Report to Congressional Committees

United States Government Accountability Office

GAO 

May 2005 DEPARTMENT OF 

ENERGY 

Improved Oversight 

Could Better Ensure 

Opportunities for 

Small Business 

Subcontracting 

GAO-05-459 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-459.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gene Aloise at 

(202) 512-3841 or aloisee@gao.gov. 

Highlights of GAO-05-459, a report to 

congressional committees 

May 2005

DEPARTMENT OF ENERGY 

Improved Oversight Could Better Ensure 

Opportunities for Small Business 

Subcontracting 

DOE’s facility management contractors’ small business subcontracting 

achievements—reported as a percentage of their total subcontracted 

dollars—are not useful for monitoring purposes because the reported data 

overstates subcontracting achievements in two ways: (1) All of the 

contractor-reported data incorrectly excluded some large-business 

subcontracts, beyond what federal reporting guidelines allow. Excluding 

these subcontracts made the percentage of subcontracted dollars going to 

small businesses appear larger than it would have, if such subcontracts were 

not incorrectly excluded. If these subcontracts had been included, some 

contractors said it was likely they would have requested lower goals. (2) 

Even when all relevant subcontracts are included, the contractor-reported 

data can still overstate contractors’ subcontracting achievements. Because a 

contractor could decide to subcontract only a small amount of its total 

federal contract, the portion of subcontracted dollars going to small 

businesses could, by comparison, appear misleadingly large. As a result, 

contractor-reported data is not useful to DOE in determining its contractors’ 

actual small business subcontracting achievements or adequately assessing 

whether small businesses are receiving maximum practicable subcontracting 

opportunities. 

DOE has not taken adequate steps to address known problems with the 

contractor-reported data. Because the data showed that the department was 

meeting its subcontracting goals, DOE officials were not inclined to closely 

monitor contractors’ practices for calculating their subcontracting goals and 

achievements. DOE officials were aware in 2002 that the contractors were 

not following federal guidelines on which subcontracts to include when 

developing goals. DOE’s Small Business Office did provide clarifying 

information on the requirements, but DOE officials failed to ensure that the 

guidelines were being followed, and problems continued. In March 2005, 

DOE issued additional guidance, but it is uncertain whether DOE will ensure 

that the guidance is followed. These oversight problems occurred, in part, 

because DOE has not clearly defined the roles, responsibilities, and needed 

interaction of the various headquarters and field organizations that 

collectively oversee the contractors’ small business subcontracting efforts. 

Data on 13 facility management contractors’ reported fiscal year 2004 small business 

subcontracting achievements, which incorrectly excluded certain subcontracts 

Number of 

contractors 

Number of contractors that 

reported achieving their 

subcontracting goals 

Number of contractors achieving 

their goals if all appropriate 

subcontracts were included 

13 (100%) 12 (92%) 4 (31%) 

Source: GAO analysis of facility management contractor data. 

Note: Details on selection of these 13 facility management contractors can be found in appendix II 

of the report. 

Federal policy requires that small 

businesses receive the maximum 

practicable subcontracting 

opportunity for providing goods 

and services to large businesses 

that contract directly with federal 

agencies. The Department of 

Energy (DOE) annually directs 

almost $20 billion to the 34 “facility 

management contractors” of which 

$3.3 billion was redirected to small 

business subcontractors in fiscal 

year 2004. DOE negotiates annual 

small business subcontracting 

goals with individual contractors 

and monitors their achievements. 

GAO was asked to (1) determine 

the usefulness of the data that DOE 

uses to monitor subcontracting 

performance and (2) discuss the 

actions that DOE has taken to 

address any problems with the 

contractors’ subcontracting efforts. 

What GAO Recommends

GAO recommends that DOE (1) 

ensure that facility management 

contractors are following federal 

guidelines for reporting 

subcontracting achievements; (2) 

for internal management purposes, 

calculate contractors’ 

achievements as a percent of the 

annual contract funding; and (3) 

issue guidance to clarify oversight 

responsibilities. In commenting on 

the report, DOE agreed with 

ensuring that reporting guidelines 

are being followed and clarifying 

oversight responsibilities. DOE 

disagreed with calculating the 

achievement data as a percent of 

contract funding, but we believe 

doing so would improve oversight. 
Page i GAO-05-459 DOE Small Business Subcontracting 

Letter 1

Results in Brief 3 

Background 5 

Data Reported by Facility Management Contractors Is Not Useful 

for DOE’s Monitoring of Their Small Business Subcontracting 

Performance 8 

DOE Oversight of Small Business Subcontracting by Facility 

Management Contractors Was Not Adequate to Address 

Identified Problems with Contractor-Reported Data 21 

Conclusions 26 

Recommendations for Executive Action 27 

Agency Comments 27 

Appendix I DOE Facility Management Contractors’ Annual 

Small Business Subcontracting Goals and 

Achievements 30 

Appendix II Scope and Methodology 38 

Determining the Usefulness of the Facility Management 

Contractor-Reported Data 38 

Determining Actions Taken by DOE to Address Problems 43 

Appendix III Comments from the Department of Energy 45 

GAO Comments 51 

Appendix IV GAO Contacts and Staff Acknowledgment 53 

Tables 

Table 1: Subcontracting Dollars that DOE Facility Management 

Contractors Reported Directing to Small Businesses in 

Fiscal Years 2001 through 2004 9 

Table 2: Types of Subcontracts Incorrectly Excluded from the 34 

Facility Management Contractors’ Calculations of Fiscal 

Year 2004 Small Business Subcontracting Achievements 11 

Contents 
Page ii GAO-05-459 DOE Small Business Subcontracting 

Table 3: Fiscal Year 2004 Small Business Subcontracting Goals, 

Reported Achievements, and Recalculated Achievements 

for 13 Facility Management Contractors 13 

Table 4: Comparison of Fiscal Year 2004 Reported Small Business 

Subcontracting Achievements with Achievements 

Recalculated as a Percent of Annual Amount Funded on 

the Facility Management Contract 15 

Abbreviations 

DOE Department of Energy 

NASA National Aeronautics and Space Administration 

NNSA National Nuclear Security Administration 

SBA Small Business Administration 

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Page 1 GAO-05-459 DOE Small Business Subcontracting 

May 13, 2005 

The Honorable Pete V. Domenici 

Chairman 

The Honorable Jeff Bingaman 

Ranking Member 

Committee on Energy and Natural Resources 

United States Senate 

The Honorable Olympia J. Snowe 

Chair 

The Honorable John F. Kerry 

Ranking Member 

Committee on Small Business and Entrepreneurship 

United States Senate 

The Small Business Act, as amended by the Small Business 

Reauthorization Act of 1997, established a federal policy that small 

businesses shall have the maximum practicable opportunity to participate 

in providing goods and services to the federal government and its direct 

contractors, consistent with efficient contract performance. Directing 

federal dollars to small businesses can produce cost savings, increase 

competition, encourage greater innovation, and enhance small business 

capacity. The policy of the federal government is to encourage contracting 

with small businesses—both prime contracts, which would be contracts 

directly between small businesses and federal agencies, and subcontracts, 

which would be between federal prime contractors and small businesses. 

The Department of Energy (DOE), the largest civilian contracting agency 

in the federal government, spent $22.4 billion on contracts in fiscal year 

2004. The majority of this amount—$18.9 billion—was spent on large 

contracts for managing DOE’s laboratories, production facilities, and 

environmental restoration sites located in various states across the nation. 

Under these “facility management contracts,” a contractor is responsible 

for performing, managing, and integrating work at a DOE site, often 

subcontracting specific portions of the work to other businesses. In fiscal 

year 2004, DOE’s 34 facility management contractors subcontracted out 

about $6.5 billion, of which about $3.3 billion went to small businesses. 

Federal regulations require that DOE’s facility management contractors 

develop small business subcontracting plans that set forth a strategy for 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-05-459 DOE Small Business Subcontracting 

providing the maximum practicable opportunities for small businesses to 

participate as subcontractors in the work that the facility management 

contractors oversee at DOE sites. The Small Business Administration 

(SBA) provides guidelines for how contractors should develop small 

business subcontracting plans and goals. These guidelines describe the 

procedures that contractors should use to officially report their small 

business subcontracting goals and achievements. In reporting, contractors 

must express the dollars going to their small business subcontractors as a 

percentage of the total dollars going to all of their subcontractors—

including both large and small businesses as well as government agencies 

and nonprofit organizations. Contractors generally must report on all of 

their subcontracts, although SBA guidelines allow two exclusions: (1) 

subcontracts performed outside of the U.S. or its territories and (2) 

subcontracts with an affiliate organization, such as a subsidiary company 

or a parent company. 

To meet government-wide small business subcontracting goals, SBA 

negotiates annual subcontracting goals with each federal agency. The goal 

that DOE’s Office of Small and Disadvantaged Business Utilization 

(referred to in this report as DOE’s Small Business Office) has negotiated 

with SBA is for 50 percent of its total subcontracting dollars to be directed 

to small businesses each year. To meet this goal, DOE contracting officers 

located at the various agency sites negotiate annual goals with individual 

facility management contractors and, with the assistance of small business 

program managers, monitor contractors’ compliance with subcontracting 

plans as well as progress toward achieving annual small business 

subcontracting goals. 

Despite the efforts of SBA to meet government-wide annual 

subcontracting goals, there have been continuing concerns that small 

businesses were not being provided the maximum practicable opportunity 

to provide goods and services to the federal government and its 

contractors. In March of 2002, the President announced a Small Business 

Agenda that proposed steps toward creating a more dynamic environment 

where small businesses could flourish, including ways to improve the 

access of small businesses to federal contracting opportunities. One of the 

strategies was to strengthen federal agency oversight of its contractors’ 

efforts to comply with small business subcontracting plans. 

In this context, you asked us to review the small business subcontracting 

achievements of DOE’s facility management contractors. This report 

discusses (1) the usefulness of the data reported by DOE facility 

management contractors for monitoring contractor performance in small 
Page 3 GAO-05-459 DOE Small Business Subcontracting 

business subcontracting and (2) the actions that DOE has taken to address 

any problems identified with its facility management contractors’ small 

business subcontracting efforts. 

To determine the usefulness of the data reported by DOE facility 

management contractors on their small business subcontracting goals and 

achievements, we received and analyzed data on fiscal year 2001 through 

2004 subcontracting goals and achievements from DOE’s 34 facility 

management contractors, as well as information on how the contractors 

developed their goals and calculated their achievements. To assess the 

reliability of the data that the contractors provided about their 

achievements, we obtained and analyzed information from all 34 

contractors about their methods for compiling subcontracting 

achievement data and steps they took to ensure the accuracy and 

completeness of these data. We also visited 13 of the 34 facility 

management contractors, which we selected based on the contractors’ 

association with the department’s three largest component 

organizations—Environmental Management, Science, and National 

Nuclear Security Administration (NNSA)—and on the geographic location 

of DOE sites. During these site visits, we obtained and analyzed supporting 

documents for small business subcontracts reported in the contractors’ 

fiscal year 2004 achievements, and we obtained documentation on the 

dollar value of any subcontracts that the contractors excluded from their 

reported achievements for that year. A more detailed description of our 

scope and methodology is presented in appendix II. We performed our 

work from June 2004 to April 2005 in accordance with generally accepted 

government auditing standards. 

The subcontracting data reported by DOE’s facility management 

contractors is not useful for monitoring whether they are meeting small 

business subcontracting goals. All contractor-reported data incorrectly 

excluded some subcontracts, beyond what SBA guidelines allow, thereby 

overstating contractors’ reported small business subcontracting 

achievements. Excluding these subcontracts reduced the facility 

management contractors’ total reported subcontracting dollars without 

reducing the reported amount that went to small businesses. As a result, 

the reported percentage of subcontracting dollars that went to small 

business appeared larger than it would have if such subcontracts were not 

incorrectly excluded. When we added the incorrectly excluded 

subcontracts (about $887 million) back into selected contractors’ reported 

achievements, 9 out of the 13 selected contractors would have fallen short 

of their subcontracting goals, although 12 had reported achieving their 

Results in Brief 
Page 4 GAO-05-459 DOE Small Business Subcontracting 

goals. However, if these subcontracts had been included, some contractors 

said it was likely they would have requested lower goals. In addition, even 

when all relevant subcontracts are included, the contractor-reported data 

are misleading because they can make the small business subcontracting 

results appear higher than they actually are. This happens because the 

contractors calculate their small business subcontracting achievements as 

a percentage of the total amount of their subcontracted dollars. Because 

the total amount of their subcontracted dollars could be very small, the 

portion going to small businesses could appear as a misleadingly large 

percentage. As a result, the contractor-reported data do not provide a true 

picture of the contractors’ performance. Therefore, the department cannot 

meaningfully use the data to monitor performance and determine whether 

the contractors are affording small business subcontractors the maximum 

practicable opportunity to provide goods and services to the facility 

management contractors, as required by the policy set out by the Small 

Business Act. 

