SMALL BUSINESS

Action Needed to 

Determine Whether

DOD’s 

Comprehensive 

Subcontracting Plan 

Test Program Should 

Be Made Permanent

Report to Congressional Committees

November 2015

GAO-16-27

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-16-27, a report to 

congressional committees

November 2015

SMALL BUSINESS

Action Needed to Determine Whether DOD’s 

Comprehensive Subcontracting Plan Test Program 

Should Be Made Permanent

Why GAO Did This Study

Since 1990, DOD has been conducting 

a congressionally directed test 

program related to how contractors 

report their subcontracting activities. 

The purpose of the program is to test 

whether using comprehensive 

subcontracting plans that cover 

multiple contracts across contractor 

plants, divisions, or entire companies 

can yield administrative cost savings 

and enhance small business 

subcontracting opportunities. Despite 

the 25-year existence of the program, 

little is publicly known about its 

effectiveness. 

The National Defense Authorization 

Act for Fiscal Year 2015 included a 

provision for GAO to report on the 

results of the program. This report 

addresses the extent to which the 

program (1) reduces administrative 

costs, and (2) enhances 

subcontracting opportunities for small 

businesses. GAO analyzed prior DOD 

reviews and data on estimates of 

administrative costs savings; reviewed 

program participants’ performance for 

enhancing small business 

subcontracting opportunities for fiscal 

years 2006 through 2013; and 

interviewed officials from DOD, 

program participants, and small 

business advocacy groups.

What GAO Recommends

Congress should consider making the 

program permanent. GAO also 

recommends that DOD work with 

Congress on the program’s status. 

DOD agreed. DOD disagreed with a 

recommendation to draft a legislative 

proposal to make the program 

permanent. GAO subsequently 

modified the recommendation and 

added the matter for Congress.

What GAO Found

Reviews commissioned by the Department of Defense (DOD) concluded that the 

Test Program for Negotiation of Comprehensive Small Business Subcontracting 

Plans (Test Program) has resulted in the avoidance of millions of dollars in 

administrative costs for both program participants and DOD. According to the 

review conducted in 2013, the 12 firms then participating in the program avoided 

about $18.5 million in costs through the use of single comprehensive 

subcontracting plans rather than multiple individual subcontracting plans. Also, a 

2007 review estimated that DOD avoided administrative costs of at least $45 

million in fiscal year 2005. GAO reviewed the methodologies used for these 

reviews and took other steps to validate their findings. According to DOD 

officials, if the Test Program were terminated or allowed to expire, a significant 

one-time administrative cost of about $22 million could result to participants. 

GAO’s analysis confirms this conclusion. Test Program participants and DOD 

officials GAO interviewed stated that the program also has resulted in nonfinancial benefits, including greater company-wide awareness of small business 

subcontracting opportunities. The participants GAO interviewed said that without 

the program their companies might be less inclined to award subcontracts to 

small businesses. They emphasized, however, that the program’s continuing test 

status creates uncertainty and inhibits further expansion. The 2007 review 

recommended that DOD work with Congress to make the Test Program 

permanent; however, DOD has not acted on this recommendation. Doing so 

could help eliminate uncertainty with the program. 

GAO found that the Test Program enhanced small business subcontracting 

opportunities, although participants’ performance in meeting individual goals has 

varied. Participants are evaluated on their achievement of negotiated initiatives 

and goals in their comprehensive subcontracting plans. GAO’s analysis of 

performance reports found that participants made acceptable progress on their 

initiatives 87 percent of the time, thus providing tangible subcontracting 

opportunities for small businesses. For example, during fiscal years 2006 through 

2013, program participants redirected nearly $93 million in subcontracts from 

large businesses to small businesses. Participants also achieved a 72-percent 

success rate in increasing small business subcontracts in areas such as 

integrated circuits and information technology, thus addressing a concern among 

some small businesses that high-end technical work was not being 

subcontracted under the program. The 2013 DOD review estimated that 

participant initiatives could amount to as much as $1.8 billion per year in 

increased small business opportunities. GAO’s analysis found that participants 

did not always meet individual goals, in part due to the challenging nature of 

these goals. However, GAO also found that their combined performance from 

fiscal years 2006 through 2013 resulted in subcontract awards to small 

businesses that exceeded aggregate goals by about $5.4 billion. The annual 

performance reviews of the participants, which take into account performance on 

both initiatives and goals, have been largely positive.

View GAO-16-27. For more information, 

contact William T. Woods at (202) 512-4841 or 

woodsw@gao.gov
Page i GAO-16-27 Small Business Subcontracting 

Letter 1

Background 2

Test Program Allows Participants and DOD to Avoid Millions in 

Administrative Costs and May Provide Additional Benefits 7

Test Program Enhanced Small Business Opportunities, Though 

Participant Performance Varied 11

Conclusions 20

Matter for Congressional Consideration 21

Recommendation for Executive Action 21

Agency Comments and Our Evaluation 21

Appendix I Objectives, Scope, and Methodology 25

Appendix II Comments from the Department of Defense 28

Appendix III GAO Contact and Staff Acknowledgments 31

Tables

Table 1: Key Differences between Comprehensive Subcontracting 

Plans and Individual Subcontracting Plans 4

Table 2: Test Program Participants, Year of Entry, and 

Participation Level, as of Fiscal Year 2015 5

Table 3: Test Program Total Estimated Annual Administrative 

Costs Avoided as Determined by DOD Reviews 7

Figures

Figure 1: Number of Test Program Participants that Met or 

Exceeded Their Small Business Subcontracting Dollar 

and Percentage Goals, Fiscal Years 2006 through 2013 14

Figure 2: Test Program Dollar Achievements in Comparison to 

Dollar Goals for Small Business Subcontracting, Fiscal 

Years 2006 through 2013 15

Figure 3: Comparison of Test Program Participants and 

Nonparticipants for Percentage of Subcontracting Dollars 

Awarded to Small Businesses, Fiscal Years 2006 through 

2013 16

Contents
Page ii GAO-16-27 Small Business Subcontracting 

Abbreviations

DCMA Defense Contract Management Agency

DOD Department of Defense

FAR Federal Acquisition Regulation

OSBP Office of Small Business Programs

SBIR Small Business Innovation Research

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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necessary if you wish to reproduce this material separately.
Page 1 GAO-16-27 Small Business Subcontracting 

441 G St. N.W.

Washington, DC 20548

November 16, 2015

Congressional Committees

Contractors on certain defense contracts are required to develop plans 

specifying how much of the work will be performed by subcontractors. In 

1989, Congress authorized the Test Program for Negotiation of 

Comprehensive Small Business Subcontracting Plans (Test Program), 

which permits participating contractors to submit a single subcontracting 

plan covering all of their contracts rather than a separate plan for each 

contract. The purpose of the Test Program is to reduce the administrative 

burden on contractors and enhance subcontracting opportunities for small 

businesses.1 Although the Test Program’s initial performance period was 

3 years, Congress has extended its duration eight times, with the most 

recent extension scheduled to end December 31, 2017. Despite the 25-

year tenure of the Test Program, little is publicly known about its results, 

as the Department of Defense (DOD) has not published any reports on its 

performance.

