United States Government Accountability Office

GAO Report to the Committee on Small 

Business and Entrepreneurship, U.S. 

Senate 

DOE CONTRACTING

Improved Program 

Management Could 

Help Achieve Small 

Business Goal 

April 2006 

 

GAO-06-501 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

DOE CONTRACTING

Improved Program Management Could 

Highlights of GAO-06-501, a report to Help Achieve Small Business Goal 

Committee on Small Business and 

Entrepreneurship, U.S. Senate 

Federal policy requires that small 

businesses receive the maximum 

practicable opportunity for

providing goods and services to 

federal agencies through prime 

contracts—direct contracts

between the government and a 

contractor. The Department of 

Energy (DOE) buys more than $20

billion in goods and services

annually. GAO was asked to (1) 

discuss DOE’s key efforts to 

increase small business prime 

contracting opportunities and (2) 

identify the management

challenges DOE faces in improving

its small business prime 

contracting performance. In

addition to these objectives GAO is 

providing information on the

management of small business 

programs by other federal agencies

that either share certain

characteristics with DOE’s largest

program offices or that have

components that share certain 

characteristics with these offices. 

What GAO Recommends

GAO recommends that DOE define 

the concrete steps it will take to 

achieve further progress toward its 

annual goal, collect relevant 

performance information to better

gauge the effectiveness of its 

efforts, and use performance 

information to support program 

improvements as needed. 

In commenting on this report, DOE 

concurred with the findings and 

recommendations and described

steps it will take to further improve 

its small business efforts. 

Key DOE efforts to increase small business prime contracting have included 

identifying more contracting opportunities for small businesses, expanding 

small business development and outreach activities, and increasing program 

management and oversight. The department has had some success in 

redirecting to small businesses portions of contracts to manage large DOE 

facilities, as well as in securing additional small business prime contracting 

opportunities from the department’s other contracts. As a result, the total 

dollars awarded annually as prime contracts to small businesses have 

increased, and the share of procurement dollars awarded to small business 

in 2005 was DOE’s second highest ever. Despite these gains, however, DOE 

was unable to meet its small business prime contracting goal in 4 of the past 

5 years (see table below).

DOE faces two key management challenges to improving its small business

program. Addressing these challenges will bring DOE’s small business 

program more in line with the practices associated with high-performing 

organizations and with principles contained in the Government Performance 

and Results Act. Specifically, DOE has not defined the concrete steps 

necessary to enable it to achieve its prime contracting goal and does not 

collect sufficient information to effectively assess its small business program 

efforts, identify problems, and implement changes that could further 

increase small business prime contracting. 

Other federal agencies with missions or agency components with missions 

similar to DOE periodically comprehensively evaluate their programs to 

determine effectiveness, identify problems and make changes intended to 

improve performance. GAO obtained information from the following three 

agencies: the National Aeronautics and Space Administration, the 

Department of the Army (U.S. Army Corps of Engineers), and the 

Department of Health and Human Services (Centers for Disease Control and 

Prevention). 

DOE’s Small Business Contracting Goals, Achievements, Fiscal Years 2001 through 2005 

Dollars in millions

2001 2002 2003 2004 2005

DOE goal 5.00% 3.70% 3.70% 5.06% 5.50%

DOE achievement 2.89% 3.11% 4.08% 4.18% 4.15%

DOE achievement $588.6 $634.4 $904.2 $943.6 $947.6

Difference between goal 

and achievement $429.7 $120.4 $84.2 $198.7 $308.3

Source: GAO analysis of DOE data. 

Note: Data are adjusted for inflation and expressed in 2005 constant dollars. 

www.gao.gov/cgi-bin/getrpt?GAO-06-501.

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. 
Contents 

Letter 1

Results in Brief 5

Background 8

DOE Efforts to Increase Contracts with Small Businesses Have 

Had Partial Success 9 

Two Key Management Challenges Hinder DOE’s Efforts to Further 

Improve Its Small Business Contracting Performance 16 

Other Federal Agencies Use Formal Program Evaluation to Guide 

Changes in Their Small Business Programs 21 

Conclusions 25

Recommendations for Executive Action 26 

Agency Comments and Our Evaluation 26 

Appendix I Objectives, Scope, and Methodology 28 

Appendix II Comments from the Department of Energy 33 

Appendix III GAO Contact and Staff Acknowledgments 36 

Tables 

Table 1: Major Office of Environmental Management Procurements 

That Redirect Work Traditionally Performed by Large 

Businesses with Facility Management Contracts to Small 

Business Prime Contracts 10 

Table 2: DOE’s Small Business Prime Contracting Goals and 

Achievements, Fiscal Years 2001 through 2005 14 

Table 3: Practices of High-Performing Organizations Compared 

with DOE Small Business Program Practices 17 

Table 4: Comparison of DOE, Department of Defense, Health and 

Human Services, and National Aeronautics and Space 

Administration Small Business Prime Contracting 

Performance, Fiscal Year 2004 31 

Page i GAO-06-501 DOE Small Business Prime Contracting
Abbreviations 

DOE Department of Energy 

FPDS-NG Federal Procurement Data System—Next Generation 

NASA National Aeronautics and Space Administration

NNSA National Nuclear Security Administration 

SBA Small Business Administration 

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

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Page ii GAO-06-501 DOE Small Business Prime Contracting
United States Government Accountability Office

Washington, DC 20548 

April 7, 2006

The Honorable Olympia J. Snowe 

Chair 

The Honorable John F. Kerry 

Ranking Member 

Committee on Small Business and Entrepreneurship 

United States Senate 

The federal government spends nearly $300 billion annually to obtain 

goods and services ranging from military aircraft to office supplies, from 

nuclear waste storage to grounds keeping. While most of these purchases 

are through contracts with large businesses, the federal government’s 

policy is to contract with small businesses to the maximum extent 

feasible.1

 Among other things, directing federal funds to small businesses 

can increase competition and contribute to the economic well-being of the 

nation.2

 The Small Business Act, as amended by the Small Business 

Reauthorization Act of 1997 requires that the federal government, as a 

whole, award at least 23 percent of federal prime contracting dollars to 

small businesses annually.3

 The Small Business Administration, which 

oversees the federal small business program, negotiates an appropriate 

individual prime contracting goal with each federal agency,4

 including the 

Department of Energy (DOE). The specific percentage goal varies from 

agency to agency, depending upon agency program missions, procurement 

requirements, and past procurement history. Both the Federal Acquisition 

Regulation and DOE-specific acquisition regulations govern the 

 1

The Small Business Administration (SBA) defines small businesses as enterprises that (1) 

are independently owned and operated; (2) are not dominant in their field of operation; and

(3) meet SBA-defined criteria for company size and sales volume, which vary depending on

industry type. SBA uses the term “other than small business” for all entities that are not

small businesses. For the purposes of this report, a large business fits the SBA definition of

“other than small business.” 

2

See, e.g., 15 U.S.C. § 631(a) (declaration of policy set out in the Small Business Act). 

3

15 U.S.C. § 644(g). Prime contracts are direct contracts between the government and a

contractor. 

4

Certain categories of procurements are excluded from this requirement. These include

federal agencies that fund contracts primarily with funds from agency-generated sources 

(e.g., the U.S. Postal Service) and contracts not under the Federal Acquisition Regulation 

(e.g., the Federal Aviation Administration). 

Page 1 GAO-06-501 DOE Small Business Prime Contracting
administration of the department’s procurements. In addition, DOE has 

issued internal guidance in the form of acquisition letters, secretarial 

memoranda, and other communications to outline additional small 

business requirements. Broadly, these requirements direct procurement 

officials to contract with small businesses unless specific and limited 

circumstances prevent doing so. For example, an exemption from small 

business prime contracting requirements is allowed if capable small 

businesses cannot be found to perform the needed work at a fair price. 

DOE is the largest civilian contracting agency in the federal government, 

with procurements of approximately $22.8 billion for fiscal year 2005, or 

more than 90 percent of its annual budget. DOE relies primarily on “facility 

management contractors”—traditionally large businesses and 

universities—to manage operations at sites across the country. These 

contractors maintain the nation’s nuclear weapons stockpile, clean up

radioactive and hazardous wastes, and conduct complex scientific 

research, among other activities. According to DOE, in fiscal year 2005, the 

department paid 87 percent of its procurement dollars to 43 facility 

management contracts. Given the broad scope and complexity of the work 

conducted, many of these contracts are for hundreds of millions of dollars 

annually, with four contracts exceeding $1 billion annually. The remaining 

13 percent of DOE’s procurement dollars were awarded through contracts 

with nonfacility management contractors, many of them small businesses, 

for things like legal services and facility design and construction activities. 

