent fraud risks affecting the program  As discussed earlier, CMS took steps to identify fraud risks  However, CMS has not used a process to identify inherent fraud risks from the universe of potential vulnerabilities facing Medicare, including threats from various sources  According to CPI officials, most of the agency’s fraud control activities are focused on fraud risks posed by providers  The Fraud Risk Framework discusses fully considering inherent fraud risks from internal and external sources in light of fraud risk factors such as incentives, opportunities, and rationalization to commit fraud  For example, according to CMS officials, the inherent design of the Medicare Part C program may pose fraud risks that are challenging to detect  A fraud risk assessment would help CMS identify all sources of fraudulent behaviors, beyond threats posed by providers, such as those posed by health-insurance plans, contractors, or employees  Assessing the likelihood and impact of fraud risks and determining fraud risk tolerance  CMS has taken steps to prioritize fraud risks in some areas, but it had not assessed the likelihood or impact of fraud risks or determined fraud risk tolerance across all parts of Medicare  Assessing the likelihood and impact of inherent fraud risks would involve consideration of the impact of fraud risks on program finances, reputation, and compliance  Without assessing the likelihood and impact of risks in Medicare or internally determining which fraud risks may fall under the tolerance threshold, CMS cannot be certain that it is aware of the most-significant fraud risks facing this program and what risks it is willing to tolerate based on the program’s size and complexity  Examining the suitability of existing fraud controls and prioritizing residual fraud risks  CMS had not assessed existing control activities or prioritized residual fraud risks  According to the Fraud Risk Framework, managers may consider the extent to which existing control activities—whether focused on prevention, detection, or response—mitigate the likelihood and impact of inherent risks and whether the remaining risks exceed managers’ tolerance  This analysis would help CMS to prioritize residual risks and to determine mitigation approaches  For example, CMS had not established preventive fraud control activities in Medicare Part C  Using a fraud risk assessment for Medicare Part C and closely examining existing fraud control activities and residual risks, CMS could be better positioned to address fraud risks facing this growing program and develop preventive control activities  Furthermore, without assessing existing fraud control activities and prioritizing residual fraud risks, CMS cannot be assured that its current control activities are addressing the most-significant risks  Such analysis would also help CMS determine whether additional, preferably preventive, fraud controls are needed to mitigate residual risks, make adjustments to existing control activities, and potentially scale back or remove control activities that are addressing tolerable fraud risks  Documenting the risk-assessment results in a fraud risk profile  CMS had not developed a fraud risk profile that documents key findings and conclusions of the fraud risk assessment  According to the Fraud Risk Framework, the risk profile can also help agencies decide how to allocate resources to respond to residual fraud risks  Given the large size and complexity of Medicare, a documented fraud risk profile could support CMS’s resource-allocation decisions as well as facilitate the transfer of knowledge and continuity across CMS staff and changing administrations  Senior CPI officials told us that the agency plans to start a fraud risk assessment for Medicare after it completes a separate fraud risk assessment of the federally facilitated marketplace  This fraud risk assessment for the federally facilitated marketplace eligibility and enrollment process is being conducted in response to a recommendation we made in February 2016  In April 2017, CPI officials told us that this fraud risk assessment was largely completed, although in September 2017 CPI officials told us that the assessment was undergoing agency review  CPI officials told us that they have informed CM officials that there will be future fraud risk assessments for Medicare; however, they could not provide estimated timelines or plans for conducting such assessments, such as the order or programmatic scope of the assessments  Once completed, CMS could use the federally facilitated marketplace fraud risk assessment and apply any lessons learned when planning for and designing fraud risk assessments for Medicare  According to the Fraud Risk Framework, factors such as size, resources, maturity of the agency or program, and experience in managing risks can influence how the entity plans the fraud risk assessment  Additionally, effective managers tailor the fraud risk assessment to the program when planning for it  The large scale and complexity of Medicare as well as time and resources involved in conducting a fraud risk assessment underscore the importance of a well-planned and tailored approach to identifying the assessment’s programmatic scope  Planning and tailoring may involve decisions to conduct a fraud risk assessment for Medicare as a whole or divided into several subassessments to reflect their various component parts (e g , Medicare Part C)  CMS’s existing fraud risk identification efforts as well as communication channels with stakeholders could serve as a foundation for developing a fraud risk assessment for Medicare  The leading practices identified in the Fraud Risk Framework discuss the importance of identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process  CMS’s fraud risk identification efforts discussed earlier could provide key information about fraud risks and their likelihood and impact  Furthermore, existing relationships and communication channels across CMS and its extensive network of stakeholders could support building a comprehensive understanding of known and potential fraud risks for the purposes of a fraud risk assessment  For example, the fraud vulnerabilities identified through data analysis and information sharing with health-insurance plans, law-enforcement organizations, and contractors could inform a fraud risk assessment  CPI’s Command Center missions—facilitated collaboration sessions that bring together experts from various disciplines to improve the processes for fraud prevention in Medicare—could bring together experts to identify potential or emerging fraud vulnerabilities or to brainstorm approaches to mitigate residual fraud risks  As CMS makes plans to move forward with a fraud risk assessment for Medicare, it will be important to consider the frequency with which the fraud risk assessment would need to be updated  While, according to the Fraud Risk Framework, the time intervals between updates can vary based on the programmatic and operating environment, assessing fraud risks on an ongoing basis is important to ensure that control activities are continuously addressing fraud risks  The constantly evolving fraud schemes, the size of the programs in terms of beneficiaries and expenditures, as well as continual changes in Medicare—such as development of innovative payment models and increasing managed- care enrollment—call for constant vigilance and regular updates to the fraud risk assessment  In our December 2017 report we recommended that the Administrator of CMS conduct fraud risk assessments for Medicare and Medicaid to include respective fraud risk profiles and plans for regularly updating the assessments and profiles  In its March 2018 letter to GAO, HHS stated that it is currently evaluating its options with regards to implementing this recommendation  As of July 2018, the recommendation remains open  The design and implement component of the Fraud Risk Framework calls for federal managers to design and implement a strategy with specific control activities to mitigate assessed fraud risks and collaborate to help ensure effective implementation  According to the Fraud Risk Framework, effective managers develop and document an antifraud strategy that describes the program’s approach for addressing the prioritized fraud risks identified during the fraud risk assessment, also referred to as a risk-based antifraud strategy  A risk- based antifraud strategy describes existing fraud control activities as well as any new fraud control activities a program may adopt to address residual fraud risks  In developing a strategy and antifraud control activities, effective managers focus on fraud prevention over detection, develop a plan for responding to identified instances of fraud, establish collaborative relationships with stakeholders, and create incentives to help effectively implement the strategy  Additionally, as part of a documented strategy, management identifies roles and responsibilities of those involved in fraud risk management activities; describes control activities as well as plans for monitoring and evaluation; creates timelines; and communicates the antifraud strategy to employees and stakeholders, among other things  As discussed earlier, CMS had some control activities in place to identify fraud risk in Medicare, particularly in the FFS program  However, CMS had not developed and documented a risk-based antifraud strategy to guide its design and implementation of new antifraud activities and to better align and coordinate its existing activities to ensure it is targeting and mitigating the most-significant fraud risks  Antifraud strategy  CMS officials told us that CPI does not have a documented risk-based antifraud strategy  Although CMS has developed several documents that describe efforts to address fraud, the agency had not developed a risk-based antifraud strategy for Medicare because, as discussed earlier, it had not conducted a fraud risk assessment that would serve as a foundation for such strategy  In 2016, CPI identified five strategic objectives for program integrity, which include