Background

As reflected by federal statutes and a number of executive orders, it is the  policy of the federal government to encourage the participation of small  businesses, including businesses owned and controlled by socially and  economically disadvantaged individuals, in the performance of federal  procurement contracts. The Small Business Act established SBA as an  independent agency of the federal government to aid, counsel, assist, and  protect the interests of small business concerns; preserve free competitive  enterprise; and maintain and strengthen the overall economy of the  nation. Among other things, the act sets a minimum governmentwide goal  for small business participation of not less than 23 percent of the total  value of all prime contract awards for each fiscal year and makes SBA  responsible for reporting annually on agencies’ achievements on their  procurement goals. The act authorizes the President to establish the  annual governmentwide goals.
To meet its responsibilities under the act, SBA negotiates annual  procurement goals with each federal executive agency with the intent to  ultimately achieve the 23 percent governmentwide goal. Some agencies  have goals higher than 23 percent, while others may have goals that are  lower than or equal to 23 percent—SBA negotiates all of them with the  intent that the governmentwide small business participation rate will not  be less than the goal of 23 percent. Among the agencies we reviewed for  this report, annual small business procurement goals for fiscal year 2005  ranged from 16 percent (NASA) to 56 percent (Interior). DOD’s goal was  set at 23 percent, Treasury’s at 24 percent, and HHS’s at 30 percent. The  Small Business Act also sets annual prime contract dollar goals for  participation by certain types of small businesses that agencies strive to  meet as part of their efforts to meet their overall small business  participation goal. Specifically, these include goals for participation by  SDBs (5 percent), businesses owned and controlled by women or service- disabled veterans (5 and 3 percent, respectively), and, businesses located  in historically underutilized business zones (HUBZones, 3 percent). “Each department or agency that contracts with businesses to develop advertising for the  department or agency or to broadcast Federal advertising shall take an aggressive role in  ensuring substantial minority-owned entities’ participation, including 8(a), SDB, and  Minority Business Enterprise (MBE) in Federal advertising-related procurements.”
The criteria for determining a firm’s status as an 8(a) or SDB are set forth  in section 8 of the Small Business Act and related regulations, while the  definition of MBE is set forth in Executive Order 11625. Specifically,    The 8(a) program, authorized by section 8(a) of the Small Business Act,  was created to help small disadvantaged businesses compete in and access  the federal procurement market. Generally, in order to be certified under  SBA’s 8(a) program, a firm must satisfy SBA’s applicable size standards, be  owned and controlled by one or more socially and economically  disadvantaged individuals who are citizens of the United States, and  demonstrate potential for success. Black Americans, Hispanic Americans,  Native Americans, and Asian Pacific Americans are presumptively socially  disadvantaged for purposes of eligibility. The personal net worth of an  individual claiming economic disadvantage must be less than $250,000 at  the time of initial eligibility and less than $750,000 thereafter.
To qualify for SDB certification, a firm must be owned and controlled by  one or more socially and economically disadvantaged individuals or a  designated community development organization. Individuals presumed  to be socially disadvantaged for purposes of the 8(a) program are also  presumed to be socially disadvantaged for purposes of determining  eligibility for SDB certification. In contrast to the 8(a) program applicants,  businesses applying for SDB certification need not demonstrate potential  for success, and the personal net worth of the owners may be up to  $750,000 at the time of certification. SDBs are eligible for incentives such  as price evaluation adjustments of up to 10 percent when bidding on  federal contracts in certain industries. Prime contractors that achieve  SDB subcontracting targets may receive evaluation credits for doing so.  Section 8(a) firms automatically qualify as SDBs, but other firms may  apply for SDB-only certification.
Executive Order 11625 defines minority business enterprises as those  businesses that are owned or controlled by one or more socially or  economically disadvantaged persons. The order states that disadvantages  could arise from cultural, racial, or chronic economic circumstances or  background or from similar causes. Under the order, socially or  economically disadvantaged individuals include, but are not limited to,  African-Americans, Puerto Ricans, Spanish-speaking Americans, American  Indians, Eskimos, and Aleuts. While the definition of “MBE” is similar to  the definition of “socially and economically disadvantaged small business”  for purposes of the 8(a) and federal SDB programs, unlike these programs,  the order does not limit the term “MBE” to small businesses.
Executive Order 13170 spells out specific responsibilities for SBA, OMB,  and executive agencies with procurement authority. Generally, the order  gives SBA responsibility for setting goals with agencies and publicly  reporting the progress toward those goals. Although the order gives OMB  general oversight responsibility for implementing the order, OMB and SBA  officials told us that the two agencies had agreed that SBA would take on  the oversight responsibilities because SBA already had programs in place  to oversee the small business programs of federal agencies. Section 2(b) of  the order directed federal agencies with procurement authority to develop  long-term, comprehensive plans to, among other things, aggressively seek  to ensure that businesses classified as 8(a), small disadvantaged, and  minority-owned are aware of contracting opportunities and report  annually on efforts to increase utilization of these businesses. Section 2(b)  also directed OMB to review each of these plans and report to the  President on the sufficiency of each plan to carry out the terms of the  executive order.
The federal government awards contracts for advertising-related services  for a variety of reasons, but primarily to deliver messages about its  programs and services. According to Advertising Age, the largest amount  of federal advertising spending goes to procure television and magazine  advertising. Within the federal government, as we noted earlier, the biggest  buyer of these services is DOD, which is very often doing so as part of  ongoing recruiting campaigns by the military services. Additionally, for  example, the Treasury’s Bureau of Engraving and Printing procures the  services of an advertising firm to promote public awareness and  acceptance of changes to U.S. currency (e.g., the introduction of the  redesigned currency). Similarly, NASA also uses advertising firms to help  plan and carry out a variety of events held around the country intended to  publicize its programs and ongoing space research as well to support  internal purposes, such as organizing off-site conferences.