The administration of DOE’s small business program spans several 

different organizational units. DOE’s Office of Small and Disadvantaged 

Business Utilization (referred to in this report as DOE’s Small Business 

Office) is responsible for establishing small business policy and 

implementing the department’s small business program, including 

engaging in small business outreach and business development activities 

and encouraging the department to meet its small business contracting 

goal. DOE’s Office of Procurement and Assistance Management and the 

Office of Acquisition and Supply Management of the National Nuclear 

Security Administration (NNSA) set overall procurement policy and are 

responsible for ensuring that these policies are followed by procurement 

officials and contracting officers throughout the department. In addition, 

these offices coordinate with DOE’s Small Business Office in setting small 

business policy. The NNSA and DOE program offices such as the Office of

Science and the Office of Environmental Management determine their 

Page 2 GAO-06-501 DOE Small Business Prime Contracting
procurement needs and identify small business contracting opportunities.5

Small business contacts in each program office support the small business 

activities within their respective organizational units. 

In 1999, a change in federal procurement policy affected how DOE set its 

annual small business prime contracting goal and measured its 

achievement. Prior to the change, federal policy allowed DOE to include 

the small business subcontracts of its large facility management 

contractors when developing its goal and calculating its small business 

prime contracting achievement.6

 This prior policy, which applied only to

DOE, reflected a view that the facility management contractors were 

acting as surrogates for the department and, therefore, the subcontracts 

were equivalent to DOE prime contracts. In 1999, the Office of Federal 

Procurement Policy changed the policy so that DOE could not include the

subcontracts issued by facility management contractors when developing 

small business prime contracting goals or when calculating actual 

achievements.7

 Given this decision, DOE’s small business prime 

contracting goal was adjusted downward from 18 percent in 1999 to 5 

percent in 2000. DOE’s fiscal year 2006 goal for small business prime 

contracting is 5.5 percent of its total contracting dollars. 

In 2004, we testified that DOE had and would continue to have difficulty 

meeting its near-term and long-term small business prime contracting 

goals but was taking steps to improve results, including enhancing its 

small business outreach efforts and assessing facility management 

contracts up for renewal to identify work that might be redirected to small 

businesses.8 For this report, you asked us to (1) provide an update on 

DOE’s key efforts to increase small business prime contracting 

opportunities and the results of these efforts to date and (2) identify the 

 5

NNSA is a separately organized agency within DOE with its own procurement organization 

and program offices. For purposes of this report, NNSA is referred to as a “program office,” 

as are DOE’s Office of Environmental Management, Office of Science, and other programbased organizational elements. 

6

A subcontract is any contract entered into by a prime contractor or subcontractor to 

provide supplies and/or services in support of a prime contract or subcontract. 

7

The Office of Federal Procurement Policy within the Office of Management and Budget 

issues policy letters and is responsible for resolving any disagreements between the Small 

Business Administration and federal agencies on small business prime contracting goals. 

8

GAO, 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 3 GAO-06-501 DOE Small Business Prime Contracting
management challenges DOE faces in improving its small business prime 

contracting performance. In addition to these two objectives, at your 

request, we are providing information on the management of small 

business programs by other federal agencies that either share certain 

characteristics with DOE’s largest program offices or that have 

components that share certain characteristics with these offices. 

To evaluate DOE’s key small business efforts and their results to date, we 

reviewed federal regulations, DOE guidance and management directives 

concerning small business prime contracting, departmentwide and 

program-specific small business plans, and budget documents. We 

reviewed DOE contract data from the Federal Procurement Data System, 

the federal government’s repository of information regarding the nature 

and value of contract awards, as well as from a DOE-specific procurement 

database. In addition, we reviewed the activities of the DOE Small 

Business Office and the small business prime contracting activities at 

NNSA and DOE’s Offices of Environmental Management and of Science,

which collectively account for the bulk of DOE’s prime contracting. In

conducting these reviews, we interviewed DOE small business, 

procurement, and program officials. 

To identify the management challenges DOE faces in improving its small 

business prime contracting performance, we compared the management 

practices of DOE’s small business program with established management 

principles. We interviewed DOE small business and procurement officials 

and reviewed program guidance, management directives, and program 

performance plans to determine the current practices supporting the DOE 

small business program. We compared and contrasted these practices with 

general management principles embodied in the Government Performance 

and Results Act of 1993 and literature regarding effective management 

practices at federal agencies. 

In addition, to illustrate some of the ways in which other federal agencies 

approach the management of their small business programs, we obtained

information on the practices of the small business offices at three other 

agencies that either share certain characteristics with DOE or that have

agency components that share certain characteristics with DOE: the 

National Aeronautics and Space Administration (NASA), the Department 

of the Army (U.S. Army Corps of Engineers), and the Department of 

Health and Human Services (Centers for Disease Control and Prevention). 

Although DOE is unique in relying on facility management contractors to 

accomplish much of its mission, the chosen comparison agencies or 

agency components are similar enough to DOE to provide useful insight 

Page 4 GAO-06-501 DOE Small Business Prime Contracting
within the context of their small business programs. We selected these 

three agencies because each has annual procurement activity on a scale as 

large, or larger, than the three DOE program offices examined in this 

study, and each agency has consistently been able to award a larger 

proportion of its procurement dollars to small businesses than has DOE. 

Additionally, like DOE, these agencies or their components that we visited 

must consider public safety and national security concerns to execute

sound procurement decisions. Finally, these agencies or their relevant 

components have missions that share similarities with those of the DOE 

program offices we examined. For instance, both the U.S. Army Corps of 

Engineers and DOE’s Office of Environmental Management have 

environmental cleanup as a key component of their mission. Basic 

scientific research is central to the missions of both the Department of 

Health and Human Services’ Centers for Disease Control and Prevention 

and DOE’s Office of Science. NASA, like DOE, employs large firms to carry 

out facility management contracts, although to a much lesser extent.9

 We 

interviewed small business, contracting, and procurement officials and 

staff from these agencies, and reviewed program planning and guidance 

documentation. We conducted our work between February 2005 and 

March 2006 in accordance with generally accepted government auditing 

standards. 

DOE has increased the total prime contracting dollars awarded to small 

businesses since 2001 through three key efforts, although the department 

still fell short of its goal in most years. First, DOE increased the 

procurement opportunities available to small businesses. Specifically, 

DOE identified larger procurements that could be split and partially 

redirected from existing facility management contracts to small 

businesses. DOE also set aside for small businesses many nonfacility 

management contracts that were either new or up for renewal. These 

nonfacility management contracts, however, represent a declining share of 

total DOE procurements. Second, DOE expanded small business 

development and outreach activities. For example, DOE revamped its 

mentor-protégé program—which pairs an established contractor with a 

less-experienced small business protégé—and participation increased 

from 5 pairs in 2002 to 48 pairs in 2005, although just one of the protégés 

Results in Brief 

 9

GAO has previously reported on aspects of NASA’s small business prime contracting 

performance. See GAO, Federal Procurement: Trends and Challenges in Contracting with

Women-Owned Small Businesses, GAO-01-346 (Washington, D.C.: Feb. 16, 2001). 

Page 5 GAO-06-501 DOE Small Business Prime Contracting
has been awarded a prime contract to date. Third, DOE strengthened 

management and oversight of its small business program. For example, in

2002 DOE began to track, on a quarterly basis, the proportion of total 

procurement dollars awarded by each program office to small businesses. 

Collectively, these improvement efforts increased awards to small 

business from about $589 million in 2001 to about $948 million in 2005. 

However, they have not been sufficient to enable DOE to consistently 

meet its small business prime contracting goals. Since 2001, DOE has 

fallen short of its goal by at least $120 million every year except 2003, 

when it exceeded its goal by $84 million. In 2005, it appears that DOE 

missed its small business prime contracting goal of 5.5 percent of total 

procurement dollars by about $300 million, although its estimated 

achievement of 4.15 percent would represent its second highest 

performance since 2001. The three program offices we reviewed—Office 

of Environmental Management, Office of Science, and NNSA—are 

responsible for the vast majority of DOE’s large facility management 

contracts and control over 90 percent of DOE’s procurement dollars. 

However, in large part because of their reliance on facility management 

contracts, these program offices account for less than half of the nearly $1 

billion in small business procurements that DOE made in fiscal year 2005. 

DOE faces two key management challenges to improving its small 

business program practices. Addressing these challenges would bring 

DOE’s small business program more in line with practices of highperforming organizations and with principles contained in the Government 

Performance and Results Act. The key management challenges are as 

follows: 

• Although DOE establishes an annual small business prime contracting 

goal, the department has not defined concrete steps that will enable it to 

achieve this goal. DOE has identified a number of activities in its small 

business strategic plan that it believes will contribute toward achieving its 

goal, such as conducting the mentor-protégé program and maintaining a 

procurement forecast. However, it has not defined what it specifically 

expects to accomplish from each activity or established a way to measure 

if these activities are indeed advancing DOE toward its goal. For example, 

for the mentor-protégé program, the department has not identified the 

number or value of small business prime contracts it expects to result 

from the program. 