DOE has not taken adequate steps to address the problems with the small 

business subcontracting data reported by its facility management 

contractors, resulting in a lack of assurance that facility management 

contractors are providing maximum practicable opportunities for small 

business subcontracting. Because achievement data reported by the 

facility management contractors showed that DOE was meeting the small 

business subcontracting goal it established with SBA, DOE officials were 

not inclined to closely monitor facility management contractors’ 

subcontracting practices or take adequate steps to address even known 

problems with the achievement data. In some cases, DOE’s contracting 

officers approved facility management contractors’ small business 

subcontracting plans, even though those plans specified practices for 

calculating goals and achievements that were not consistent with SBA 

guidelines. In other cases, officials in DOE’s Small Business Office knew 

of, but did not adequately address, problems with subcontracting 

achievement data until we raised concerns about the data. Further, DOE 

officials were aware in 2002 that the facility management contractors were 

not consistently following SBA guidelines concerning which subcontracts 

to include when developing small business subcontracting goals. Although 

DOE’s Small Business Office then provided clarifying information on the 

requirements, these problems continued. In March 2005, DOE issued 

additional guidance, but it is uncertain whether DOE will ensure that the 

guidance is followed. As a result of these oversight problems, DOE had not 

ensured that its facility management contractors were providing maximum 

practicable opportunities for small businesses. These problems occurred, 

in part, because DOE has not clearly defined the roles, responsibilities, 
Page 5 GAO-05-459 DOE Small Business Subcontracting 

and needed interaction of the various headquarters and field organizations 

that must work together to provide oversight of the small business 

subcontracting program. 

To improve the overall effectiveness of DOE’s small business 

subcontracting program, we are recommending that the Secretary of 

Energy take steps to (1) ensure that DOE has useful data for managing the 

small business subcontracting program and (2) improve oversight of the 

subcontracting program by ensuring that roles and responsibilities are 

clearly defined. 

DOE agreed with our recommendations that the department strengthen 

oversight of its small business subcontracting program by clarifying 

oversight roles and responsibilities and by ensuring that facility 

management contractors follow a consistent practice for calculating and 

reporting their small business subcontracting goals and achievements. 

However, DOE disagreed with our recommendation that, for internal 

program management purposes, the department use data on its 

contractors’ subcontracting achievements, calculated as a percentage of 

the dollars obligated to their prime contract. DOE maintained that it 

should continue to use subcontracting data, calculated as a percentage of 

the total dollars subcontracted, as reported to SBA. While we agree that 

DOE’s contractors should continue to report their subcontracting 

achievements as SBA requires, we continue to believe that, for internal 

management purposes, the data do not provide a true picture of contractor 

performance. Without a true picture of performance, DOE cannot 

effectively oversee that performance to determine whether its facility 

management contractors are providing the maximum practicable 

subcontracting opportunities to small businesses. 

DOE has major sites and facilities around the country where the 

department carries out its missions, including developing, maintaining, 

and securing the nation’s nuclear weapons capability; cleaning up the 

nuclear and hazardous wastes resulting from more than 50 years of 

weapons production; and conducting basic energy and scientific research, 

such as mapping the human genome. DOE relies on facility management 

contractors to operate its facilities and accomplish its missions. This 

mission work is carried out under the direction of the National Nuclear 

Security Administration (NNSA) and DOE’s program offices, including the 

offices of Environmental Management and Science. 

Background 
Page 6 GAO-05-459 DOE Small Business Subcontracting 

SBA develops regulations and provides guidance for federal agencies and 

their contractors to follow in carrying out the federal policy to provide 

maximum practicable contracting opportunities for small businesses, 

consistent with efficient contract performance.1

 Under the Small Business 

Act and federal regulations, any large business with a federal prime 

contract that has a value over $500,000 (or $1 million for construction 

contracts) and that has subcontracting possibilities, must have a small 

business subcontracting plan, including annual goals for directing 

subcontracting dollars to small businesses. SBA has also issued specific 

guidance for developing annual subcontracting goals and reporting 

achievements to SBA.2

 Although there is no specified percentage goal for 

small business subcontracting in law or regulations, SBA’s governmentwide goal is that 40 percent of federal subcontracted dollars be directed to 

small businesses.3

DOE’s facility management contractors carry out the SBA requirements by 

developing subcontracting plans and annual goals, and reporting their 

achievements to DOE and SBA.4

 Facility management contractors use the 

following process: 

• Develop small business subcontracting plans. Facility management 

contractors generally develop small business subcontracting plans as part 

of the overall proposal submitted in response to a DOE request for 

 1

Federal subcontracting requirements pertain to small businesses both as an overall 

category and in terms of the various subcategories of small businesses that are defined in 

federal law, such as small disadvantaged businesses, women- or veteran-owned small 

businesses, and small businesses located in historically underutilized business zones. For 

this report, we examined DOE facility management contractors’ activities in subcontracting 

with small businesses, as an overall category. We did not examine their subcontracting 

activities with respect to any of the subcategories of small businesses. 

2

Small Business Administration, Office of Government Contracting, Goaling Guidelines for 

the Small Business Preference Programs: For Prime and Subcontract Federal 

Procurement Goals and Achievements (Washington, D.C.: July 3, 2003). 

3

To meet this 40 percent government-wide goal, SBA negotiates annual subcontracting 

goals with each federal agency. The goal that SBA negotiated with DOE for fiscal years 

2004 and 2005 is that 50 percent of subcontracted dollars be directed to small businesses. 

4

For the 10 years prior to fiscal year 2000, the Office of Federal Procurement Policy within 

the Office of Management and Budget had allowed DOE to include in its small business 

prime contracting achievements, the subcontracting dollars awarded to small businesses 

by its facility management contractors. For a discussion of the change in policy starting 

with fiscal year 2000, see Department of Energy: Achieving Small Business Prime 

Contracting Goals Involves Both Potential Benefits and Risks, GAO-04-738T (Washington, 

D.C.: May 18, 2004). 
Page 7 GAO-05-459 DOE Small Business Subcontracting 

proposals on a new contract or upon extension or renewal of an existing 

contract. The subcontracting plan includes information on the types of 

work to be subcontracted and how, and to what extent, the contractor 

would provide subcontracting opportunities for small businesses. The 

proposed subcontracting plans are reviewed as part of the overall 

proposal and are then incorporated into the contract when it is awarded. 

• Develop annual small business subcontracting goals. Generally, the 

facility management contractors perform “make-or-buy” analyses to 

determine how much of their work will be subcontracted rather than 

performed by the contractors’ own employees. For the portion of the work 

the facility management contractor intends to subcontract, the facility 

management contractors develop small business subcontracting goals 

each year, after considering the proposed funding for the contracts, 

upcoming subcontracting opportunities, and the potential for small 

businesses to perform the subcontracting work. After an agreement is 

reached on the proposed goals, the goals are incorporated into the 

contract. 

• Report small business subcontracting achievements. Facility 

management contractors are required to report their small business 

subcontracting achievements to SBA twice each fiscal year—as of the 

ends of March and September. SBA guidelines specify that small business 

subcontracting achievements should be calculated as a percentage of total 

dollars subcontracted. Facility management contractors also report this 

achievement information to DOE.5

DOE’s Small Business Office negotiates the department’s annual small 

business subcontracting goals with SBA, coordinates outreach efforts with 

the small business community, and works with NNSA and DOE’s program 

offices to establish and monitor annual goals. DOE’s Office of 

Procurement and Assistance Management and NNSA’s Office of 

Acquisition and Supply Management establish policies and guidance for 

conducting procurements according to federal and departmental 

regulations, and they maintain the information systems on the 

department’s prime contracts, including annual dollars provided to each 

 5

Large business subcontractors of DOE’s facility management contractors are subject to 

the same requirements for small business subcontracting plans and annual goals. Although 

the facility management contractors are not allowed to include the small business 

subcontracting achievements of these “lower-tier” subcontractors in their reported 

achievements, SBA guidelines allow DOE to include these lower-tier subcontracting 

achievements toward the department’s small business subcontracting goals. 
Page 8 GAO-05-459 DOE Small Business Subcontracting 

facility management contractor. NNSA and DOE’s program offices, such as 

Environmental Management and Science, are responsible for providing 

program oversight and direction to the contractors. 

In addition to the oversight responsibilities shared among DOE’s various 

headquarters and field organizations, SBA has a role in the oversight of 

facility management contractors’ small business subcontracting efforts. 

SBA officials in regional offices generally review proposed subcontracting 

plans and proposed annual small business goals. Regional SBA officials 

also review the reports on small business subcontracting achievements 

submitted by facility management contractors, and they may review large 

proposed subcontracts to determine if there are potential opportunities for 

small businesses. SBA regional offices also perform periodic compliance 

reviews of individual contractor’s small business subcontracting efforts, 

including validating the data reported by the contractors to ensure that the 

contractor is following SBA guidelines.6

The data that DOE uses to monitor its facility management contractors’ 

performance in small business subcontracting generally shows that the 

contractors have exceeded their annual subcontracting goals. However, 

these data are not useful for monitoring purposes for two reasons. First, 

the data reported by the facility management contractors frequently 

overstated their subcontracting achievements, by failing to account for all 

of their subcontracts, as required by SBA reporting guidelines. As a result, 

the percent of total subcontracting dollars going to small businesses 

appeared larger than if the contractors had been following SBA’s reporting 

guidelines. Second, even if the facility management contractors were 

correctly reporting their small business subcontracting achievements, the 

method for calculating those achievements does not provide a true picture 

of contractors’ performance. The method can make a contractor appear to 

be performing well—for example, by directing 80 percent of 

subcontracting dollars annually to small businesses—when, in fact, that 

percentage is based on a small amount of dollars. When small business 

subcontracting dollars are recalculated as a percent of the annual funding 

on the facility management contract, the contractor’s actual achievement 

can turn out to be relatively low. Because contractor-reported data does 

 6

GAO has reported on SBA compliance reviews in the past. See Small Business 

Subcontracting Report Validation Can Be Improved, GAO-02-166R (Washington, D.C.: 

Dec. 13, 2001). 

Data Reported by 

Facility Management 

Contractors Is Not 

Useful for DOE’s 

Monitoring of Their 

Small Business 

Subcontracting 

Performance 
Page 9 GAO-05-459 DOE Small Business Subcontracting 

not provide a true picture of the contractors’ performance, the department 

cannot meaningfully use the data to monitor performance and determine 

whether the contractors are providing small business subcontractors with 

the maximum practicable opportunity to provide goods and services to the 

facility management contractors, as required by the policy set out by the 

Small Business Act. 

The contractor-reported data that DOE uses to monitor facility 

management contractors’ performance in small business subcontracting 

generally showed that contractors exceeded their annual small business 

subcontracting goals in fiscal years 2001 through 2004. In fiscal year 2004, 

for example, 29 of the 34 facility management contractors reported 

exceeding their annual goals when they directed 33 to 88 percent of their 

subcontracting dollars to small businesses. These contractors reported 

exceeding their goals by as much as 28 percent, whereas the contractors 

that reported falling short of their goals for that year did so by as much as 

26 percent. Whether or not individual contractors achieved their goals, the 

34 contractors collectively reported directing nearly $3.3 billion7

 to small 

business subcontractors in fiscal year 2004, representing a 27 percent 

increase over the amount they had directed to small businesses in fiscal 

year 2001 (see table 1). Additional information on the facility management 

contractors’ subcontracting goals and achievements for fiscal years 2001 

through 2004 is presented in appendix I. 

Table 1: Subcontracting Dollars that DOE Facility Management Contractors 

Reported Directing to Small Businesses in Fiscal Years 2001 through 2004 

Fiscal year Small business subcontracting dollars

2001 $2,574,701,477

2002 3,076,546,419

2003 3,071,831,243

2004 3,281,485,994

Source: GAO analysis of DOE and facility management contractor data. 

 7

The $3.3 billion includes only dollars directed by the facility management contractors to 

small businesses with which they had a direct contractual relationship. The figure does not 

account for the dollars directed to small businesses by the approximately 592 large 

business subcontractors of DOE’s facility management contractors that also had their own 

small business subcontracting plans in fiscal year 2004. These dollars were not within the 

scope of our review because we focused on the achievements of the 34 facility 

management contractors. 