The National Defense Authorization Act for Fiscal Year 2015 included a 

provision for us to report on the results of the Test Program.2 This report 

addresses the extent to which the Test Program (1) reduces 

administrative costs, and (2) enhances subcontracting opportunities for 

small businesses.

To address whether the Test Program reduces administrative costs, we 

analyzed DOD-commissioned reviews of the program performed in 2002, 

2007, and 2013; each of which included estimates of the cost savings or 

avoidance associated with the program. We assessed the methodologies 

employed and assumptions used, including estimates of the number of 

contracts and cost of labor involved in preparing program documentation, 

to arrive at the estimates for savings. To validate the data used in the 

 1

The National Defense Authorization Act for Fiscal Years 1990 and 1991, Pub. L. No. 109-

189, § 834 and the National Defense Authorization for Fiscal Year 1996, Pub. L. No.104-

106, § 811(a).

2

The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for 

Fiscal Year 2015, Pub. L. No. 113-291, § 821(e).

Letter
Page 2 GAO-16-27 Small Business Subcontracting 

2013 study, we interviewed DOD officials to discuss how the data were 

collected and obtained, and we analyzed and compared the data to more 

current information we obtained independently. We found the 

methodologies in all three studies to be reasonable, and the data were 

sufficiently reliable for our purposes. We interviewed officials from DOD 

and 5 of the 12 Test Program participants, selected to represent different 

levels of corporate participation in the program and varying volumes of 

small business subcontracting activity, to obtain their views on any 

reduction in administrative costs and other benefits they may have 

realized from their participation in the program. The views expressed by 

these participants provided insight into the operation of the program, but 

are not generalizable to all program participants.

To address whether the Test Program enhances subcontracting 

opportunities for small businesses, we reviewed legislation and agency 

guidance for the Test Program and relevant GAO and DOD reports. We 

also reviewed Test Program participants’ comprehensive subcontracting 

plans from fiscal years 2006—the first year not covered by a prior DOD 

review—through 2013—the last year for which full data were available. 

We compared the approved subcontracting goals and initiatives as stated 

in the plans to the results for each participant and as reflected in annual 

performance reviews, known as Form 640 reviews, conducted by the 

Defense Contract Management Agency (DCMA) to establish trends for 

participant performance. We also interviewed officials from DOD’s Office 

of Small Business Programs, DCMA’s Small Business Programs Division, 

the five Test Program participants described above, and two small 

business advocacy groups chosen for their representation of the small 

business community for their views on the Test Program. The views 

expressed by these groups provided insight into the operation of the 

program, but are not generalizable to all small businesses. Appendix I 

provides additional details on our objectives, scope, and methodology.

We conducted this performance audit from March to November 2015 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In fiscal year 2014, DOD’s prime contractors subcontracted for $133 

billion in goods and services to support DOD’s missions, of which $44 Background
Page 3 GAO-16-27 Small Business Subcontracting 

billion, or 33 percent, was awarded to small businesses. The Federal 

Acquisition Regulation (FAR) generally requires proposed prime 

contractors to have individual subcontracting plans in place for contracts 

(including modifications) of more than $650,000—or $1.5 million for 

construction contracts—whenever subcontracting opportunities exist.3

These plans are to document subcontracting goals as a specific dollar 

amount planned for small business awards and as a percentage of total 

available subcontracting dollars to various socioeconomic categories of 

small businesses.4 The plans also are to identify the types of products 

and services suitable for subcontracting awards.

Under the authorizing statute, as implemented in regulation, each 

participant in the Test Program negotiates and reports on subcontracting 

goals and achievements for a specific fiscal year on a plant, division, or 

corporate-wide basis. A comprehensive plan may cover a large number of 

individual contracts. For example, one participant told us about a plan that 

covered more than 3,000 contracts that otherwise would require individual 

subcontracting plans. Reporting small business subcontracting activity in 

a comprehensive plan means that less data may be available on the 

subcontracting activities for specific contracts or programs. In addition, 

comprehensive subcontracting plans are to include various initiatives to 

enhance small business subcontracting opportunities through specific 

programs or other actions. According to a DOD official, these initiatives 

are not specific to any one contract, but can be completed across the 

entire scope of defense work the prime contractor performs. Table 1 

highlights the key differences between the comprehensive subcontracting 

plans used in the Test Program and individual subcontracting plans.

 3

FAR 19.707(a). Effective October 1, 2015, the prime contractor subcontracting plan floor 

will be raised from $650,000 to $700,000 and the construction threshold of $1,500,000 will 

stay the same. 80 Federal Register 38293, 38294, Final Rule, July 2, 2015. 

4

15 U.S.C. § 644(g). The Small Business Act defines various socioeconomic categories of 

small businesses including women-owned, veteran-owned, service-disabled veteranowned, small disadvantaged, and Historically Underutilized Business Zone. 
Page 4 GAO-16-27 Small Business Subcontracting 

Table 1: Key Differences between Comprehensive Subcontracting Plans and Individual Subcontracting Plans

Comprehensive subcontracting plan Individual subcontracting plan

Negotiation of plan goals Each fiscal year Generally once for the duration of the contract 

Time frame covered One fiscal year Duration of the contract

Plan submission Once per fiscal year Generally once for the duration of the contract

Inclusion of initiatives Yes No

Defense Contract Management 

Agency performance evaluation

Each fiscal year Every third fiscal year for the duration of the contract

Sources: DOD and Federal Acquisition Regulation. | GAO-16-27

Current Test Program eligibility is limited by statute to defense contractors 

that performed at least three DOD prime contracts for supplies and 

services worth a combined value of at least $5 million during the 

preceding fiscal year.5 In addition, the contractor must have achieved a 

small disadvantaged business subcontracting participation rate of at least 

5 percent during the preceding fiscal year. Participation in the Test 

Program is voluntary and, as shown in table 2, there are currently 12 

participants.