antifraud elements and an emphasis on prevention  However, according to CMS officials, these objectives were identified from discussions with CMS leadership and various stakeholders and not through a fraud risk assessment process to identify inherent fraud risks from the universe of potential vulnerabilities, as described earlier and called for in the leading practices  These strategic objectives were presented at an antifraud conference in 2016, but were not announced publicly until the release of the Annual Report to Congress on the Medicare and Medicaid Integrity Programs for Fiscal Year 2015 in June 2017  Stakeholder relationships and communication  CMS has established relationships and communicated with stakeholders, but, without an antifraud strategy, stakeholders we spoke with lacked a common understanding of CMS’s strategic approach  Prior work on practices that can help federal agencies collaborate effectively calls for a strategy that is shared with stakeholders to promote trust and understanding  Once an antifraud strategy is developed, the Fraud Risk Framework calls for managers to collaborate to ensure effective implementation  Although some CMS stakeholders were able to describe various CMS program- integrity priorities and activities, such as home health being a fraud risk priority, the stakeholders could not communicate, articulate, or cite a common CMS strategic approach to address fraud risks in its programs  Incentives  The Fraud Risk Framework discusses creating incentives to help ensure effective implementation of the antifraud strategy once it is developed  Currently, some incentives within stakeholder relationships may complicate CMS’s antifraud efforts  Among contractors, CMS encourages information sharing through conferences and workshops; however, competition for CMS business among contractors can be a disincentive to information sharing  CMS officials acknowledged this concern and said that they expect contractors to share information related to fraud schemes, outcomes of investigations, and tips for addressing fraud, but not proprietary information such as algorithms to risk-score providers  Without developing and documenting an antifraud strategy based on a fraud risk assessment, as called for in the design and implement component of the Fraud Risk Framework, CMS cannot ensure that it has a coordinated approach to address the range of fraud risks and to appropriately target and allocate resources for the most-significant risks  Considering fraud risks to which Medicare is most vulnerable, in light of the malicious intent of those who aim to exploit the programs, would help CMS to examine its current control activities and potentially design new ones with recognition of fraudulent behavior it aims to prevent  This focus on fraud is distinct from a broader view of program integrity and improper payments by considering the intentions and incentives of those who aim to deceive rather than well-intentioned providers who make mistakes  Also, continued growth of the program, such as growth of Medicare Part C, calls for consideration of preventive fraud control activities across the entire network of entities involved  Furthermore, considering the large size and complexity of Medicare and the extensive stakeholder network involved in managing fraud in the program, a strategic approach to managing fraud risks within the programs is essential to ensure that a number of existing control activities and numerous stakeholder relationships and incentives are being aligned to produce desired results  Once developed, an antifraud strategy that is clearly articulated to various CMS stakeholders would help CMS to address fraud risks in a more coordinated and deliberate fashion  Thinking strategically about existing control activities, resources, tools, and information systems could help CMS to leverage resources while continuing to integrate Medicare program-integrity efforts along functional lines  A strategic approach grounded in a comprehensive assessment of fraud risks could also help CMS to identify future enhancements for existing control activities, such as new preventive capabilities for its Fraud Prevention System (FPS) or additional fraud factors in provider enrollment and revalidation, such as provider risk-scoring, to stay in step with evolving fraud risks  CMS Has Established Monitoring and Evaluation Mechanisms That Could Inform a Risk-Based Antifraud Strategy for Medicare The evaluate and adapt component of the Fraud Risk Framework calls for federal managers to evaluate outcomes using a risk-based approach and adapt activities to improve fraud risk management  Furthermore, according to federal internal control standards, managers should establish and operate monitoring activities to monitor the internal control system and evaluate the results, which may be compared against an established baseline  Ongoing monitoring and periodic evaluations provide assurances to managers that they are effectively preventing, detecting, and responding to potential fraud  CMS has established monitoring and evaluation mechanisms for its program-integrity activities that it could incorporate into an antifraud strategy  As described in the Fraud Risk Framework, agencies can gather information on the short-term or intermediate outcomes of some antifraud initiatives, which may be more readily measured  For example, CMS has developed some performance measures to provide a basis for monitoring its progress towards meeting the program-integrity goals set in the HHS Strategic Plan and Annual Performance Plan  Specifically, CMS measures whether it is meeting its goal of “increasing the percentage of Medicare FFS providers and suppliers identified as high risk that receive an administrative action ” CMS does not set specific antifraud goals for other parts of Medicare; other CMS performance measures relate to measuring or reducing improper payments in the various parts of Medicare  CMS uses return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities and FPS  For example, CMS uses return-on-investment to measure the effectiveness of FPS and, in response to a recommendation we made in 2012, CMS developed outcome-based performance targets and milestones for FPS  CMS has also conducted individual evaluations of its program-integrity activities, such as an interim evaluation of the prior-authorization demonstration for power mobility devices that began in 2012 and is currently implemented in 19 states  Commensurate with greater maturity of control activities in Medicare FFS compared to other parts of Medicare and Medicaid, monitoring and evaluation activities for Medicare Parts C and D and Medicaid are more limited  For example, CMS calculates savings for its program-integrity activities in Medicare Parts C and D, but not a full return-on-investment  CMS officials told us that calculating costs for specific activities is challenging because of overlapping activities among contractors  CMS officials said they continue to refine methods and develop new savings estimates for additional program-integrity activities  According to the Fraud Risk Framework, effective managers develop a strategy and evaluate outcomes using a risk-based approach  In developing an effective strategy and antifraud activities, managers consider the benefits and costs of control activities  Ongoing monitoring and periodic evaluations provide reasonable assurance to managers that they are effectively preventing, detecting, and responding to potential fraud  Monitoring and evaluation activities can also support managers’ decisions about allocating resources, and help them to demonstrate their continued commitment to effectively managing fraud risks  As CMS takes steps to develop an antifraud strategy, it could include plans for refining and building on existing methods such as return-on- investment or savings measures, and setting appropriate targets to evaluate the effectiveness of all of CMS’s antifraud efforts  Such a strategy would help CMS to efficiently allocate program-integrity resources and to ensure that the agency is effectively preventing, detecting, and responding to potential fraud  For example, while doing so would involve challenges, CMS’s strategy could detail plans to advance efforts to measure a potential fraud rate through baseline and periodic measures  Fraud-rate measurement efforts could also inform risk assessment activities, identify currently unknown fraud risks, align resources to priority risks, and develop effective outcome metrics for antifraud controls  Such a strategy would also help CMS ensure that it has effective performance measures in place to assess its antifraud efforts beyond those related to providers in Medicare FFS, and establish appropriate targets to measure the agency’s progress in addressing fraud risks  In our December 2017 report we recommended that the Administrator of CMS should, using the results of the fraud risk assessments for Medicare, create, document, implement, and communicate an antifraud strategy that is aligned with and responsive to regularly assessed fraud risks  This strategy should include an approach for monitoring and evaluation  In its March 2018 letter to GAO, HHS stated that it is currently evaluating its options with regards to implementing this recommendation  As of July 2018, the recommendation remains open  Chairman Jenkins and Ranking Member Lewis, this concludes my prepared statement  I look forward to the subcommittee’s questions  If you or your staff have any questions concerning this testimony, please contact Seto J  Bagdoyan, who may be reached at (202) 512-6722 or bagdoyans@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 who made key contributions to this testimony include Tonita Gillich (Assistant Director), Irina Carnevale (Analyst-in- Charge), Colin Fallon, Scott Hiromoto, and Maria McMullen  Improper Payments: Actions and Guidance Could Help Address Issues and Inconsistencies in Estimation Processes  GAO-18-377  Washington, D C : May 31, 2018  Medicare: CMS Should Take Actions to Continue Prior Authorization Efforts