Contractor-Reported Data 

on Small Business 

Subcontracting 

Achievements Frequently 

Overstated Performance 
Page 10 GAO-05-459 DOE Small Business Subcontracting 

Although facility management contractors generally reported exceeding 

their subcontracting goals, the data are not useful for monitoring the 

contractors’ performance, because the contractors’ achievements were 

frequently overstated. When calculating subcontracting achievements, 

SBA guidelines allow contractors to exclude from their calculations only 

those subcontracts performed outside of the U.S. or its territories and 

subcontracts with affiliate organizations, such as a subsidiary or parent 

company.8

 However, in fiscal year 2004, all 34 of the contractors’ reported 

achievements incorrectly excluded other types of subcontracts, beyond 

what SBA guidelines allow (see table 2). The facility management 

contractors we visited generally told us it was their normal practice to 

make these types of exclusions. In making these types of exclusions, the 

contractors said they were following their past practices or that DOE 

contracting officers had approved the additional exclusions. For example, 

officials representing one of these contractors pointed out that, in 

excluding subcontracts from the calculation of their subcontracting 

achievements beyond what SBA guidance allows, their company was 

following the subcontracting plan approved by DOE. The contractor 

officials said that they would not have made these exclusions, if DOE had 

not permitted them, nor would they have negotiated as high a 

subcontracting goal under those circumstances. 

 8

Except for these types of subcontracts, SBA guidelines for contractor reporting of small 

business subcontracting achievements require that reports include all subcontracts 

awarded by the prime contractor. Section 19.701 of the Federal Acquisition Regulation 

(FAR) defines “subcontract” to mean “any agreement (other than one involving an 

employer-employee relationship) entered into by a Government prime contractor or 

subcontractor calling for supplies and/or services required for performance of the contract, 

contract modification, or subcontract.” According to a contracting program manager in 

SBA’s Office of Government Contracting, electricity and other utilities, whether or not they 

are obtained through a formal procurement process, would be considered a subcontract 

under the FAR. 
Page 11 GAO-05-459 DOE Small Business Subcontracting 

Table 2: Types of Subcontracts Incorrectly Excluded from the 34 Facility 

Management Contractors’ Calculations of Fiscal Year 2004 Small Business 

Subcontracting Achievements 

Type of subcontracts incorrectly excluded from 

calculations of small business subcontracting 

achievements 

Number of facility 

management contractorsa

Purchases from other government agencies, nonprofit 

organizations, or other facility management contractors 

29

Utility purchases 26

Credit card transactions 22

Purchases from sources directed by DOE or mandated 

by law 

14

Selected blanket purchasing agreementsb 10

Lease agreements 8

Source: GAO analysis of facility management contractor data. 

a

For a given type of subcontract, the remainder of the 34 contractors not reflected in this column had 

either included the subcontract type in their reported achievements or did not have any subcontracts 

of that type in fiscal year 2004. 

b

Blanket purchasing agreements reflect purchases made through DOE’s integrated contractor 

purchasing team or through the General Services Administration’s federal supply schedule. 

Facility management contractors’ practice of incorrectly excluding certain 

subcontracts from achievement calculations resulted in overstating their 

reported subcontracting achievements by making the achievements 

appear larger than they would have appeared, if only the appropriate 

exclusions had been made in the calculation. For SBA-reporting purposes, 

contractors calculate their subcontracting achievements by expressing the 

dollars that they directed to small business subcontracts as a percentage 

of the total amount they subcontracted. However, because they incorrectly 

excluded subcontracts that generally did not go to small businesses—such 

as subcontracts with other facility management contractors—the facility 

management contractors incorrectly reduced the total amount that was 

subcontracted (the denominator), without affecting the total amount going 

to small businesses (the numerator). As a result, the percentage of total 

subcontracted dollars going to small businesses appeared larger than it 

actually was. 

The effect of making incorrect exclusions on achievement calculations is 

significant. At the 13 facility management contractors we visited, we 

analyzed the fiscal year 2004 dollar amounts associated with the 

subcontracts that were incorrectly excluded from the calculation of their 

reported subcontracting achievements. These excluded subcontracts 
Page 12 GAO-05-459 DOE Small Business Subcontracting 

totaled about $887 million. For these 13 contractors, the practice of 

incorrectly excluding subcontracts from their reported achievements 

resulted in overstating the percentage achievements by as much as 27 

percent. Moreover, although 12 of the 13 contractors had appeared, from 

their reported achievements, to be meeting or exceeding their 

subcontracting goals, when the achievements were recalculated by adding 

the incorrectly excluded subcontracts back into the calculation, only 4 

contractors would have achieved their goals. The remaining 9 contractors 

would have fallen short of their subcontracting goals, by as much as $31.1 

million, or about 19 percent. According to contractor officials, it is also 

likely that these contractors would not have agreed to as high of a 

subcontracting goal, if they had to include these subcontracts (see table 

3).9

 9

The facility management contractors at the 13 sites we visited provided us with the dollar 

amounts associated with subcontracts excluded from their fiscal year 2004 small business 

subcontracting goal and achievement calculations. After the facility management 

contractors reviewed a statement of facts that we provided to them to ensure the accuracy 

of the information, several of the contractors responded that they would have negotiated 

lower goals if they had included all of the appropriate subcontracts in their calculations. 
Page 13 GAO-05-459 DOE Small Business Subcontracting 

Table 3: Fiscal Year 2004 Small Business Subcontracting Goals, Reported Achievements, and Recalculated Achievements for 

13 Facility Management Contractors 

Fiscal year 2004 (percent) 

Facility management contractor 

and location 

Subcontracting 

goal

Reported 

subcontracting 

achievement 

Recalculated 

achievementa

Extent to which the 

recalculated achievement 

differed from the 

subcontracting goalb

Battelle Memorial, Pacific Northwest 

National Laboratory, Wash. 55.0 60.8 42.9 (12.1)

Bechtel Hanford, Hanford Site, Wash. 50.0 65.0 64.7 14.7

Bechtel Jacobs, Oak Ridge Site, Tenn. 28.0 38.9 36.4 8.4

Bechtel National, Waste Treatment 

Plant, Wash. 46.0 65.2 38.1 (7.9)

Bechtel Nevada, Nevada Test Site, 

Nev. 62.0 70.6 58.1 (3.9)

Bechtel SAIC, Yucca Mountain Project, 

Nev. 55.0 57.0 36.4 (18.6)

BWXT Y-12, Y-12 National Security 

Complex, Tenn. 63.0 66.7 56.5 (6.5)

CH2M Hill Hanford, Hanford Site, Wash. 48.0 59.9 42.6 (5.4)

Fluor Hanford, Hanford Site, Wash. 40.0 52.1 44.6 4.6

Lockheed Martin, Sandia National 

Laboratories, N. Mex. 50.0 49.9c

46.0 (4.0)

University of California, Lawrence 

Livermore National Laboratory, Calif. 35.0 39.2 31.6 (3.4)

University of California, Los Alamos 

National Laboratory, N. Mex. 42.0 44.0 39.3 (2.7)

UT Battelle, Oak Ridge National 

Laboratory, Tenn. 48.0 62.7 50.3 2.3

Source: GAO analysis of facility management contractor data. 

Note: Details on selection of these 13 facility management contractors can be found in appendix II. 

a

Recalculated achievements include the subcontracts that had been incorrectly excluded from the 

reported achievements. 

b

Numbers in parentheses are negative and represent the percentage by which the contractor would 

have fallen short of subcontracting goals. 

c

Although the fiscal year 2004 small business subcontracting achievement reported by the facility 

management contractor at the Sandia National Laboratories fell short of that contractor’s 

subcontracting goal by less than 0.1 percent of total subcontracted dollars (or approximately 

$591,000), the contractor directed the largest subcontracting dollar amounts to small businesses of 

the 34 facility management contractors in 3 of the 4 years of our study, including fiscal year 2004. 

That year, for example, the contractor directed about $486 million to small businesses out of the $974 

million it subcontracted—$115 million more in subcontract dollars to small businesses than the 

second highest facility management contractor. 
Page 14 GAO-05-459 DOE Small Business Subcontracting 

The fiscal year 2004 small business subcontracting achievements reported 

by many of the remaining 21 contractors that we did not visit during our 

study also are likely overstated, although we did not document the extent 

of the overstatement. Based on information these contractors reported to 

us, all 21 contractors had incorrectly excluded subcontracts from the 

calculations of fiscal year 2004 subcontracting achievements. This practice 

will almost always result in overstating actual achievements, because the 

subcontracts excluded from the calculations are generally not awarded to 

small businesses. 

The method that facility management contractors use to calculate their 

small business subcontracting achievements for SBA reporting purposes 

does not present a true picture of a contractor’s small business 

subcontracting because achievements are not calculated in relation to the 

total value of the facility management contract. Rather, the method for 

calculating small business subcontracting achievements is based on a 

quantity determined by the facility management contractors—namely, the 

portion of total work under their DOE contract that they intend to 

subcontract out. Thus, a contractor can appear to be performing well—i.e., 

directing 80 percent of its subcontracting dollars to small businesses—but 

that percentage is not very informative about the actual amount of 

subcontracting occurring with small businesses. 

In our view, calculating small business subcontracting achievements in 

this manner invariably presents a misleading picture. For example, in 

fiscal year 2004, contractors at two of DOE’s weapons production facilities 

reported substantially different small business subcontracting 

achievements—one reported directing 80 percent of its subcontracting 

dollars to small businesses (or $92.6 million) while the other reported 57 

percent (or $109.9 million). However, these percentages hide the fact that 

the first contractor subcontracted out proportionally less of the work of 

the facility management contract than the second contractor, despite the 

fact that both facility management contracts were similar in size. 

Recalculating the subcontracting achievements as a percentage of the 

amount of funding directed by DOE to each facility management contract 

for the year reveals that the actual subcontracting achievements were 

quite similar—21 and 23 percent respectively of the contracts’ annual 

funding. Thus, the contractor that appeared, from the data that DOE uses, 

to be significantly outperforming the other was actually devoting a slightly 

smaller portion of its facility management contract dollars to small 

business subcontracting. 

Small Business 

Subcontracting Reporting 

Method Does Not Provide 

a True Picture of Facility 

Management Contractors’ 

Performance 
Page 15 GAO-05-459 DOE Small Business Subcontracting 

Recalculating the subcontracting achievement data as a percent of the 

annual amount funded by DOE for each facility management contract 

provides a very different picture of the contractors’ performance. Some 

contractors that appeared to be outperforming most other contractors 

were ranked near the bottom of the list when their achievements were 

measured as a percent of the annual funding on their contract. For 

example, the reported subcontracting achievement in fiscal year 2004 of 

the contractor at the Princeton Plasma Physics Laboratory appeared to be 

the second highest among the 34 contractors. However, after we 

recalculated the achievements as a percentage of annual contract funding, 

the contractor’s performance dropped significantly to 28th out of 34 

contractors (see table 4). Conversely, 6 of the 17 contractors that were in 

the bottom half of the rankings of reported subcontracting achievements 

moved to the top half, after we recalculated the achievements as a percent 

of the annual amount funded on each facility management contract. 

Table 4: Comparison of Fiscal Year 2004 Reported Small Business Subcontracting Achievements with Achievements 

Recalculated as a Percent of Annual Amount Funded on the Facility Management Contract 

Facility management 

contractor and location 

Reported 

subcontracting 

achievements (percent 

of total dollars 

subcontracted) 

Rank of reported 

achievements from 

highest (1) to lowest 

(34)

Recalculated 

subcontracting 

achievements (percent 

of annual amount 

funded on the facility 

management contract) 

Rank of recalculated 

achievements from 

highest achievement 

(1) to lowest (34)

Washington TRU 

Solutions, Waste Isolation 

Pilot Plant, N. Mex. 88.0 1 27.9 5

Princeton University, 

Princeton Plasma Physics 

Laboratory, N.J. 83.2 2 12.8 28

BWXT Pantex, Pantex 

Facility, Tex. 80.3 3 21.2 9

Bechtel Nevada, Nevada 

Test Site, Nev. 70.6 4 20.5 10

BWXT Y-12, Y-12 

National Security 

Complex, Tenn. 66.7 5 17.0 16

Midwest Research 

Institute, National 

Renewable Energy 

Laboratory, Colo. 66.6 6 22.7 7

West Valley Nuclear 

Services Company, West 

Valley Demonstration 

Project, N.Y. 66.5 7 28.6 4
Page 16 GAO-05-459 DOE Small Business Subcontracting 

Facility management 

contractor and location 

Reported 

subcontracting 

achievements (percent 

of total dollars 

subcontracted) 

Rank of reported 

achievements from 

highest (1) to lowest 

(34)

Recalculated 

subcontracting 

achievements (percent 

of annual amount 

funded on the facility 

management contract) 

Rank of recalculated 

achievements from 

highest achievement 

(1) to lowest (34)

Bechtel National, Waste 

Treatment Plant, Wash. 65.2 8 29.1 3

Bechtel Hanford, Hanford 

Site, Wash. 65.0 9 29.2 2

Universities Research 

Association, Fermi 

National Accelerator 

Laboratory, Ill. 63.5 10 14.3 24

UT Battelle, Oak Ridge 

National Laboratory, 

Tenn. 62.7 11 17.0 17

Battelle Memorial, Pacific 

Northwest National 

Laboratory, Wash. 60.8 12 14.8 23

CH2M Hill Hanford, 

Hanford Site, Wash. 59.9 13 30.3 1

Stanford University, 

Stanford Linear 

Accelerator Center, Calif. 59.3 14 15.7 22

Bechtel BWXT Idaho, 

Idaho National 

Laboratory, Idaho 58.2 15 12.7 29

Westinghouse Savannah 

River, Savannah River 

Site, S.C. 58.0 16 7.5 34

Brookhaven Science 

Associates, Brookhaven 

National Laboratory, N.Y. 57.5 17 13.8 26

Bechtel SAIC, Yucca 

Mountain Project, Nev. 57.0 18 20.3 11

Honeywell Federal 

Manufacturing & 

Technologies, Kansas 

City Plant, Mo. 56.8 19 23.2 6

Iowa State University, 

Ames Laboratory, Iowa 56.7 20 9.5 33

Fluor Hanford, Hanford 

Site, Wash. 52.1 21 13.9 25
Page 17 GAO-05-459 DOE Small Business Subcontracting 

Facility management 

contractor and location 

Reported 

subcontracting 

achievements (percent 

of total dollars 

subcontracted) 

Rank of reported 

achievements from 

highest (1) to lowest 

(34)

Recalculated 

subcontracting 

achievements (percent 

of annual amount 

funded on the facility 

management contract) 

Rank of recalculated 

achievements from 

highest achievement 

(1) to lowest (34)

Southeastern Universities 

Research Association, 

Thomas Jefferson 

National Accelerator 

Facility, Va. 50.1 22 16.4 19

Lockheed Martin, Sandia 

National Laboratories, N. 

Mex. 49.9 23 21.5 8

University of Chicago, 

Argonne National 

Laboratory, Ill. 46.0 24 12.0 30

University of California, 

Los Alamos National 

Laboratory, N. Mex. 44.0 25 19.8 12

Bechtel Bettis, Bettis 

Atomic Power Laboratory, 

Pa. 39.4 26 16.5 18

University of California, 

Lawrence Livermore 

National Laboratory, Calif. 39.2 27 12.9 27

Bechtel Jacobs, Oak 

Ridge Site, Tenn. 38.9 28 17.8 14

DynMcDermott Petroleum 

Operations, Strategic 

Petroleum Reserve, La. 38.8 29 16.1 20

University of California, 

Lawrence Berkeley 

National Laboratory, Calif. 37.4 30 16.0 21

KAPL, Inc., Knolls Atomic 

Power Laboratory, N.Y. 36.4 31 11.2 32

CH2M Hill Mound, Mound 

Site, Ohio 36.1 32 12.0 31

Fluor Fernald, Fernald 

Closure Project, Ohio 33.5 33 17.7 15

Kaiser-Hill, Rocky Flats 

Closure Project, Colo. 33.3 34 17.8 13

Source: GAO analysis of DOE and facility management contractor data. 

Note: Any apparent tie situations are due to rounding of the achievement data. Ranks in the table 

reflect the actual rank-order. Both the reported and the recalculated subcontracting achievements 

presented in this table have not been adjusted to include any subcontracts that the facility 

management contractors incorrectly excluded from their calculations, because we did not have 

information on the dollar value of the incorrectly excluded subcontracts for all 34 contractors. 
Page 18 GAO-05-459 DOE Small Business Subcontracting 

While a contractor may be subcontracting a smaller percentage of its 

facility management contract to small businesses than other facility 

management contractors, there can be several reasons for differences in 

contractors’ small business subcontracting achievements, which should be 

examined before concluding that a particular contractor is 

underperforming. For example, DOE and contractor officials told us that 

the type of work contractors perform at DOE sites is an important factor 

in determining the potential for small business subcontracting. Our 

analysis of the 34 facility management contractors’ fiscal year 2004 small 

business subcontracting achievements suggests that this may be true. We 

found that the 16 contractors primarily involved in environmental cleanup 

or weapons production at DOE sites generally directed a greater 

percentage of their contracts’ annual funding to small business 

subcontracting than the 16 contractors at DOE research laboratories.10

Contractor and DOE officials said that opportunities for small business 

subcontractors tend to be more limited at research laboratories than other 

types of DOE facilities, because research activities are often integrated, 

and fragmenting those activities among several contractors could 

negatively impact the work. Officials said that other types of work, such as 

facility construction or cleanup projects, generally have more 

subcontracting potential and can often be structured at such a scale that 

small businesses could perform the work. 

Contract performance goals can also affect opportunities for small 

business subcontracting. For example, small business subcontracting 

opportunities diminished somewhat at an environmental cleanup site in 

Oak Ridge, Tennessee, after DOE and the facility management contractor, 

Bechtel Jacobs, renegotiated the contract to include more aggressive time 

lines and cost limitations for completing the work. In response to the 

changes in its contract, Bechtel Jacobs began subcontracting less of the 

work, including work that small business subcontractors had previously 

performed. DOE and contractor officials told us that the company wanted 

more control over the work to better ensure meeting the new time lines 

 10On average, facility management contractors at the DOE Environmental Management 

program’s cleanup sites and at the NNSA’s weapons production facilities directed to small 

businesses 20.4 percent of their contracts’ annual funding. In contrast, contractors 

managing and operating research laboratories for NNSA and DOE directed to small 

businesses an average of 15.4 percent of their facility management contracts’ annual 

funding. These calculations do not include the achievements of facility management 

contractors at the Yucca Mountain Project or the Strategic Petroleum Reserve, because 

their missions and the type of work performed there do not coincide with the two 

categories of DOE and NNSA facilities identified above. 
Page 19 GAO-05-459 DOE Small Business Subcontracting 

and cost limitations. Officials from local small businesses that subcontract 

with Bechtel Jacobs said that while they did not disagree with Bechtel 

Jacobs’s strategy for dealing with the changes to its contract, the small 

businesses had to adapt to a new business environment in which less 

subcontracting work would be available under that facility management 

contract. 

Although differences in the type of work and contract performance goals 

may account for some of the differences in facility management 

contractors’ performance in small business subcontracting, there may be 

other reasons for those differences. For example, contractor officials said 

that the timing of projects or changes in the annual funding for a facility 

management contract could affect opportunities for small businesses to 

participate in work that is generally conducive to small business 

subcontracting. In addition, contractors at sites with similar missions and 

similar types of work can vary substantially in the amount of funding that 

they direct to small business subcontractors. For example, contractors at 

the Sandia and Los Alamos National Laboratories in New Mexico ranked 

highly among the 34 facility management contractors—8th and 12th, 

respectively—in the percentage of their contracts’ annual funding that 

they directed to small businesses in fiscal year 2004. In contrast, the 

contractor at the Lawrence Livermore National Laboratory in California, 

which conducts work similar to that of the two New Mexico laboratories, 

ranked much lower—27th among the 34 contractors. Contractor and DOE 

officials with whom we met suggested reasons for such differences in 

performances, for example, differences in the availability of small 

businesses that are capable of providing the needed goods and services or 

differences in the facility management contractors’ commitment to 

providing small businesses with the maximum practicable opportunity to 

participate in the work. 

Furthermore, actions by DOE to increase its direct, or prime, contracting 

with small businesses may reduce the subcontracting opportunities 

available for small businesses. For example, in an effort to increase the 

amount of prime contract dollars going to small businesses, in 2003, DOE 

redirected around $30 million of work from the facility management 

contract for managing and operating the Strategic Petroleum Reserve in 

Louisiana and awarded it as a separate prime contract to a small business. 

Before DOE redirected the work, a contractor official said that the facility 

management contractor responsible for performing the work had been 

subcontracting most of it to small businesses. The official further stated 

that, as a result, DOE and the facility management contractor negotiated a 

lower small business subcontracting goal for fiscal year 2004 of 27.7 
Page 20 GAO-05-459 DOE Small Business Subcontracting 

percent of the total dollars subcontracted, representing a 21.3 percent 

drop from the 49 percent goal at the end of fiscal year 2003. Although the 

facility management contractor exceeded its subcontracting goal in fiscal 

year 2004, the total dollars available for subcontracting decreased by 

around 12 percent ($6.1 million), and the portion going to small businesses 

decreased by 9.3 percent ($1.8 million). 

Because the subcontracting achievement data that DOE relies on does not 

provide a true picture of the facility management contractors’ 

performance in small business subcontracting, the department cannot 

meaningfully use those data to monitor performance. Without data 

providing a truer picture of contractors’ performance, DOE lacks a basis 

for knowing whether differences in performance truly exist. Moreover, the 

department also lacks a basis for understanding whether differences in 

performance are legitimate—such as stemming from the types of work 

performed under a facility management contract—or are the result of 

differences in contractors’ level of commitment to small business 

subcontracting. 

Having recognized potential weaknesses in contractor-reported 

achievement data, at least one federal agency we contacted is taking a 

more innovative approach for using data to monitor subcontracting 

efforts.11 The National Aeronautics and Space Administration (NASA), for 

internal management purposes, calculates small business subcontracting 

goals and achievements for its prime contractors as a percentage of the 

annual funding for the prime contracts. NASA’s small business office said 

it uses this method to oversee contractor performance because it (1) 

presents a truer picture of actual achievements and (2) provides a better 

basis to evaluate a contractor’s maximum practicable opportunity to 

subcontract with small businesses. This office said the data the 

contractors report to SBA can be misleading, in that a large percentage 

achievement can be reported even though a relatively small amount of 

dollars may actually be going to small business subcontracts. 

Although DOE continues to base its facility management contractors’ 

subcontracting goals on the total dollars subcontracted, for at least one of 

 11We examined limited aspects of the subcontracting program managed by small business 

officials at the National Aeronautics and Space Administration (NASA), because DOE and 

NASA share some similarities in their approach to accomplishing their respective missions. 

For example, both NASA and DOE contract extensively to carry out their missions, 

accomplished in part through work at the agencies’ contractor-operated research facilities. 
Page 21 GAO-05-459 DOE Small Business Subcontracting 

those contractors, the department’s Environmental Management program 

plans to use a small business subcontracting approach that is similar to 

NASA’s approach. During a recent solicitation for bids for an 

environmental cleanup contract at the Hanford Site’s River Corridor 

Project in Washington State, the program’s solicitation specified that the 

winning bidder must subcontract 60 percent of work under the 

approximately $2 billion contract, with half of that directed to small 

businesses, or potentially about $600 million over the 7-year life of the 

contract. According to proposal documents, Environmental Management 

took this approach in part because of input from small businesses and 

because it would better ensure that small businesses had an opportunity to 

participate in a significant portion of the work under the contract. 

DOE had not taken adequate steps to address known problems with the 

small business subcontracting achievement data reported by its facility 

management contractors. Because misleading achievement data gave the 

appearance of a successful small business subcontracting program, DOE 

officials did not closely monitor facility management contractors’ 

subcontracting practices or follow through to ensure that the contractors 

complied with SBA reporting guidelines. DOE’s reliance on misleading 

data also resulted in a lack of assurance that the facility management 

contractors were providing the maximum practicable opportunities for 

small business subcontracting. The inadequate oversight was due, in part, 

to a lack of clear guidance on how DOE’s various headquarters and field 

organizations should coordinate and integrate their efforts to effectively 

oversee the small business subcontracting program. 

DOE knew there were problems with the data reported by the facility 

management contractors but did not take adequate corrective action. This 

had several undesirable consequences: (1) it created the false impression 

that DOE was meeting its small business subcontracting goals, (2) it 

caused errors in recognizing and rewarding contractor performance, and 

(3) it undermined efforts to ensure that facility management contractors 

were providing the maximum practicable subcontracting opportunities for 

small businesses. 

False impression that DOE was meeting its small business 

subcontracting goals. The misleading data that DOE was using gave the 

appearance of a successful small business subcontracting program. As a 

result, DOE officials were not inclined to closely monitor facility 

management contractors’ subcontracting practices or to fully address 

DOE Oversight of 

Small Business 

Subcontracting by 

Facility Management 

Contractors Was Not 

Adequate to Address 

Identified Problems 

with ContractorReported Data 

Reliance on Misleading 

Data Undermined DOE’s 

Oversight 
Page 22 GAO-05-459 DOE Small Business Subcontracting 

known problems with the achievement data. DOE officials in the small 

business and procurement offices told us that they recognized in 2002 that 

the facility management contractors were not consistently following SBA 

guidelines on what subcontracts could be excluded when calculating small 

business subcontracting goals and achievements. In April 2002, DOE’s 

Small Business Office provided clarifying information in an e-mail message 

to small business program managers both in the DOE program offices and 

the facility management contractors. The information emphasized the 

importance of consistently following SBA guidelines. Although DOE 

provided subsequent training for small business program managers, DOE 

officials did not take adequate steps to ensure that the contractors were 

correctly applying SBA guidelines. Based on our analysis of fiscal year 

2004 subcontracting practices, none of the 34 facility management 

contractors fully complied with the SBA guidelines. 

In some cases, DOE actually approved the incorrect reporting practices by 

its facility management contractors. For example, we found 10 instances 

where DOE had reviewed and approved subcontracting plans that 

specifically called for incorrectly excluding subcontracts from the 

calculations of small business subcontracting goals and achievements. In 

two other cases, the facility management contractors specified incorrect 

exclusions in annual planning documents for fiscal year 2004. DOE uses 

these planning documents to evaluate overall contractor performance for 

the year. DOE contracting officers told us that they had approved or 

allowed the incorrect practices because they did not believe these 

subcontracts could practically go to small businesses anyway. For 

example, the facility management contractors may have had existing longterm subcontracts with large businesses to provide information 

technology assistance, building maintenance, or other site support 

services. 

Recent program reviews by DOE’s Small Business Office were also not 

sufficient to identify and rectify these incorrect practices. In September 

2002, the Secretary directed the Small Business Office to develop a 

strategic plan for providing maximum practicable opportunities to small 

businesses, including subcontracting by facility management contractors. 

As part of its May 2003 strategic plan, the Small Business Office stated that 

it would periodically review the small business subcontracting efforts of 

the facility management contractors. During fiscal year 2004, the Small 

Business Office performed reviews of the small business subcontracting 

programs at five of DOE’s facility management contractors. These reviews 

focused primarily on determining if the small business subcontracting 

plans contained the information required by federal regulations and 
Page 23 GAO-05-459 DOE Small Business Subcontracting 

whether the contractors met their annual small business subcontracting 

goals. The reviews did not evaluate how the facility management 

contractors were developing the annual small business subcontracting 

goals or whether all appropriate subcontracts were included in the goal 

and achievement calculations. DOE Small Business Office officials told us 

that, based on the results of our work, they are considering revising their 

review methodology to include these steps. 

In March 2005, near the end of our review, DOE and NNSA procurement 

organizations issued additional guidance on small business contracting 

goals. The guidance stressed that the accuracy of contractor-reported data 

was vital to the credibility of the department’s performance in small 

business subcontracting. The guidance emphasized that, in calculating and 

reporting small business subcontracting goals and achievements, 

contractors could exclude only the subcontract types allowed by SBA 

guidelines. The guidance further states that contracting officers shall 

ensure that facility management contractors are aware of these 

procedures and do not apply additional exclusions when developing their 

subcontracting goals. However, given DOE’s oversight of these practices 

in the past, it remains to be seen whether DOE will now follow through 

and ensure that facility management contractors comply with this 

guidance. 

Errors in recognizing and rewarding contractor performance. DOE’s 

Small Business Office established a Secretarial Small Business Awards 

program to recognize and acknowledge outstanding performance on an 

annual basis. One of these awards—the facility management contractor 

small business achievement award—is presented each year to the facility 

management contractor with the highest percentage increase in 

subcontract awards to small businesses from the previous year. 

We reviewed the facility management contractor small business 

achievement awards DOE presented in fiscal years 2003 and 2004. 

Although the fiscal year 2003 award appears to be appropriate, the fiscal 

year 2004 award went to a facility management contractor who directed 

fewer dollars to small businesses from one year to the next. Specifically, 

the data DOE used to make the determination showed that the percentage 

of subcontracting dollars going to small businesses increased from 61 

percent in fiscal year 2002 to 66 percent in fiscal year 2003, a 5 percentage 

point increase. However, during the same period, the total dollars 

subcontracted by the facility management contractor dropped from $60.7 

million to $52.1 million, and the subcontracting dollars directed to small 

businesses dropped from $36.8 million to $34.4 million. If DOE had 
Page 24 GAO-05-459 DOE Small Business Subcontracting 

measured the change in the contractor’s small business subcontracting 

achievements by comparing them with the annual funding on the facility 

management contract, DOE officials would have discovered that the 

contractor’s performance actually declined by about 7 percent during the 

period (from 19.7 percent of annual funding on the contract to 13.0 

percent). DOE Small Business Office officials told us that they based this 

award on increases in the percentage of subcontracting dollars going to 

small businesses rather than changes in the total dollars directed to small 

businesses. Officials said using changes in total dollars directed to small 

businesses would not be fair to all the contractors because the facility 

management contractors with multibillion dollar annual funding on their 

contracts would have an advantage in showing increased dollars to small 

businesses. While we agree that using dollars to compare the performance 

among contractors could favor those with greater annual funding, relying 

solely on the percentage of subcontracted dollars going to small 

businesses may result in rewarding declining performance, as 

demonstrated above. 

Undermined efforts to ensure maximum practicable opportunities for 

small businesses. DOE’s reliance on misleading data created an 

environment in which DOE officials were not inclined to closely monitor 

the small business subcontracting program. For example, DOE allowed 

facility management contractors to incorrectly exclude subcontracts when 

calculating their small business subcontracting achievements, which led to 

the incorrect perception that they were achieving their subcontracting 

goals. Without accurate and consistent data on the subcontracting efforts 

of the facility management contractors, DOE has no way of determining 

whether a facility management contractor is providing the maximum 

practicable opportunity for small businesses. 

Another consequence of these program weaknesses is a perception among 

members of the small business community that DOE’s facility 

management contractors could do better at providing opportunities for 

meaningful subcontracting work. This perception has led to distrust and 

criticism of DOE’s facility management contractors by small business 

associations and advocates. For example, during a May 2004 congressional 

hearing on DOE’s direct contracting with small businesses, small business 

advocacy groups raised concerns about whether the level of 

subcontracting by DOE facility management contractors reflected 
Page 25 GAO-05-459 DOE Small Business Subcontracting 

maximum practicable opportunities.12 Additionally, small business 

associations have expressed concerns about what they perceive as unfair 

treatment by DOE facility management contractors, such as using small 

business subcontractors to perform work that provides little opportunity 

for the small business to develop technical capabilities. Small business 

advocacy groups that we contacted said that if DOE held the facility 

management contractors more accountable for achieving small business 

subcontracting results, such as by using data that provided a truer picture 

of actual performance, the small business groups would have a basis for 

greater confidence in DOE’s small business subcontracting program. 

DOE officials did not address problems with the small business 

subcontracting program, in part, because the various headquarters and 

field organizations that must work together to provide oversight of the 

small business subcontracting program did not do so effectively. Oversight 

of facility management contractors’ small business subcontracting efforts 

includes reviewing and approving facility management contractors’ small 

business subcontracting plans and annual goals, monitoring the 

contractors’ progress toward achieving small business subcontracting 

goals, and taking action when necessary to ensure that the contractors 

meet their small business subcontracting goals. 

Although DOE contracting officers have final responsibility for providing 

direction to the facility management contractors on all aspects of DOE 

contracts, other DOE headquarters and field offices, such as the Small 

Business Office and the program offices, share responsibilities for 

monitoring and overseeing the small business subcontracting activities of 

facility management contractors. DOE contracting officers, usually located 

at DOE field locations, have primary responsibility for communicating 

with facility management contractors on all aspects of the contracts, 

including the contractors’ small business subcontracting efforts.13 DOE’s 

Small Business Office has the overall responsibility for managing the 

department’s small business programs and monitoring performance 

 12U.S. Government Printing Office, DOE Contracting with Small Business: Hearing Before 

the Committee on Energy and Natural Resources, United States Senate, S. Hrg. 108-610 

(Washington, D.C.: May 18, 2004). 

13In addition, contracting officers usually review upcoming subcontract procurements 

exceeding a specified dollar amount to determine if facility management contractors have 

given adequate consideration to small business opportunities. 

Oversight Responsibilities 

for the Small Business 

Subcontracting Program 

Were Not Clearly Defined 

or Integrated 
Page 26 GAO-05-459 DOE Small Business Subcontracting 

toward meeting annual goals. Since the Small Business Office has no 

direct authority over DOE’s facility management contractors, it 

coordinates the subcontracting program efforts by using small business 

program managers within DOE’s program offices and field locations. The 

small business program managers at the field locations review 

subcontracting plans and annual goals, and they provide input to the 

contracting officers. 

Effective oversight requires more than just carrying out these activities, 

but also collectively ensuring that the activities identify and correct 

problems and that program goals are achieved. Effective oversight was not 

happening, in part, because DOE guidance does not clearly define the 

roles, responsibilities, and needed interaction of the various headquarters 

and field organizations involved. DOE guidance on the small business 

program clearly defines only the roles of the contracting officer, which 

include review of small business subcontracting plans, annual goals, and 

reported achievements. The guidance also states that the contracting 

officer is responsible for ensuring that facility management contractors 

comply with the SBA guidelines on which subcontracts may be excluded 

from their subcontracting goals and achievements. However, the guidance 

does not clearly define roles or responsibilities for the Small Business 

Office, small business program managers, or others who need to 

coordinate their efforts to achieve department goals.14 Absent this 

guidance, we found that the collective efforts of these officials were not 

sufficient to identify and correct the problems discussed in this report or 

to ensure that program goals were being achieved. 

Creating opportunities for small businesses to participate in providing 

goods and services to DOE’s facility management contractors supports 

federal policy and produces benefits for both DOE and the small business 

community. Because about 85 percent of DOE’s funding currently goes to 

its facility management contractors, none of which are small businesses, 

the small business subcontracting efforts of those facility management 

contractors are of even greater importance to DOE. However, misleading 

data has created the false impression that DOE is meeting its small 

business subcontracting goals, undermined DOE’s oversight of 

 14In addition to DOE guidance on small business programs, NNSA has issued policy 

guidance on small business that defines requirements and responsibilities but has limited 

information on how various organizations should coordinate oversight efforts for small 

business subcontracting. 

Conclusions 
Page 27 GAO-05-459 DOE Small Business Subcontracting 

subcontracting efforts, and generated mistrust among members of the 

small business community. Furthermore, DOE actions to date have not 

adequately addressed problems with misleading data. Until the problems 

with contractor-reported achievement data are resolved and the program 

oversight issues are addressed, DOE cannot ensure that the federal policy 

of providing the maximum practicable opportunity for small businesses is 

being achieved. 

To ensure that facility management contractors comply with SBA 

guidelines and follow a consistent practice for calculating and reporting 

small business subcontracting goals and achievements, we recommend 

that the Secretary of Energy direct the appropriate officials responsible for 

DOE’s Small Business Office and procurement organizations to ensure, 

through regular oversight and review activities, that facility management 

contractors comply with DOE’s March 2005 guidance on small business 

procurement goals. 

To ensure that DOE has useful data for managing its small business 

subcontracting program and for measuring and comparing contractors’ 

performance in pursuing the maximum practicable opportunity for small 

business subcontracting, we recommend the Secretary of Energy direct 

the appropriate officials responsible for DOE’s Small Business Office and 

procurement organizations to use, for internal management purposes, data 

on facility management contractors’ annual small business subcontracting 

achievements calculated as a percentage of the obligated dollars facility 

management contractors received that year on their contract with DOE. 

To improve DOE’s oversight of the small business subcontracting program 

and to provide the maximum practicable opportunity for small businesses 

to subcontract at DOE sites, we recommend that the Secretary of Energy 

take steps to strengthen oversight of the program, including issuing 

guidance clarifying the roles, responsibilities, and necessary interactions 

among DOE small business office, program office, and procurement 

officials responsible for managing the small business subcontracting 

program. 

We provided a draft of this report to DOE for review and comment. In 

written comments the Secretary of Energy generally agreed with the 

report and two of the recommendations but disagreed with one of the 

recommendations. The department agreed with our recommendation to 

strengthen oversight of its small business subcontracting program. DOE 

Recommendations for 

Executive Action 

Agency Comments 
Page 28 GAO-05-459 DOE Small Business Subcontracting 

said that it is in the process of revising existing guidance to clarify 

oversight roles and responsibilities and the necessary coordination and 

integration of oversight efforts between DOE headquarters and field 

organizations. 