	Agencies Responded to Executive Order 13170 by Emphasizing Existing Programs and Initiating Some New Activities Targeted to Advertising

The five agencies we reviewed implemented Executive Order 13170  primarily by continuing their existing efforts to broadly identify potential  contracting opportunities with all types of small businesses, while three of  the agencies addressed section 4 of the order by initiating new actions  specific to advertising-related contracts. For example, HHS and NASA  cited ongoing training efforts directed to procurement staff or small  businesses as one way their agencies addressed the order. The five  agencies’ focus on ongoing efforts was consistent with SBA’s and OMB’s  views that several provisions of the order duplicated program  requirements under existing legislation. Specific to advertising, Treasury  officials indicated that the agency was building on existing relationships  with trade associations in order to identify advertising contracting for  SDBs. Earlier this year, Treasury also established new outreach efforts and  reporting requirements for advertising contracts with 8(a), SDB, and  minority-owned businesses.

		Agencies Are Generally Using Existing Programs to Address the Requirements of the Order

Rather than develop plans focused specifically on section 4 of the  executive order, for the most part the five agencies that we reviewed said  that they already had programs in place to address similar requirements in  previous legislation and that these activities were consistent with the  expectations of the order. In response to the order, agencies generally  reemphasized to procurement officers in subagencies around the country  (who are responsible for awarding contracts) each agency’s small business  program policies and goals. While not directed specifically toward  advertising contracts, these existing programs were designed to encourage  the participation of small and minority-owned businesses in federal  procurement.
Treasury, HHS, and NASA spelled out their strategies for addressing the  executive order in written implementation plans that they prepared  pursuant to the requirements of section 2(b) of the order. DOD and  Interior did not, as directed, prepare such plans at that time, but agency  officials from those departments described to us the efforts they  undertook. More specifically, to ensure that 8(a)s, SDBs, and minority- owned businesses were aware of contracting opportunities:    Treasury indicated in its implementation plan that it would continue to  maintain a Web site for small business procurement and would post  annual forecasts of contracting opportunities there. Further, the agency  stated that it would publicize contracting opportunities in the Commerce  Business Daily and FedBizOpps (an Internet-based point-of-entry for  federal government procurement opportunities) and use its existing  relationship with a variety of trade associations to foster the development  of small minority-owned and women-owned businesses to increase  awareness of contracting opportunities.
HHS’s plan stated that the agency would continue to train program and  procurement officials through the HHS Acquisition Training Program on  policies that affect federal procurement awards to 8(a), small  disadvantaged, and minority-owned businesses.
NASA’s plan stated that it would continue to provide a 3-day course,  “Training and Development of Small Businesses in Advanced  Technologies,” that was designed to increase the knowledge base of small  businesses—including disadvantaged, 8(a), and women-owned businesses,  and minority educational institutions—by improving their ability to  compete for contracts in NASA’s technical and complex environment.
Interior officials told us that they had disseminated information on future  contracting opportunities to small businesses through the Internet,  developed an advanced procurement plan, and conducted quarterly  outreach meetings with potential small business contractors.
DOD officials noted that the department’s Small Business Program  adhered to the requirements set forth in the Small Business Act and other  applicable statutory provisions and federal regulations. The officials  further explained that they used FPDS-NG and the department’s internal  database to monitor DOD’s progress toward meeting its small business  program goals.
The five agencies’ focus on enhancing their ongoing small business  procurement programs to address section 4 of Executive Order 13170 was  consistent with SBA’s and OMB’s views that some requirements in the  order reflected previous legislation. Specifically, officials from SBA and  OMB told us that several provisions of the executive order paralleled  procurement program requirements under the Small Business Act and  other existing legislation. As a result, these two agencies, which were  assigned certain oversight and reporting responsibilities in section 2 of the  order, agreed that SBA should address such responsibilities as part of its  ongoing oversight activities under the Small Business Act. For example,  the order requires SBA to conduct semiannual evaluations of the  achievements in meeting governmentwide prime and subcontracting goals  and the actual prime and subcontract awards to 8(a)s and SDBs for each  agency and to make the information publicly available. However, prior to  the issuance of the order, SBA was already evaluating awards to SDBs and  publishing the information in its annual reports on the goals and  achievements of each agency’s procurement efforts. SBA’s goaling  requirements were previously established by the Small Business Act.