to Reduce Spending  GAO-18-341  Washington, D C : April 20, 2018  Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts with the Fraud Risk Framework  GAO-18-88  Washington, D C : December 5, 2017  Medicare: CMS Fraud Prevention System Uses Claims Analysis to Address Fraud  GAO-17-710  Washington, D C : August 30, 2017  Medicare Advantage Program Integrity: CMS’s Efforts to Ensure Proper Payments and Identify and Recover Improper Payments  GAO-17-761T  Washington, D C : July 19, 2017  Medicare Provider Education: Oversight of Efforts to Reduce Improper Billing Needs Improvement  GAO-17-290  Washington, D C : March 10, 2017  High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others  GAO-17-317  Washington, D C : February 15, 2017  Medicare Advantage: Limited Progress Made to Validate Encounter Data Used to Ensure Proper Payments  GAO-17-223  Washington, D C : January 17, 2017  Medicare: Initial Results of Revised Process to Screen Providers and Suppliers, and Need for Objectives and Performance Measures  GAO-17-42  Washington, D C : November 15, 2016  Medicare: Claim Review Programs Could Be Improved with Additional Prepayment Reviews and Better Data  GAO-16-394  Washington, D C : April 13, 2016  Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments  GAO-16- 76  Washington, D C : April 8, 2016  Health Care Fraud: Information on Most Common Schemes and the Likely Effect of Smart Cards  GAO-16-216  Washington, D C : January 22, 2016  A Framework for Managing Fraud Risks in Federal Programs  GAO-15-593SP  Washington, D C : July 28, 2015  Medicare Program Integrity: Increased Oversight and Guidance Could Improve Effectiveness and Efficiency of Postpayment Claims Reviews  GAO-14-474  Washington, D C : July 18, 2014  Medicare Fraud Prevention: CMS Has Implemented a Predictive Analytics System, but Needs to Define Measures to Determine Its Effectiveness  GAO-13-104  Washington, D C : October 15, 2012  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 


Report 2: During World War II and then again after the outbreak of fighting in Korea, Congress found that the existence of thousands of small business concerns was being threatened by war-induced shortages of materials coupled with an inability to obtain defense contracts or financial assistance  Concerned that many small businesses might fail without government assistance, in 1953, Congress passed and President Dwight Eisenhower signed into law the Small Business Act (P L  83-163), which authorized the Small Business Administration (SBA)  The act specifies that it is the declared policy of Congress to promote the interests of small businesses to "preserve free competitive enterprise " Congress specified that one of the ways to preserve free competitive enterprise was to insure that small businesses received a "fair proportion" of federal contracts and subcontracts: It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation  Congress indicated that its intent in supporting small businesses was not to "favor small business at the expense of its larger competitors  Our only purpose in supporting the creation and effective operation of the SBA is to equalize the scales when necessary to guarantee the continued vigor of our competitive free enterprise system " More recently, a House committee report indicated that the primary rationale for small business contracting programs is the positive economic benefits they provide, as well as assisting small businesses overcome the complexities of the system  The economic benefits of these programs can be seen in two primary areas—market competition and local economic development  First, [these] programs … are designed to increase and diversify small contractors with the intent of expanding the federal supplier base  This leads to increased competition, which results in higher quality, greater product variety, and lower prices  Second, these contracting initiatives lower barriers to entry in a wide range of markets for small businesses  This provides greater market access for small firms' goods and services  From an economic perspective, such access is critical to generating positive macroeconomic benefits, including higher job creation, wage growth, and greater income distribution  Over the years, Congress has approved legislation to support small business in various ways  For example, the SBA administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion  In recent years, congressional interest in these programs has increased, primarily because assisting small businesses is viewed as a means to stimulate economic activity and create jobs  This report describes the various federal programs, requirements, procurement officers, and procurement offices involved in promoting federal contracting and subcontracting with small businesses, small disadvantaged businesses (SDBs), SDBs participating the SBA's "8(a) Program," Historically Underutilized Business Zone (HUBZone) small businesses, women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses (SDVOSBs)  The SBA administers many, but not all, of these programs  It examines the following federal requirements and authorities in promoting contracting and subcontracting with small businesses: 1  The requirement that federal agencies generally reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000) but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased  2  The establishment of small business procurement goals, both government-wide and agency specific, to promote the awarding of contracts to small businesses  3  The requirement that federal agencies generally set aside contracts that have an anticipated value exceeding the simplified acquisition threshold exclusively for small businesses when there is a reasonable expectation that offers will be obtained from at least two responsible small businesses offering the products of different small businesses (Rule of Two) and the award will be made at a fair market price  4  The authority provided federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e g , only a single source is available, under urgent and compelling circumstances)  5  The authority provided federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e g , 8(a) small businesses, HUBZone small businesses, WOSBs, and SDVOSBs)  It discusses the SBA's oversight and responsibilities concerning the small business goaling program, small business mentor-protégé programs, the 7(j) management and training program, and the surety bond guaranty program  It also discusses the role of the Office of Small and Disadvantaged Business Utilization (OSDBU), located in each federal agency, in promoting contracting with small businesses, and examines the role and responsibilities of various federal procurement officers, including procurement center representatives, commercial market representatives, and business opportunity specialists, in promoting small business contracting opportunities  This report concludes with a brief discussion of the strong bipartisan support for small business contracting programs  However, that does not mean that these programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs  For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting  Advocates want the federal government to enact policies that reduce or eliminate exclusions that narrow the reach of small business contracting preferences  Critics have questioned some of these programs' effectiveness, in terms of promoting both small business opportunities to win federal contracts and a more diversified, robust economy  With a few exceptions, businesses interested in bidding on a federal contract must obtain a Dun & Bradstreet Data Universal Numbering System (DUNS) number (i e , a unique nine-digit identification number) for each of the business's physical locations, and register with the federal government's System for Award Management (SAM)  SAM is used by government agencies for several purposes, including to find contractors  Businesses also must match their products and services to a North American Industry Classification System (NAICS) code  Businesses generally have a primary NAICS code, and may have multiple NAICS codes if they sell multiple products and services  Businesses that identify themselves as a small business in SAM must (1) meet the Small Business Act's definition of a small business and (2) not exceed size standards established, and updated periodically, by the SBA  The Small Business Act 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 Small Business Act authorizes the SBA to establish size standards to ensure that only small businesses are provided SBA assistance  The SBA currently uses two types of size standards to determine SBA program eligibility: industry-specific size standards and alternative size standards , for some lending and venture capital investment programs based on the applicant's maximum tangible net worth and average net income after federal taxes  The SBA's industry-specific size standards are used to determine eligibility for federal small business contracting purposes  The SBA determines if a business is small by comparing that business's economic characteristics (typically number of employees or average annual receipts) to size standards listed in the SBA's Table of Small Business Size Standards   The table has size standards for 1,036 industrial classifications in the North American Industrial Classification System  Businesses that exceed the applicable size standard for their primary industry do not meet the requirement of being small  The SBA's size standards are designed to (1) encourage competition within each industry and (2) ensure that SBA assistance is provided only to firms that are not dominant in their field on a national basis  The size standards are derived through an assessment of four economic factors: (1) the average firm size, (2) the average assets size as a proxy of start-up costs and entry barriers, (3) the four-firm concentration ratio (the cumulative share of total industry receipts of that industry's four biggest firms) as a measure of industry competition, and (4) the 