 5

The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for 

Fiscal Year 2015, Pub. L. No. 113-291, § 821(b)(2) raises the monetary threshold to $100 

million. 
Page 5 GAO-16-27 Small Business Subcontracting 

Table 2: Test Program Participants, Year of Entry, and Participation Level, as of 

Fiscal Year 2015

Participant 

Entry date

(fiscal year)

Level of 

participation

BAE Systems 2007 Division

The Boeing Companya 1991 Corporate

GE Aviation 1991 Division

General Dynamics/C4 Systems, Advanced 

Information Systems and Information Technology

2007 Division

Hamilton Sundstrand Corporation 1996 Division

Harris Corporation Government Communications 

Systems 

1996 Division

L-3 Communications CSB Sector 2006 Division

Lockheed Martin Corporation 2004 Corporate

Northrop Grumman Electronic Systems 1996 Division

Pratt & Whitney Government Division 2002 Division

Raytheon Company 1999 Corporate

Sikorsky Aircraft Corporation 1996 Division

Sources: DOD and Defense Contract Management Agency officials. | GAO-16-27

a

The Boeing Company ceased participation in 2007, but active contracts awarded before that time are 

still reported through the Test Program.

According to data in the Federal Procurement Data System—Next 

Generation, the federal government’s contract reporting system, 8 of 

these contractors are ranked among the top 10 U.S. defense contractors, 

based on contract dollars obligated in fiscal year 2014.

According to DOD officials, the DOD Office of Small Business Programs 

(OSBP) is responsible for overseeing the Test Program, but delegates the 

management and oversight of comprehensive subcontracting plan annual 

negotiations and performance evaluation to the Defense Contract 

Management Agency (DCMA). DCMA is responsible for reviewing and 

approving Test Program participants’ proposed comprehensive 

subcontracting goals and initiatives to ensure that they are challenging 

yet realistic. DCMA is also responsible for reviewing the achievements of 

the participants at the end of the fiscal year and rating their performance. 

The Test Program does not have an overall measure for demonstrating 

success in creating small business subcontracting opportunities; instead, 

metrics are established for each individual participant. The performance 

of participants in the Test Program is measured by their achievement of 

negotiated goals and initiatives.
Page 6 GAO-16-27 Small Business Subcontracting 

Congress has extended the program eight times but has not made the 

program permanent in part because of a lack of data on program 

performance. The latest extension was in the National Defense 

Authorization Act for Fiscal Year 2015 in which Congress temporarily 

extended the Test Program to December 31, 2017, and made a number 

of amendments to the program. These amendments included, among 

other things: an increase in the eligibility requirements; additional 

reporting requirements on subcontracting activities and costs to increase 

visibility at the contract, program, and military department levels; and an 

additional consequence for failure to make good faith efforts to comply 

with the program.6

DOD commissioned reviews of the Test Program from two consulting 

groups in 2002, 2007, and 2013. These reviews examined the 

performance of Test Program participants against their goals and 

initiatives and whether administrative savings had been achieved.7

According to DOD officials, DOD has not released these reviews publicly 

or submitted them to the Congress. All of the reviews found that the 

program resulted in administrative costs savings and enhanced 

subcontracting opportunities for small businesses.

Some in the small business community have publicly raised concerns 

about the Test Program. The primary concern is that the lack of data 

available to evaluate the program precludes a determination of the 

program’s effectiveness and impact on small businesses. Specifically, 

some small business advocates believe that more data are needed to 

evaluate whether the program has resulted in more awards in areas such 

as innovative technology research that traditionally have not been made 

available to small businesses.

 6

The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for 

Fiscal Year 2015, Pub. L. No. 113-291, § 821.

7

The 2002 and 2007 reviews combined to offer comprehensive data about the results of 

the Test Program through fiscal year 2005. Therefore, we selected fiscal years 2006

through 2013, the last year for which full data were available for our audit, for our analysis 

of program results. The 2013 DOD-commissioned review reported only a summary of 

program results. 
Page 7 GAO-16-27 Small Business Subcontracting 

Prior DOD reviews estimated that use of the Test Program resulted in the 

avoidance of millions of dollars in administrative costs for both 

participants and DOD and may offer other benefits. Significant one-time 

administrative costs could result if the Test Program were canceled or 

allowed to expire and comprehensive subcontracting plans could no 

longer be used. Test Program participants and DOD officials we 

interviewed stated that the use of comprehensive subcontracting plans 

results in benefits other than administrative cost avoidance as well. 

However, DOD has not taken action to address the program’s status. 

DOD’s reviews estimated that the program resulted in millions of dollars 

in cost avoidance for the program’s participants. According to these 

reviews, cost avoidance is enabled primarily by the use of a single 

comprehensive subcontracting plan for multiple contracts rather than an 

individual subcontracting plan for each contract. Our examination of the 

methodologies and data used in these reviews, as well as our own 

analysis of more recent data on contracts covered by comprehensive 

subcontracting plans, support these conclusions. Table 3 shows the total 

estimated annual administrative costs avoided by the participants, 

according to the DOD reviews.

Table 3: Test Program Total Estimated Annual Administrative Costs Avoided as 

Determined by DOD Reviews

Year of review

Number of 

participating firms

Total estimated annual 

administrative costs avoideda

2002 20 Between $2.3 and $4.6 million

2007 13 Between $6.8 and $13.7 million

2013 12 $18.5 million

Source: DOD. | GAO-16-27

a

Figures are in then-year dollars. The 2002 and 2007 reviews used estimated ranges in their 

calculations for avoided costs, while the 2013 review incorporated costs collected from the 

participants. 

Some of the Test Program participant officials we interviewed explained 

that they have not quantified their administrative cost avoidance under the 

program; however, they stated that savings likely accrued from 

negotiating a single plan for multiple contracts as opposed to individual 

plans. One participant official stated that utilizing comprehensive 

subcontracting plans also allows them to use fewer people for the 

administrative tasks of developing and monitoring subcontracting plans. 

Certain participants noted that the resources that would have gone to the 

development and administration of individual plans can be used instead 

Test Program Allows 

Participants and DOD 

to Avoid Millions in 

Administrative Costs 

and May Provide

Additional Benefits

Test Program Reduces 

Administrative Costs for 

Participants and DOD
Page 8 GAO-16-27 Small Business Subcontracting 

for increased small business outreach activities such as more small 

business forums. Expansion of the Test Program from division-level to 

company-level could increase the cost avoidance for certain participants, 

but officials from one division-level participant we interviewed stated that 

the continued test status of the program served to inhibit that expansion. 