Our comparison of the order to existing legislation also showed that  almost all of the requirements in the order had already been reflected in  previous legislation. For example, the order required agencies to ensure  that minority-owned businesses are aware of future prime contracting  opportunities, an existing requirement under the Small Business Act and  the Federal Acquisition Regulation (FAR). Similarly, the order requires  that the directors of the Offices of Small and Disadvantaged Business  Utilization (OSDBU) carry out their responsibilities to maximize the  participation of 8(a)s and SDBs in federal procurement, a requirement that  was previously set forth in the Small Business Act. Specifically, the Small  Business Act requires each covered agency to establish an OSDBU to be  responsible for, among other things, the implementation and execution of  the functions and duties under the sections of the act that pertain to the  8(a) and SDB programs in each agency. We found that many of the  activities mentioned in the agencies’ implementation plans or described to  us highlighted actions that the agencies already had in place in their small  business programs.

		Some Agencies Planned New Activities to Direct Federal Advertising Contracts to 8(a)s, SDBs, or Minority-Owned Businesses

Although agency officials at all five agencies indicated that their current  small business programs broadly addressed procuring services from 8(a)s,  SDBs, and minority-owned businesses, including advertising-related  services, three of the five agencies we reviewed—HHS, Treasury, and  Interior—planned new activities to increase federal advertising  contracting opportunities for these businesses. For example, HHS stated  in its implementation plan that it would make every effort to develop  alternative strategies to maximize small and minority business  participation in its advertising contracts at both the prime contracting and  subcontracting levels. HHS also directed staff from its OSDBU to work  with its operational divisions to ensure that all advertising efforts were  properly structured under the Federal Acquisition Regulation.
In order to direct federal advertising procurement opportunities to 8(a)s,  SDBs, and minority-owned businesses, Treasury stated in its  implementation plan that it would identify contracting opportunities for  SDBs in advertising and information technology by building on its existing  relationships with trade associations. Treasury had previously established  a memorandum of understanding (MOU) with several trade associations,  including the Minority Business Summit Committee and the U.S. Pan Asian  American Chamber of Commerce. Treasury intended the MOU to foster an  environment that would allow small and minority-owned firms to compete  successfully for Treasury contracts and subcontracts. According to  Treasury officials, the focus on advertising in Executive Order 13170  allowed the department to leverage an existing program by adding a  component specifically for advertising and information technology  services.
In addition to the efforts to partner with trade organizations that it began  in 2001, Treasury issued an acquisition bulletin in January 2007  establishing additional outreach efforts and reporting requirements  relating to the procurement of federal advertising services from 8(a)s,  SDBs, and minority-owned businesses. The bulletin requires (1) small  business specialists located at Treasury’s bureaus to use databases and  other sources to identify minority-owned entities to solicit for advertising- related services, and (2) Treasury’s bureaus to report all contract actions  related to federal advertising to the Office of Procurement Executive for  contracts awarded from March 1, 2007, through September 30, 2007.
Interior, which had previously relied on its existing small business  program to address the order, is currently drafting an implementation plan  that will, according to the department’s OSDBU officials, propose  activities to increase advertising opportunities for 8(a)s, SDBs, and  minority-owned businesses. Interior plans to convey through its efforts  that the department’s OSDBU is available to make the process of doing  business with Interior simpler and more consistent across Interior’s  component subagencies. Interior plans to target all small businesses  whose owners include representatives from socioeconomic groups  identified as disadvantaged in the Small Business Act.