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 " Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small (ranging from fewer than 50 employees for some industries to fewer than 1,500 employees for others) and average annual receipts for most other industries (ranging from no more than $1 million for some industries to no more than $40 million for others)  To make it easier to determine if an offeror meets the SBA's definition of a small business, prior to soliciting bids, federal agencies are required to classify a product or service being acquired in only one (NAICS code) industry, "whose definition best describes the principal nature of the product or service being acquired even though for other purposes it could be classified in more than one " When acquiring a product or service that could be classified in two or more industries with different size standards, contracting officers must "apply the size standard for the industry accounting for the greatest percentage of the contract price " If a solicitation calls for more than one item and allows offers to be submitted on any or all of the items, "an offeror must meet the size standard for each item it offers to furnish " If a solicitation calling for more than one item requires offers on all or none of the items, "an offeror may qualify as a small business by meeting the size standard for the item accounting for the greatest percentage of the total contract price " With several notable exceptions (e g , HUBZone small businesses, SBA 8(a) program participants, and veteran-owned small businesses [VOSBs] and SDVOSBs seeking contracts with the Department of Veterans Affairs), businesses generally self-certify their status as small when they register their business in the SAM database  The contracting officer is required to accept an offeror's representation in a specific bid or proposal that it is a small business unless "(1) another offeror or interested party challenges the concern's small business representation or (2) the contracting officer has a reason to question the representation " If an offeror's small business status is challenged, the contracting officer is generally not allowed to award the contract until the SBA has made a size determination or 15 business days after the SBA receives the protest, whichever occurs first  The SBA's Office of Government Contracting Area Office (Area Office) serving the area in which the headquarters of the offeror is located initially reviews the protest  The Area Office is required, by regulation, to determine the offeror's size status within 15 business days after receipt of the protest, or "within any extension of time granted by the contracting officer " If the SBA does not make a determination within the required time, the contracting officer "may award the contract after determining in writing that there is an immediate need to award the contract and that waiting until SBA makes its determination will be disadvantageous to the government " An appeal of the Area Office's decision may be filed with the SBA's Office of Hearings and Appeals (OHA)   If the OHA accepts the appeal for consideration and finds the protested concern to be ineligible for award, the contracting officer must "terminate the contract unless termination is not in the best interests of the government, in keeping with the circumstances described in the [aforementioned] written determination  However, the contracting officer shall not exercise any options or award further task or delivery orders " Furthermore, a concern cannot become eligible for a specific award after the SBA has determined that it is not a small business, even if the concern takes action to meet the definition of a small business  The SBA or the federal agency may suspend or debar a firm from future government contracts for misrepresenting its size status  In addition, individuals that knowingly misrepresent a business's size to secure a federal contract can be subject to civil and criminal penalties  15 U S C  §644(e)(1) states, "To the maximum extent practicable, procurement strategies used by a Federal department or agency having contracting authority shall facilitate the maximum participation of small business concerns as prime contractors, subcontractors, and suppliers " To accomplish this goal, FAR regulations (FAR §19 202-1) require contracting officers, when applicable, to take the following actions prior to awarding a federal contract: 1  "Divide proposed acquisitions of supplies and services (except construction) into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement " 2  "Plan acquisitions such that, if practicable, more than one small business concern may perform the work, if the work exceeds the amount for which a surety may be guaranteed by the SBA against loss under 15 U S C  §694b [generally $6 5 million, or $10 million if the contracting officer certifies that the higher amount is necessary] " 3  "Ensure that delivery schedules are established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the Government " 4  "Encourage prime contractors to subcontract with small business concerns [primarily through the agency's role in negotiating an acceptable small business subcontracting plan with prime contractors on contracts anticipated to exceed $700,000 or $1 5 million for construction contracts] " 5  "Provide a copy of the proposed acquisition package to the SBA procurement center representative [PCR, duties are described later]" for his or her review, comment and recommendation, or, if a PCR is not assigned, to the SBA Area Office serving the area in which the procuring activity is located "at least 30 days prior to the issuance of the solicitation if (i) The proposed acquisition is for supplies or services currently being provided by a small business and the proposed acquisition is of a quantity or estimated dollar value, the magnitude of which makes it unlikely that small businesses can compete for the prime contract; (ii) The proposed acquisition is for construction and seeks to package or consolidate discrete construction projects and the magnitude of this consolidation makes it unlikely that small businesses can compete for the prime contract; or (iii) The proposed acquisition is for a consolidated or bundled requirement … The contracting officer shall provide all information relative to the justification for the consolidation or bundling, including the acquisition plan or strategy and if the acquisition involves substantial bundling, the information identified in [FAR] 7 107-4  The contracting officer shall also provide the same information to the agency Office of Small and Disadvantaged Business Utilization [duties are described later] " 6  "Provide a statement explaining why the (i) Proposed acquisition cannot be divided into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement; (ii) Delivery schedules cannot be established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the government; (iii) Proposed acquisition cannot be structured so as to make it likely that small businesses can compete for the prime contract; (iv) Consolidated construction project cannot be acquired as separate discrete projects; or (v) Consolidation or bundling is necessary and justified " 7  "Process the 30-day notification concurrently with other processing steps required prior to the issuance of the solicitation " 8  "If the contracting officer rejects the SBA procurement center representative's recommendation … document the basis for the rejection and notify the SBA procurement center representative [who (as described later) may appeal the rejection to the chief of the contracting office and, ultimately, to the agency head] " The SBA may assign one or more procurement center representatives (PCRs) to any contracting activity or contract administration office to implement the SBA's policies and programs  The SBA currently has 49 PCRs located in the SBA's six Area Offices  PCRs are required to comply with the contracting agency's directives governing the conduct of contracting personnel and the release of contract information  PCR duties include the following: Review proposed acquisitions to recommend "the setting aside of selected acquisitions not unilaterally set aside by the contracting officer;" new qualified small business sources; and the feasibility of breaking out components of the contract for competitive acquisitions  Review proposed acquisition packages  If the PCR (or, if a PCR is not assigned, the SBA Area Office serving the area in which the procuring activity is located) "believes that the acquisition, as proposed, makes it unlikely that small businesses can compete for the prime contract," the PCR can recommend any alternate contracting method that he or she "reasonably believes will increase small business prime contracting opportunities " The recommendation must be made to the contracting officer within 15 days after the package's receipt  Recommend small businesses "for inclusion on a list of concerns to be solicited in a specific acquisition " Appeal to the contracting office's chief "any contracting officer's determination not to solicit a concern recommended by the SBA for a particular acquisition, when not doing so results in no small business being solicited " This appeal may be further appealed to the agency head  Conduct periodic reviews of the agency's contracting activity, including the agency's assessment of any required small business subcontracting plan, "to ascertain whether the agency is complying with the small business policies in this regulation " Sponsor and participate in conferences and training "designed to increase small business participation in the contracting activities of the office " Every federal agency (except the SBA) that has procurement powers is required to have an OSDBU, whose director, by statute, reports directly to the head of the agency and has supervisory authority over agency staff performing certain procurement functions  The OSDBU's primary responsibility is to ensure that small businesses, SDBs, WOSBs, SDVOSBs, and HUBZone small businesses are treated