• DOE does not use performance information to evaluate and improve 

program performance. The department does collect some performance 

data, but it does not collect sufficient information to allow it to effectively 

Page 6 GAO-06-501 DOE Small Business Prime Contracting
assess its small business program efforts, identify problems, and 

implement changes that could further increase small business prime 

contracting over time. For example, DOE does not collect data on the 

specific reasons that nonfacility management contracts may not have been 

awarded to small businesses, even though department policy requires that

all such new contracts be reserved for small businesses to the extent 

possible. 

Although the manner in which federal agencies with similar missions or 

with organizational components similar in mission to DOE carry out their 

small business programs is comparable in several ways to DOE’s 

practices, there are important differences. Specifically, the agencies 

differed substantially from DOE in their efforts to evaluate their small 

business programs for effectiveness, to identify performance problems, 

and to implement a program of corrective action to further strengthen 

small business performance over the long-term. For example, Department 

of the Army guidance requires that detailed performance reviews of the 

U.S. Army Corps of Engineers and other component offices’ small business 

programs be completed once every 3 years. Improvement plans are 

required to address any deficiencies. Similarly, Health and Human Services

provides for comprehensive evaluations of the small business program at 

the Centers for Disease Control and Prevention, and NASA evaluates the 

small business activities at the agency’s procurement centers. We did not 

evaluate the effectiveness of these agencies’ small business practices. 

However, over time, these agencies awarded a greater share of their 

procurement dollars to small businesses than DOE. 

We are recommending that DOE take a more systematic approach to 

managing its small business program to include the following: defining the 

concrete steps DOE will take to achieve further progress toward its annual 

goal; collecting relevant performance information to better gauge the 

effectiveness of its efforts; and using performance information to support 

program improvements, as needed. 

DOE generally concurred with our findings and recommendations, but 

expressed concern that, in comparing DOE to other federal agencies, we 

did not fully appreciate the department’s management and operating 

contract business model. The report does recognize that the use of large 

facility management contractors to perform much of DOE’s work has 

constrained the department’s ability to contract with small businesses. The 

report also recognizes that other federal agencies do not face a similar 

constraint. We believe the comparisons we made between DOE and other 

agencies are appropriate because we compared key management practices

Page 7 GAO-06-501 DOE Small Business Prime Contracting
of each agency’s small business program, which are not dependent on the

particular business model used to accomplish the agency’s mission. DOE’s

written comments are reprinted in appendix II. 

DOE has more than 50 major sites in 35 states where the department 

carries out its varied missions, including developing, maintaining, and 

securing the nation’s nuclear weapons capability, cleaning up the nuclear 

and hazardous wastes resulting from long-term weapons production, and

conducting basic energy and scientific research and development. This 

work is overseen primarily by DOE’s largest program offices—the NNSA, 

the Office of Environmental Management, and the Office of Science—and

is primarily carried out though facility management contracts. DOE has a 

workforce of 16,000 federal employees; the department relies on the more 

than 100,000 employees of its contractors to manage its facilities and 

achieve its missions. 

DOE’s contracts with small businesses occur in several different ways. 

First, small businesses receive direct contracts from a portion of DOE’s 

procurement outlays that are not awarded as facility management 

contracts. Second, small businesses may compete for and receive facility 

management contracts. Historically, small businesses have not performed 

these contracts, though in a few cases small businesses have won such 

contracts after DOE identified ways to limit the contract’s scope of work. 

Third, small businesses receive subcontracts from DOE’s prime 

contractors. In 2004, approximately 17.5 percent of facility management 

contract dollars went to small businesses as subcontracts. Subcontracts, 

however, do not count toward achieving DOE’s small business prime 

contracting goal. 

Advocacy responsibilities for small business contracting rest primarily 

with a small business office—usually called the Office of Small and 

Disadvantaged Business Utilization—at each executive-branch agency. In 

general, officials in these small business offices are responsible for 

negotiating an annual small business prime contracting goal with the Small 

Business Administration (SBA), establishing each agency’s small business 

policy and guidance, coordinating agencies’ small business outreach 

efforts, and monitoring small business performance with respect to the

goal. Within DOE, the department’s Office of Procurement and Assistance 

Management and NNSA’s Office of Acquisition and Supply Management 

also play important supporting roles in promoting small business prime 

contracting. These offices establish overall department procurement 

policy and prepare more specific guidance to reflect contracting 

requirements consistent with federal acquisition regulations. These 

Background 

Page 8 GAO-06-501 DOE Small Business Prime Contracting
procurement offices also maintain data on DOE’s prime contracts, 

including annual obligations to small businesses, and work with the Small 

Business Office staff to monitor small business performance and 

implement small business policies. DOE’s program offices are responsible 

for identifying small business prime contracting opportunities and 

providing contracting oversight. The SBA calculates DOE’s annual small 

business prime contracting achievement using data from the Federal 

Procurement Data System–Next Generation, a governmentwide 

procurement database that is administered by the General Services 

Administration. 

DOE’s efforts to increase its prime contracts with small businesses have 

increased the department’s total expenditures on small business prime 

contracts since 2001. However, the increases were not sufficient to 

achieve the department’s small business prime contracting goal in 4 of the 

past 5 years. 

DOE’s approach to increasing its prime contracting with small businesses 

focused on three main areas: (1) identifying more contracting 

opportunities for small businesses, (2) expanding small business 

development and outreach activities to create a larger pool of qualified

small businesses, and (3) improving program management and oversight.

DOE’s effort to increase the opportunities for small businesses to win 

contracts with the department included restructuring or “breaking out” 

portions of projects historically conducted by the department’s facility 

management contractors and redirecting that work to small businesses, 

modifying procurement strategies to expand opportunities for small 

businesses, and continuing to emphasize the award of nonfacility 

management contracts to small businesses. 

To redirect portions of projects traditionally performed under facility 

management contracts, DOE’s Office of Environmental Management 

DOE Efforts to 

Increase Contracts 

with Small Businesses 

Have Had Partial 

Success

Key Efforts to Increase 

Small Business Contracts 

Focused on Expanding 

Contracting Opportunities, 

Finding More Qualified 

Small Businesses, and 

Improving Program 

Management and 

Oversight 

Identifying More Contracting 

Opportunities for Small 

Businesses 

Page 9 GAO-06-501 DOE Small Business Prime Contracting
identified nine such projects that it believed could be reserved for 

competition among small businesses as prime contracts. These prime 

contracts, summarized in table 1, are collectively worth about $745 

million, and many involve multiyear environmental cleanup, construction, 

and facility operations activities that are essential to the mission of this 

office. As of September 2005, the Office of Environmental Management 

had successfully awarded seven of these contracts and obligated about

$266 million.10 In December 2005, this office awarded an eighth small 

business contract, the second at Paducah, Kentucky. In December 2005,

the Office of Environmental Management cancelled the ninth contract, 

which involved the Fast Flux Test Facility procurement at Hanford, 

Washington, due to budgetary constraints and the need to focus resources 

on more important projects. 

Table 1: Major Office of Environmental Management Procurements That Redirect Work Traditionally Performed by Large 

Businesses with Facility Management Contracts to Small Business Prime Contracts 

Dollars in millions 

Project and location Brief description of work Contract value Amount obligateda

222-S Lab, Hanford, WA Analytic work on waste samples $58.8 $4.2 

Columbus Closure Project, OH Environmental cleanup 42.1 34.6

Glass Waste Storage Building #2, Savannah 

River Site, SC

Construction of waste storage facility 63.2 59.3

Grand Junction Office Mission Support, CO Technical, project management, and 

administrative services 

159.5 120.1

Portsmouth Infrastructure, OH Facility management contract for facility 

operations services 

48.8 13.6

Portsmouth Remediation, OH Facility management contract for 

environmental cleanup 

141.3 28.2

Paducah Infrastructure, KY Facility management contract for facility 

operations services 

39.9 6.4

Paducah Remediation, KY Facility management contract for 

environmental cleanup 

191.6 N/Ab

Fast Flux Test Facility, Hanford, WA Deactivation, decontamination, and 

decommissioning of reactor facility 

N/AcN/Ac

Source: DOE. 

a

As of September 30, 2005. 

b

DOE awarded this contract in December 2005. 

 10Although the total award value of these contracts is about $745 million, the SBA uses 

annual obligations in its measure of DOE’s small business achievements. Award value often 

spans multiple years over the life of a contract. 

Page 10 GAO-06-501 DOE Small Business Prime Contracting
c

DOE made an initial award of this contract in 2004 for $235 million. However, the award was

protested and DOE withdrew the solicitation. The procurement was subsequently cancelled in 

December 2005.