The 2007 DOD review also found the cost avoided by Test Program 

participants and DOD would increase substantially if more prime 

contractors used the program, but that this was unlikely due to their 

reluctance to enter the program because of its test status.

In addition to the costs avoided by program participants, DOD also may 

benefit from avoiding administrative costs as a result of the Test Program. 

The 2007 DOD review found that DOD benefited from negotiating, 

administering, and monitoring consolidated small business subcontracting 

plans rather than multiple individual plans. For example, for fiscal year 

2005, the review estimated that the administrative cost avoided by DOD 

under the Test Program was at least $45 million. Defense officials stated 

that additional participation in the Test Program by other prime 

contractors could increase the department’s cost avoidance, but stated 

that they are not considering new participants for the program due to its 

test status.

DOD’s 2013 review noted that the program participants at that time had 

about 7,000 contracts and subcontracts that would require individual 

subcontracting plans if the Test Program did not exist. The estimated cost 

to convert the contracts to individual subcontracting plans if the Test 

Program were canceled or allowed to expire was $21.7 million. The 

review also noted that the combined cost for the participants to prepare, 

submit and negotiate their comprehensive subcontracting plans on an 

annual basis under the Test Program was approximately $660,000. In 

addition, most of the current participants have been in the Test Program 

for at least 10 years; two have been in the program since its inception 25 

years ago. As a result, converting from comprehensive subcontracting 

plans to individual subcontracting plans may require participants to add 

personnel and change their current administrative systems. One 

participant noted that reverting to individual subcontracting plans would 

require an additional 44 employees to handle the additional administrative 

workload and an estimated $2 million in system changes. 

Our analysis of similar data supports these estimates. We analyzed data 

from DCMA for contracts that were active as of March 2015 for 6 of the 

12 Test Program participants, including those with the largest number of 

Administrative Costs to 

Convert Existing Test 

Program Plan Contracts to 

Individual Contracting 

Plans Could Be 

Substantial
Page 9 GAO-16-27 Small Business Subcontracting 

contracts, and found a total of 3,299 contracts that would require 

individual subcontracting plans in the absence of the Test Program. Using 

estimates provided by DOD for the cost and number of hours required to 

develop an individual subcontracting plan, we determined that these six 

participants would need to spend between $6.3 million and $9.5 million to 

convert existing contracts to individual subcontracting plans. One 

participant we interviewed estimated that for fiscal year 2013, the cost to 

convert all of the contracts under the Test Program to individual plans 

would have been approximately $6.6 million. The cost to this participant 

to prepare, review, and negotiate its fiscal year 2013 comprehensive 

subcontracting plan was $159,000.

As is the case with the Test Program participants, DOD would likely 

experience an increase in costs for negotiating, administering, and 

monitoring individual small business subcontracting plans if the program 

were to end. Defense officials noted that DOD would have to hire

additional personnel in DCMA and the military services to manage the 

thousands of additional individual subcontracting plans. These 

personnel—which would include contracting officers, small business 

specialists, and cost analysts—all require specific levels of expertise and 

training depending on the cost and complexity of the contract. According 

to DOD officials, it would be challenging to provide the amount of 

resources required with the limited acquisition workforce DOD employs 

and available budgets for hiring new personnel.

According to some of the Test Program participants we interviewed, the 

use of comprehensive subcontracting plans as opposed to individual 

subcontracting plans also provides additional non-monetary benefits. For 

example, certain participants stated that they benefit from the approach of 

consolidating small business subcontracting, as it allows them to consider 

or leverage small business subcontracting opportunities across the whole 

organization rather than on a contract-by-contract basis. Some 

participants stated that as a result of this approach they have increased 

small business subcontracting outside of their defense contracts by 

utilizing the same small businesses cultivated under the Test Program for 

other work. All of the participants we interviewed noted that the issue of 

small business subcontracting has greater visibility and awareness with 

corporate leadership as a result of the Test Program and that their entities 

might be less inclined to award subcontracts to small businesses in its 

absence.

Test Program May Result 

in Other Benefits for 

Participants, DOD, and 

Small Busineses but DOD 

Has Not Taken Action to 

Address Program Status
Page 10 GAO-16-27 Small Business Subcontracting 

DOD officials agreed that, in addition to administrative cost avoidance, 

the Test Program gives them leverage they may not have in negotiating 

individual contracting plans. The ability to require the contractor to look for 

opportunities across multiple contracts increases the likelihood of small 

business outreach and subcontract awards. Officials stated, however, that 

there are some concerns within the department about the Test Program. 

For example, they stated that reporting of small business subcontracting 

activity at a division or corporate level reduces the department’s visibility 

into small business activity on a contract or programmatic level. In 

addition, DOD officials said that the continuing test status of the program 

has made it difficult for OSBP and DCMA to develop the policies and 

guidance they believe are needed to enhance program activities.

The 2007 review strongly recommended that DOD work with Congress to 

make the Test Program permanent. According to DOD officials, DOD has 

not acted on this recommendation, by drafting a legislative proposal or 

taking other actions, primarily due to concerns that the program, at least 

as structured prior to the latest legislative changes, may limit visibility into 

small business subcontracting activities for individual programs or 

contracts. However, implementation of the increased reporting 

requirements legislated in the National Defense Authorization Act for 

Fiscal Year 2015 may alleviate these concerns as they include reporting 

on small business subcontracting activities at, among other things, the 

contract and major defense acquisition program level.8 Working with 

Congress to address the program’s status, for example by providing 

information on the effectiveness of the Test Program as identified in the 

three DOD-commissioned reviews and our analysis, could help eliminate 

the uncertainty associated with the program.

 8

The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for 

Fiscal Year 2015, Pub. L. No. 113-291, § 821(b),
Page 11 GAO-16-27 Small Business Subcontracting 

In reviewing participants’ performance in the Test Program, DCMA looks 

at whether participants have achieved the negotiated initiatives and goals 

associated with their comprehensive subcontracting plans, and assigns 

an overall rating for that fiscal year’s performance. Our analysis found 

that 87 percent of DCMA’s reviews indicated that participants made 

acceptable progress on their initiatives to enhance small business 

opportunities, but that participants’ performance in meeting their 

negotiated subcontracting goals varied. Our analysis also found that while 

participants did not always meet individual goals, their aggregate 

performance resulted in subcontract awards to small business that 

exceeded aggregate goals by approximately $5.4 billion from fiscal years 

2006 through 2013. When compared to the performance of contractors 

not participating in the program (nonparticipants), Test Program 

participants have lower percentages of dollars awarded to small 

businesses. Participants we interviewed explained that this is due, among 

other things, to the nature of the contracts they perform and the way the 

Test Program tracks achievement of goals. Finally, DCMA’s annual 

performance reviews, which assess achievements against both

negotiated initiatives and goals, have been largely positive.