fairly and that they have an opportunity to compete and be selected for a fair amount of the agency's contract dollars  Among its statutory responsibilities are the following: "Identify proposed solicitations that involve significant bundling of contract requirements, and work with the agency acquisition officials and the Administration to revise the procurement strategies for such proposed solicitations where appropriate to increase the probability of participation by small businesses as prime contractors, or to facilitate small business participation as subcontractors and suppliers, if a solicitation for a bundled contract is to be issued " Assist small businesses "to obtain payments, required late payment interest penalties, or information regarding payments due to the concern from an executive agency or a contractor " Assign "a small business technical adviser to each office to which the SBA has assigned" a PCR  The small business technical advisor "shall be a full-time employee of the procuring activity, well qualified, technically trained and familiar with the supplies or services purchased at the activity; and whose principal duty shall be to assist" the PCR  Provide the agency's "Chief Acquisition Officer and senior procurement executive … with advice and comments on acquisition strategies, market research, and justifications [related to limitations on the consolidation of contracts as a means to provide small businesses appropriate opportunities to participate as prime contractors and subcontractors] " Provide training to small businesses and contract specialists, provided that the training does not interfere with the director carrying out his or her other responsibilities  Ensure that a small business that notifies the PCR prior to a contract's award that "a solicitation, request for proposal, or request for quotation unduly restricts [its] ability … to compete for the award … is aware of other resources and processes available to address unduly restrictive provisions … even if such resources and processes are provided by such agency, the Administration, the Comptroller General, or a Department of Defense (DOD) procurement technical assistance program [described below] " Review all subcontracting plans "to ensure that the plan provides maximum practicable opportunity for small business concerns to participate in the performance of the contract to which the plan applies " In accordance with P L  109-163 , the National Defense Authorization Act of 2006, the DOD renamed its OSDBU the Office of Small Business Programs (OSBP)  The act also redesignated the Army, Navy, and Air Force's OSDBUs to OSBPs of the Department of the Army, Navy, and Air Force, respectively  At the agency level, procurement department heads (sometimes titled senior procurement executive ) are responsible for implementing small business programs at their agencies, including achieving program goals  In general, procurement department staff who work on small business issues (often titled small business specialists ) coordinate with OSDBU directors on their agencies' small business programs  Chief acquisition officers provide a focal point for acquisition in agency operations  Their key functions include "monitoring and evaluating agency acquisition activities, increasing the use of full and open competition, increasing performance-based contracting, making acquisition decisions, managing agency acquisition policy, acquisition career management, acquisition resources planning, and conducting acquisition assessments " The SBA must assign a breakout procurement center representative (breakout PCR) to each major procurement center  A major procurement center is, in the opinion of the SBA Administrator, a procurement center that purchases substantial dollar amounts of other than commercial items, and has the potential to incur significant savings as a result of the placement of a breakout PCR  The breakout PCR advocates for (1) the appropriate use of full and open competition, and (2) the breakout of items, "when appropriate and while maintaining the integrity of the system in which such items are used " The breakout PCR is in addition to the PCR  When a breakout PCR is assigned, the SBA must assign at least two co-located small business technical advisors  SBA breakout PCRs and technical advisors must comply with the contracting agency's directives governing the conduct of contracting personnel and the release of contract information  The SBA must obtain security clearances for its breakout PCRs and technical advisors as required by the contracting agency  The SBA has four commercial market r epresentatives who, among other duties, help prime contractors find small businesses that are capable of performing subcontracts; provide counseling on the contractor's responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews of contractors awarded contracts requiring an acceptable subcontracting plan that provides small businesses "the maximum practicable opportunity to participate in contract performance consistent with its efficient performance" (generally any solicitation to perform a contract that is expected to exceed $700,000 ($1 5 million for construction) and that has subcontracting possibilities)  The SBA's business opportunity s pecialists provide, among other duties, guidance, counseling, and referrals for assistance with technical, management, financial, or other matters intended to improve the competitive viability of SBA 8(a) program participants  They provide 8(a) program participants comprehensive assessments of the firm's strengths and weaknesses; monitor and document their compliance with 8(a) program requirements; advise them on compliance with contracting regulations after the award of a 8(a) program contract or subcontract; review and monitor their compliance with mentor-protégé agreements; represent the interests of the SBA Administrator and small businesses in the award, modification, and administration of 8(a) program contracts and subcontracts; and report fraud or abuse involving the 8(a) program  The Small Business Procurement Advisory Council (SBPAC), whose members are composed of the SBA Administrator (or his or her designee), the director of the Minority Business Development Agency, and the head of each OSDBU in each federal agency having procurement powers, has the following statutory duties: 1  Develop positions on proposed procurement regulations affecting the small business community  2  Submit comments reflecting such positions to appropriate regulatory authorities  3  Conduct reviews of each OSDBU to determine the office's compliance with its statutory requirements  4  Identify best practices for maximizing small business utilization in federal contracting that may be implemented by federal agencies having procurement powers  5  Submit annually, to the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship, a report describing (1) the comments submitted to appropriate regulatory authorities, including any outcomes related to the comments; (2) the results of its review of each OSDBU ; and (3) best practices identified for maximizing small business contracting   The Defense Logistic Agency's Procurement Technical Assistance Program (PTAC) helps "businesses pursue and perform under contracts with the Department of Defense, other federal agencies, state and local governments and with government prime contractors  Most of the assistance the PTACs provide is free  PTAC support to businesses includes registration in systems such as the System for Award Management (SAM), identification of contract opportunities, and help in understanding requirements and in preparing and submitting bids " The Competition in Contracting Act of 1984 generally requires "full and open competition" for government procurement contracts  However, various provisions of the Small Business Act authorize or, in some cases, require federal agencies to provide for other than "full and open competition through the use of competitive procedures" when contracting with small businesses  For example, as mentioned previously, federal agencies are generally required to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased  In addition, federal agencies are generally required to set aside contracts that have an anticipated value exceeding the simplified acquisition threshold exclusively for small businesses when there is a reasonable expectation by the contracting officer that offers will be obtained by at least two responsible small businesses offering the products of different small businesses (Rule of Two) and the award will be made at a fair market price; may similarly set aside contracts exceeding the simplified acquisition threshold for competition reserved for specific types of small businesses (e g , 8(a) small businesses, HUBZone small businesses, WOSBs and SDVOSBs); may enter into negotiations directly with particular types of small businesses (e g , a sole source award) when the award could not otherwise be made (e g , only a single source is available or under urgent and compelling circumstances); and are required to grant HUBZone small businesses a price evaluation preference of not more than 10% in open and unrestricted competitions  Several SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts  These include various prime contracting programs; subcontracting programs; and other assistance (e g , contracting technical training assistance and oversight of the federal small business goaling program and the Surety Bond Guarantee program)  Several contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole source awards in circumstances in which such awards could not be made to other firms  These programs provide small businesses an opportunity to win government contracts without having to compete against larger and more experienced companies  The 8(a) Minority Small Business and Capital Ownership Development Program (named for the section of the Small Business Act from which it derives its authority) provides business development assistance to businesses owned and controlled by persons who are