The department also agreed with our recommendation to ensure that the 

facility management contractors follow a consistent practice for 

calculating and reporting their small business subcontracting goals and 

achievements, as outlined in DOE’s March 2005 guidance. In its comments, 

DOE outlined several steps it had taken to provide training, clarifying 

information, and guidance on the importance of accurate and consistent 

small business subcontracting data. However, effective oversight requires 

more than providing guidance and training. We believe that regular review 

and oversight activities will also be necessary to verify that contractors are 

complying with the guidance. 

Regarding our recommendation that the department use data on its facility 

management contractors’ small business subcontracting achievements—

recalculated as a percentage of the dollars obligated on their prime 

contract—to internally manage its program, DOE disagreed with the 

recommendation and proposed to continue calculating the achievements 

as a percentage of the total dollars subcontracted. While we agree that 

DOE should continue to follow SBA guidance for SBA reporting purposes, 

we continue to believe that this calculation method fails to provide a true 

picture of the facility management contractors’ small business 

subcontracting performance, which is necessary for effective oversight. As 

our report clearly demonstrated, the method can overstate the 

performance of contractors that devote a relatively small portion of their 

total contract to subcontracting. Thus, to ensure that DOE is providing the 

maximum practicable subcontracting opportunities to small businesses, 

for internal program management purposes, the department should use 

subcontracting achievement data calculated as a percentage of the facility 

management contract obligations. As described in our report, one of the 

department’s programs intends to use this approach to internally manage 

the small business subcontracting goals and achievements for the 

$2 billion contract to clean up the Hanford Site’s River Corridor in 

Washington State. 
Page 29 GAO-05-459 DOE Small Business Subcontracting 

DOE also provided technical comments on the facts presented in the 

report, which we incorporated as appropriate. DOE’s comments and our 

responses are presented in appendix III. 

We conducted our review from June 2004 to April 2005, in accordance 

with generally accepted government auditing standards. Appendix II 

provides details on our scope and methodology. 

As arranged 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 to the Secretary of 

Energy. We will also make copies available to others on 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 on this report, please call me at 

(202) 512-3841. Other staff contributing to this report are listed in 

appendix IV. 

Gene Aloise 

Director, Natural Resources and Environment 
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 30 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

Battelle Memorial, 

Pacific Northwest National Laboratory, 

Wash. 

 

FY 2001 47.0 $54,357,833 $104,872,886 51.8 $421,791,076 12.9

FY 2002 47.0 59,788,116 131,556,970 45.5 470,448,150 12.7

FY 2003 47.0 75,350,321 114,311,713 65.9 555,727,382 13.6

FY 2004 55.0 81,388,171 133,912,552 60.8 550,910,993 14.8

Bechtel Bettis, 

Bettis Atomic Power Laboratory, 

Pa. 

 

FY 2001 30.0 53,093,888 162,362,210 32.7 342,340,000 15.5

FY 2002 30.0 71,145,858 136,485,213 52.1 343,972,000 20.7

FY 2003 30.0 55,542,807 135,949,919 40.9 334,771,000 16.6

FY 2004 35.0 62,811,750 159,372,044 39.4 381,767,479 16.5

Bechtel BWXT Idaho, 

Idaho National Laboratory, 

Idaho 

 

FY 2001 70.0 123,469,383 171,069,181 72.2 643,793,953 19.2

FY 2002 60.0 103,106,547 153,887,715 67.0 681,960,071 15.1

FY 2003 60.0 100,852,558 155,992,132 64.7 809,719,475 12.5

FY 2004 60.0 98,794,079 169,798,501 58.2 775,716,116 12.7

Bechtel Hanford, 

Hanford Site, 

Wash. 

 

FY 2001 50.0 18,287,757 34,632,902 52.8 131,770,462 13.9

FY 2002 50.0 15,967,088 36,927,958 43.2 127,488,208 12.5

FY 2003 50.0 13,210,454 35,202,892 37.5 110,244,402 12.0

FY 2004 50.0 38,940,166 59,915,369 65.0 133,563,675 29.2

Bechtel Jacobs, 

Oak Ridge Site, 

Tenn. 

 

FY 2001 46.0 134,014,921 292,351,969 45.8 488,503,515 27.4

FY 2002 34.0 142,094,257 335,397,251 42.4 476,330,731 29.8

FY 2003 38.0 140,783,155 358,596,321 39.3 489,003,276 28.8

FY 2004 28.0 116,441,561 299,533,583 38.9 653,252,083 17.8

Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 31 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

Bechtel National, 

Waste Treatment Plant, 

Wash. 

 

FY 2001 46.0 34,590,534 53,276,882 64.9 339,471,427 10.2

FY 2002 46.0 122,452,585 217,707,111 56.3 646,035,709 19.0

FY 2003 46.0 167,633,416 290,642,324 57.7 653,965,320 25.6

FY 2004 46.0 196,320,937 301,003,381 65.2 675,301,802 29.1

Bechtel Nevada, 

Nevada Test Site, 

Nev. 

 

FY 2001 50.0 54,888,245 85,069,821 64.5 287,008,003 19.1

FY 2002 55.0 56,746,250 83,089,259 68.3 409,298,787 13.9

FY 2003 62.0 83,639,885 121,103,349 69.1 434,472,175 19.3

FY 2004 62.0 95,085,821 134,734,610 70.6 464,972,914 20.5

Bechtel SAIC, 

Yucca Mountain Project, 

Nev. 

 

FY 2001 60.0 22,607,401 42,993,104 52.6 173,504,003 13.0

FY 2002 55.0 36,779,883 60,749,142 60.5 187,150,369 19.7

FY 2003 55.0 34,363,154 52,122,410 65.9 265,198,002 13.0

FY 2004 55.0 60,965,967 106,904,609 57.0 300,692,496 20.3

Brookhaven Science Associates, 

Brookhaven National Laboratory, 

N.Y. 

 

FY 2001 55.0 55,169,181 96,259,669 57.3 453,190,513 12.2

FY 2002 55.0 69,726,716 127,327,687 54.8 460,076,142 15.2

FY 2003 55.0 62,610,576 108,708,417 57.6 440,919,419 14.2

FY 2004 55.0 58,257,687 101,331,077 57.5 422,891,497 13.8

BWXT Pantex, 

Pantex Facility, 

Tex. 

FY 2001 60.0 36,294,115 57,583,576 63.0 329,219,350 11.0

FY 2002 60.0 72,514,853 97,829,311 74.1 404,242,527 17.9

FY 2003 60.0 74,018,228 99,218,150 74.6 424,131,223 17.5

FY 2004 60.0 92,587,654 115,264,030 80.3 437,236,858 21.2
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 32 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

BWXT Y-12, 

Y-12 National Security Complex, 

Tenn. 

 

FY 2001 40.0 69,072,392 130,070,576 53.1 889,855,250 7.8

FY 2002 50.0 88,579,725 139,672,095 63.4 574,888,585 15.4

FY 2003 50.0 86,985,976 140,627,195 61.9 707,392,050 12.3

FY 2004 63.0 114,442,560 171,568,241 66.7 675,042,163 17.0

CH2M Hill Hanford, 

Hanford Site, 

Wash. 

 

FY 2001 32.0 36,726,618 106,629,667 34.4 380,827,936 9.6

FY 2002 36.0 59,584,936 92,552,044 64.4 277,569,297 21.5

FY 2003 48.0 55,134,273 114,819,210 48.0 363,753,927 15.2

FY 2004 48.0 103,529,585 172,878,788 59.9 342,276,389 30.3

CH2M Hill Mound, 

Mound Site, 

Ohioa

 

 

FY 2003 62.0 10,158,519 20,966,482 48.5 85,566,434 11.9

FY 2004 62.0 12,064,809 33,408,204 36.1 100,904,523 12.0

DynMcDermott Petroleum Operations, 

Strategic Petroleum Reserve, 

La. 

 

FY 2001 46.0 24,470,589 51,250,166 47.8 119,355,167 20.5

FY 2002 47.0 37,801,131 79,267,315 47.7 158,111,114 23.9

FY 2003 49.0b 19,475,303 51,608,283 37.7 156,520,402 12.4

FY 2004 27.7b 17,655,913 45,487,040 38.8 109,940,228 16.1

Fluor Fernald, 

Fernald Closure Project, 

Ohio 

 

FY 2001 50.0 25,068,949 64,304,653 39.0 287,185,818 8.7

FY 2002 50.0 59,830,146 108,034,504 55.4 227,425,087 26.3

FY 2003 36.0 68,038,876 170,975,046 39.8 317,787,501 21.4

FY 2004 36.8 57,402,853 171,172,293 33.5 323,951,180 17.7

Fluor Hanford, 

Hanford Site, 

Wash. 

 

FY 2001 38.0 88,065,808 165,445,464 53.2 634,136,465 13.9

FY 2002 50.0 76,600,234 158,177,744 48.4 646,094,972 11.9
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 33 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

FY 2003 34.0 93,676,386 169,044,664 55.4 663,332,198 14.1

FY 2004 40.0 97,261,252 186,626,708 52.1 702,003,969 13.9

Honeywell Federal Manufacturing & Technologies, 

Kansas City Plant, 

Mo. 

 

FY 2001 39.6 79,894,524 156,636,154 51.0 461,742,878 17.3

FY 2002 43.6 78,418,650 150,710,281 52.0 444,906,343 17.6

FY 2003 48.0 95,707,764 163,478,172 58.5 477,229,514 20.1

FY 2004 50.4 109,887,925 193,471,624 56.8 473,410,852 23.2

Iowa State University, 

Ames Laboratory, 

Iowa 

 

FY 2001 50.0 2,646,192 4,101,321 64.5 24,840,396 10.7

FY 2002 50.0 3,454,193 5,279,121 65.4 30,371,174 11.4

FY 2003 50.0 2,752,123 4,557,186 60.4 23,839,727 11.5

FY 2004 50.0 3,012,140 5,311,183 56.7 31,619,046 9.5

Kaiser-Hill, 

Rocky Flats Closure Project, 

Colo. 

 

FY 2001 28.0 162,257,410 563,299,072 28.8 628,143,478 25.8

FY 2002 28.0 264,673,600 584,969,258 45.3 650,955,392 40.7

FY 2003 32.0 176,490,595 500,214,847 35.3 676,926,087 26.1

FY 2004 32.0 115,112,878 346,231,264 33.3 645,566,636 17.8

KAPL, Inc., 

Knolls Atomic Power Laboratory, 

N.Y. 

FY 2001 30.0 41,862,997 120,798,260 34.7 269,009,235 15.6

FY 2002 30.0 32,610,006 109,724,015 29.7 258,475,000 12.6

FY 2003 30.0 33,006,151 105,297,202 31.4 277,624,659 11.9

FY 2004 30.0 46,460,851 127,753,113 36.4 416,417,286 11.2

Lockheed Martin, 

Sandia National Laboratories, 

N. Mex. 

FY 2001 55.0 360,026,522 517,397,711 69.6 1,612,890,671 22.3

FY 2002 50.0 387,917,485 694,278,857 55.9 1,851,953,436 21.0

FY 2003 50.0 458,883,711 866,283,746 53.0 2,027,314,032 22.6

FY 2004 50.0 486,348,399 973,878,609 49.9 2,259,983,950 21.5
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 34 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

Midwest Research Institute, 

National Renewable Energy Laboratory, 

Colo. 

 

FY 2001 60.0 56,987,818 81,181,977 70.2 214,696,696 26.5

FY 2002 60.0 46,934,755 70,828,281 66.3 211,027,075 22.2

FY 2003 60.0 52,932,233 81,724,746 64.8 229,855,701 23.0

FY 2004 60.0 48,276,350 72,503,042 66.6 212,381,970 22.7

Princeton University, 

Princeton Plasma Physics Laboratory, 

N.J. 

FY 2001 52.0 9,925,776 14,701,621 67.5 74,149,076 13.4

FY 2002 52.0 8,043,427 10,670,803 75.4 74,716,992 10.8

FY 2003 55.0 5,928,245 7,905,233 75.0 68,961,918 8.6

FY 2004 60.0 9,901,358 11,895,244 83.2 77,635,828 12.8

Southeastern Universities Research Association, 

Thomas Jefferson National Accelerator Facility, 

Va. 

 

FY 2001 46.0 22,966,248 36,869,558 62.3 106,312,598 21.6

FY 2002 50.0 23,663,361 41,217,369 57.4 108,275,952 21.9

FY 2003 50.0 16,561,882 25,653,401 64.6 98,731,409 16.8

FY 2004 48.0 18,697,871 37,285,236 50.1 113,896,732 16.4

Stanford University, 

Stanford Linear Accelerator Center, 

Calif. 

 

FY 2001 55.0 31,172,615 51,630,433 60.4 204,122,243 15.3

FY 2002 56.0 28,252,330 51,405,657 55.0 210,650,537 13.4

FY 2003 57.5 39,451,555 62,778,071 62.8 230,864,436 17.1

FY 2004 56.0 39,419,478 66,461,098 59.3 250,900,104 15.7

Universities Research Association, 

Fermi National Accelerator Laboratory, 

Ill. 

 

FY 2001 50.0 44,450,000 91,872,000 48.4 307,997,017 14.4

FY 2002 50.0 45,862,000 87,820,000 52.2 309,200,090 14.8

FY 2003 50.0 39,552,000 77,990,000 50.7 316,292,588 12.5

FY 2004 50.0 45,284,000 71,268,000 63.5 316,519,364 14.3

 
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 35 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

University of California, 

Lawrence Berkeley National Laboratory, 

Calif. 

 

FY 2001 51.8 60,364,815 129,655,264 46.6 471,669,387 12.8

FY 2002 51.8 61,485,715 157,523,278 39.0 471,786,072 13.0

FY 2003 34.0 48,337,720 114,788,499 42.1 456,533,356 10.6

FY 2004 32.0 63,686,742 170,154,503 37.4 397,451,166 16.0

University of California, 

Lawrence Livermore National Laboratory, 

Calif. 

 

FY 2001 46.0 168,927,591 423,235,849 39.9 1,389,055,837 12.2

FY 2002 46.0 182,167,689 497,929,164 36.6 1,562,149,121 11.7

FY 2003 35.0 175,743,871 470,886,313 37.3 1,556,259,049 11.3

FY 2004 35.0 204,297,721 520,668,966 39.2 1,589,252,698 12.9

University of California, 

Los Alamos National Laboratory, 

N. Mex. 

 

FY 2001 35.0 314,500,000 846,300,000 37.2 2,056,138,764 15.3

FY 2002 42.0 431,300,000 1,072,100,000 40.2 1,968,726,402 21.9

FY 2003 42.0 370,700,000 854,600,000 43.4 1,984,708,594 18.7

FY 2004 42.0 371,100,000 843,200,000 44.0 1,876,507,610 19.8

University of Chicago, 

Argonne National Laboratory, 

Ill. 

 

FY 2001 48.0 66,709,921 127,394,963 52.4 498,328,731 13.4

FY 2002 48.0 66,089,187 120,411,075 54.9 530,767,915 12.5

FY 2003 48.0 65,525,795 120,451,914 54.4 525,415,187 12.5

FY 2004 50.0 70,362,618 152,980,199 46.0 585,987,022 12.0

UT Battelle, 

Oak Ridge National Laboratory, 

Tenn. 

 

FY 2001 46.0 68,303,840 141,080,341 48.4 667,887,413 10.2

FY 2002 43.0 91,435,096 185,694,443 49.2 849,633,299 10.8

FY 2003 46.0 118,547,793 219,013,040 54.1 807,960,210 14.7

FY 2004 48.0 170,389,081 271,744,455 62.7 1,005,411,132 17.0

 
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 36 GAO-05-459 DOE Small Business Subcontracting 

Facility 

management 

contractor, 

location, and 

fiscal year (FY) 

Subcontracting 

goal (percent of 

total dollars 

subcontracted) 

Subcontracting 

dollars to small 

businesses

Total dollars 

subcontracted

Subcontracting 

achievement 

(percent of total 

dollars 

subcontracted)

Annual funding 

received on the 

facility 

management 

contract 

Recalculated

subcontracting 

achievement 

(percent of 

annual funding)

Washington TRU Solutions, 

Waste Isolation Pilot Plant, 

N. Mex. 

 

FY 2001 75.0 20,291,938 26,456,431 76.7 111,360,499 18.2

FY 2002 75.0 33,534,321 44,576,023 75.2 118,905,751 28.2

FY 2003 75.0 38,629,035 45,053,723 85.7 124,985,758 30.9

FY 2004 60.0 39,136,122 44,500,492 88.0 140,432,118 27.9

West Valley Nuclear Services, 

West Valley Demonstration Project, 

N.Y. 

 

FY 2001 46.0 22,445,717 36,359,853 61.7 95,636,099 23.5

FY 2002 50.0 32,013,652 45,896,861 69.8 91,345,339 35.1

FY 2003 55.0 21,906,883 37,503,459 58.4 95,835,513 22.9

FY 2004 45.0 26,661,695 40,088,050 66.5 93,272,276 28.6

Westinghouse Savannah River, 

Savannah River Site, 

S.C. 

 

FY 2001 50.0 193,000,000 367,000,000 52.6 1,498,224,335 12.9

FY 2002 48.0 171,800,000 298,000,000 57.7 1,419,323,559 12.1

FY 2003 51.0 169,700,000 291,000,000 58.3 1,478,654,637 11.5

FY 2004 51.0 109,500,000 188,900,000 58.0 1,452,022,082 7.5

Source: GAO analysis of DOE and facility management contractor data. 

Note: The subcontracting achievements—both as a percent of total dollars subcontracted and as a 

percent of annual funding—presented in this table have not been adjusted to include any 

subcontracts that the facility management contractors incorrectly excluded from their calculations 

because we did not know the dollar value of the incorrectly excluded subcontracts for all 34 

contractors. 

a

We omitted subcontracting goal and achievement data for DOE’s Mound Site in Ohio for fiscal years 

2001 and 2002, because the contractor that managed and operated the site in 2001 and 2002 is not 

the same contractor that did so from 2003 through the duration of our study. While we included 

subcontracting achievement data from the previous contractor in the aggregated data for all facility 

management contractors in table 1, we did not include those data in this appendix because the fiscal 

year 2001 and 2002 data for the Mound Site came from a different source than the rest of the 

subcontracting goal and achievement data in this appendix. As a result, we had not assessed the 

reliability of the fiscal year 2001 and 2002 data for the Mound Site to be able to publish the 

contractor-level subcontracting goal and achievement data. 
Appendix I: DOE Facility Management 

Contractors’ Annual Small Business 

Subcontracting Goals and Achievements 

Page 37 GAO-05-459 DOE Small Business Subcontracting 

b

The facility management contractor managing and operating the Strategic Petroleum Reserve had a 

small business subcontracting goal of 47.0 percent for the first half of fiscal year 2003, but the goal 

was increased to 49.0 percent for the second half of the fiscal year, after the contractor was awarded 

a new facility management contract with DOE for the same site, and they negotiated a new 

subcontracting goal. However, for fiscal year 2004, the contractor’s subcontracting goal dropped to 

27.7 percent. According to a contractor official, DOE and the contractor renegotiated the lower goal 

after DOE removed about $30 million of work from the facility management contract in fiscal year 

2003. The facility management contractor had been subcontracting a majority of that work to small 

business subcontractors. 
Appendix II: Scope and Methodology 

Page 38 GAO-05-459 DOE Small Business Subcontracting 

We determined (1) the usefulness of the data reported by the Department 

of Energy’s (DOE) facility management contractors for monitoring 

contractor performance in small business subcontracting and (2) the 

actions that DOE has taken to address any problems identified with its 

facility management contractors’ small business subcontracting efforts. To 

conduct our work, we contacted DOE and contractor officials, as well as 

representatives from the Small Business Administration (SBA) and from 

small-business advocacy groups. We also collected data from all 34 of 

DOE’s facility management contracts on their subcontracting activities 

and took steps to assess the reliability of the contractors’ data, which 

included reviews of subcontracting files at 13 of the 34 contractors. 

To determine the usefulness of the facility management contractorreported data for DOE monitoring purposes, we requested data from 

DOE’s 34 facility management contractors on their annual small business 

subcontracting goals and achievements. Specifically, we asked the 

contractors to provide the subcontracting percentage-goals that they 

negotiated with DOE for fiscal years 2001 through 2004, as well as the 

dollar figures comprising those percentages, including the total dollars to 

be subcontracted during the year and the portion of subcontracting dollars 

they expected would go to small businesses.1

 We also asked the 

contractors to provide us with their subcontracting percentage 

achievements for fiscal years 2001 through 2004 and the dollar figures 

comprising those percentages—namely, the total dollars that were 

subcontracted and the small business subcontracting dollars. (Selected 

subcontracting goal and achievement data appear in app. I.) Additionally, 

in our data request, we asked the contractors to identify the types of 

subcontracts that they included or excluded from their small business 

subcontracting goals and achievements for fiscal year 2004. Furthermore, 

we requested copies of the contractors’ small business subcontracting 

plans that were in effect during fiscal year 2004. 

We used a data collection instrument to obtain data from the facility 

management contractors on their fiscal year 2001 through 2004 small 

business subcontracting goals and achievements. In the data collection 

 1

Although contractors are required to establish annual subcontracting goals for various 

subcategories of small businesses, such as small disadvantaged or women-owned small 

businesses, during our study, we only examined small business subcontracting as an 

overall category. We did not examine the contractors’ subcontracting activities with 

respect to any subcategories. 

Appendix II: Scope and Methodology 

Determining the 

Usefulness of the 

Facility Management 

Contractor-Reported 

Data 
Appendix II: Scope and Methodology 

Page 39 GAO-05-459 DOE Small Business Subcontracting 

instrument, we provided tables for the contractors to enter their 

subcontracting information, and we included instructions on how to 

complete the tables. The data collection instrument also included a series 

of questions on various aspects of the reliability of the data they provided, 

as part of our assessment of data reliability described later in this 

appendix. 

Because we received the requested information from all 34 of DOE’s 

facility management contractors, we did not rely on results from any 

subset of those contractors to conduct our analysis and, therefore, no 

sampling error is associated with our work. However, data gathering 

methods, such as the ones we used, may introduce error into the data that 

is not associated with statistical sampling, commonly referred to as 

nonsampling errors. For example, difficulties in how a particular 

instruction was interpreted, in the availability of the information 

requested, and in how the data were entered into the tables could 

introduce unwanted variation into the data collected. We took steps in the 

development of the data collection instrument to minimize these 

nonsampling errors. For example, we pretested a draft of the data 

collection instrument with 3 facility management contractors. In addition, 

we provided the draft to 5 knowledgeable small business and procurement 

officials in DOE headquarters. Within GAO the data collection instrument 

was reviewed by the Office of General Counsel and by experts in federal 

contracting and research methodology. We modified the data collection 

instrument as appropriate to reflect the comments and suggestions of the 

contractor, DOE, and GAO reviewers, and sent the data collection 

instrument to all 34 of DOE’s facility management contractors. We 

received responses from all 34 contractors. 

We then assessed the reliability of the subcontracting data we received 

from each of the 34 facility management contractors. To assess the data 

reliability, we (1) analyzed the contractors’ responses to the data reliability 

questions that were included in the data collection instrument and (2) 

conducted a more detailed review of subcontract files at 13 of the 34 

contractors. 

First, we reviewed the contractors’ responses to the series of data 

reliability questions in the data collection instrument, which addressed 

such areas as data entry, data access, quality control procedures, and data 

accuracy and completeness. Follow-up questions were added as 

necessary. In consultation with a GAO expert in research methodology, we 

analyzed the contractors’ responses for weaknesses in data reliability that 

would make their data unusable for analysis and reporting purposes. In 
Appendix II: Scope and Methodology 

Page 40 GAO-05-459 DOE Small Business Subcontracting 

their responses, 7 of the 34 contractors discussed minor limitations to 

their data control processes that might affect how the data should be 

interpreted. For example, 3 contractors stated that their subcontracting 

data was both accurate and complete, while noting that it was such to the 

extent that they could make it. Another contractor reported that the data it 

provided for fiscal years 2001 and 2002 may be less accurate than the data 

for fiscal years 2003 and 2004, because prior to 2003, the contractor did 

not require that its small business subcontractors self-certify or provide 

documents that verify their small business status. 

Second, we visited a nonprobability sample2

 of 13 of the 34 facility 

management contractors to conduct a more detailed assessment of the 

reliability of the fiscal year 2004 subcontracting achievement data that 

they provided in response to our data collection instrument. We used 

several criteria to select facility management contractors for site visits, 

including a contractors’ association with DOE’s three largest component 

organizations—Environmental Management, the National Nuclear Security 

Administration (NNSA), and the Office of Science—as well as geographic 

location, and the type of work performed under the facility management 

contract. The three DOE component organizations we focused on control 

30 of DOE’s 34 facility management contracts, and their annual budgets 

account for over 70 percent of DOE’s overall budget. In selecting NNSA 

contractors, we chose both research laboratories and weapons production 

facilities, to ensure inclusion of the types of work that NNSA uses to carry 

out its missions. In addition, to obtain geographically diverse cases, we 

selected contractors from four states in the Western U.S.—California, 

Nevada, New Mexico, and Washington—and one Eastern state, Tennessee. 

Nearly one-half of the 34 DOE facility management contractors are located 

within these five states. 

Based on these selection criteria, we made visits to the following 13 

facility management contractors: 

Battelle Memorial, Pacific Northwest National Laboratory, Wash.; 

Bechtel Hanford, Hanford Site, Wash.; 

Bechtel Jacobs, Oak Ridge Site, Tenn.; 

Bechtel National, Waste Treatment Plant, Wash.; 

 2

Results from a nonprobability sample cannot be used to make inferences about a 

population, because in a nonprobability sample, some elements of the population being 

studied have no chance or an unknown chance of being selected as part of the sample. 
Appendix II: Scope and Methodology 

Page 41 GAO-05-459 DOE Small Business Subcontracting 

Bechtel Nevada, Nevada Test Site, Nev.; 

Bechtel SAIC, Yucca Mountain Project, Nev.; 

BWXT Y-12, Y-12 National Security Complex, Tenn.; 

CH2M Hill Hanford, Hanford Site, Wash.; 

Fluor Hanford, Hanford Site, Wash.; 

Lockheed Martin, Sandia National Laboratories, N. Mex.; 

University of California, Lawrence Livermore National Laboratory, Calif.; 

University of California, Los Alamos National Laboratory, N. Mex.; and 

UT Battelle, Oak Ridge National Laboratory, Tenn. 

Collectively, these 13 contractors had subcontracts worth about $4.2 

billion in fiscal year 2004 (or 64.2 percent of the total subcontracting 

dollars for all 34 facility management contractors). Of that amount, over 

$2.1 billion went to small businesses, accounting for nearly two-thirds of 

the almost $3.3 billion in subcontract dollars that the 34 contractors 

directed to small businesses that year. 

During our visits to these 13 facility management contractors, we looked 

at the reliability of the fiscal year 2004 small business subcontracting 

achievement data that the contractors provided in the data collection 

instrument. Even though our data covered fiscal years 2001 through 2004, 

for our more detailed review of data reliability, we focused on fiscal year 

2004, because we performed most of our analyses on data from that year. 

Although individual contractors may manage thousands of small business 

subcontracts in a given year, for each of the 13 contractors, we chose 

separate nonprobability samples of 5 small business subcontracts—for a 

total of 65 subcontracts—that the facility management contractors had 

included in the fiscal year 2004 small business subcontracting 

achievements. We selected each nonprobability sample from a complete 

list of the contractors’ fiscal year 2004 small business subcontracts, which 

we obtained prior to visiting the contractors. The criteria we used for 

selecting contracts was the subcontract amount and the goods and 

services provided. We selected subcontracts that received among the 

largest dollar commitments in fiscal year 2004 and that encompassed a 

variety of the types of goods and services provided by small business 

subcontractors. In total, the 65 subcontracts in our nonprobability samples 

accounted for 17.2 percent ($368.1 million) of the $2.1 billion dollars 

committed to small business subcontracts in fiscal year 2004 by the 13 

facility management contractors. 

At each contractor’s facility, we reviewed documents for each of the five 

subcontracts, in order to verify the dollar commitments to those 
Appendix II: Scope and Methodology 

Page 42 GAO-05-459 DOE Small Business Subcontracting 

subcontracts in fiscal year 2004, that the contractor included in their 

response to the data collection instrument. We also reviewed any 

documents certifying the small business status of those subcontractors at 

the time the subcontracts were awarded. In addition, to understand the 

effect of excluding certain subcontracts from the contractors’ small 

business subcontracting achievement calculations, these 13 contractors 

provided us with data on the dollar amount of their excluded subcontracts 

in fiscal year 2004. 

For all 65 of the small business subcontracts we reviewed, we were able to 

verify through documents in the subcontract files that the amount of 

dollars committed to the selected subcontracts in fiscal year 2004 equaled 

the dollar amounts that the facility management contractors had taken 

credit for when reporting their small business subcontracting 

achievements for that year. Also, for 63 of the selected subcontracts, we 

were able to find documents that certified the subcontractor’s status as a 

small business at the time the subcontract was awarded. However, for the 

2 remaining subcontracts—which were from 2 different facility 

management contractors—documents showed that the subcontractors had 

been classified as large businesses at the time the subcontract was 

awarded.3

 Therefore, these 2 subcontracts should not have been reflected 

in those contractors’ fiscal year 2004 subcontracting achievements as 

small business subcontracts. Because this only occurred with 3 percent of 

the 65 subcontracts (representing 5.7 percent of the total $368.1 million 

value of those subcontracts), we did not consider it to be a material 

weakness of the subcontracting achievement data. In both instances 

where facility management contractors had mistakenly included a large 

business subcontract in their small business subcontracting achievements, 

the contractors subsequently restated their fiscal year 2004 subcontracting 

 3

In addition to the two facility management contractors, one other facility management 

contractor informed us, prior to the site visit, that one of the five subcontracts in the 

nonprobability sample had turned out to be awarded to a large business. The contractor 

said that, as a result, they were restating their reported small business subcontracting 

achievement data. Therefore, we selected an additional subcontract to complete the 

nonprobability sample of five, before beginning our review of this contractor’s 

subcontracting files. 
Appendix II: Scope and Methodology 

Page 43 GAO-05-459 DOE Small Business Subcontracting 

achievements.4 The subcontracting achievement data included in this 

report reflect the restated amounts. 

Based on all of our efforts to assess data reliability, we believe that the 

data are sufficiently reliable for characterizing the 34 facility management 

contractors’ fiscal year 2004 small business subcontracting achievements. 

To determine the actions that DOE has taken to address any problems 

identified with its facility management contractors’ small business 

subcontracting efforts, we visited officials at the nonprobability sample of 

13 of the 34 facility management contractors previously described. We also 

met with the field-based DOE small business officials and contracting 

officers responsible for overseeing the facility management contractors’ 

performance in small business subcontracting. 

In addition to our site visits, in DOE’s headquarters we interviewed 

officials from DOE’s Small Business Office and small business officials 

from the major component organizations, as well as DOE and NNSA 

procurement officials, to learn about their role and actions for overseeing 

the facility management contractors’ small business subcontracting 

efforts. From these officials, we obtained policy guidance, results of field 

reviews, and other documents related to DOE and NNSA’s oversight 

activities. We also interviewed headquarters and field-based officials from 

SBA’s Office of Government Contracting to further understand SBA 

guidelines for contractor reporting of small business subcontracting data. 

Furthermore, we spoke with representatives from three small business 

advocacy groups—the East Tennessee Environmental Business 

 4

Following our reliability assessment, one contractor reported that it encountered other 

problems with potential miscoding of large business subcontracts as small in the data 

system that the contractor uses to calculate its small business subcontracting 

achievements. A contractor official said that the contractor is implementing corrective 

actions, such as requiring its procurement staff to manually enter subcontractors’ business 

size information into the contractor’s procurement data system. 

Determining Actions 

Taken by DOE to 

Address Problems 
Appendix II: Scope and Methodology 

Page 44 GAO-05-459 DOE Small Business Subcontracting 

Association, the New Mexico 8(a) and Minority Business Association, and 

the Small Environmental Business Action Coalition. 

We conducted our work from June 2004 to April 2005 in accordance with 

generally accepted government auditing standards. 
Appendix III: Comments from the Department 

of Energy 

Page 45 GAO-05-459 DOE Small Business Subcontracting 

Appendix III: Comments from the 

Department of Energy 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 
Appendix III: Comments from the Department 

of Energy 

Page 46 GAO-05-459 DOE Small Business Subcontracting 
Appendix III: Comments from the Department 

of Energy 

Page 47 GAO-05-459 DOE Small Business Subcontracting 

Now on p. 8. 

See comment 2. 

See comment 1. 
Appendix III: Comments from the Department 

of Energy 

Page 48 GAO-05-459 DOE Small Business Subcontracting 

Now on p. 21. 

See comment 5. 

See comment 4. 

Now on p. 12. 

See comment 3. 
Appendix III: Comments from the Department 

of Energy 

Page 49 GAO-05-459 DOE Small Business Subcontracting 

See comment 9. 

See comment 8. 

See comment 7. 

Now on p. 23 

See comment 6. 
Appendix III: Comments from the Department 

of Energy 

Page 50 GAO-05-459 DOE Small Business Subcontracting 
Appendix III: Comments from the Department 

of Energy 

Page 51 GAO-05-459 DOE Small Business Subcontracting 

The following are GAO’s comments on the Department of Energy’s letter 

dated May 3, 2005. 

1. We acknowledge in the draft report and highlights page that DOE had 

taken steps to address the problems with contractor-reported data, 

including issuing clarifying information in 2002 and additional 

guidance in March 2005. However, we stated that these steps had not 

been adequate to ensure that the facility management contractors were 

complying with the guidance. The draft report also stated that the 

reviews of the five facility management contractors performed by 

DOE’s Small Business Office did not include an evaluation of whether 

the facility management contractors were following SBA guidelines for 

developing small business subcontracting goals. 

2. We agree that the Small Business Act and the Federal Acquisition 

Regulation do not require a specific level of subcontracting and that 

individual contractors determine the amount of work that will be 

subcontracted. The draft report reflects these two statements. 

However, we also stated in the draft report that if a contractor 

determines that only a small percentage of the work will be 

subcontracted, calculation of small business subcontracting 

achievements as a percentage of that percentage can be misleading. 

3. We agree and modified the final report. 

4. We modified the final report to acknowledge that prior to fiscal year 

2000, DOE was able to include the small business subcontracting 

achievements of its facility management contractors toward the 

department’s small business prime contracting goals. However, while 

it may have been an acceptable past practice for the facility 

management contractors to exclude more subcontracts under these 

conditions, the practice should have been discontinued in fiscal year 

2000. 

5. In the draft report, we acknowledged that DOE is in the process of 

revising existing guidance to clarify oversight roles and responsibilities 

and the necessary coordination and integration of oversight efforts 

between DOE headquarters and field organizations. 

6. In the draft report, we stated that effective oversight of facility 

management contractors’ practices for calculating and reporting their 

small business subcontracting goals and achievements will require 

more than providing guidance and training. We believe that regular 

GAO Comments 
Appendix III: Comments from the Department 

of Energy 

Page 52 GAO-05-459 DOE Small Business Subcontracting 

oversight activities will also be necessary to verify that contractors are 

complying with this guidance. 

7. Our draft report does not state that “more small business 

subcontracting is always better.” The draft report does discuss federal 

policy, set out in the Small Business Act, that small businesses shall 

have the maximum practicable opportunity to provide goods and 

services to the federal government and its contractors, consistent with 

efficient contract performance. The draft report also states that there 

can be several reasons for differences in contractors’ small business 

subcontracting achievements, including type of work, contract 

performance goals, and changes in the annual funding for a contract. 

8. We disagree that the fiscal year 2004 subcontracting achievement data 

are premature. Although the facility management contractors have not 

yet submitted their fiscal year 2004 subcontracting reports to DOE, we 

obtained this data directly from the 34 facility management contractors 

so that we could include the most recent results in our report. We 

obtained fiscal year 2004 data after the end of the fiscal year so that it 

would reflect the final subcontracting activities for the year. We 

assessed the reliability of the data for accuracy and completeness (see 

app. II). In addition, in March 2005, we provided a statement of facts to 

the contractors for their review to ensure the accuracy of the 

information. 

9. DOE disagreed with our recommendation that, for internal 

management purposes, the department use data on its contractors’ 

subcontracting achievements, calculated as a percentage of the dollars 

obligated to their prime contract with DOE. While the contractors 

should continue to report their subcontracting achievements as SBA 

requires, we continue to believe that, for internal management 

purposes, the data do not provide a true picture of their performance, 

which is necessary for the department to perform effective oversight. 
Appendix IV: GAO Contacts and Staff 

Acknowledgment 

Page 53 GAO-05-459 DOE Small Business Subcontracting 

Gene Aloise, (202) 512-3841 

William R. Swick, (206) 287-4851 

In addition to the individuals named above, Carole Blackwell, Ellen Chu, 

John Delicath, Doreen Feldman, Dominic Nadarski, Judy Pagano, Laina 

Poon, Jeff Rueckhaus, and Ginny Vanderlinde made key contributions to 

this report. 

Appendix IV: GAO Contacts and Staff 

Acknowledgment 

GAO Contacts 

Acknowledgments 

(360492) 
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