In comparison with the Office of Environmental Management, NNSA and 

the Office of Science identified relatively fewer procurements that could 

be redirected from their facility management laboratory contracts and set

aside for small businesses. NNSA and Office of Science procurement 

officials said that redirecting work from facility management contracts to

small businesses was not a priority in their programs because removing 

mission-related work from the contractors managing the laboratories 

could diminish the department’s ability to ensure the work at these 

laboratories is effectively accomplished. However, these officials were 

trying to identify mission-related work that could be moved from facility 

management contracts to small business contracts when a compelling 

“business case” could be made for doing so. For example, in 2004 NNSA 

awarded a contract to a small business for design, construction, and 

integration services for radiation sensors. These services were previously 

provided under the Sandia National Laboratories facility management 

contract. This award has an overall value of $80 million, of which $71.5 

million had been obligated through the end of fiscal year 2005. In addition, 

NNSA and the Office of Science recently collaborated with the Office of 

Environmental Management to develop a small business information 

technology contract to provide services at the three DOE facilities in Oak 

Ridge, Tennessee. DOE plans to award this approximately $130 million 

contract in fiscal year 2006. These information technology services are 

currently being performed by three large businesses as subcontractors to 

the facility management contractors at the Oak Ridge sites. Science is also 

considering breaking out select small business subcontracts from the 

Thomas Jefferson National Accelerator Facility contract and awarding 

these as prime contracts. 

To further expand opportunities for small businesses, DOE also modified 

procurement strategies. Its two efforts in this area were led by the Office 

of Environmental Management and NNSA. These two efforts were as 

follows: 

• In 2004, the Office of Environmental Management established “indefinite 

delivery/indefinite quantity” contracts in which it preapproved 8 large and 

14 small businesses to provide services on environmental cleanup and 

deactivation, demolition, and removal of facilities on an as-needed basis. 

These contracts authorize a maximum of $800 million in total contract 

task orders through 2009. Through fiscal year 2005, almost $24 million in 

task orders had been issued, all of which went to small businesses. 

Officials cited a variety of possible reasons for the limited use of this 

Page 11 GAO-06-501 DOE Small Business Prime Contracting
contract mechanism so far, including contract officers’ unfamiliarity with 

implementation procedures and security issues surrounding 

administration of the contracts. 

• An NNSA initiative—known as the “tri-lab initiative”—involved combining 

procurements common to the Sandia, Lawrence Livermore, and Los 

Alamos national laboratories, such as facility security, maintenance 

services and computer hardware, and purchasing of goods and services 

from small business suppliers. According to NNSA, most of the targeted 

procurements were for support services, such as temporary staff, rather 

than direct mission laboratory work. The three laboratories initially 

estimated that as much as $187 million in procurements could be 

redirected to small businesses in fiscal year 2005, with a goal of $300 

million by 2007. However, before NNSA could fully take advantage of any 

potential benefits, the initiative was canceled. According to NNSA 

officials, the cancellation was primarily due to congressional concerns 

regarding the potential impact on the department’s ability to ensure that 

the laboratories’ projects are effectively accomplished, as well as concerns 

that some small businesses could lose existing laboratory subcontracts if

NNSA awarded the work as new prime contracts through the tri-lab 

initiative. 

Finally, DOE’s efforts to expand contracting opportunities included 

continuing to emphasize the importance of directing nonfacility 

management contracts to small businesses. DOE procurement officials 

said that nonfacility management contracts issued by the department are 

reserved for small businesses whenever possible. Exceptions would 

involve situations in which only a large business supplier was available, 

such as for utilities. Between fiscal years 2001 and 2004, the percentage of 

these contracts awarded to small businesses increased from 48.7 percent 

(753 out of 1,546 contracts) to 53.0 percent (831 out of 1,569 contracts). In 

fiscal year 2004, small businesses received 61 percent ($282 million) of the 

total dollars spent on these new nonfacility management contracts. 

DOE has attempted to increase its use of small businesses by increasing 

the pool of small businesses willing and able to provide goods and services

to the department. This effort has involved a variety of business 

development and outreach activities, including establishing a small 

business advisory team with participation by small businesses, pairing 

large and small businesses as mentors and protégés to assist in developing 

small businesses’ capabilities, and periodically hosting small business 

conferences to discuss upcoming contracting opportunities and to help 

small businesses understand the intricacies of the federal procurement 

Expanding Small Business 

Development and Outreach 

Activities 

Page 12 GAO-06-501 DOE Small Business Prime Contracting
process. DOE contends that many of these activities will help to expand 

both prime contracts and subcontracts with small businesses. 

The extent to which these efforts contribute to DOE’s small business 

prime contracting achievements is generally unclear. For example, 

regarding the pairing of small and large businesses in DOE’s mentorprotégé program, since 2002 the number of business pairs has increased

from 5 to 48, but only one participating small business has subsequently 

received a prime contract from DOE. Similarly, while attendance at DOE’s 

annual small business conference has increased since 2004, and the 

feedback DOE collects from participants is generally positive, DOE does 

not know the extent to which the conferences have led to small businesses 

receiving prime contracts. 

In addition to these DOE-wide efforts managed by the Small Business 

Office, the Offices of Environmental Management and Science, as well as 

NNSA also pursue small business development and outreach activities, 

including attending small business conferences, managing a mentorprotégé program, and providing other training support for small 

businesses. For example, NNSA conducts biweekly outreach to small 

businesses by inviting interested small businesses to meet with NNSA 

procurement officials to discuss their capabilities and learn of upcoming 

procurement opportunities. NNSA has held 318 of these sessions between 

March 2002 and January 2006. Nine small businesses attending one or 

more of the sessions have obtained 25 DOE prime contracts worth about 

$66 million. Also, Sandia National Laboratory, which primarily conducts 

work for NNSA, runs its own mentor-protégé program that intends to build

the long-term capacity of small businesses. 

To strengthen DOE’s management and oversight of its small business 

program, the Small Business Office took the following main actions: 

Improving Program 

Management and Oversight 

• In 2002, it began quarterly reviews of the prime contracting achievements 

of each program office. These reviews are intended to track the 

department’s progress toward meeting its overall small business goal and

to communicate results to program office officials and the Secretary of 

Energy. 

• In 2004, it attempted to improve coordination among the department’s 

small business, procurement, and program offices by establishing the 

Advance Planning Acquisition Team. The team includes officials from 

these DOE offices and intends to collectively review upcoming 

procurements, identify potential small business contracting opportunities, 

Page 13 GAO-06-501 DOE Small Business Prime Contracting
and exchange information on promising practices for improving DOE’s 

small business achievements. 

• In 2004, it began to review all contracts over $3 million not reserved for 

small businesses to determine if small business opportunities had been 

adequately considered. 

The department, however, does not collect data that indicate the extent to 

which these efforts have directly or indirectly affected DOE’s small 

business prime contracting achievement. Therefore, the impact of these 

efforts is unclear. 

Despite DOE’s efforts to strengthen its small business program, the 

department has not achieved its small business prime contracting goal in 4 

of the past 5 years. Table 2 shows that DOE’s procurement dollars 

awarded to small businesses as prime contracts increased steadily during 

the 5-year period, and the amount nearly doubled between fiscal years 

2001 and 2005.11 However, except for fiscal year 2003, DOE failed to meet 

its annual small business prime contracting goal, falling short by more 

than $120 million each year. 

Table 2: DOE’s Small Business Prime Contracting Goals and Achievements, Fiscal 

Years 2001 through 2005 

Despite Increasing Its 

Contracting with Small 

Businesses, DOE Prime 

Contracting Achievement 

Continues to Fall Short of 

Its Annual Goal 

Dollars in millions

2001 2002 2003 2004 2005a

Goal 5.00% 3.70% 3.70% 5.06% 5.50%

Achievement 2.89% 3.11% 4.08% 4.18% 4.15%

Achievement $588.6 $634.4 $904.2 $943.6 $947.6

Difference between goal and 

achievement $429.7 $120.4 $84.2 $198.7 $308.3

Sources: GAO analysis of Fiscal Year 2001-2004 Small Business Administration Goaling Achievement reports; 2005 data from Federal 

Procurement Data System – Next Generation.

 11Unless otherwise specified, all dollar values in the remainder of this section are reported

as constant 2005 dollars. 

Page 14 GAO-06-501 DOE Small Business Prime Contracting
Notes: The fiscal year 2005 Federal Procurement Data System – Next Generation data are 

preliminary, as of the issuance of this report, and provide only an initial estimate of the department’s 

fiscal year 2005 performance. The final Small Business Administration Goaling Achievement report

for FY05 is yet to be published. GAO has previously questioned the reliability, accuracy and 

completeness of the Federal Procurement Data System and the data of its predecessor system. 

However, we determined that the federal data system’s small business contracting data, which are 

used by the Small Business Administration to assess the prime contracting achievement of each 

federal agency, were sufficiently reliable for purposes of this report. See appendix I for further 

information on how we determined data reliability. Percentages are of procurement dollars, and all 

dollars are constant fiscal year 2005. 