socially and economically disadvantaged  African Americans, Hispanics, Native Americans (including American Indians, Eskimos, Aleuts, and Native Hawaiians), Asian-Pacific Americans, and Subcontinent Asian Americans are presumed to be socially and economically disadvantaged  Other individuals can also qualify as socially and economically disadvantaged on a case-by-case basis  To be considered economically disadvantaged, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter  Federal agencies are authorized to award contracts for goods or services, or to perform construction work, to the SBA for subcontracting to 8(a) firms  The SBA is authorized to delegate the function of executing contracts to the procuring agencies and often does so  Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded through either a set-aside or on a sole source basis, with the contract amount generally determining the acquisition method used  When the contract's anticipated total value, including any options, is less than $4 million ($7 million for manufacturing contracts), the contract is normally awarded without competition (as a sole source award)  In contrast, when the contract's anticipated value exceeds these thresholds, the contract generally must be awarded via a set-aside with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price  The SBA also provides technical assistance and training to 8(a) firms  Firms may participate in the 8(a) Program for no more than nine years  In FY2017, the federal government awarded $27 2 billion to 8(a) firms  $16 4 billion was awarded with an 8(a) preference ($8 billion through an 8(a) set-aside and $8 4 billion through an 8(a) sole source award); $4 8 billion was awarded to an 8(a) firm in open competition with other firms; and $6 billion was awarded with another small business preference (e g , set-asides and sole source awards for small businesses generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses)  This program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole source awards (so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million, or $7 million for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open competitions  The HUBZone program targets assistance to small businesses located in areas with low income, high poverty, or high unemployment  To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone  In FY2017, the federal government awarded $7 53 billion to HUBZone-certified small businesses  $1 90 billion was awarded with a HUBZone preference ($1 49 billion through a HUBZone set-aside, $65 3 million through a HUBZone sole source award, and $346 9 million through a HUBZone price-evaluation preference); $1 53 billion was awarded to HUBZone-certified small businesses in open competition with other firms; and $4 10 billion was awarded with another small business preference (e g , set-asides and sole source awards for small businesses generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses)  This program allows agencies to set aside contracts for SDVOSBs  Also, federal agencies may award sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6 5 million for manufacturing contracts)  For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs  In FY2017, the federal government awarded $18 2 billion to SDVOSBs  $6 8 billion was awarded through a SDVOSB set-aside award; $4 3 billion was awarded to a SDVOSB in open competition with other firms; and $7 1 billion was awarded with another small business preference (e g , set-asides and sole source awards for small businesses generally and for HUBZone firms, 8(a) firms, and WOSBs)  Under this program, contracts may be set aside for economically disadvantaged WOSBs in industries in which women are underrepresented and substantially underrepresented  Federal agencies may award sole source contracts to WOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6 5 million for manufacturing contracts)  In FY2017, the federal government awarded $21 3 billion to WOSBs  $648 9 million was awarded with a WOSB preference ($580 5 million through a WOSB set-aside and $68 4 million through a WOSB sole source award); $7 0 billion was awarded to a WOSB in open competition with other firms; and $13 7 billion was awarded with another small business preference (e g , set-asides and sole source awards for small businesses generally and for HUBZone firms, 8(a) firms, and SDVOSBs)  Federal contracting officers are required to provide the SBA's PCR (or, if a PCR is not assigned, the SBA Area Office serving the procuring activity area) a "reasonable period of time" to review any solicitation requiring submission of a small business subcontracting plan and to submit advisory findings before the solicitation is issued  The PCR's advisory comments regarding the small business subcontracting plan's acceptability must be submitted, in writing, to the appropriate contracting officer within five working days after the plan's receipt  As mentioned previously, the SBA's commercial market representatives help prime contractors find small businesses to perform subcontracts; counsel contractors on their responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews, often in concert with a SBA PCR, of contractors awarded contracts that require an acceptable small business subcontracting plan  Federal agencies may also set aside contracts or make sole source awards to small businesses not participating in any other program under certain conditions  The Department of Transportation's (DOT's) Disadvantaged Business Enterprise (DBE) Program originally began in 1980 as a minority/women's business enterprise program "established by regulation under the authority of Title VI of the Civil Rights Act of 1964 and other nondiscrimination statutes that apply to DOT financial assistance programs " Congress has reauthorized the DBE program several times since its inception; most recently in P L  114-94 , the Fixing America's Surface Transportation Act (FAST-Act)  The FAST-Act provides, that, except to the extent the Secretary of Transportation determines otherwise, not less than 10% of the amounts made available for any program under Titles I (federal-aid highways), II (innovative project finance), III (public transportation) and VI (innovation) of the act and 23 U S  Code 403 (highway safety research and development), shall be expended with DBEs  DOT also has a separate DBE program for airport concessions  A DBE is a for-profit small business owned and controlled by socially and economically disadvantaged individuals  Eligibility for the DBE program differs somewhat from the 8(a) program  For example, under the DBE program, women are presumed to be socially and economically disadvantaged individuals  Also, to be regarded as economically disadvantaged, an individual must have a personal net worth (excluding ownership interest in the firm and equity in his or her primary personal residence) that does not exceed $1 32 million  The DBE must also meet SBA size criteria and have average annual gross receipts not exceeding $23 98 million  Size limits for the airport concessions DBE program are higher  The DBE program's eight objectives are to 1  ensure nondiscrimination in the award and administration of DOT-assisted contracts in the department's highway, transit, and airport financial assistance programs; 2  create a level playing field on which DBEs can compete fairly for DOT-assisted contracts; 3  ensure that the department's DBE program is narrowly tailored in accordance with applicable law; 4  ensure that only firms that fully meet the program's eligibility standards are permitted to participate as DBEs; 5  help remove DBE-participation barriers in DOT-assisted contracts; 6  promote the use of DBEs in all types of federally-assisted contracts and procurement activities conducted by recipients; 7  assist the development of firms that can compete successfully in the marketplace outside the DBE program; and 8  provide appropriate flexibility to recipients of federal financial assistance in establishing and providing opportunities for DBEs  Other federal programs promote subcontracting with small disadvantaged businesses (SDBs)  SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups  Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence)  Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do  Federal agencies must negotiate "subcontracting plans" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract  Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs "have an equitable opportunity to compete for subcontracts " Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors "monetary incentives" to subcontract with SDBs  As of February 11, 2019, the SBA's Dynamic Small Business Search database included 2,538 SBA-certified SDBs and 100,595 self-certified SDBs  The SBA's 7(j) Management and Technical Assistance program provides "a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities " Eligible individuals and businesses include "8(a) certified firms, SDBs, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals " In FY2017, the 7(j) Management and Technical Assistance program assisted 4,100 small businesses  The SBA's Surety Bond Guarantee program aims to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels  The program guarantees individual contracts of up to $6 5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary  The SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs  In FY2017, the SBA guaranteed 10,397 bid and final surety bonds with a total contract value of more than $6 3 billion  A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner  The agreement binds the contractor to comply with the terms and conditions of a contract  If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed  The surety bond reduces the risk associated with contracting  Surety bonds are meant to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions  Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government  Small business mentor-protégé programs typically seek to pair new businesses with more experienced businesses in