Participants made acceptable progress, as assessed by DCMA, on their 

negotiated initiatives in 74 of the 85 reviews we analyzed—an 87 percent 

success rate. Our analysis indicates that completion of these initiatives 

has resulted in tangible subcontracting opportunities for small businesses. 

DOD officials stated the achievement of these initiatives is not tied to any 

one contract within the comprehensive subcontracting plan; any of the 

defense work being subcontracted by a prime contractor can be used to 

meet the initiative. According to a participant and DOD officials, the 

initiatives offer a distinct advantage over individual subcontracting plans. 

Examples of initiatives include:

• redirecting subcontracts from large businesses to small businesses;

• targeting increased small business subcontracts in technical fields 

such as integrated circuits, computer information technology products, 

and engineering and technical services; and

Test Program 

Enhanced Small 

Business 

Opportunities, 

Though Participant 

Performance Varied

Implementation of 

Initiatives Enhanced 

Subcontracting 

Opportunities for Small 

Businesses
Page 12 GAO-16-27 Small Business Subcontracting 

• participating in the Small Business Innovation Research (SBIR) and 

Mentor-Protégé Programs.9

Some of these initiatives target the socioeconomic categories of small 

businesses for which the participants had the most difficulty achieving 

performance goals. For example, one participant failed to meet its 

subcontracting goals for the small disadvantaged business category over 

a 3-year period. For each of these years the participant had an initiative to 

increase performance in that category.

According to our analysis of DCMA reviews, participants are generally 

successful at achieving their initiatives. In our review period of fiscal years 

2006 through 2013, we found

• 16 initiatives resulted in the redirect of approximately $93 million in 

subcontracts from large business to small businesses;

• a 72-percent success rate in participants meeting milestones for 

increasing small business subcontracts in targeted industries;

• 24 mentor-protégé initiatives resulted in 61 new mentor-protégé 

relationships between participants and small businesses; and

• 11 SBIR projects that identified 83 new small business suppliers.

The 2013 DOD review estimated that initiatives completed by Test 

Program participants could amount to as much as $1.8 billion per year in 

increased small business opportunities, and that participants spent as 

much as $5.5 million annually on small business subcontracting 

enhancements and initiatives.

Our analysis found that Test Program participants’ performance in 

meeting their negotiated subcontracting goals varied. The Test Program 

 9

The Small Business Innovation Research Program was established in 1982 for use by 

civilian and defense agencies to stimulate technological innovation and utilize small 

businesses to meet federal research and development needs. Small Business Innovation 

Development Act of 1982, Pub. L. No. 97-219, § 2. DOD’s Mentor-Protégé Program was 

established in 1991 to provide incentives for major DOD contractors to serve as mentors 

to small disadvantaged businesses thereby increasing small business capabilities and 

participation in subcontracts. National Defense Authorization Act for Fiscal Year 1991, 

Pub. L. No. 101-510, § 831.

Participants’ Performance 

in Meeting Goals Varies
Page 13 GAO-16-27 Small Business Subcontracting 

does not have overall small business subcontracting goals similar to 

those that DOD negotiates annually with the Small Business 

Administration, but does have goals on a contractor-by-contractor basis.10

The goals, as well as the achievements, for small business 

subcontracting are expressed in terms of (1) the total dollars awarded to 

small businesses, and (2) the dollars awarded to small business as a 

percent of total subcontract dollars.

DCMA is responsible for annually negotiating and approving Test 

Program participants’ dollar and percentage goals to ensure that they are 

realistic and challenging. In all the negotiation support memorandums we 

reviewed, DCMA attempted to negotiate with the participants to establish 

challenging goals. According to DCMA documentation, this was 

accomplished by, for example, analyzing a participant’s 5-year 

subcontracting performance trends and comparing them to submitted 

goals, or assessing a participant’s documented support of its proposed 

goals to determine if a goal higher than that presented by the participant 

was realistic.

As shown in figure 1, the number of Test Program participants that met or 

exceeded goals varied by fiscal year.

 10DOD and the federal government annually negotiate with the Small Business 

Administration their small business subcontracting goals. In fiscal year 2013, for example, 

the DOD overall small business goal was 36.7 percent and the federal government’s 

overall goal was 36 percent.
Page 14 GAO-16-27 Small Business Subcontracting 

Figure 1: Number of Test Program Participants that Met or Exceeded Their Small Business Subcontracting Dollar and 

Percentage Goals, Fiscal Years 2006 through 2013

Note: The number of Test Program participants may change from year to year due to contractors 

entering and exiting the program as well as mergers and acquisitions.

According to some participants we interviewed, there are a number of 

reasons that individual participants may not meet their annual goals. One 

reason is that the goals are intended to be “stretch goals” beyond what 

the participants are confident they know can be achieved. Our analysis 

also shows that when participants failed to meet a goal they generally 

missed the goal by a small percentage. For example, in fiscal year 2011, 

the eight participants who missed their goals all did so by less than 10 

percent and in two cases by less than 1 percent. Some participants also 

stated that their inability to renegotiate goals to account for changes in the 

dollars available for subcontracting may also negatively affect their 

achievements. DCMA officials said that they generally prefer not to allow 

for renegotiation, as it is a time consuming process.

When examining the performance of Test Program participants as a 

group, we found that they exceeded their combined goals for 
Page 15 GAO-16-27 Small Business Subcontracting 

subcontracting dollars awarded to small businesses in each year of our 

review period, as shown in figure 2, for a total of approximately $5.4 

billion above the combined goals from fiscal years 2006 through 2013.

Figure 2: Test Program Dollar Achievements in Comparison to Dollar Goals for 

Small Business Subcontracting, Fiscal Years 2006 through 2013

For the goal of percentage of total subcontracting dollars awarded to 

small business, we found that, at an aggregate level, participants 

exceeded goals in 3 of the 8 fiscal years we reviewed and missed 

achieving those goals by less than 4 percent in every other fiscal year.
Page 16 GAO-16-27 Small Business Subcontracting 

In our discussion with one small business advocate, one of the criticisms 

of the Test Program raised was that participants generally awarded a 

lower percentage of their subcontracting dollars to small businesses than 

nonparticipants. Our analysis, as shown in figure 3, shows this to be the 

case.

Figure 3: Comparison of Test Program Participants and Nonparticipants for 

Percentage of Subcontracting Dollars Awarded to Small Businesses, Fiscal Years 

2006 through 2013

For Test Program participants, the percentage of subcontract dollars 

awarded to small businesses ranged from a low of around 25 percent in 

fiscal year 2011 to a high of around 29 percent in fiscal year 2008. 

However, for nonparticipants the percentage was a low of around 33

percent in fiscal year 2008, and a high of nearly 43 percent in fiscal year 

2006.

We found that over the 8-year review period, Test Program participants 

also experienced less success in achieving their negotiated goals for the 

various socioeconomic categories of small businesses when compared to 

nonparticipants’ achievements. Test Program participants consistently 

awarded, on the basis of percentage of subcontract dollars awarded, 

Various Reasons Given for 

Disparity in Percentage of 

Subcontracting Dollars 

Awarded to Small 

Businesses by 

Participants Compared to 

Other Defense 

Contractors
Page 17 GAO-16-27 Small Business Subcontracting 

lower percentages than nonparticipants. The only fiscal year that Test 

Program participants’ awarded higher amounts than nonparticipants was 

in fiscal year 2008 and then only for 2 of the 5 subcategories measured.

According to some participants we interviewed, there are a number of 

factors that can adversely affect their ability to achieve their annual 

percentage and dollar subcontracting goals. Examples of these factors 

include funding changes that affect the value of a contract or other 

changes to contracts that affect the amounts available for subcontracting. 

These factors are not unique to Test Program participants and could 

apply to any contractor involved in federal contracting; however, there are 

some factors that may have a disproportionate effect on Test Program 

participants. These factors include the following:

• Test Program participants represent some of DOD’s largest 

prime contractors. As a result, many of the contracts they receive 

from DOD are large, technically complex, and include a scope of work 

that may require teaming arrangements with other large businesses, 

reducing the dollars available for subcontracting to small businesses. 

For example, the F-35 Joint Strike Fighter program has a prime 

contract with Lockheed Martin Corporation. For this highly complex 

and technical work, Lockheed Martin has subcontracted significant 

portions of the work to Northrup Grumman Corporation and BAE 

Systems, neither of which is considered a small business.

• Test Program participants can only count certain small business 

subcontracting activities toward their goals. While small 

businesses may be involved at some level of subcontracting—either 

through a direct award from the prime contractor as a first-tier 

subcontractor or as a second-tier subcontractor through an award 

from a first-tier subcontractor—the ability of a Test Program 

participant to count small business subcontracting dollars towards 

their performance goals is limited. According to Test Program 

participants and DOD officials we interviewed, federal acquisition 

regulations require that goals for small business subcontracting be 

based on the prime contractor’s first-tier subcontracts. This 

government-wide practice does not permit prime contractors to report 

subcontracting below the first-tier for purposes of demonstrating the 

achievement of small business subcontracting goals. Therefore, 

participants can only take credit for awards made at the first-tier of 

subcontracting. For example, for the F-35 program Lockheed Martin 

has approximately 500 first-tier suppliers and 1,250 second-tier 

suppliers. Lockheed Martin does not receive credit for small business 
Page 18 GAO-16-27 Small Business Subcontracting 

subcontract achievements below the first-tier, which could represent a 

significant amount of small business subcontracting. 

• If a small business subcontractor grows into a large business, its 

subcontracts are no longer counted toward participants’ goals.

The determination of a subcontractor’s size as small for 

subcontracting purposes is set on the date that it self-certifies that it is 

small for the subcontract and is not typically revisited for the duration 

of the contract. Some participants we interviewed stated that, for their 

comprehensive subcontracting plans, the size determination is 

revisited when assessing progress against annual goals. For 

example, if a small business becomes successful and wins contracts 

that grow it into a larger business during the comprehensive 

subcontracting plan’s annual assessment period, a Test Program 

participant cannot count those subcontracting dollars toward the 

attainment of its small business goals. For instance, if a participant 

subcontracts work to a veteran-owned small business which then wins 

contracts from other sources and grows beyond the small business 

size standards, those subcontract dollars are excluded from the 

calculation of goal attainment.

• Make or buy decision. Participants may make decisions to produce 

components in-house rather than buying them from a supplier in order 

to reduce the overall contract cost. This decision thus reduces the 

amount of subcontracting dollars available to small businesses.

To achieve another perspective on Test Program performance, we 

analyzed DCMA performance ratings for the individual participants. In our 

review of 85 annual performance reviews for fiscal years 2006 through 

2013, Test Program participants generally received positive annual 

performance ratings from DCMA. DCMA is responsible for annually 

evaluating the performance of Test Program participants and making 

recommendations as to their continued participation in the program. 

When evaluating the participants, DCMA is to consider their performance 

on both goals and initiatives and, if they failed to achieve these, whether 

Overall Ratings on 

Participants’ Performance 

Are Generally Positive
Page 19 GAO-16-27 Small Business Subcontracting 

the participants made a “good faith effort” to do so.11 Participants receive 

an annual overall program rating ranging from “Unsatisfactory” to 

“Outstanding.” Participants that do not receive at least an “Acceptable”

rating are required to submit to DCMA a detailed corrective action plan to 

account for and improve on known deficiencies.

For example, for fiscal year 2013, the 12 participating firms received the 

following ratings:

• Five participants received an Outstanding rating—meaning they 

generally exceeded the annual negotiated small business goals and 

two additional socioeconomic category goals and had exceptional 

success with numerous specific initiatives to assist, promote, and 

utilize small businesses. 

• Four participants received a Highly Successful rating—meaning they 

generally met or exceeded negotiated goals, including three small 

business categories, and had moderate success with some initiatives 

to assist, promote, and utilize small businesses. 

• Three participants received an Acceptable rating—meaning they 

generally demonstrated a good faith effort to meet all of their annual 

subcontracting goals and provided reasonable and supportable 

explanations why certain goals could not be met.

In the period we reviewed, fiscal years 2006 through 2013, no participants 

received a rating of “Unsatisfactory” and three participants received a 

rating of “Marginal.” Also, none of the participants we reviewed in the 

period were found by DCMA to not have made a “good faith effort” in 

seeking to meet their goals, no matter what their overall rating. According 

to DCMA annual performance documentation, the “Marginal” ratings were 

assigned generally because the participants were deficient in meeting key 

 11According to the Small Business Administration, a prime contractor can demonstrate that 

it has made a good faith effort in several ways including by (1) meeting its dollar and 

percentage goals; (2) overachieving in some small business categories to make up for an 

underachievement in other categories; or (3) performing one of a variety of things (e.g., 

participate in a formal mentor-protégé program or break out contract work items into 

smaller units to facilitate small business participation). FAR Subpart 19.701 defines failure 

to make a good faith effort to comply with the subcontracting plan to mean “willful or 

intentional failure to perform in accordance with the requirements of the subcontracting 

plan, or willful or intentional action to frustrate the plan.”
Page 20 GAO-16-27 Small Business Subcontracting 

subcontracting plan elements, or the contractor failed to satisfy one or 

more requirements of a corrective plan from a prior review. Two of these 

participants achieved ratings at the “Acceptable” level or above in 

subsequent reporting periods and one voluntarily exited the program.

DOD officials said they have never terminated a participant from the 

program, but that some have voluntarily exited the program. DOD officials 

stated that ratings are taken into consideration by both DOD and 

participants when negotiating future participation in the program and may 

be taken into consideration as part of the determination of past 

performance by contracting officers in awarding future government 

contracts. One participant representative highlighted that the company 

uses its high ratings as a marketing tool to attract small businesses.

Because of its large contracting operations, DOD is critical to the success 

of federal programs designed to provide opportunities for small 

businesses. The Test Program is aimed at enhancing these opportunities 

and reducing participants’ administrative costs. The evidence collected by 

DOD and our analysis of that evidence indicates that the program has 

achieved these goals. The use of comprehensive subcontracting plans 

allows both DOD and Test Program participants to avoid millions of 

dollars in administrative costs and has led to demonstrable 

enhancements in small business subcontracting opportunities, thereby 

meeting the criteria established by Congress. While there may be 

concerns about the visibility of small business subcontracting on 

particular contracts or programs, these concerns may diminish when 

legislative changes made to the program as part of the fiscal year 2015 

National Defense Authorization Act are implemented. Given that the Test 

Program has been in existence for 25 years, and therefore has become a 

de facto permanent program for both DOD and participants, termination 

of the program in favor of individual subcontracting plans would likely 

require substantial increases in manpower and fiscal resources. However, 

DOD has not acted on a 2007 review recommendation to work with 

Congress to make the Test Program permanent. Continually extending

the program rather than making it permanent creates uncertainty among 

participants and DOD, inhibiting the expansion of the program by some 

participants, the inclusion of new participants, and the formulation of DOD 

policies and additional guidance that could enhance the program’s 

results. Working with Congress to address the program’s status, for 

example by providing information on the effectiveness of the Test 

Program as identified in the three DOD-commissioned reviews and our 

Conclusions
Page 21 GAO-16-27 Small Business Subcontracting 

analysis, could help eliminate the uncertainty associated with the 

program.

To help ensure continued reductions in administrative costs to DOD and 

program participants and enhance subcontracting opportunities for small 

businesses, Congress should consider making the Test Program 

permanent. 

We recommend that the Secretary of Defense work with Congress to 

determine the status of the Test Program. In doing so, the Secretary 

could provide Congress with information on the effectiveness of the Test 

Program as discussed in the three DOD-commissioned reviews.

In written comments, DOD did not concur with the draft report’s 

recommendation to draft a legislative proposal to make the program 

permanent and questioned the finding related to the Test Program 

enhancing small business subcontracting opportunities. The department 

agreed to work with Congress to determine the status of the Test 

Program. Given DOD’s disagreement, we added a matter for 

Congressional consideration to this report and modified the 

recommendation as discussed below. DOD’s comments are provided in 

full in appendix II.

Related to the finding on enhancing small business subcontracting 

opportunities, with its comments on our draft report, DOD provided a 

chart that shows a decrease in the percentage of subcontract dollars 

awarded to small business by Test Program participants from fiscal years 

1996 through 2014. The department stated in its response that “[t]his 

trend shows that the current practices associated with the [Test Program] 

do not enhance opportunities for small businesses.” We do not agree with 

that assessment for a number of reasons. 

• While the percentage of subcontracting dollars awarded to small 

business by program participants declined since fiscal year 1996, 

more recent data through fiscal year 2013 show that the performance 

of program participants has remained relatively stable, as shown in 

Figure 3. Although the percentages for program participants are lower 

than for nonparticipants, the trends are generally the same for both.

The differences between the groups may be attributable to some of 

the factors we discussed in our report—such as the large, technically 

Matter for 

Congressional 

Consideration

Recommendation for 

Executive Action

Agency Comments 

and Our Evaluation
Page 22 GAO-16-27 Small Business Subcontracting 

complex nature of some participant’s contracts and their inability to 

count certain small business subcontracting activities towards their 

goals—which do not suggest shortcomings in the program.

• Enhancing opportunities for small business is measured by more than 

just the percentage of subcontract dollars awarded. For example, the 

value of the small business subcontracts awarded by program 

participants grew during this period from about $895 million to more 

than $7.7 billion. Small businesses therefore have received a 

relatively smaller portion of a significantly larger amount.

• As discussed in the report, the Test Program also provided enhanced 

opportunities to small businesses through a variety of initiatives 

completed by the participants. These initiatives, among other things, 

resulted in the redirection of millions of dollars of subcontracts from 

large businesses to small businesses, and increased small business 

participation in targeted industries, including innovative research. 

• Finally, regardless of the overall percentages, we found that program 

participants met or nearly met all of the “stretch” percentage goals 

negotiated with the department in the fiscal years we reviewed. In 

total, the Test Program participants exceeded the dollar goals by 

approximately $5.4 billion. 

Thus, we continue to believe the program achieved its goals of enhancing 

opportunities for small businesses, and as discussed in the report, 

reducing participants’ and DOD’s administrative costs. Given these 

findings, and that DOD had not acted on the 2007 review 

recommendation to work with Congress to make the program permanent, 

we included a recommendation in the draft report for DOD to draft a 

legislative proposal to make the program permanent or otherwise work 

with Congress to determine the status of the Test Program. The 

department agreed to work with Congress to determine the status of the 

Test Program; however, DOD did not concur with the recommendation to 

draft a legislative proposal. Consequently we modified the 

recommendation and added a matter for Congressional consideration to 

help ensure continued reductions in administrative costs to DOD and 

program participants and enhance subcontracting opportunities for small 

businesses.
Page 23 GAO-16-27 Small Business Subcontracting 

We are sending copies of this report to the appropriate congressional 

committees and to the Secretary of Defense. This report will also be 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-4841 or by email at woodsw@gao.gov. Contact 

points for our Office of Congressional Relations and Public Affairs may be 

found on the last page of this report. Staff who made key contributions to 

this report are listed in appendix III.

William T. Woods

Director

Acquisition and Sourcing Management
Page 24 GAO-16-27 Small Business Subcontracting 

List of Committees

The Honorable John McCain

Chairman

The Honorable Jack Reed

Ranking Member

Committee on Armed Services

United States Senate 

The Honorable David Vitter

Chairman

The Honorable Jeanne Shaheen

Ranking Member

Committee on Small Business and Entrepreneurship

United States Senate 

The Honorable Mac Thornberry

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable Steve Chabot

Chairman

The Honorable Nydia Velazquez

Ranking Member

Committee on Small Business

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 25 GAO-16-27 Small Business Subcontracting 

Section 821(e) of the National Defense Authorization Act for Fiscal Year 

2015 included a provision for us to report on the results of the Department 

of Defense’s Test Program for Negotiation of Comprehensive Small 

Business Subcontracting Plans (Test Program).1 This report addresses 

the extent to which the Test Program (1) reduces administrative costs, 

and (2) enhances subcontracting opportunities for small businesses.

To address if the Test Program reduces administrative costs for program 

participants, we collected and analyzed three reviews conducted for the 

Department of Defense (DOD) on the Test Program in 2002, 2007, and 

2013 that included estimates of the costs associated with the program. 

We assessed the methodologies and assumptions utilized—including the 

number of contracts and cost of labor to compile program 

documentation—and used data collected for DOD’s 2013 study to 

validate the findings. To help assess the validity of the data, we discussed 

with DOD officials how the data was collected. We determined that the 

methodologies were valid and the data were reliable for our purposes. In 

addition, we interviewed DOD officials and 5 of the 12 Test Program 

participants to obtain their views on any cost savings generated by having 

the Test Program, as well as any benefits they experienced from a 

reduced administrative burden. Test Program participants we interviewed 

represented different levels of participation in the program, including two 

corporate-level participants and three division-level participants, as well 

as range of subcontracting activity. The views expressed by these 

participants provided insight into the operation of the program but are not 

generalizable to all program participants.

In order to determine if the conversion costs articulated by the 2013 

review were reasonable, we assessed the methodology used, obtained 

the data used for the estimate, discussed how the data was collected with 

DOD, and performed our own analysis using more recent data that found 

the conclusions of the 2013 review to be reasonable. To perform this 

analysis, we obtained March 2015 contract data from the Defense 

Contract Management Agency (DCMA) for the Test Program participants. 

From the contract listings we received, we removed those contracts for 

which we could not determine contract costs, as well as those that were 

below reporting thresholds that would require an individual subcontracting 

 1

The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for 

Fiscal Year 2015, Pub. L. No. 113-291, § 821(e).

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 26 GAO-16-27 Small Business Subcontracting 

plan, to determine the total number of contracts that would have required 

individual subcontracting plans in the absence of the Test Program. DOD 

officials also provided a range of estimates for the number of hours 

required to develop an individual subcontracting plan, as well as the cost 

per hour, which we used to determine the cost for conversion. To validate 

the March 2015 contract data received from DCMA, we also obtained 

data from one corporate-level participant with a high level of 

subcontracting activity that we interviewed. This allowed us to estimate its 

cost for converting contracts under their comprehensive subcontracting 

plan to individual subcontracting plans. We determined that the data were 

reliable for our purposes.

To address whether the effect of Test Program initiatives enhanced small 

business subcontracting opportunities, we selected the period of fiscal 

years 2006 through 2013 for analysis. This selection was made because 

prior DOD reviews released in 2002 and 2007 assessed participants’

performance against goals and initiatives through fiscal year 2005 and 

fiscal year 2013 was the last full year of data available. The 2002 study 

used data from fiscal years 1991 to 2000, and the 2007 study used data 

from fiscal years 2001 to 2005. We reviewed the available plans, 

memorandums, and reviews used by DCMA to assess participant 

performance from fiscal years 2006 through 2013. This included: 80 

annual comprehensive subcontracting plans submitted by participants to 

DCMA, 60 DCMA memorandums documenting negotiations with the 

participants, and 85 annual Form 640 reviews performance reviews by 

DCMA. We also analyzed the three DOD-commissioned reviews. To 

provide context for the negotiation process, as well as to gather different 

viewpoints about the initiatives as a whole, we interviewed 

representatives from DCMA’s Small Business Programs Division, DOD’s 

Office of Small Business Programs (OSBP), and five Test Program 

participants.

To address whether the Test Program enhances subcontracting 

opportunities for small businesses by successfully achieving its annual 

goals, we reviewed Test Program participants’ comprehensive 

subcontracting plans and negotiation support memorandums and 

analyzed performance data from fiscal years 2006 through 2013. We 

compared the actual performance contained in the Form 640 reviews 

against the approved subcontracting goals. We also obtained information 

about the small business subcontracting performance of DOD in general 

from DOD’s OSBP. Combining this information with that obtained for 

program participants, we identified trends in small business 

subcontracting for Test Program participants in comparison to DOD small 
Appendix I: Objectives, Scope, and 

Methodology

Page 27 GAO-16-27 Small Business Subcontracting 

business subcontracting performance in general. We also reviewed 

legislation, agency guidance, Federal Register notices, and relevant GAO 

and DOD reports. We also interviewed officials from DOD’s OSBP, 

DCMA’s Small Business Programs Division, 5 of the 12 prime contractors 

participating in the Test Program, and two small business advocacy 

groups chosen for their representation of the small business community, 

for their views on the Test Program, and factors that contribute to or 

undermine its success. The views expressed by these groups provided 

insight into the operation of the program but are not generalizable to all 

small businesses.

We conducted this performance audit from March to November 2015 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from the Department 

of Defense

Page 28 GAO-16-27 Small Business Subcontracting 

Appendix II: Comments from the Department 

of Defense
Appendix II: Comments from the Department 

of Defense

Page 29 GAO-16-27 Small Business Subcontracting 
Appendix II: Comments from the Department 

of Defense

Page 30 GAO-16-27 Small Business Subcontracting 
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 31 GAO-16-27 Small Business Subcontracting 

William T. Woods, (202) 512-4841 or woodsw@gao.gov

In addition to the contact named above, J. Kristopher Keener (Assistant 

Director), Kathryn (Emily) Bond, Joe Hunter (Analyst-in-Charge), Cale 

Jones, Julia Kennon, Stephen V. Marchesani, Sylvia Schatz, and 

Roxanna Sun made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(121272)
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