To some degree, DOE’s small business prime contracting achievements 

have been limited because the department’s small business prime 

contracting achievements occurred primarily from procurements that 

were directed to nonfacility management contracts, which have been a 

declining portion of DOE’s overall procurement outlays. Between fiscal 

years 2001 and 2005, more than 98 percent of the approximately $4 billion

DOE obligated to prime contracts with small businesses went to 

nonfacility management contracts. Only since fiscal year 2005 did DOE 

direct facility management contracts to small businesses—$41.8 million 

for infrastructure and remediation activities at Portsmouth and $6.4 

million for infrastructure activities at Paducah. At the time of our review, 

DOE had obligated $2.7 million to the Paducah remediation facility 

management contract, which was awarded in December 2005. During this 

time period, DOE’s facility management contracts were taking an everincreasing share of total procurement dollars. In 2001, DOE obligated 

about $14.8 billion to its facility management contracts, which was about 

80 percent of total procurements that year. In 2005, DOE obligated $19.8

billion to its facility management contracts, which was about 87 percent of 

the department’s total procurement outlays. 

In analyzing DOE’s inability to meet its small business prime contracting 

achievement goal, it is also worth noting that the program offices we 

reviewed—the Offices of Environmental Management, and Science, and 

NNSA—accounted for slightly less than half of the approximately $948 

million in small business prime contracting achievements in fiscal year 

2005 despite having responsibility for almost 90 percent of DOE’s total 

procurement dollars. According to preliminary data from DOE’s Small 

Business Office, in 2005 the Office of Environmental Management directed

about $198 million, or 2.9 percent of its procurement dollars to small 

businesses; NNSA directed $237 million, or 2.6 percent; and the Office of 

Page 15 GAO-06-501 DOE Small Business Prime Contracting
Science directed about $30 million, or 1.1 percent.

12 In contrast, more than 

half of DOE’s fiscal year 2005 contracting with small businesses originated

from the DOE offices that are collectively responsible for only 10 percent 

of the department’s total procurement dollars. These offices include, for 

example, the Office of Fossil Energy and Office of Energy Efficiency and 

Renewable Energy. These smaller program offices within DOE directed 

about $469 million, or 21 percent, of their procurement dollars to small 

business prime contracts, slightly more than the combined small business 

prime contracts at the Offices of Environmental Management, and Science 

and NNSA. However, DOE’s other program offices are responsible for 

substantially fewer multimillion dollar facility management contracts than 

the Offices of Environmental Management, and Science and NNSA. 

DOE faces two management challenges in further improving its small 

business prime contracting performance. First, although DOE negotiates 

an annual small business prime contracting goal, it has not identified 

concrete steps—referred to as program objectives—that are expected to

contribute in a specific measurable way to achieving its goal. Second, it 

does not use performance information to evaluate and improve program 

performance. Both types of practices are commonly associated with highperforming organizations and are consistent with principles contained in

the Government Performance and Results Act. More specific information 

on these model practices and DOE’s comparative practices can be found 

in table 3. 

Two Key Management 

Challenges Hinder 

DOE’s Efforts to 

Further Improve Its 

Small Business 

Contracting 

Performance 

 12The Federal Procurement Data System does not report achievement data by DOE

program office. The achievements by program office reported here are estimated from

DOE’s internal data system, and totaled $934 million in September 2005, the most recent 

data available. This total differs slightly from the $947.6 million in small business 

achievements calculated by the federal data system. 

Page 16 GAO-06-501 DOE Small Business Prime Contracting
Table 3: Practices of High-Performing Organizations Compared with DOE Small Business Program Practices 

Suggested practice Characteristics of practice Why it is important 

Extent to which DOE employs this

practice 

Establish program goals. Goals should be measurable, 

specific, and realistically 

represent something the 

organization can be expected 

to achieve. 

Focuses an organization’s efforts 

on achieving specific outcomes 

and allows an assessment of 

future performance against the 

goals. 

Fully: In accordance with the Small 

Business Act, DOE negotiates an 

annual small business prime 

contracting rate that takes into 

account agency mission, 

procurement requirements, and past 

performance. 

Define program objectives. Program objectives can be

thought of as the concrete 

steps, path, or approach an

organization intends to take to

reach a goal or goals. 

Objectives should be focused 

on the specific results an 

organization wishes to 

achieve. They should also be 

measurable so that progress 

on these objectives—success 

or failure—can be easily 

determined. 

Program objectives help lay out 

the strategy an organization will 

employ to achieve its program

goals. Having objectives that are 

measurable allows management 

to assess the success or failure 

of specific efforts to achieve its 

goals. 

Partially: DOE has identified a

number of activities in its small 

business strategic plan that it 

believes will contribute toward

achieving its goal. However, it has 

not laid out what it specifically

expects to accomplish from each 

activity or established a way to 

measure if these activities are 

indeed advancing it toward its goal. 

Use performance 

information to evaluate and 

improve program

performance. 

Organizations should regularly

collect and analyze 

performance information to 

assess whether program 

activities are having the 

desired results. 

Organizations should 

comprehensively evaluate the 

performance of their programs

on a periodic basis. 

Timely collection and analysis of 

performance data allows 

organizations to measure 

progress toward achieving their 

goals and to adjust program 

activities and policies as 

necessary. In addition, periodic 

comprehensive evaluations of 

program performance can reveal 

systemic problems and promote 

continuous program 

improvement over the long term. 

Partially: The department does 

collect some performance data, but 

does not collect sufficient 

information to allow it to effectively 

assess its small business program 

efforts, identify problems, and 

implement changes that could

further increase small business 

prime contracting over time. 

Sources: GAO analysis of guidance published by the Governmental Accounting Standards Board, the National Academy of Public

Administration, the IBM Center for the Business of Government, and prior GAO reports regarding effective managing for results 

practices. 

DOE Has Not Effectively 

Detailed How It Will 

Achieve Its Small Business 

Prime Contracting Goal 

Although DOE negotiates a small business prime contracting goal each 

year—5.5 percent in fiscal year 2005—DOE has not specified the concrete 

steps the department will take to achieve its small business prime 

contracting goal or how progress toward that goal can be measured. In a 

literature review of the practices of high-performing organizations, we 

found that such organizations often define specific program objectives 

indicating how the organization intends to achieve its goals. These 

objectives are measurable and are focused on the specific results an 

organization wishes to achieve. Well-defined objectives help an

organization gauge its progress in achieving its programmatic goal. 

Page 17 GAO-06-501 DOE Small Business Prime Contracting
While DOE’s small business strategic plan identifies a number of 

activities—which the department refers to as “objectives”— that the 

department believes will contribute toward achieving its goal, these 

objectives do not lay out what it specifically expects to accomplish from 

each activity or establish a way to measure if these activities are indeed 

advancing it toward its goal. Among the “objectives” the department has 

identified are maintaining a procurement forecast, conducting a small 

business breakout study of facility management contracts, and conducting

a mentor-protégé program. DOE has not indicated how these actions are 

intended to contribute to achieving its small business prime contracting 

goal, and thus how the success of these actions should be measured. For 

example, for the mentor-protégé program, the department has not laid out 

the number or value of small business prime contracts it expects to result 

from the program. 

In addition, the department has not established program objectives for 

those key departmental efforts holding the greatest promise to increase 

the department’s small business prime contracting. For example, DOE 

currently sets aside prime contracts for small businesses from two 

categories of procurements: nonfacility management contracts and facility 

management contracts. Yet, the department has not specified the extent to 

which each of these types of procurements should contribute towards 

achievement of DOE’s small business prime contracting goal or how the 

success of DOE’s efforts to set aside small business contracts in these 

areas might be assessed. For example, 61 percent of obligations to new 

nonfacility management contracts went to small businesses in 2004. 

However, only 28 percent of the total obligations for nonfacility 

management contracts went to small businesses. Whether or not DOE has 

been successful in reserving such contracts for small businesses and 

whether the department’s efforts should be further improved are unclear. 

Defining an appropriate objective regarding the small business awards for 

nonfacility management contracts could increase DOE’s understanding of

its efforts in this area and provide a much clearer means of assessing its 

progress. 

Similarly, the department has not established an objective for the extent to

which DOE might create small business opportunities from facility 

management contracts. As discussed earlier, the proportion of 

procurements associated with facility management contracts has been 

increasing. Generally, the department has begun to recognize that to 

further increase its small business prime contracting performance over the

long term, it may be necessary to increase the small business opportunities 

redirected from facility management contracts. Furthermore, Congress 

Page 18 GAO-06-501 DOE Small Business Prime Contracting
recently required DOE to study the feasibility of changes to facility 

management contracts so that additional small business prime contracting 

opportunities might be provided.13 To date, the Office of Environmental 

Management has led the department’s effort in redirecting such contracts

to small businesses by setting aside a number of small business 

opportunities culled from facility management contracts. Other program 

offices have done so to a lesser degree or have plans to do so in the future 

but have not yet awarded those contracts. As DOE continues to consider 

what small business opportunities it is reasonably able to draw from 

facility management contracts, establishing a program objective would 

encourage the department to maximize these opportunities. 

DOE Does Not Use

Performance Information 

to Evaluate and Improve 

Program Performance 

DOE does not systematically analyze the performance of its small business 

program to determine the effectiveness of specific activities or policies in

advancing its goal, although the department does collect some 

performance information. DOE’s main effort to collect and analyze 

performance information consists of tracking the proportion of total 

procurement dollars going to small businesses as prime and subcontracts 

at both the agencywide level and the program office level. The prime 

contracting data are tracked quarterly. Additionally, the Small Business 

Office collects information on a few of its small business development and 

support activities, such as attendance at and participants’ views on the 

quality of small business conferences. Also, DOE’s procurement office 

collects and tracks aggregate data on the extent to which facility 

management and nonfacility management contracts have been awarded to

 13Section 6022 of the 2005 Emergency Supplemental Appropriations Act for Defense, the 

Global War on Terror, and Tsunami Relief (Pub. L. No. 109-13) requires the SBA 

administrator, the Chief Counsel for Advocacy of the Small Business Administration, the 

chairman of the Defense Nuclear Facilities Safety Board, the Secretary of Energy, and the 

NNSA administrator to jointly conduct a study regarding the feasibility of possible changes 

to management and operating contracts (referred to as facility management contracts in 

this report) and other management contracts within DOE to encourage new opportunities

for small businesses to increase their role as prime contractors. In conducting the study,

they are required to jointly consider the need for sound management practices at facilities 

managed by prime contractors, safety, security, and necessary oversight of facilities, and 

the resources required to implement findings of the study. According to SBA officials, at 

the time of our review, the study was still under way, and a report date had not been 

determined. 

Page 19 GAO-06-501 DOE Small Business Prime Contracting
small businesses and whether such contracts involve multiyear 

agreements.14

DOE does not, however, collect sufficient information to provide the 

department with insight on whether or how specific policies or processes 

should be changed to further increase small business prime contracting. 

For example, as noted earlier, DOE’s policy is to set aside for small 

businesses all new nonfacility management contracts to the extent 

possible; in fiscal year 2004, about half of all new nonfacility management 

contracts were awarded to small businesses and half were not. However, 

the department does not require procurement staff to report the reasons 

that contracts have not been awarded to small businesses. The Federal

Procurement Data System allows agencies to report several reasons for 

nonawards that include the following: no known small business source; a 

small business was solicited but did not make an offer; and a known small 

business source existed, but no offer was solicited. Such information 

might help DOE assess if staff are having difficulty identifying small 

businesses capable of performing DOE contracts, if small businesses are 

having problems preparing offers, or if time constraints are limiting staff 

efforts to solicit offers from small businesses, for example. A senior 

procurement analyst with DOE’s Office of Procurement and Assistance 

Management said the department does not collect this type of information 

because it has not viewed it as useful. However, high-performing 

organizations regularly collect and analyze performance data to develop 

information on the effectiveness of their efforts—determining whether or 

not these efforts are achieving the desired results. 

In addition, many high-performing organizations also conduct periodic 

program reviews or audits to identify systemic problems and determine 

what adjustments to policy or practice should be made to improve 

performance over the long run. While the department does conduct some 

limited assessments of the small business efforts carried out by the 

individual program offices, these assessments do not routinely result in 

documented plans for improved long-term performance. For example, 

 14DOE’s procurement office also has a balanced scorecard program intended to assess the 

efficiency and effectiveness of the department’s overall procurement program. The 

balanced scorecard is a conceptual framework intended to translate an organization’s

vision and goals into a set of performance indicators that measure progress toward these 

goals. Through the balanced scorecard, an organization monitors both its current 

performance and its efforts to improve processes. The balanced scorecard does not, 

however, include a specific effort to assess the effectiveness of the small business program. 

Page 20 GAO-06-501 DOE Small Business Prime Contracting
DOE’s procurement office requires program offices to periodically review

compliance with overall federal acquisition regulations, including specific

requirements regarding small business prime contracting. But according to

the manager of this effort, these limited compliance reviews have not 

identified problems with any program office’s small business practices 

that have required corrective action. In addition, DOE’s Small Business 

Office conducts an informal assessment of a program office’s efforts to 

meet its small business prime contracting goal when that office does not 

achieve its goal. However, the Small Business Office officials said they 

tend to focus on near-term obstacles that the program office faces in 

awarding small business contracts rather than on systematically evaluating 

the program office’s management of its small business prime contracting 

efforts. Problems identified often include such things as bid protests and 

delayed appropriations that impede the award of anticipated small 

business contracts. Similarly, any planned corrective action tends to focus 

on a program office’s ability to identify additional contracting 

opportunities for small businesses in the near-term, rather than on 

programmatic changes that might improve performance over the longterm. Furthermore, because the assessment is informal, it is not 

documented, leaving the Small Business Office without a written plan that

can be used to hold a program office accountable for achieving results. 

Thus, when the department’s three largest program offices appeared 

unable to meet their small business prime contracting goals in fiscal year 

2005—leaving DOE short of its 5.5 percent small business goal—the 

department had little information to fully account for the shortfall or 

systematically determine a course of possible corrective action to make 

program improvements. 

The small business management practices employed by federal agencies 

having a mission or agency component with a mission similar to DOE’s 

provide examples of strategies for small business program evaluation and 

continuous improvement. Unlike at DOE, each agency is required to use 

performance information gained from periodic program reviews to help 

identify and direct program improvement efforts. We did not assess the 

specific small business practices employed by these agencies to determine 

if they were effective or the impact these practices may have had upon 

their small business prime contracting.15 However, over time, these 

Other Federal 

Agencies Use Formal 

Program Evaluation 

to Guide Changes in 

Their Small Business 

Programs 

 15For further information on our work at these federal agencies, including the limitations of 

the data and information we obtained, please refer to appendix I. 

Page 21 GAO-06-501 DOE Small Business Prime Contracting
agencies and the components we visited have awarded a greater share of 

their procurement dollars to small businesses and more often met their 

prime contracting goals than has DOE.16

In general, the small business programs at the three agencies we visited 

carry out activities similar to those conducted by DOE. As with all federal 

agencies, procurements are subject to the requirements of the Small 

Business Act and the Federal Acquisition Regulation, which together 

require small business contracting procedures and set-asides meant to 

ensure small businesses are afforded maximum practicable opportunities 

for federal prime contracts. As such, each small business office has a role

in articulating and establishing agency small business contracting policy,

as well as conducting small business outreach and development activities.

As at DOE, these agencies, their components that we visited, or both, also

promote the use of small businesses among agency contracting and 

procurement staff, train agency staff on federal and agency small business 

contracting requirements, maintain databases of potential small business 

vendors, and track and report small business accomplishments, 

periodically reporting results to senior agency officials. 

In contrast to DOE, however, NASA, the Department of the Army, and the 

Department of Health and Human Services use formal program evaluation

to guide programmatic changes. In conjunction with the Office of 

Procurement, the NASA small business office performs a comprehensive 

review of NASA’s procurement offices on a rotating three-year basis. 17 The 

purpose of the audit is to ensure that the small business program is being 

appropriately implemented and to bring to management’s attention issues 

that hinder progress toward agency goals. This review also examines how 

well the small business goals are being met, what the major impediments 

to small business utilization are, and what steps can be taken to improve 

small business usage within the procurement center. A recent review of 

NASA’s Kennedy Space Center found that occasionally small business 

specialists found it difficult to balance their procurement and small 

business work duties and recommended some organizational changes that

would help staff surmount such difficulties. Another recent review of the

 16Because these goals are negotiated at the parent organization level, the Department of the

Army does not directly negotiate a goal with the SBA. However, Army and the U.S. Army

Corps of Engineers both have consistently exceeded the goal negotiated between SBA and

the Department of Defense, its parent department. 

17This NASA review is called the “Procurement Management Survey Report.”

Page 22 GAO-06-501 DOE Small Business Prime Contracting
Goddard Space Flight Center identified a strained relationship between 

the SBA’s procurement center representative, who assesses NASA 

procurements for small business opportunities, and procurement center 

staff. The review recommended mediation from the Small Business 

Administration regional office to improve that relationship. In addition, the 

Goddard review also included a recommendation to further reinforce the 

importance of small businesses to NASA by having newly-hired staff and 

some others participate in an internal training course sponsored by the 

NASA small business office. According to NASA small business officials, 

this course is intended to show that the use of innovative and technically 

competent small businesses make business sense for NASA, regardless of 

the particular small business contracting goal, and can contribute 

substantially to the agency’s ability to achieve its scientific mission. The 

Director of NASA’s small business office said that one of the main 

functions of his office staff is ensuring that program and procurement 

officials throughout the agency understand the business and mission 

benefits of contracting with small businesses. 

Similarly, the Department of the Army is subject to an annual small 

business program review by the Department of Defense (DOD) small 

business office, in which the Army must be evaluated on a number of 

factors that are both qualitative and quantitative, such as whether the 

organization has been able to meet its internal prime contracting goal, 

whether its performance has improved over the prior year, and the quality 

of organization’s small business improvement plan. If DOD officials are 

unsatisfied with the performance rating earned by the Army, the head of

the organization may be required to implement a performance 

improvement plan, which must be reviewed with senior department 

officials in the Office of the Under Secretary for Acquisition, Technology,

and Logistics. Army officials said they believe that elevating these 

concerns to a higher department level helps ensure problems are 

corrected. In addition, the Army is required to outline a minimum of three 

program improvement initiatives it intends to pursue during the year. 

These initiatives must include implementation milestones and criteria for

assessing whether the initiatives have been successful. For example, in 

2004, the Army identified an initiative to establish the policies and 

procedures of the Army-managed mentor-protégé program. This initiative

ultimately led to a number of policy changes, an independent Army 

mentor-protégé program, and a workshop to help small businesses 

understand how to develop a formal mentor-protégé agreement with a 

DOD prime contractor. 

Page 23 GAO-06-501 DOE Small Business Prime Contracting
Although the Army requires its subordinate organizations to report small 

business prime contracting progress annually, which is substantially less 

often than such performance is tracked at DOE, the Army evaluates the 

small business program performance of each subordinate Army 

organization, including the U.S. Army Corps of Engineers, by conducting 

comprehensive performance audits at least once every 3 years. These 

comprehensive audits of Army small business programs are intended to 

generate a program improvement plan to address any deficiencies 

identified during the audit. Deficiencies that require corrective action must 

be reported to the Secretary of the Army. Army officials said they believe

that yearly performance reviews and a periodic comprehensive evaluation

together help ensure that needed programmatic changes are implemented. 

The Department of Health and Human Services also employs program 

evaluations with the aim of producing small business program 

improvements. Health and Human Services is in the initial stage of using 

the agencywide balanced scorecard, an evaluation framework Health and

Human Services uses to assess its performance in a number of diverse 

areas, to periodically evaluate its small business program. Part of this 

effort includes surveying a wide range of small business program 

stakeholders—agency employees, customers, and vendors—to determine 

both the quality and quantity of services provided not only by Health and

Human Services’ small business office, but also by the small business 

specialists assigned to operational divisions, such as the Centers for 

Disease Control and Prevention.18 To determine the effectiveness of the 

agency’s small business program, these surveys target questions for the 

different stakeholders. For instance, employees of the operational 

divisions are asked how well small business specialists are supporting 

their procurement efforts, whether they understand small business 

contracting requirements, and how much the small business specialists are 

involved in advanced acquisition planning, among other things. The agency

also surveys potential small business contractors on the quality of support 

they receive from small business specialists, in particular whether staff 

has sufficiently explained how to do business with Health and Human 

Services, whether they have been adequately informed of contracting 

opportunities, and whether they have received help resolving problems 

with solicitation issues. Health and Human Services intends to aggregate

 18According to the director of Health and Human Services’ s small business office, these 

activities are the result of departmental small business policies and are required not only of 

the Centers for Disease Control, but of other operational divisions as well. 

Page 24 GAO-06-501 DOE Small Business Prime Contracting
results and provide a descriptive statistical analysis, using the data to drive 

the small business program’s continuous improvement efforts. For 

example, the results are intended to help determine if additional program 

oversight, such as program audits or on-site monitoring, is necessary. 

Health and Human Services intends for this evaluation to be conducted 

once every 2 years. Each operational division, including the Centers for 

Disease Control, must subsequently prepare a summary report that 

identifies needed changes, a plan to address any performance areas 

requiring improvement, and target dates for completing improvements. 

This report must be submitted to Health and Human Services’ 

management and appropriate agency stakeholders. 

DOE has made progress since 2001 not only in increasing the total dollars 

it awards to small businesses, but also in increasing the share of its 

procurement dollars awarded to such businesses. Nonetheless, it has been 

able to achieve its annual small business prime contracting goal just once 

in the last 5 years. DOE’s performance as well as its future potential in this 

area is clearly constrained by the department’s traditional reliance on a 

limited group of large firms and universities to manage high-cost projects 

in which public safety and national security are important concerns. 

Moreover, the share of the department’s procurement dollars going to 

such projects is increasing, whereas the share going to projects more 

commonly performed by small businesses is declining. These 

circumstances create hurdles for DOE that other federal agencies do not 

face. 

Conclusions 

In spite of these circumstances, DOE has made substantial efforts to 

improve its small business prime contracting performance. However, the 

department has not accompanied these efforts with a clear understanding 

of how they affect prime contracting performance, which efforts are 

working well and which are not, and what changes might be made to 

improve the effectiveness of these efforts. If DOE can combine its small 

business improvement efforts with a clear strategy for achieving its annual

goal, with performance information that indicates its efforts are effective,

and with program evaluations that help to identify problems and lead the 

department to address them, DOE can more credibly demonstrate that—

even if it continues to fall short of its prime contracting goal—-it has done 

all it possibly can to give small businesses the maximum practicable 

opportunity to contract with the department. 

Page 25 GAO-06-501 DOE Small Business Prime Contracting
To improve DOE’s management of its small business prime contracting 

program and to help ensure that small businesses receive the maximum 

practicable opportunity for DOE prime contracts, we recommend the 

Secretary of Energy direct the Office of Small and Disadvantaged Business 

Utilization, the Office of Procurement and Assistance Management, and 

the NNSA Office of Acquisition and Supply Management to jointly 

establish a systematic, organized, and disciplined approach to achieving 

the department’s small business goal. Such an approach should include the 

following three steps: 

• Define small business program objectives that collectively identify the 

steps or approach DOE intends to take to reach its annual prime 

contracting goal. These objectives should focus on the specific results the 

department intends to achieve, should clearly contribute directly to DOE’s 

prime contracting performance, and should be measurable so that 

progress can be determined. 

• Identify, collect, and analyze performance information that will allow the 

department to determine whether the small business program activities it

carries out are achieving the desired results. 

• Periodically conduct a comprehensive evaluation of the department’s and 

program offices’ small business programs to determine if changes are 

needed and use these assessments to guide improvement efforts. 

We provided a draft of this report to the Department of Energy for review 

and comment. In written comments, the Director of the Office of Small 

and Disadvantaged Business Utilization stated that DOE concurred with 

findings and recommendations and was taking steps to further improve its 

small business efforts. For example, DOE stated it would take further 

steps to identify the approach it will take to reach its annual prime 

contracting goal, to better assess the effectiveness of its existing small 

business efforts and identify areas of improvement, and conduct periodic 

evaluations of the department’s small business programs. However, DOE 

expressed concern that we did not fully appreciate the department’s 

management and operating contract business model, especially in making

comparisons to the small business programs at other federal agencies. The

report does recognize that the use of large facility management 

contractors to perform much of DOE’s work has constrained the 

department’s ability to contract with small businesses. The report also 

recognizes that other federal agencies do not face a similar constraint. We 

believe the comparisons we made between DOE and other agencies are 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

Page 26 GAO-06-501 DOE Small Business Prime Contracting
appropriate because we compared key management practices of each 

agency’s small business program, which are not dependent on the 

particular business model used to accomplish the agency’s mission. 

Furthermore, in selecting the three federal agencies to contrast with 

DOE’s small business program, our intent was to provide information on 

specific small business practices that differed somewhat from DOE’s own 

practices and that might provide examples for DOE as it continues its 

improvement efforts. DOE also provided technical comments on the draft

report, which we incorporated as appropriate. 

We are sending copies of this report to the Secretary of Energy and the 

Administrator of the NNSA. We will also make copies available to others

upon request. This 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 about this report, please contact me 

at (202) 512-3841 or aloisee@gao.gov. Contact points for our Offices 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. 

Gene Aloise 

Director, Natural Resources and Environment 

Page 27 GAO-06-501 DOE Small Business Prime Contracting
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

Our objectives were to (1) provide an update on the Department of 

Energy’s (DOE) key efforts to increase small business prime contracting 

opportunities and the results of these efforts to date and (2) identify the 

management challenges DOE faces in improving its small business prime 

contracting performance. In addition to these objectives, we are providing 

information on the management of small business programs by other 

federal agencies that either share certain characteristics with DOE’s 

largest program offices or that have components that share certain 

characteristics with these offices. 

To conduct our work, we interviewed DOE headquarters and program 

office officials,as well as representatives from the Small Business 

Administration (SBA), and collected and analyzed data from federal and

DOE procurement databases. We also interviewed officials from the small 

business offices at the Department of Defense, the Department of the 

Army, the Department of Health and Human Services, and the National 

Aeronautics and Space Administration (NASA). 

To gain an understanding of DOE’s key small business management efforts 

and results to date, we obtained and reviewed DOE policy guidance and 

management directives concerning small business prime contracting, 

including internal memoranda, small business and procurement guidance, 

agencywide and program-specific small business plans, budget documents, 

and other related documents. To further gain an understanding of the DOE 

Small Business Office and Office of Procurement and Assistance 

Management roles and responsibilities with regard to small business prime 

contracting, we reviewed the Federal Acquisition Regulation, as well as 

the DOE-specific supplement to these regulations. We also interviewed 

DOE officials in the Small Business Office and small business officials 

from the department’s program offices, as well as officials in the Office of

Procurement and Assistance Management and their counterparts at the 

National Nuclear Security Administration (NNSA). We also interviewed 

officials at SBA to learn about federal small business policy, how small 

business goals are established with the federal agencies, how they ensure 

the federal government meets these goals, and what role they have in

overseeing small business activities nationwide. 

To determine DOE’s small business prime contracting achievement for 

fiscal years 2001 through 2004, we reviewed SBA’s federal goals report. To 

determine DOE’s small business prime contracting achievement for fiscal 

Page 28 GAO-06-501 DOE Small Business Prime Contracting
Appendix I: Objectives, Scope, and 

Methodology 

year 2005, and to determine expenditures to date toward specific 

contracts, we relied on the Federal Procurement Data System—Next 

Generation (FPDS-NG),1

 the federal government’s repository of 

information regarding the nature and value of federal procurement 

actions. This database contains detailed information on government 

contract actions over $25,000 and summary data for procurements of less 

than $25,000. We have previously issued reports critical of the reliability, 

accuracy, and completeness of FPDS-NG data and the data of its 

predecessor system2

 and remain concerned about some aspects of the data 

system. However, based on the following measures, we determined that 

the data of interest were sufficiently reliable for the purposes of this 

report. We interviewed DOE officials and officials from the General 

Services Administration, the agency responsible for the FPDS-NG system, 

to determine the steps taken to ensure accuracy and completeness of 

procurement data in FPDS-NG. In addition to FPDS-NG, we also used data 

taken from a DOE-specific procurement database, called the Procurement 

and Assistance Data System and maintained by DOE’s Office of 

Procurement and Assistance Management, to determine fiscal year 2005

prime contracting achievements for DOE’s largest program offices: the 

Office of Environmental Management, the Office of Science, and NNSA. As 

appropriate, we converted dollar values to constant 2005 dollars using 

Gross Domestic Product price indices from the Bureau of Economic 

Analysis. 

To identify the main challenges DOE faces in improving its small business 

prime contracting performance, we reviewed the management practices of 

DOE’s small business program and compared these against established 

management principles identified in select literature from leading 

organizations on effective management practices at federal agencies. For 

example, we reviewed guidance published by the Governmental 

Accounting Standards Board, the National Academy of Public 

Administration, and the IBM Center for the Business of Government, 

regarding effective management practices. We also reviewed prior GAO 

reports concerning managing for results, as well as the Government 

 1

For a discussion of this system, see: GAO, Improvements Needed to the Federal 

Procurement Data System-Next Generation, GAO-05-960R (Washington, D.C.: Sept. 27, 

2005). 

2

See GAO, Contract Management: Reporting of Small Business Contract Awards Does 

Not Reflect Current Business Size, GAO-03-740T (Washington, D.C.: May 7, 2003) and 

GAO, Reliability of Federal Procurement Data, GAO-04-295R (Washington, D.C.: Dec. 30, 

2003). 

Page 29 GAO-06-501 DOE Small Business Prime Contracting
Appendix I: Objectives, Scope, and 

Methodology 

Performance and Results Act of 1993. We also reviewed program guidance, 

management directives, including DOE internal guidance entitled 

Managing Critical Management Improvement Initiatives, and program 

performance plans to determine the current practices supporting the DOE 

small business program. To gain a further understanding of DOE’s small 

business management efforts, we also interviewed DOE Small Business 

Office officials and staff, and DOE Procurement Office officials. 

To provide information on how other federal agencies address small 

business program management challenges, we obtained information on 

the practices of the small business offices of three other agencies that 

either share certain characteristics with DOE or have component 

organizations that share characteristics with DOE: the National 

Aeronautics and Space Administration, the Department of the Army (U.S. 

Army Corps of Engineers), and the Department of Health and Human 

Services (Centers for Disease Control and Prevention). We selected these 

agencies because each has annual procurement activity on a scale as large 

as or larger than the three DOE offices examined in this study and each 

agency has been able to award a larger share of its procurement dollars to 

small business than has DOE. Additionally, like DOE, these agencies must 

consider public safety and national security concerns to execute sound 

procurement decisions. See table 4 for a comparison of each agency’s 2004

total procurements and small business prime contracting achievement 

information. Finally, these agencies were chosen to reflect the complexity

of the varied missions at DOE. Both the U.S. Army Corps of Engineers and 

DOE’s Office of Environmental Management have environmental cleanup

as a key component of their missions; scientific research conducted by the 

Centers for Disease Control and Prevention is similar in scope and 

complexity to that conducted by DOE’s Office of Science; and both the 

NNSA and NASA have highly technical and complex missions. 

Page 30 GAO-06-501 DOE Small Business Prime Contracting
Appendix I: Objectives, Scope, and 

Methodology 

Table 4: Comparison of DOE, Department of Defense, Health and Human Services, and National Aeronautics and Space 

Administration Small Business Prime Contracting Performance, Fiscal Year 2004 

Dollars in billions 

Agency 

Total

procurements

Total small 

business prime 

contracting

Small business 

prime contracting 

achievement

Small business 

prime contracting 

goal

Department of Energy $22.0 $0.9 4.2% 5.1%

Department of Defense 210.7 46.9 22.3 23.0

Department Of the Armya55.5 15.5 27.9 26.6

U.S. Army Corps of Engineers

a

8.8 3.5 39.5 40.4

Health and Human Services 7.9 2.3 29.6 30.3 

Centers for Disease Control and Preventiona0.98 0.13 13.6 30.3

National Aeronautics and Space 

Administration $12.5 $1.8 14.5% 16.2% 

Sources: GAO analysis of procurement and contracting data provided by federal agencies reviewed and SBA 2004 goaling report. 

a

SBA only reports data for the totality of agency procurements. The data for the Department of the 

Army (U.S Army Corps of Engineers), and the Centers for Disease Control and Prevention were 

provided by department officials.

To provide information on the small business program management and 

oversight at these agencies, we obtained and reviewed documentation of 

agency-specific procurement regulations, small business and procurement 

policy guidance, management memoranda, small business strategic plans,

budget documents, and other related documentation. In addition, we 

interviewed cognizant officials at each agency concerning this

information. We did not assess the specific small business practices of 

these agencies to determine if they were effective. Instead, we obtained 

information on small business program activities to identify practices that

somewhat differed from DOE’s practices and that could serve as examples 

DOE might want to consider as it further seeks to improve its prime 

contracting performance. Although the examples we highlight in this 

report are consistent with established management principles, we did not 

determine if these practices, as implemented by the federal agencies we 

visited, have had a direct impact on their small business prime contracting. 

The Department of Defense maintains a small business office for each

major component of the agency, and the operations of each are overseen 

by the Department of Defense’s small business office. Therefore, we 

interviewed small business officials in the small business offices at the 

Department of Defense, the Department of the Army, and the U.S. Army 

Corps of Engineers. The Department of Health and Human Services, in 

contrast, has a central agencywide small business office that is supported 

Page 31 GAO-06-501 DOE Small Business Prime Contracting
Appendix I: Objectives, Scope, and 

Methodology 

by a small business specialist in each of its 11 operating divisions, such as 

Centers for Disease Control and Prevention. Therefore, we interviewed 

small business officials from the department’s small business office, as 

well as the small business specialist and procurement officials at the 

Centers for Disease Control. NASA’s small business office is similarly 

centralized, so we conducted interviews with officials from this office 

only. 

We conducted our work between February 2005 and March 2006 in 

accordance with generally accepted government auditing standards. 

Page 32 GAO-06-501 DOE Small Business Prime Contracting
Appendix II: Comments from the Department Appendix II: Comments from the Department of Energy 

of Energy 

Page 33 GAO-06-501 DOE Small Business Prime Contracting
Appendix II: Comments from the Department 

of Energy 

Page 34 GAO-06-501 DOE Small Business Prime Contracting
Appendix II: Comments from the Department 

of Energy 

Page 35 GAO-06-501 DOE Small Business Prime Contracting
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 36 GAO-06-501

Appendix III: GAO Contact and Staff 

Acknowledgments 

Gene Aloise (202) 512-3841 

In addition to the individual named above, William R. Swick, Assistant 

Director; Doreen Feldman; Kevin Jackson; Carolyn Kirby; Michael L. 

Krafve; Harry Medina; Dominic Nadarski; Cynthia Norris; John W. 

Stambaugh; Stan Stenersen; and Virginia Vanderlinde made key 

 contributions to this report. 

DOE Small Business Prime Contracting

GAO Contact 

Staff 

Acknowledgments 

(360534) 
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