mutually beneficial relationships  Protégés may receive financial, technical, or management assistance from mentors in obtaining and performing federal contracts or subcontracts, or serving as suppliers under such contracts or subcontracts  Mentors may receive credit toward subcontracting goals, reimbursement of certain expenses, or other incentives  The federal government currently has several mentor-protégé programs to assist small businesses in various ways  The 8(a) Mentor-Protégé Program is a government-wide program designed to assist small businesses "owned and controlled by socially and economically disadvantaged individuals" participating in the SBA's Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) program) in obtaining and performing federal contracts  For that purpose, mentors may (1) form joint ventures with protégés that are eligible to perform federal contracts set aside for small businesses; (2) make certain equity investments in protégé firms; (3) lend or subcontract to protégé firms; and (4) provide technical or management assistance to their protégés  The SBA's A ll S mall B usiness Mentor-Protégé Program is a government-wide mentor-protégé program for all small business concerns, consistent with the SBA's mentor-protégé program for participants in the SBA's 8(a) Business Development program  The Department of Defense (DOD) Mentor-Protégé Program , in contrast, is agency-specific  It assists various types of small businesses and other entities in obtaining and performing DOD subcontracts and serving as suppliers on DOD contracts  Mentors may (1) make advance or progress payments to their protégés that DOD reimburses; (2) award subcontracts to their protégés on a noncompetitive basis when they would not otherwise be able to do so; (3) lend money to or make investments in protégé firms; and (4) provide or arrange for other assistance  Other agencies also have agency-specific mentor-protégé programs to assist various types of small businesses or other entities in obtaining and performing subcontracts under agency prime contracts  The Department of Homeland Security (DHS), for example, has a mentor-protégé program wherein mentors may provide protégés with rent-free use of facilities or equipment, temporary personnel for training, property, loans, or other assistance  Because these programs are not based in statute, unlike the SBA and DOD programs, they generally rely upon preexisting authorities (e g , authorizing use of evaluation factors) or publicity to incentivize mentor participation  Currently, more than 1,200 mentor-protégé agreements are in place, even though there are issues with the accuracy and thoroughness of some federal agency records  Since 1978, federal agency heads have been required to establish federal procurement goals, in consultation with the SBA, "that realistically reflect the potential of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals" to participate in federal procurement  Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting the goals to the SBA  In 1988, Congress authorized the President annually to establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals  Congress required the government-wide minimum participation goal for small businesses to be "not less than 20% of the total value of all prime contract awards for each fiscal year" and "not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year" for small businesses owned and controlled by socially and economically disadvantaged individuals  Each federal agency was also directed to "have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency " The SBA was also required to report to the President annually on the attainment of the goals and to include the information in an annual report to Congress  The SBA negotiates the goals with each federal agency and establishes a small business eligible baseline for evaluating the agency's performance  The agency head is required to "make consistent efforts to annually expand participation by small business concerns from each industry category " If the SBA and the agency cannot agree on the goals, the agency may submit the case to the Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) for resolution  The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i e , non-appropriated funds), contracts not covered by the FAR, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System – Next Generation, or FPDS-NG (such as government procurement card purchases and contracts valued less than $10,000)  These exclusions typically account for 18% to 20% of all federal prime contracts each year  The SBA then evaluates the agencies' performance against their negotiated goals annually, using FPDS-NG data, managed by the U S  General Services Administration (GSA), to generate the small business eligible baseline  This information is compiled into the official Small Business Goaling Report, which the SBA releases annually  Each agency that fails to achieve any proposed prime or subcontract goal is required to submit a justification to the SBA on why it failed to achieve a proposed or negotiated goal with a proposed plan of corrective action  Agencies can take credit in every category that is applicable to the recipient of the contract  For example, "when counting goaling achievements, a contract awarded to a service-disabled Veteran-Owned Woman-Owned Small Business would be counted toward the Small Business (SB) goal, the Service-Disabled Veteran-Owned Small Business (SDVOSB) goal and the Women-Owned Small Business (WOSB) goal  However, these category counts are not summed to triple the total count  The Sum of Parts Does Not Equal the Whole (italics in original) " Over the years, federal government-wide procurement goals have been established for small businesses generally ( P L  100-656 , the Business Opportunity Development Reform Act of 1988, and P L  105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997); small businesses owned and controlled by socially and economically disadvantaged individuals ( P L  100-656 ); women ( P L  103-355 , the Federal Acquisition Streamlining Act of 1994); small businesses located within a HUBZone ( P L  105-135 ); and small businesses owned and controlled by a service-disabled veteran ( P L  106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999)  The current federal small business procurement goals are at least 23 0% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year; 5 0% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses (including participants in the SBA's 8(a) Program) for each fiscal year; 5 0% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses; 3 0% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses; and 3 0% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses  There are no punitive consequences for not meeting these goals  However, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting  For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings  As shown in Table 1 , the FY2017 Small Business Goaling Report , using FPDS-NG data, indicates that federal agencies met the federal procurement goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017  Table 1 also provides, for comparative purposes, the percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017  Before awarding a federal contract, the contracting officer must affirmatively determine that the business is responsible to perform the contract  If the contracting officer determines that an apparent successful small business offeror lacks certain elements of responsibility (e g , is unable to fulfill the requirements of a specific government procurement because it lacks capability, competency, capacity, credit, integrity, perseverance, tenacity, or limitations on subcontracting), the officer is required to refer the matter in writing to the SBA for review and a possible Certificate of Competency (COC), even if the next acceptable offer is also from a small business  The COC certifies in writing that the small business meets all required elements of responsibility for the purpose of receiving and performing a specific government contract  The "COC program empowers the SBA to certify to contracting officers as to all elements of responsibility of any small business concern to receive and perform a specific government contract  The COC program does not extend to questions concerning regulatory requirements imposed and enforced by other federal agencies " As mentioned previously, the SBA's commercial market representatives conduct periodic compliance reviews of contractors awarded contracts that require an acceptable small business subcontracting plan  In addition, once the contract is completed, federal agencies are required to pay the contractor on a timely basis and pay interest penalties for late payments  Under specified circumstances, federal agencies may also pay contractors before the contract's payment's due date  The periodic compliance review can take place on-site, at the contracting agency, or virtual  Materials that may be reviewed include the contractor's contract files, correspondence that is directly or indirectly related to the contract, IT systems, subcontracting methods, and procedures  Contractors are selected randomly for audit  The SBA may enter into agreements with other federal agencies to conduct these assessments  The compliance report includes compliant and non-compliant items found during the assessment of the contractor's subcontracting activities and a rating indicating the contractor's level of compliance or non-compliance, ranging from unsatisfactory to outstanding  If any deficiencies are found, the contractor is required to submit, within 30 days of the compliance review rating letter date, a corrective action plan (CAP)  The CAP is submitted to the SBA Area Office via email, or any method designated by the SBA  The commercial market representative conducts a follow-up compliance report within six months to a year of the date the SBA acknowledges receipt of the contractor's CAP to ensure that corrective actions have been taken to eliminate the deficiencies  