	Advertising Obligations and Contract Actions Awarded to 8(a), Small Disadvantaged, and Minority-Owned Businesses Varied across Agencies

Overall, from fiscal years 2001 through 2005, 8(a), small disadvantaged,  and minority-owned businesses received about 5 percent of the $4.3 billion  in advertising-related obligations awarded by DOD, Interior, HHS,  Treasury, and NASA. These businesses accounted for 12 percent of the  contract actions that the five agencies awarded, but the percentages the  agencies awarded varied substantially.  For example, Treasury awarded  less than 2 percent of its advertising-related dollars to 8(a)s, SDBs, and  minority-owned businesses over the 5-year period, while HHS awarded  about 25 percent to these business types. Advertising dollars also varied  from one year to the next at individual agencies, sometimes significantly,  primarily because of large advertising campaigns that the respective  agencies undertook to publicize new programs or promote their mission  (e.g., public health). The extent to which agencies’ yearly increases in  overall advertising obligations affected obligations to 8(a), small  disadvantaged, and minority-owned firms also varied.

		Participation of 8(a), Small Disadvantaged, and Minority-Owned Businesses Varied Widely among the Five Agencies

According to federal procurement data, the federal government obligated  about $4.8 billion to contractors for advertising-related services from fiscal  years 2001 through 2005. During this period, the five agencies obligated  $4.3 billion for advertising-related services—about 92 percent of total  advertising-related obligations for the federal government (this amount  consists of $3.4 billion of their own funds, and another $919 million on  behalf of other agencies). As shown in figure 1, DOD accounted for over  half of all advertising-related obligations during this period.
Treasury (Other agency funded)
From fiscal years 2001 through 2005, the five agencies we reviewed  collectively obligated about $218 million to businesses designated as 8(a),  small disadvantaged, or minority-owned; individually, their utilization of  these businesses varied widely (fig. 2). Specifically, HHS awarded the  highest dollar amount to 8(a), SDB, and minority-owned businesses during  the 5-year period—about $122 million—and NASA awarded the highest  percentage of its dollars to these businesses—89 percent, or about $41  million.
During this period, the five agencies awarded a total of 6,279 contract  actions, about 12 percent of which (725) were awarded to businesses with  these designations (fig. 3). Individually, the extent to which agencies  awarded contract actions to 8(a), SDB, and minority-owned businesses  varied widely, with Treasury awarding none on behalf of other agencies to  these types of businesses and NASA awarding 45 percent. The number of  contract actions awarded to 8(a)s, SDBs, and minority-owned businesses  ranged from 0 at Treasury (administered for other agencies) to 449 at  DOD.
Individually, the agencies we reviewed awarded different percentages of  their advertising-related contracting dollars and actions to these types of  small businesses. For example, on average, NASA awarded more than 80  percent of its total advertising-related obligations to businesses in each of  these categories for the 5-year period. Except for 8(a)s and SDBs in 2001,  NASA consistently awarded 66 percent or more of its advertising-related  obligations to the three types of businesses. In contrast, Treasury and  DOD on average awarded 1.7 percent or less of their advertising-related  obligations to 8(a), SDB, or minority-owned businesses. Figure 4 shows  the amount of advertising-related obligations awarded by each agency to  each of the three business types for 5 fiscal years as well as the total for  the 5-year period. Similarly, figure 5 shows the number of advertising- related contact actions awarded by each agency to each of the three  business types for each year and the total for the 5-year period.  Contracting dollars and actions awarded directly to businesses can be  counted in more than one category, so the dollars and actions awarded to  various types of small businesses are not mutually exclusive.

		Year-to-Year Variations in Agencies’ Advertising Obligations Were Due to Advertising Campaigns Specific to the Agency

As we noted earlier in this report, federal agencies award contracts for  advertising-related services for a variety of reasons, the primary one being  to deliver messages about the agencies’ programs and services. The  advertising services that agencies procured ranged from recruiting and  public service announcements to public relations. We found that  advertising dollars for agencies sometimes varied significantly from one  year to the next (table 1) and that these differences were mostly the result  of large advertising campaigns specific to the individual agencies.
While we noted the year-to-year variations in agencies’ overall advertising  obligations, we also observed that these variations did not always translate  into a direct effect on the share of agencies’ advertising obligations that  went to 8(a)s, SDBs, or minority-owned businesses (fig. 4). For example,  during the 5-year period under review, DOD showed an upward trend of  increasing obligations for advertising-related procurement, with the  largest increase occurring in fiscal year 2005 (about 31 percent). DOD  officials attributed the increase in advertising expenses to confronting the  challenge of continuing to fill the military ranks with recruits and  reenlistees in the midst of war. More specifically, during fiscal year 2005  DOD awarded multiple actions on four ongoing unrelated large contracts  with obligations ranging from about $60 million to $175 million. None of  these new fiscal year 2005 contract actions used 8(a)s, SDBs, or minority- owned businesses. Overall, however, DOD increased its advertising-related  obligations to each of the three business types (from 2004 to 2005).
HHS officials told us that HHS’s higher advertising-related obligations in  fiscal years 2001 and 2003 were mostly attributable to the Centers for  Disease Control and Prevention’s (CDC) development of a Youth National  Media Program. In support of this initiative, two advertising programs  were conceived: the National Youth Media Campaign and the Targeted  Communities-Youth Media Campaign. HHS obligated $151 million for  these two campaigns. A portion of these obligations—just over $48  million—was awarded to two minority-owned businesses, one of which  was also certified as a SDB. These campaigns included HHS’s VERB  advertisement targeted toward children and teens to promote more  physical activity (fig. 6).
The increase in HHS’s overall advertising obligations from 2002 to 2003 did  not have a uniformly similar effect on the obligations the agency directed  to 8(a)s, SDBs, and minority-owned firms, even though, as we note, some  of the spending for the youth initiative was directed to small  disadvantaged and minority-owned firms. Specifically, as a percentage of  the agency’s total advertising obligations, HHS’s total obligations to 8(a)  and minority-owned firms decreased from 2002 to 2003, and its obligations  to SDBs showed an increase of less than 1 percent.
About 84 percent of NASA’s obligations were related to two contracts. The  first of these was a contract NASA’s Langley Research Center awarded in  fiscal year 2001 to an SDB for a variety of public relations activities. For  example, this contractor provided services such as preparing written and  photographic materials for media and selected internal and external  communications programs and administrative support for outreach and  special events. The contractor also developed, installed, and maintained  exhibits for events and provided logistical and general services to plan and  conduct conferences, symposia, peer reviews, and workshops for off-site  conferences and events. From fiscal years 2001 through 2005, NASA  obligated over $5 million for this contract.
The second NASA contract was awarded in fiscal year 2002 as a multiple- year contract by its Marshall Space Flight Center. The contract was  originally awarded to a business classified as minority-owned that was  later admitted to the 8(a) and SDB programs. The contractor was primarily  responsible for providing support services to human resources,  educational programs, government and community relations, public  exhibits, internal communications, employee training, and organizational  development. More recently, the contractor has helped with several public  events, including an air show called Thunder in the Valley in Columbus,  Georgia, in March 2007 and the X-Prize Cup in Las Cruces, New Mexico, in  October 2006. Between fiscal years 2002 and 2005, NASA obligated over  $33 million for this contract.
Generally, agency officials told us that the procurement decisions  reflected in their overall contracting data and specifically the advertising  contracting data we present here were more often driven by needs  identified at the subagency or local area level than by the departments’  needs. These decisions are made by contracting officers at procurement  offices, which are located around the country. For example, NASA has  contracting officers at each of its 10 field centers. Each center specializes  in different areas of research and technology specific to NASA. The  Marshall Space Flight Center in Huntsville, Alabama, for example, focuses  on space exploration, with specific emphasis on completing the  international space station and returning to the moon. Contract-related  needs for the Marshall Space Flight Center seek to advance technology in  the space exploration area, and officials at the center identify contracting  opportunities to meet those needs. Officials in NASA’s OSDBU told us that  they did not tell contracting officers what services should be directed to  small businesses, because the businesses that were selected to provide a  service were chosen based on need (as identified by the centers’  contracting officers and other officials) and ability to meet the center’s  requirements.

	Agency Comments and Our Evaluation

We provided SBA, OMB, GSA, DOD, Treasury, HHS, Interior, and NASA  with a draft of this report for review and comment. After reviewing the  report, all agencies responded that they did not have any comments,  including any of a technical nature.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after the  date of this letter. At that time, we will send copies of this report to the  Ranking Member of the Senate Committee on Small Business and  Entrepreneurship, the Chair and Ranking Member of the House  Committee on Small Business, and other interested congressional  committees. In addition, we will send copies to the Secretaries of Defense,  Treasury, Health and Human Services, and Interior, as well as NASA’s  Administrator, the Administrator of General Services, the Administrator of  the Small Business Administration, and the Director of the Office of  Management and Budget. We will also make copies available to others  upon request. In addition, the report will be available at no charge on the  GAO Web site at http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix II.

Appendix I: Scope and Methodology

In this report, we describe (1) strategies that the Departments of Defense  (DOD), Interior, Health and Human Services (HHS), Treasury, and  National Aeronautics and Space Administration (NASA) used to address  section 4 of Executive Order 13170, and (2) the total obligations, the  number of contract actions, and the percentage of total obligations  represented by these contract actions that each of the five agencies  awarded to businesses in the Small Business Administration’s (SBA) 8(a)  and federal small disadvantaged business (SDB) programs and to minority- owned businesses for advertising-related services. We queried the Federal  Procurement Data System-Next Generation (FPDS-NG) using the product  service codes for advertising and public relations to identify advertising- related activity. Using these data, we judgmentally selected the four  agencies that had obligated the most funds (DOD, Interior, HHS, and  Treasury) and one that had a high participation of 8(a), small  disadvantaged, and minority-owned businesses (NASA), based on  identification in the FPDS-NG of awards to 8(a)s, SDBs, and minority- owned businesses for advertising-related contracts for fiscal years 2001 to  2005. In total, these agencies represented about 92 percent of all federal  advertising-related obligations for this 5-year period.
To describe strategies used by the five federal agencies to address section  4 of Executive Order 13170, we obtained documentation from the agencies  outlining the actions they planned to take to implement the order,  interviewed agency officials regarding their plans and actions taken, and  compared both their planned actions as well as actions taken to the  requirements presented in the order. We also interviewed officials at SBA  and Office of Management and Budget (OMB) regarding the oversight  responsibilities each was given in implementing the order. Furthermore,  we identified a number of federal statutes and regulations pertaining to  executive agency procurement and small business programs, including the  Small Business Act and the Federal Acquisition Regulations, that were  consistent with the requirements of section 2 of the Executive Order  13170.
To determine the total dollar amount for each of the five agency’s  advertising-related obligations for fiscal years 2001 through 2005 and the  dollar amount and percentage for obligations and contract actions  awarded to businesses designated as 8(a)s, SDBs, or minority-owned  during that same time period, we extracted key data fields from FPDS-NG.  These data fields included contracting department, procurement  instrument identifier (contract/order number), advertising-related product  or service codes (R701 and R708), SDB firm designation, 8(a) firm  designation, minority-owned designation, and funding agency. We then  analyzed the data to identify the total amount of advertising-related  obligations for each agency for each fiscal year and the amount and  percentage of the total for obligations and number of contract actions  awarded to 8(a)s, SDBs, and minority-owned businesses. We did not use  FPDS data from before fiscal year 2001 because agencies did not  consistently report certain data elements important to our analysis, such  as minority ownership. Even after the General Services Administration  (GSA) upgraded the system to FPDS-NG in 2003 (to capture, among other  things, a data element for minority ownership from fiscal year 2004  forward), agencies varied in the extent to which they modified earlier  years’ data to reflect this information.
In assessing the reliability of federal contracting data, we interviewed  officials from GSA, the agency responsible for maintaining FPDS-NG.  Additionally, we performed specific steps using the FPDS-NG data. First,  we compared FPDS-NG advertising totals to the Federal Procurement  Data System, the previous governmentwide contracting system, for the  five agencies for fiscal years 2001 through 2003. For the DOD data, we  also compared FPDS-NG advertising totals to DD-350 (DOD’s internal  contracting database) totals for fiscal years 2001 through 2005. In these  comparisons, we found some differences between the databases that we  determined could be attributed to the fact that FPDS-NG was a real-time  system that allowed for editing and updates, such as updates to the  primary purpose of a multiple-year contract in later years. FPDS and DD- 350 did not allow for such real-time changes. On the basis of this  assessment, we concluded that FPDS-NG data were sufficiently reliable  for the purposes of our report.
Next, we tested the reliability of the 8(a), SDB, and minority-owned  designations in FPDS-NG. To do this, we electronically compared the  FPDS-NG designations for 8(a) and SDB to SBA’s list of certified 8(a)s and  SDBs. We found a small number of certified 8(a) businesses that were not  designated as such in FPDS-NG. For DOD contractors that the DD-350 also  identified as being 8(a), we modified our data to reflect the certified 8(a)  status. To determine the reliability of the minority-owned data in FPDS- NG, we compared FPDS-NG contractor data for fiscal years 2004 and 2005  to the self-reported minority-owned designations in SBA’s Small  Disadvantaged Businesses file and the Central Contractor Registration  database (the DOD database that also serves as the primary vendor  database for the U.S. government). We found that the number of minority- owned businesses that received advertising-related contracts from these  five agencies was undercounted in the FPDS-NG for fiscal years 2004 and  2005. We could not determine the degree of undercounting because our  analysis was not based on a sample that could be generalized to the  population of advertising-related contractors. Other than the minor  differences that we found, we determined that the business designations  were sufficiently reliable for the purposes of our report.
We conducted our work in Washington, D.C., between October 2006 and  June 2007 in accordance with generally accepted government auditing  standards.

Appendix II: GAO Contact and Staff Acknowledgments

	Staff Acknowledgments

In addition to the individual named above, Bill MacBlane, Assistant  Director; Johnnie Barnes; Michelle Bracy; Emily Chalmers; Julia Kennon;  Lynn Milan; Marc Molino; Omyra Ramsingh; and Rhonda Rose made key  contributions to this report.

Summary:
Why GAO Did This Study

In 2005, federal spending on advertising exceeded $1 billion. Five agencies--DOD, Treasury, HHS, Interior, and NASA--together made up over 90 percent of this spending from 2001 to 2005. Executive Order 13170, signed in October 2000, directs agencies to take an aggressive role in ensuring substantial participation in federal advertising contracts by businesses in the Small Business Administration's (SBA) 8(a) and small disadvantaged business (SDB) programs and minority-owned businesses. This report describes (1) strategies DOD, HHS, Treasury, Interior, and NASA used to address Executive Order 13170, and (2) the total obligations, number of contract actions, and percentage of total obligations represented by these actions that each agency awarded to 8(a)s, SDBs, and minority-owned businesses for advertising services. In conducting this study, GAO analyzed agency contracting data and executive order implementation plans and interviewed agency procurement officials.

What GAO Found

Because much of Executive Order 13170 was consistent with existing legislation, the five agencies we reviewed generally addressed the order's emphasis on advertising contracts by continuing existing programs designed to identify potential contracting opportunities with all types of small businesses. The five agencies' focus on ongoing efforts was consistent with SBA's and the Office of Management and Budget's (OMB) views that several provisions of the order paralleled procurement program requirements under the Small Business Act. Three agencies--HHS, Treasury, and Interior--also planned additional activities that targeted the agency's contracting efforts for advertising services. For example, one of Treasury's additional activities was to work with trade associations to identify opportunities for SDBs in advertising. From fiscal years 2001 through 2005, 8(a), SDB, and minority-owned businesses received about 5 percent of the $4.3 billion in advertising-related obligations of DOD, Treasury, HHS, Interior, and NASA and 12 percent of the contract actions that these agencies awarded; the percentages varied substantially among each of the five agencies. For example, Treasury awarded less than 2 percent of its advertising-related dollars to 8(a)s, SDBs, and minority-owned businesses collectively over the 5-year period, while NASA awarded about 89 percent to these types of businesses. Overall advertising obligations also varied from one year to the next at individual agencies, sometimes significantly. Year-to-year increases were driven by large campaigns that the respective agencies undertook to publicize new programs or promote their mission (e.g., public health). Agencies varied in the extent to which year-to-year increases in overall advertising obligations had a similar effect on obligations to 8(a), small disadvantaged, and minority-owned firms.