The SBA keeps the federal agency that awarded the contract informed of the contractor's adherence to correcting the deficiencies  If the contractor refuses to provide or address all deficiencies in the CAP, a delinquent CAP letter is sent advising the contractor that it has 15 days from the letter's date to comply with federal regulations  If an acceptable CAP is not received in the allotted time frame the case is escalated to the SBA's subcontracting program manager who informs the SBA's Office of Government Contracting director and works with the SBA's Office of General Counsel and the federal agency that awarded the contract for resolution or to begin accessing liquidated damages  Once a contract is awarded, federal agencies are generally required to pay interest to prime contractors on any invoice payments the agency fails to make by the date(s) specified in the contract, or within 30 days of receipt of a proper invoice for the amount due if no date is specified in the contract  Similar requirements exist for prime contractors in paying subcontractors on construction contracts  These requirements are especially important for small businesses in the construction industry  Specifically, every construction contract awarded by a federal agency must contain clauses obligating the prime contractor to (1) pay the subcontractor for "satisfactory performance" under the subcontract within seven days of receiving payment from the agency and (2) pay interest on any amounts that are not paid within the proper time frame  The contract must also obligate the prime contractor to include similar payment and interest penalty terms in its subcontracts, as well as require its subcontractors to impose these terms on their subcontractors  This latter provision ensures that the payment and interest penalty requirements flow down to all tiers of construction subcontractors  In addition, required subcontracting plans must incorporate terms obligating the prime contractor to notify the agency awarding the contract in writing if a subcontractor is paid a reduced price for goods supplied or services completed under the contract, or if payment is made to the subcontractor more than 90 days past due  The prime contractor must include the reason for the reduction in payment or failure to pay a subcontractor within 90 days  If the contracting officer for a covered contract (a contract that requires an acceptable subcontracting plan) determines that a prime contractor has a history of unjustified, untimely payments to contractors, the contracting officer shall record the contractor's identity, describe the circumstances under which the contractor may be determined to have a history of unjustified, untimely payments to subcontractors, and include the contractor's identity in, and make publicly available through, the Federal Awardee Performance and Integrity Information System, or any successor  This information is used by federal agencies to "evaluate the business ethics and quality of prospective contractors competing for Federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources " Federal agencies are permitted to make an accelerated payment up to seven days before the required payment date in a federal contract, or earlier if the agency deems it necessary on a case-by-case basis if, after receiving a proper invoice, it is in the best interest of the government, and any of the following is true: the invoice in under $2,500; the payment is to a small business; or the payment is related to an emergency, disaster, or military deployment  In addition, the Secretary of Defense is required, to the fullest extent permitted by law, to establish an accelerated payment date for its small business prime contractors, with a goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is not established by contract  The Secretary of Defense is also required to establish, to the fullest extent permitted by law, an accelerated payment date for its prime contractors that subcontract with small businesses, with a goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is not established by contract and the prime contractor agrees to make payments to the subcontractor "in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor " The small business contracting programs described in this report generally have strong bipartisan support  However, that does not mean that these programs face no opposition or that issues have not been raised concerning the impact or operations of specific programs  For example, small business advocates seek policies that reduce or eliminate exclusions that narrow the reach of small business contracting preferences, want the SBA to use the total value of all prime contract awards in the Small Business Goaling Report, and want the SBA to use a more discerning methodology for awarding performance grades to federal agencies in meeting its small business contracting goals  Critics have questioned some of these programs' effectiveness, in terms of both promoting small business opportunities to win federal contracts and a more diversified, robust economy  Many observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether the federal government and individual federal agencies meet the procurement goals in the annual Small Business Goaling Report  In recent years, the federal government has generally succeeded in meeting the government-wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses generally, 5% to SDBs, and 3% to SDVOSBs  However, it has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone small businesses  The Small Business Goaling Report is the most convenient measure available to compare federal small business contracting performance over time, but it has limitations  For example, the report does not include all federal contracts, because some are not deemed to be small business eligible and others are not recorded in the FPDS-NG  In addition, the report does not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy  As one group of researchers has argued, the entire goal-setting process … is geared to measuring the dollars and contracts awarded to small business, and pays little attention to the effect that access to government contracts has on small business starts, growth, and wealth generation  Results of the program are also hard to isolate, difficult to measure, and generally not judged against the next best or other alternative policies [emphasis in original]  Comprehensive studies examining the effect of small business contracting preferences on small business startups, growth, wealth generation, and industry competitiveness may prove useful for congressional oversight  In the meantime, although the Small Business Goaling Report has its limitations, it can help policymakers identify programs most in need of examination  For example, the SBA has announced that it is focusing additional efforts on promoting the HUBZone program to federal contracting officials, primarily due to the continuing difficulties federal agencies have had in meeting the 3% goal for HUBZone small businesses 

ground_truth: Congress has broad authority to impose requirements upon the federal procurement process, that is, the process whereby agencies obtain goods and services from the private sector. One way in which Congress has exercised this authority is by adopting measures to promote contracting and subcontracting between "small businesses" and federal agencies. These measures, among other things, declare a congressional policy of ensuring that a "fair proportion" of federal contract and subcontract dollars is awarded to small businesses; establish government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to small businesses; establish an annual Small Business Goaling Report to measure progress in meeting these goals; generally require federal agencies, under specified circumstances, to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses; authorize federal agencies, under specified circumstances, to set aside contracts that have an anticipated value greater than the simplified acquisition threshold exclusively for small businesses; authorize federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances); authorize federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, women-owned small businesses (WOSBs) and service-disabled veteran-owned small businesses (SDVOSBs)); and task the Small Business Administration (SBA) and other federal procurement officers with reviewing and restructuring proposed procurements to maximize opportunities for small business participation. Small business contracting programs generally have strong bipartisan support. However, that does not mean that these programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs. For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting. Advocates want the federal government to enact policies that reduce or eliminate such exclusions. Critics have questioned some of these programs' effectiveness, in terms of both promoting small business opportunities to win federal contracts and promoting a more diversified, robust economy. Many observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether federal government and individual federal agencies meet the predetermined procurement goals in the annual Small Business Goaling Report. In recent years, the federal government has generally succeeded in meeting the government-wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses, 5% to small disadvantaged businesses (SDBs), and 3% to SDVOSBs. It has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone small businesses. The Small Business Goaling Report is the most convenient measure available to compare federal small business contracting performance over time, but it has limitations. For example, the SBA excludes some contracts from the report in its determination of what is "small business eligible" and some federal procurement activities are not included because they are not recorded in the Federal Procurement Data System—Next Generation. It also does not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy.