U.S. GOVERNMENT PUBLISHING OFFICE

30–057 WASHINGTON : 2018

HOTLINE TRUTHS II: AUDIT REVEALS 

INCONSISTENCIES IN DEFENSE SUBCONTRACTING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

MAY 17, 2018 

Small Business Committee Document Number 115–073 

Available via the GPO Website: www.govinfo.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

TRENT KELLY, Mississippi 

ROD BLUM, Iowa 

JAMES COMER, Kentucky 

JENNIFFER GONZA ́ LEZ-COLO ́ N, Puerto Rico 

BRIAN FITZPATRICK, Pennsylvania 

ROGER MARSHALL, Kansas 

RALPH NORMAN, South Carolina 

JOHN CURTIS, Utah 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

DWIGHT EVANS, Pennsylvania 

STEPHANIE MURPHY, Florida 

AL LAWSON, JR., Florida 

YVETTE CLARK, New York 

JUDY CHU, California 

ALMA ADAMS, North Carolina 

ADRIANO ESPAILLAT, New York 

BRAD SCHNEIDER, Illinois 

VACANT 

KEVIN FITZPATRICK, Majority Staff Director 

JAN OLIVER, Majority Deputy Staff Director and Chief Counsel 

ADAM MINEHARDT, Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Knight ................................................................................................... 1 

Hon. Stephanie Murphy .......................................................................................... 2 

WITNESSES 

Mr. Michael J. Roark, Assistant Inspector General, Readiness and Global 

Operations, Office of Inspector General, Department of Defense, Alexandria, 

VA .......................................................................................................................... 4 

Mr. Tommy L. Marks, Director, Army Office of Small Business Programs, 

Office of the Secretary of the Army, Washington, DC ...................................... 6 

Ms. Tiffany S. Scroggs, President, Association of Procurement Technical Assistance Centers, Lacey, WA ............................................................................... 7 

APPENDIX 

Prepared Statements: 

Mr. Michael J. Roark, Assistant Inspector General, Readiness and Global 

Operations, Office of Inspector General, Department of Defense, Alexandria, VA ..................................................................................................... 16 

Mr. Tommy L. Marks, Director, Army Office of Small Business Programs, 

Office of the Secretary of the Army, Washington, DC ............................... 22 

Ms. Tiffany S. Scroggs, President, Association of Procurement Technical 

Assistance Centers, Lacey, WA .................................................................... 28 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

DOD IG Audit Report ...................................................................................... 34 

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(1) 

HOTLINE TRUTHS II: AUDIT REVEALS 

INCONSISTENCIES IN DEFENSE SUBCONTRACTING 

THURSDAY, MAY 17, 2018 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:03 a.m., in Room 

2360, Rayburn House Office Building, Hon. Steve Knight [chairman of the Subcommittee] presiding. 

Present: Representatives Chabot, Knight, Evans, Murphy, and 

Lawson. 

Chairman KNIGHT. Good morning. The hearing will come to 

order. We have a vibrant Committee here, and we are going to get 

going. Stephanie and I rule this place. But we will have some folks 

kind of come in and out. Here we go, and we are very excited about 

this hearing. 

So, with that, I will give you a little bit of how this works, and 

then I will get into my statement and get Mrs. Murphy and her 

statement, and we will kind of get this thing rolling really quickly. 

I will do it a little backwards this time. The rules are: We go 

down the row, and you have 5 minutes to have your opening statement. You will see the lights. They will come on, and they will be 

green for 4 minutes and yellow for a minute. When it goes red, just 

try and wrap it up at some point. And then we will kind of move 

quickly. 

Okay. Well, Congress has long established the need to maximize 

opportunities for small business. I believe a vibrant small business 

community is essential to our national security. Many of these 

businesses serve our country by working with the DOD to provide 

necessary goods and services to our men and women in uniform. 

One purpose of the Small Business Act is to ensure that we maintain a strong industrial base of small contractors ready to provide 

cost-effective solutions and cutting-edge innovation. 

Therefore, it is important that no part of the Small Business Act 

is ignored or undermined. Statutory provisions that are not observed can threaten the crucial benefits small businesses provide 

to our military. 

The Subcommittee is grateful to the DOD Office of the Inspector 

General, or the DODIG, for its work in continuing to investigate 

the mismanagement of small business subcontracting requireSBR002 with DISTILLER

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ments. These reports provide documented proof of agency practices 

that are detrimentally impacting small subcontractors. 

Turning to the report at hand, the DODIG investigated small 

business subcontracting at two Army Contracting Command, or 

ACC, locations. The IG’s report issued on March 19, 2018, found 

that the ACC has inconsistently complied with statutory requirements requiring the administration of subcontracting plans. This 

failure resulted in denial of $915 million in small business subcontracting opportunities. 

Putting this number in context, the IG investigated 50 contracts 

for this report. Extrapolate that across the entire Army procurement system and the damage to small business could be devastating. Furthermore, the IG found that the ACC may have 

missed opportunities to recoup liquidated damages potentially owed 

to the Federal Government and taxpayers up to $82.3 million. 

Perhaps most telling is the IG’s finding that administering subcontracting plans is not a high priority at the ACC. This translates 

to less competition, higher prices, and could rob our warfighters of 

the newest innovation and best solutions that so often come from 

small businesses and startups. 

I understand this devastating report is merely a snapshot of one 

isolated piece of our defense contracting network, but I do hope 

that this conversation today will spur others to action. I can tell 

you, in my office, we work very, very closely with aerospace, with 

DOD, with subcontracting, and one of the biggest issues that we 

have is small subcontractors kind of getting into the system or 

being able to work in the system. We also know that small businesses are very agile, and especially with the DOD, if there is an 

issue with a system that our warfighters have and there is a way 

that we can correct that quickly, we want to. 

And I will leave with just this one story. I was out with a company just recently, and they were showing me their latest in robots 

that went out for bomb disposal. And they let me play with it. And 

they gave me the controller, and it was an Xbox controller. And I 

said: Is this really the controller? 

And they said: No, but this works better. So we bought it for 

$29.99, and this is what we use. 

Now, obviously, that is probably not as good as the original controller or it doesn’t hold up that well, but it did kind of get me 

thinking of how we can be agile and how we can move quickly, and 

if the warfighter or someone on the ground, whether it be a 

ground-pounder or someone in the air or at sea, is saying something, that we have got to be able to move quickly so that we can 

do those types of things. 

So, with that I will now yield to Mrs. Murphy for her opening 

statement. 

Mrs. MURPHY. Thank you, Mr. Chairman, and also thank you 

for holding this important hearing. 

You know, small businesses continue to look for new opportunities to expand their ventures, especially by competing for contracts 

in the federal procurement marketplace. In fact, in fiscal year 2017, 

the Federal Government was involved in contracting actions worth 

over $508 billion, making it one of the largest buyers of goods and 

services in the world. 

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Prime contracts are generally viewed as the most lucrative way 

for small businesses to participate in this marketplace. However, 

as contract bundling has become more prevalent, subcontracts have 

become more of a common entry point for small businesses to work 

with the Federal Government. Therefore, it is really critical that 

we ensure there is a level playing field for small firms as they pursue subcontracts. 

During today’s hearing, we will discuss the Department of Defense Inspector General’s recent audit of two Army Contracting 

Command Centers, one in Redstone, Alabama, and the other one 

is Warren, Michigan. 

I share Chairman Knight’s concerns that the audit findings are 

troubling. The audit concluded that the preparation and enforcement of subcontracting plans must be improved to ensure that 

small businesses are not losing out on subcontracting opportunities 

that could be critical to strengthening their bottom line and supporting many jobs. 

Subcontracting plans serve as an important accountability mechanism, ensuring that prime contractors make a good-faith effort to 

provide opportunities to small businesses. So it was really disappointing to learn that contracting officials at ACC-Redstone and 

ACC-Warren did not make certain that prime contractors provided 

small businesses with adequate subcontracting opportunities for 23 

contracts valued at nearly $915 million or nearly half of the contracts that the inspector general had examined. 

In these cases, it seemed like there was a lack of knowledgeable 

contracting personnel and proper transition protocols, both of 

which are basic functions of a contracting office. With more than 

22 million contracting actions each year, every Federal agency 

should make proper review of subcontracting plans a top priority. 

I think this is particularly important in the case of the Department 

of Defense, which oversees the vast majority of government contracts. 

The audit also revealed that contracting officers at these ACCs 

lacked the proper training to successfully administer subcontracting plans. Furthermore, the IG’s audit found that the ACCRedstone and ACC-Warren may have neglected to follow up on reports showing that contractors were not meeting all of their small 

business goals. 

Overall, small businesses seem to have been an afterthought, 

rather than a primary focus for these contracting offices. You know, 

I think encouraging more small business participation in the federal marketplace remains a priority for this Committee, and subcontracting will continue to be a vital path for small businesses to 

obtain government contracts. 

So, today, we have an opportunity to examine what went wrong 

at these ACCs and how we can implement solutions to increase access to subcontracting opportunities for small businesses. I thank 

the witnesses for being here and look forward to your testimony as 

we delve into the audit findings and its recommendations. 

Thank you, and I yield back. 

Chairman KNIGHT. Thank you very much. Okay. We will go to 

introductions. I would like to formally introduce our witnesses. Our 

first witness is Mr. Michael Roark, the Assistant Inspector General 

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for Readiness and Global Operations at the DOD. He has served 

with the Department of Defense Office of Inspector General since 

June of 2000 in various staff and leadership positions. Mr. Roark 

testified before the Subcommittee previously in 2016 on a similar 

audit undertaken by the inspector general. 

And we welcome you back today. 

Our second witness is Mr. Tommy Marks, Director of Army Office of Small Business Programs. In this position, Mr. Marks serves 

as the Army’s lead on small business policies, goals, and procedures, and represents the Army in interagency communications 

with the Small Business Administration and other Federal agencies. 

And we welcome you here today, Mr. Marks. 

Our last witness is Ms. Tiffany Scroggs. Ms. Scroggs is the newly 

appointed President of the Association of Procurement Technical 

Assistance Centers—that is a mouthful—having previously served 

as the Regional Director and Vice President. Ms. Scroggs is also 

the Program Manager of the Washington State Procurement Technical Assistance Center and has been a member of the Washington 

PTAC since 2007 when she joined as a procurement counselor. We 

welcome you, Ms. Scroggs, today. 

Okay. Now we have the rules of the lights, and we are ready to 

go. 

So, Mr. Roark, you are now recognized for 5 minutes for your 

opening comments. 

STATEMENTS OF MICHAEL J. ROARK, ASSISTANT INSPECTOR 

GENERAL, READINESS AND GLOBAL OPERATIONS, OFFICE 

OF INSPECTOR GENERAL, DEPARTMENT OF DEFENSE, ALEXANDRIA, VIRGINIA; TOMMY L. MARKS, DIRECTOR, ARMY OFFICE OF SMALL BUSINESS PROGRAMS, OFFICE OF THE SECRETARY OF THE ARMY, WASHINGTON, D.C.; AND TIFFANY S. 

SCROGGS, PRESIDENT, ASSOCIATION OF PROCUREMENT 

TECHNICAL ASSISTANCE CENTERS, LACEY, WASHINGTON. 

STATEMENT OF MICHAEL J. ROARK 

Mr. ROARK. Good morning, Chairman Knight and Ranking 

Member Murphy and distinguished members of the Subcommittee. 

Thank you for the opportunity to appear before you today to discuss our March 2018 audit report of Army small business contracting. 

During the audit, we visited two Army Contracting Command, or 

ACC, contracting centers, ACC-Redstone and ACC-Warren. Our 

audit objective was to determine whether ACC-Redstone and ACCWarren contracting officials took appropriate actions to ensure that 

prime contractors met their small business subcontracting goals. 

We reviewed a sample of 50 contracts valued at approximately $1.6 

billion of 216 contracts valued at approximately $7.6 billion that 

ACC-Redstone and ACC-Warren awarded to other than small businesses with estimated completion dates in fiscal years 2015 and 

2016. 

Overall, ACC-Redstone and ACC-Warren generally provided 

small businesses with the opportunity to compete for prime contracts. However, contracting officials did not ensure that prime conSBR002 with DISTILLER

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tractors provided small businesses with adequate subcontracting 

opportunities. 

Specifically, ACC-Redstone and ACC-Warren contracting officials 

ensured that prime contractors provided small businesses with adequate subcontracting opportunities for 27 of the 50 contracts we reviewed. However, contracting officials did not ensure that prime 

contractors provided small businesses with adequate subcontracting opportunities for 23 contracts valued at approximately 

$915 million of 50 contracts we reviewed valued at $1.6 billion. 

Specifically, ACC-Redstone and ACC-Warren contracting officials 

awarded six contracts without a subcontracting plan or a determination that no subcontracting possibilities existed; did not monitor prime contractors’ compliance with individual subcontracting 

plans for 11 contracts; did not determine why prime contractors 

with individual subcontracting plans did not meet their small business subcontracting goals for five contracts; and accepted an individual subcontracting report for one contract which may have 

misreported subcontracting goals. 

Each of these items is required by the Federal Acquisition Regulation, or FAR, subpart 19.7. These problems occurred due to three 

primary causes. 

First, ACC-Redstone and ACC-Warren contracting officials stated 

that some contracting personnel did not understand subcontracting 

plan requirements. For example, ACC-Redstone did not provide 

adequate training or procedures for administering subcontracting 

plans. 

Second, ACC-Redstone and ACC-Warren contracting officials 

noted that administering subcontracting plans was often not a high 

priority. 

Third, guidance at both commands did not address the transfer 

of subcontracting plan administration duties as required by the 

FAR when a contract is assigned to a new contracting officer. 

We made a total of eight recommendations to ACC-Redstone and 

ACC-Warren and the Deputy Assistant Secretary of the Army for 

Procurement to improve small business contracting procedures. 

Specifically, we made two recommendations to ACC-Redstone, and 

the command agreed with each recommendation and is in the process of taking corrective actions. 

In addition, we made three recommendations to ACC-Warren, 

which command officials agreed with. During the audit, officials at 

ACC-Warren took corrective actions, and we closed two of those 

recommendations. ACC-Warren is now in the process of completing 

corrective actions on one other recommendation. 

Finally, we made three recommendations to the Deputy Assistant Secretary of the Army for Procurement. The Army agreed with 

each of these recommendations and is in the process of taking corrective actions. 

As a result, small businesses may not have received subcontract 

work that prime contractors for Army contracts were required by 

the FAR to make a good-faith effort to provide. Contracting officials 

did not consistently obtain subcontracting reports or follow up on 

reports that showed that contractors were not meeting their small 

business goals. 

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Therefore, ACC-Redstone and ACC-Warren may have missed opportunities to recoup liquidated damages up of up to $82.3 million. 

This concludes my statement, and I would be happy to answer any 

questions you may have for me. 

Chairman KNIGHT. Thank you, Mr. Roark. 

And I would like to welcome to our Committee the Chairman of 

the full Committee, Chairman Chabot. Thank you very much. 

Okay. And we will move forward to Mr. Marks. You now have 

5 minutes for your opening statement. 

STATEMENT OF TOMMY L. MARKS 

Mr. MARKS. Good morning, Chairman Knight, Ranking Member 

Murphy, and distinguished members of the Subcommittee. I am 

Tommy Marks, the Director of the Army Small Business Programs. 

I first want to apologize for missing the Subcommittee’s suspense 

to provide a written statement, which was delivered yesterday. I 

misinterpreted the instructions. 

Secondly, thank you for this opportunity to testify before you 

today. I am an Army veteran and a member of the senior executive 

service of the Army. I have served as a Director since April 2015. 

Prior to that, I served as the Army’s Executive Director for service 

contracts policy in the Army’s Logistics Civil Augmentation Program, known to our soldiers as LOGCAP. I entered my 40th year 

of service to our Nation in January 2018 serving as a soldier, government contractor, and civil servant, with over half of that time 

working logistics contracting in the small business community. 

From April 2017 to January 2018, the Department of Defense inspector general conducted a performance audit of contracts for 

small business subcontracting at the two Army Contracting Commands located in Redstone in Huntsville, Alabama, and in Warren, 

Michigan for the Warren Contracting Center. The inspector general 

determined that the inconsistencies exist with actions of contracting officials taken ensuring that prime contractors met their 

small business subcontracting goals. The Army concurs with all the 

findings and recommendations. 

Recommendation No. 3 addresses the responsibilities of the Office of Small Business in coordination with the Deputy Assistant 

Secretary of the Army for Procurement to train contracting and 

small business officials on subcontracting in accordance with the 

Federal Acquisition Regulation part 19.7, to provide the Army Federal Acquisition Regulation supplement subpart 5119.7, to incorporate guidance on administering and transferring responsibility of 

subcontracting responsibility to between contracting officials, and 

to issue a policy alert notifying contracting and small business officials when the revision is completed. 

We have started a training as of December 2017. To date, we 

trained 193 personnel, and we are coordinating with our commands 

to complete a training schedule for the remainder of fiscal year 

2018. The revision is currently in staffing, which should be completed in about 60 days, and the training will also—the guidance 

will go out 1 June. I owe back to Mr. Roark that in writing, which 

will close out—hopefully will close out the recommendation. 

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Finally, I want the Subcommittee to know that the Army is a 

staunch supporter of small businesses, which is an enabler for 

Army readiness and a key component to our industrial base. 

Chairman Knight, I also want to share that my first invitation 

by Congress came from your district, California 25, a small business forum with a local PTAC, a Procurement Technical Assistance 

Center, and the Chamber of Commerce of Santa Clarita in August 

of 2017. 

Thank you again for the opportunity to testify, and I look forward to your questions. 

Chairman KNIGHT. Thank you very much. 

And, now, Ms. Scroggs, you have 5 minutes for your opening. 

STATEMENT OF TIFFANY S. SCROGGS 

Ms. SCROGGS. Chairman Knight, Ranking Member Murphy, 

and distinguished members of the Subcommittee, as well as Chairman Chabot, thank you for the opportunity to testify today. My 

name is Tiffany Scroggs. I am the program manager of the Washington State Procurement Technical Assistance Center and president of the Association of Procurement Technical Assistance Centers, known as APTAC. We are the professional organization of the 

95 PTACs nationwide. 

As you may know, the PTAC program was created by Congress 

in 1985 to help small businesses compete for Federal, State, and 

Local contracts and subcontracts. We are funded in part through 

a cooperative agreement with the Defense Logistics Agency. Last 

year, PTACs helped over 48,000 small businesses win and fulfill 

government contracts and subcontracts valued at over $20 billion. 

PTACs are deeply engaged with subcontracting issues. Not only 

do we help small businesses identify subcontracting opportunities, 

we are often contacted by large primes for assistance in developing 

their subcontracting plans and locating small businesses that can 

satisfy their unique requirements. My testimony today reflects 

input from some of the most experienced procurement professionals 

across the country. I am privileged to share their insights and hope 

that they will support your efforts to improve opportunities for our 

Nation’s small business contractors. 

We find that small businesses bring to the marketplace innovation, agility, and additional competition that results in better products and services at lower cost. This enhances our Nation’s supply 

chain. 

Furthermore, limited access to subcontracts reduces the number 

and capability of small business contractors that can qualify to 

enter the acquisition pipeline. As you know, subcontracting is the 

most realistic entry point for many small businesses seeking to 

supply to the government. 

Congress and units of government can affirm that a robust small 

business participation in the supply chain is a priority by focusing 

on four elements: education, oversight, transparency, and incentives. Each of these are explored in detail in my written testimony, 

and today I will share insights for a few. I will conclude my remarks with additional information as to how PTACs across the 

country can assist in the effort. 

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First, education, ensuring that not only agency acquisition staff 

but prime contractors understand the regulations with regard to 

subcontracting goals, plans, and reporting. This will go a long way 

toward remedying situations such as those identified in the IG’s report. 

Related to oversight and internal controls, we believe that a primary factor in agency subcontracting failures is generally an unrealistic overreliance on under resourced contracting officers to faithfully enforce FAR subpart 19.7. 

I have listed several suggested remedies in my written testimony, and among them is to increase the number of SBA procurement center representatives and commercial market representatives. 

On the topic of transparency, one of the biggest barriers to small 

business access to subcontracts is lack of information about the opportunities. Unlike agency solicitations, which are posted on 

fbo.gov, there is no centralized listing for subcontracting opportunities or a mechanism for identifying connecting with potential buyers. Suggestions include establishing a public platform similar to 

FBO where subcontracting opportunities can be posted. While 

SBA’s subnet could theoretically be used for these purposes, currently it lacks critical amounts of usage and is difficult to navigate. 

Transparency is not only a powerful motivator for compliance, 

but it expands the ability of other interested parties to help support enforcement. Amongst the suggestions is to make subcontracting plan information publicly available upon award to allow 

small business contractors to participate in policing the compliance 

of prime contractors. 

However you choose to implement enhancements to the subcontracting plan compliance please remember this, PTACs play an important role in supporting subcontracting. We train small businesses to be procurement ready, and we regularly work with prime 

contractors who come to us for help with small business outreach 

and subcontract plan development. Despite our active involvement 

with small businesses, far too few prime contractors work with 

PTACs, and PTACs are hampered by the same lack of transparency that limit our small business clients. 

The value of PTACs as an essential bridge between small business contractors and DOD was highlighted this year earlier in a report of the advisory panel on streamlining and codifying acquisition 

regulations known as the section 809 panel. The 809 panel identified PTAC program as the only DOD-wide program to conduct outreach to bring small businesses into the defense market. The report 

recommended a number of provisions that would expand our capacity resulting in our ability to further support a prime contracts effort to connect with small businesses. 

Thank you again for the opportunity to testify and for your support of the PTAC program nationwide. I hope that our input today 

has been helpful, and we stand ready to help the Committee any 

way that we can. 

Chairman KNIGHT. Okay. Very good. And we will go through a 

round of questions and see how this works out. I appreciate the 

witnesses coming in today and testifying so I will kind of go 

through a couple questions and kind of go down the row. 

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Mr. Roark, give me an idea of the most impactful recommendations you made and how best we can address the deficiencies. 

Mr. ROARK. In our Army report, which we issued in March of 

2018, we made a total of eight recommendations. They are really 

broken down into three categories. The first category was determining whether liquidated damages were appropriate, and so we 

made a series of five recommendations to ACC-Redstone and ACCWarren, and those really had two categories: first, working with 

contractors to make sure that the individual subcontracting reports 

were in the system so that contracting officers could make a determination about whether they met their good faith efforts, and so 

we had three recommendations, one for Redstone and two for ACCWarren on that category. 

Chairman KNIGHT. And I don’t mean to cut you off, Mr. Roark, 

and I understand from your testimony, but how are we going to 

track this? How are we going to track that it has been done? It 

seems like the Army is very, very willing to accept these and to 

move forward and kind of correct the deficiencies, but how are we 

going to track these to make sure this happens? 

Mr. ROARK. Well, all reports that we issue go into a follow-up 

process where we follow up on the recommendations to make sure 

that they were implemented. And so, in two of the cases, the Army 

ACC-Warren actually made corrective actions on the recommendations during our audit, and we were able to verify that they carried 

out on those actions. 

For the other recommendations, other than the liquidated damages recommendations, we also had two on policies and procedures 

to the Army level and one on training, as Mr. Marks stated in his 

opening statement. And in those cases, the Army agreed, and we 

continue to follow up with each of the organizations over the next 

few months to ensure that those recommendations were implemented, and so we will continue to gather documentation and conduct interviews as necessary to verify that that was done. 

Chairman KNIGHT. Okay. And, you know, this is a little bit off, 

but this is two places that we did the audit. Do we believe that 

there is a systemic problem, or do we believe that this is something 

that might be in other services? Or can you make that determination by your audit? 

Mr. ROARK. So this audit on the Army that we just issued about 

2 months ago was really the fifth that we have done in the last 3 

years since 2015. So, over that time, we have done five different 

audits: two on the Marine Corps, one on the Air Force, and one on 

the Army, and then there was also another report that was more 

or less like a follow-up audit. 

So I think that, from those five reports, you know, we have identified trends, and for example, the consistent challenges that contracting officials face is monitoring prime contractors’ compliance 

with individual subcontracting plans and determining why prime 

contractors with individual subcontracting plans did not meet their 

small business subcontracting goals. 

Chairman KNIGHT. Okay. And, Mr. Marks, give me an idea of 

what the priorities of the Army, is subcontracting a high priority? 

Is review of subcontracting in the small business, how it kind of 

works in with prime contractors, is this a high priority? 

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Mr. MARKS. Sir, I would tell you that we haven’t done what we 

needed to do, but going forward, it is definitely going to be a priority. We focus on, as the Ranking Member stated in her statement, the prime contract side of the house we do very well. We do 

do subcontracts. We put in our acquisition strategies language as 

we build in those requirements about subcontracting, so it is a 

matter, from my standpoint, a matter of enforcement and compliance. 

Chairman KNIGHT. Okay. And I appreciate you in your statement of saying that you are very willing and you have already 

started to implement some of these new procedures to correct these 

actions, and it seems like, from Mr. Roark’s statement, that that 

is in the works and that is already happening. Some of these have 

already happened during the audit, so that is a good thing. Sometimes we get folks that come in here, and they just adamantly kind 

of keep pushing back and pushing back, and that is really not what 

you want to hear when you get an audit that shows deficiencies. 

You really want to hear a willingness to come forward and correct 

or else there will probably be another audit. 

Mr. MARKS. Yes, sir. I totally agree with you. And based on 

what the Ranking Member said, it is basic contracting, really. I 

mean, it is a part of what any contracting officer should be doing. 

They love to award contracts. I mean, that is kind of the thrill, but 

the work really is in contract administration, and that is what this 

is about. 

Chairman KNIGHT. And understand that we look—in this Committee, we look at the subcontracting, we look at the small business aspect because, as I said, they are very agile. They are very 

able to do things that maybe the primes can’t or maybe the primes 

don’t want to do just because it would cost them too much; it would 

be kind of outside their bandwidth at the time or something like 

that. So the small business can be able to go in there and look at 

that problem, fix that problem and move forward, and that is why 

it is so important, especially with the DOD, especially with the way 

that we have these large, ultra large contracts, and, you know, nobody really builds an airplane on their own anymore or builds a 

ship on their own. They have thousands of small contracting companies that help them. And so that is why we are always very, very 

adamant about making sure that that is a high priority and making sure that we know that and we want everyone to know that. 

Okay. And I am going to move to Mrs. Murphy for her first round 

of questions. 

Mrs. MURPHY. Great. Thank you, Mr. Chairman. 

Mr. Roark, your audit found that DOD may have missed opportunities to recoup liquidated damages of up to $82.3 million. That 

is staggering. Why do you believe that the contracting officials neglected to follow up on reports that prime contractors were not 

making good faith efforts to comply with subcontracting goals when 

there was the potential to recoup that amount of money? 

Mr. ROARK. So, in our report, we wrote several recommendations about why, you know, to correct some of those deficiencies, 

but, you know, I think that some of the factors that we talked 

about earlier are the case, as Mr. Marks said that, you know, the 

focus is often times on awarding contracts and not so much on the 

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administration side of it. And so, you know, we feel that there is 

a training and a guidance piece that could correct that issue. 

Also, we observed a lot of high turnover among contracting officials, and so then what happens in that case is, you know, an original contracting officer may have awarded the contract, but it 

passes off to a second or a third contracting officer. And so sometimes there is not good transition from one contracting officer to 

another, which, again, we think goes back to a training and a guidance solution there. 

And there is also a few other system issues with Federal Procurement Data System that could be improved, but I think that the 

transferring files from one to another and the—— 

Mrs. MURPHY. So let me just ask—— 

Mr. ROARK.—follow-through is kind of the two major parts. 

Mrs. MURPHY. Just as a follow-up, if that is the primary role 

of these contracting officers, you know, approving, administering, 

why isn’t this training already happening? Can you talk about 

what training they currently go through, and how do we make that 

fix? 

Mr. ROARK. So, in our report, we tackled that exact issue. We 

took a look at the training that they were getting and take—we 

also took a look at some of the guidance that they were receiving 

and what we found was that often times the training that they 

were receiving would, you know, kind of briefly get into some of 

these issues, but it didn’t really cover it in a sufficient detail to 

really, you know, cover some of the intricacies that are included in 

FAR 19.7. 

Also, on the guidance side, oftentimes when you look at the guidance, it would refer to a specific issue just briefly, but it really 

didn’t provide very detailed information to the contracting officer to 

use at a practical level to kind of determine what they should do 

in certain cases. 

Mrs. MURPHY. Okay. Thank you. 

And, Ms. Scroggs, first, let me just thank APTAC’s help with our 

successful effort to get an amendment to last year’s NDAA to provide PTACs with the clear authority to assist small businesses in 

getting SBIR and STTR contracts. I really appreciated that. 

Ms. SCROGGS. Thank you. We are excited about that. Thank 

you. 

Mrs. MURPHY. So my question is large prime contractors are required to submit subcontracting plans for review prior to receiving 

an award. If the contracting officer finds them to be inadequate, he 

or she can decide to pull the contract. In practice, however, how 

often are contracts not awarded due to inadequate subcontracting 

plans? 

Ms. SCROGGS. That is data that I don’t have. I can tell you that 

we get instances where the prime contractor will call us and say, 

‘‘The Army told me to call you,’’ or, most recently, it was, ‘‘I am in 

final negotiations on this Navy effort, and the Navy told me to call 

you so that we can demonstrate good-faith effort,’’ and so it was a 

thin relation to your individual subcontracting plan. And a lot of 

times it is just potentially the prime is not set up to handle the 

reporting. They don’t understand the FAR clause, and so they read 

the clause for the first time, and they are like, oh, man, this is 

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going to require some internal assistance. And so we brainstorm 

with them kind of what we see as best practices. We train them 

on the subpart 19.7 and help them fully understand it. 

But in my limited experience, they always pass after we work 

with them, and they are sincere about working with us. 

Mrs. MURPHY. Great. Thank you. 

And I am just about out of time, so I will yield back, Mr. Chairman. 

Chairman KNIGHT. Okay. Thank you very much. 

Mr. Evans, you are up for your opening comments. 

Mr. EVANS. Thank you, Mr. Chairman. 

I would like to ask this question to the panel. If possible, can you 

speak to the experience of minority- and women-owned firms in 

dealing with subcontracting plans and if they face any unique challenges when navigating this complex process? 

Ms. SCROGGS. Yes. The PTAC has a strong ethic and mandate 

to do specific outreach to diverse firms, including women, minority, 

veterans, and HUBZone firms, and we take that very seriously. 

One thing that we really wanted to make clear was that maximizing access to subcontracting opportunities is not the same as 

maximizing the dollars awarded, although that would be a result. 

We see that simply increasing the awards to the same set of businesses, which is kind of what happens now, it won’t deliver the 

benefits that we are describing here today. We would like to see a 

prioritization of creating an open and vibrant opportunity so that 

the firms from many diverse backgrounds can have a true opportunity to get into the supply chain maybe for the first time or have 

an opportunity to compete where previously they did not. 

So the prime contractors kind of fit into three categories, those 

that take the goals very seriously and see the benefit behind them; 

those that kind of do it because they are required to, and they 

might have limited capacity to take it more seriously than we 

would like them to see; and then the third group who simply 

doesn’t care and maybe does it as an afterthought when they realize they haven’t complied with their reporting. 

But those firms, the minority firms, the women-owned firms, the 

veteran-owned firms, certainly there is opportunity with the 

goaling to get their foot in the door, to put forth a good capability 

statement, and to kind of connect with the primes that way. So, in 

that sense, the goals work, and the firms that are able to perform 

are usually able to make the case if there is a competitive opportunity in which to bid. 

Mr. MARKS. Sir, what we do is we track, you know, the four socioeconomic categories for the women-owned businesses, but we do 

not track it broken down to that level. 

Mr. EVANS. Okay. 

Mr. ROARK. For our audit, we, on the Army, we focused on 

small businesses as a whole, and we didn’t break it down into any 

further subcategories. 

Mr. EVANS. Okay. 

Ms. Scroggs, go back to you. Can you think of any examples of 

success for women or minority contractors, and if so, why the experience of that—particularly firms—were different? 

Ms. SCROGGS. Repeat it again. Why the firms were successful? 

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13 

Mr. EVANS. Yes. Can you think of any examples of success for 

women or minority contractors, and if so, why the experience of 

that particular firm was different? 

Ms. SCROGGS. Certainly we have many, many examples of 

firms in the 8(a) program, the Small Business Development Program that the SBA monitors. We have firms that are in that program that see great benefit, and I am working with one firm now 

that is likely to graduate a few months early as a result of exceeding the size standard for their industry code, which is kind of the 

whole purpose of the program. 

And so the benefits to that, of course, are really strong in terms 

of prime contracts, but the prime contractors also take the small 

business—the disadvantaged business goal pretty seriously as well, 

and they were able to gain appropriate past performance through 

the 8(a) program that made them more competitive with the other 

primes. So, you know, the 8(a) program is—I would put a feather 

in that cap as a success program certainly helping firms compete. 

Mr. EVANS. Thank you, Mr. Chairman. 

I yield back the balance of my time. 

Chairman KNIGHT. Thank you very much. 

Mr. Lawson, you are up for your questions. 

Mr. LAWSON. Thanks, Mr. Chairman and Ranking Member. 

One of the questions I had Mr. Evans asked, and so that took care 

of it. And I thought it was quite interesting the way you all responded. 

As I travel across this country and come in contact with small 

businesses all the time about subcontracting, one of the things they 

express a great deal is the anxiety that they have as subcontractors. When you talk to the prime, the prime blames it on the Federal Government, the paperwork, the requirements, and everything 

else that you can think of. So, in your opinion, what is the number 

of challenges that small businesses are facing when they are participating as a subcontractor with opportunities when they have all 

this anxiety? And just for the panel, and I don’t know whether you 

all see a lot of this, but when we are out in the field, this is what 

they speak to all the time. I had a small business roundtable in 

Jacksonville about 3 or 4 weeks ago, and this was brought up a 

great deal. And so I don’t know how you get to the bottom line of 

it, and maybe some of you all can shed some light on it. 

Mr. MARKS. Sir, I would tell you that I have not heard it to the 

level that you have heard. We get inquiries to our office. I take capability briefs. I have open line to talk to contractors about—small 

business contractors about any issue that they may have so that 

we can help solve that. They don’t have any data on what those 

anxieties are, but typically, in the pay arena, we get those complaints, and if we get those, we run those to ground because we 

know that if the prime—when we are paying the prime, they are 

supposed to do due diligence and pay their subcontractors. And 

those are some of the issues that sometimes come up, and we will 

hold the primes accountable. 

Mr. LAWSON. Okay. And if I may, do you think some of the anxiety expressed because the relationship with the prime, those anxieties are there because they lose the contract or the prime contract 

will go with someone else? And the reason why I ask that question 

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14 

is it appears that they don’t have the bonding capacity to compete 

as a prime, and so they rely very heavily on the prime in order to 

do these contracts, but the anxiety level comes from the fact that 

they might even feel they do a better job than the prime, you know. 

And so what I am trying to say, from your experience, do you ever 

come in contact with any of that where the subs are much more 

successful than the primes, but they have to rely on the primes because the way this is set up in defense spending? 

Mr. MARKS. I will tell you that that is probably a true statement. I mean, we do—in the service arena—service contracts 

arena, when you look at contracts that are awarded, a number of 

teams that are put together really with like prime and small businesses to do the work. A lot of times a small business, as you stated, don’t have—they don’t have the capacity to compete on their 

own in order to win the contracts. So I will tell you a number of 

them that I talked to, they would prefer to subcontract versus 

being a prime contractor because of our red tape, as they say, you 

know, a lot of stuff to do business with the Department of Defense, 

with the Federal Government, period, so. 

Mr. LAWSON. And before my time runs out, Mr. Roark, what 

can you all do to try to help alleviate those kinds of concerns? 

Mr. ROARK. I think that, you know, one of the benefits that has 

come out of our series of audits has been taking a look across the 

services to determine whether prime contractors are being held accountable for living up to their subcontractor goals that they said 

that they would do at the time of award. And I think that it is important to review whether contracting officers and contracting officials are actually following up on that throughout the contract to 

see if they are actually meeting the goals that they said that they 

would. So I think that, looking across the services, to ensure that 

the primes are being held accountable and that contracting officials 

are reviewing their progress is important. 

Mr. LAWSON. Okay. Thank you. 

Mr. Chairman, could I have one more shot at it? 

Chairman KNIGHT. Yes. 

Mr. LAWSON. How often do you all evaluate the prime contractors? Is it done on a yearly basis? A quarterly basis? How often is 

it done? Can anybody speak to that? And if I am not clear, what 

I mean is, how are they performing in conjunction with their subcontractors? 

Mr. MARKS. So I think, as the audit showed, we are not doing 

what we should be doing. When we establish those subcontracting 

goals with a prime contractor and they put that on the table, and 

what we are not doing well today is really compliance because we 

have already got the verbiage in our regulations. 

You have talked about liquidated damages. You are supposed to 

develop that before the contract award. The two of us know what 

that is, and as this audit shows, that is not being done. So, until 

we really enforce, and I think we have the tools, it is holding folks 

accountable, and you have got to do the enforcement and hold them 

accountable. 

Mr. LAWSON. Okay. 

Mr. Chairman, I yield back. 

Chairman KNIGHT. Thank you. And just a couple follow-ups. 

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Ms. Scroggs, have you noticed any difference in military versus 

civilian agency adherence to Small Business Act subcontracting requirements? 

Ms. SCROGGS. No. We find that the IG’s findings related to the 

Army are consistent across all agencies, regardless of military or 

civilian. 

Chairman KNIGHT. So, you know, obviously, that is a problem 

for us. We are very much about subcontracting small business 

being able to work in the system, to be able to do some of those 

things in the system that we just don’t see primes stepping up and 

doing or primes not wanting to do. So I know I have repeated myself a couple times on this, but it is pretty important. 

So, Mr. Marks and Mr. Roark, we are going to ask one thing of 

you. In the next 4 to 6 months, we want a follow-up to this Committee on how things are going from the adherence of the recommendations and, Mr. Marks, on what you are doing to make 

these deficiencies not there anymore, how you are correcting them, 

what is going on, what is the new policies, the new procedures. And 

I am a very kind of put a point on it. That is November 17, is 6 

months. If you come back earlier, you get credit in the Committee. 

There you go. So we would like to have that, and we would like 

to have a good relationship with the Committee that we are working on the things that we think are very important, we think that 

the community thinks are very important. And that is how it happens with a good working relationship. So, if we can commit to 

that, then we are good to go. 

Are there any further questions from the Committee? Okay. I 

think we have done our work, and this Committee—let’s see. I always end before I am supposed to say what I am saying. Okay. I 

ask unanimous consent that members have 5 legislative days to 

submit statements and supporting materials for the record. 

Without objection, so ordered. And this hearing is now adjourned. 

[Whereupon, at 10:51 a.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

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lNS~ECTQRJiE:r~-tEML U.S. DepartmentofDefense 

Statement of Michael J. Roark 

Assistant Inspector General for 

Readiness and Global Operations 

Department of Defense Office of Inspector General 

for a hearing on 

Before the 

Subcommittee on Contracting and Workforce 

Committee on Small Business 

U.S. House of Representatives 

May 17,2018 
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Good morning Chairman Knight, Ranking Member Murphy, and distinguished members 

of the Subcommittee. Thank you for the opportunity to appear before you today to discuss our 

audit of Army small business contracting. 

March 2018 Audit Report on Army Small Business Contracting 

During the audit on Army small business contracting, we visited two Army Contracting 

Command (ACC) contracting centers. ACC-Redstone supports the development, acquisition, 

and fielding of aviation and missile systems. ACC-Warren supports the development, 

acquisition, and fielding of soldier and ground systems. 

Our audit objective was to determine whether ACC-Redstone and ACC-Warren 

contracting officials took appropriate actions to ensure that prime contractors met their small 

business subcontracting goals. For this audit, we reviewed a sample of 50 contracts (valued at 

approximately $1.6 billion) of216 contracts (valued at approximately $7.6 billion) that ACeRedstone and ACC-Warren awarded to other than small businesses with estimated completion 

dates in Fiscal Years 2015 and 2016. 

Overall, ACC-Redstone and ACC-Warren generally provided small businesses with the 

opportunity to compete for prime contracts; however, contracting officials did not ensure that 

prime contractors provided small businesses adequate subcontracting opportunities. We made a 

total of 8 recommendations to the Army to address the deficiencies identified during the audit. 

Small Businesses Subcontracting Opportunities for Army Contracts 

ACC-Redstone and ACC-Warren contracting officials ensured that prime contractors 

provided small businesses with adequate subcontracting opportunities for 27 (valued at $693.5 

1 
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million) of 50 contracts reviewed (valued at $1.6 billion) with estimated completion dates in FYs 

2015 or2016. 

However, ACC-Redstone and ACC-Warren contracting officials did not ensure that 

prime contractors provided small businesses with adequate subcontracting opportunities for 23 

(valued at $914.8 million) of 50 contracts (valued at $1.6 billion). Specifically, ACC-Redstone 

and ACC-Warren contracting officials: 

• awarded 6 contracts, valued at $330.7 million, without a subcontracting plan or a 

determination that no subcontracting possibilities existed; 

• did not monitor prime contractors' compliance with individual subcontracting plans 

for II contracts, valued at $480.3 million; 

• did not determine why prime contractors with individual subcontracting plans did not 

meet their small business subcontracting goals for 5 contracts, valued at $81.6 

million; and 

• accepted an Individual Subcontracting Report for one contract, valued at $22.1 

million, which may have misreported subcontracting awards. 

Each of these items are required by the Federal Acquisition Regulation (FAR) Subpart 19.7. 

These problems occurred because of three primary causes. First, ACC-Redstone and 

ACC-Warren contracting officials stated that some contracting personnel did not understand 

subcontracting plan requirements. For example, ACC-Redstone did not provide adequate 

training or procedures on administering subcontracting plans. Second, ACC-Redstone and ACeWarren contracting officials noted that administering contracting plans was not a high priority. 

Third, subcontracting plan administration guidance at both locations did not address the transfer 

of subcontracting plan administration duties required by the FAR when a contract is assigned to 

2 
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a new contracting officer. For example, the Army FAR Supplement (AFARS) did not address 

the transfer of subcontracting plan administration duties, 1 

Status of Army Recommendations 

The report made 8 recommendations to ACC-Redstone, ACC-Warren, and the Deputy 

Assistant Secretary of the Army for Procurement to improve small business contracting 

procedures. Specifically, we recommended that ACC-Redstone ensure individual subcontracting 

reports are entered into the Electronic Subcontracting Reporting System for seven contracts, and 

determine whether liquidated damages can be imposed against the contractors. We also 

recommended that ACC-Redstone determine whether the contractors for two contracts made a 

good-faith effort to meet their subcontracting goals, and if not, whether liquidated damages may 

be imposed against the contractor. ACC-Redstone agreed with each recommendation and is in 

the process of taking corrective actions. 

In addition, the report recommended that ACC-Warren ensure that individual 

subcontracting reports arc entered into the Electronic Subcontracting Reporting System for three 

contracts, and determine whether liquidated damages may be imposed against the contractors. 

We recommended that A CC-Warren determine whether the contractors for three contracts made 

a good-faith effort to meet the subcontracting goals in their plans, and if not, whether liquidated 

damages can be imposed against the contractors. We also recommended that ACC-Warren 

require one contractor to submit a corrected individual subcontracting report in the Electronic 

Subcontracting Reporting System, and determine whether liquidated damages may be imposed 

against the contractor if a good-faith effort was not made to meet subcontracting goals. 

1 AFARS Subpart 5119.7. 

3 
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ACC-Warren agreed with each recommendation and is in the process of completing corrective 

actions. 

Finally, the report recommended that the Deputy Assistant Secretary of the Army for 

Procurement train contracting officers on FAR 19.7 responsibilities for approving and 

administering subcontracting plans. We also recommended that the Army revise the AFARS, 

and alert contracting officials. regarding procedures for transferring subcontracting plan 

administration duties when a contract is transferred from one contracting ofticer to another. 2 

ACC-Redstone and ACC-Warren May Have Missed Opportunities to Recoup Liquidated 

Damages 

As a result, small businesses may not have received subcontract work that prime 

contractors for Army contracts were required by the FAR to make a good-faith effort to provide. 

Contracting officials did not obtain subcontracting reports and did not follow-up on reports that 

showed that contractors were not meeting their small business goals. Therefore, ACC-Redstone 

and ACC-Warren may have missed opportunities to recoup liquidated damages of up to 

$82.3 million. We made recommendations to ACC-Redstone, ACC-Warren, and the Deputy 

Assistant of the Army for Procurement to improve procedures for administering subcontracting 

plans submitted by prime contractors. 

Results of Series of Five Audits on DoD Small Business Subcontracting 

The subject oftoday's hearing is our March 2018 audit report on Army small business 

contracting, however, this is only our most recent report on this subject. We issued a total of five 

2 AFARS Subpart 5119.7. 

4 
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reports on Marine Corps, Air Force, and Army small business subcontracting from 2015 to 2018. 

We initiated the audits on DoD small business contracting based on a hotline complaint alleging 

that two Marine Corps contracting commands did not ensure small businesses were awarded a 

sufficient number of contracts and did not hold large prime contractors accountable for meeting 

small business subcontracting goals. Specifically, we conducted two audits of Marine Corps 

contracting commands (Marine Corps Installations National Capital Region-Regional 

Contracting Oftlce and Marine Corps Systems Command); a follow-up audit to determine 

whether Marine Corps Installations National Capital Region-Regional Contracting Oflice 

implemented our recommendations; an audit on two Air Force contracting commands, and an 

audit on two Army contracting commands. 

In these five reports, we identified that contracting officials had consistent challenges 

monitoring prime contractors' compliance with individual subcontracting plans, and determining 

why prime contractors with individual subcontract plans did not meet their small business 

subcontracting goals. 

These challenges existed because training and guidance provided to contracting officials 

were not adequate, and administering subcontracting plans was often not a high priority. 

Shortfalls also commonly existed with high turnover rates among contracting personnel 

negatively impacting transferring duties to administer subcontracting plans from one contracting 

official to another. Contracting officers also did not consistently enter data correctly into the 

Federal Procurement Data System-Next Generation that allowed contracting officials to monitor 

compliance with small business subcontracting plans or enable contractors to submit individual 

subcontracting reports in the Electronic Subcontracting Reporting System. This concludes my 

statement and I would be happy to answer any questions you have. 

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RECORD VERSION 

STATEMENT BY 

MR. TOMMY L. MARKS 

DIRECTOR FOR ARMY SMALL BUSINESS 

BEFORE THE 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE 

COMMITTEE ON SMALL BUSINESS 

ON 

AUDIT REVEALS INCONSISTENCIES IN DEFENSE SUBCONTRACTING 

SECOND SESSION, 115TH CONGRESS 

MAY 17,2018 

NOT FOR PUBLICATION UNTIL RELEASED BY THE 

COMMITTEE ON SMALL BUSINESS 
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Chairman Knight, Ranking Member Murphy, distinguish Members of the House Small 

Business Committee on Contacting and Workforce. The Army is a staunch supporter of 

Small Business. Small Business is a "Readiness Enabler" in support of the Army's 

mission and the industrial base. Small Business goals that support the Secretary of the 

Army's priorities of Readiness, Modernization and Reform are; to ensure mission 

requirements in support of readiness and the industrial base through small business 

utilization; to increase innovation through Small Business Innovation Research and 

Small Technology Transfer Research Programs (SBIR/STTR) in support of the Army's 

modernization priorities and to advocate for changes in policy to reduce barriers to entry 

for small businesses. 

Across the last three fiscal years, Headquarters, Department of the Army, Office of 

Small Business Programs (HQDA OSBP) has led the Department of Defense (DoD) 

and federal government agencies in small business contracting -averaging $18.78 per 

year. It is an achievement firmly based on our ability to connect with the small business 

community at its most basic level: listening and responding. Communication is essential 

to OSBP's goals as directed actions by 15 U.S.C. 644 (k). Our mission is to be the 

premier advocacy organization committed to maximizing small business utilization in 

support mission requirements. 

The Army's priorities of readiness, modernization, and reform begin with supporting 

small businesses in each socioeconomic category. HQDA OSBP continues to focus on 

modernization and readiness, which is essential to efficiency, and reform. In 

coordination with the Deputy Assistant Secretary for Research and Technology (DASA 

R&T) and Army Commands (ACOM), OSBP is committed to educating small 

businesses and institutions through SBIRISTTR programs. In doing so, the SBIR/STTR 

program yielded over $5.6M in awards for fiscal year 2017. 

As a policy office, OSBP is vital to the procurement process. The ability to recognize 

opportunities for small businesses to do business with the Army begins with 

engagement. OSBP has instituted a multi-channel communication plan via traditional 
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and social media focused on readiness, modernization, efficiency, Soldiers and their 

families. Our story is about more than what we buy; the story begins by connecting with 

the small business community at the highest level. It is a story of the Army's mission in 

tandem with the small business community to support the Warfighter. It is providing 

clarity of the procurement process and supporting the execution thereof. It is safety, 

innovation and the security of a Nation in the face of existential threats. 

Commitment to Small Business Utilization 

A review of the statistics revealed that the Department of Defense (DoD) awarded 

$59.48 in prime contract dollars to small business firms, during the period October 1, 

2016 through September 30, 2017. In FY 2017, DoD's total Small Business eligible 

dollars was $2648. The three major services of the DoD (Air Force, Army, and Navy) 

accounted for $2088 which is approximately 78% of DoD's total Small Business eligible 

dollars. 

The Army awarded more dollars($18.78) to Small Businesses. The prime small 

business goal was 26%, which the Army exceeded goal by achieving 28.74%. As it 

relates to each socioeconomic category, the Army accomplished the following: The 

small disadvantaged business goal was 11% with a reported achievement of 13.1 %; 

service-disabled veteran-owned business goal was 3.5% with an achievement of 4.3%; 

the Historically Underutilized Business-Zone goal was 3% -achieving 2.3%; and 

women-owned small business goal was 4.8% with an achievement of 5.6%. On the 

whole, the Army met four of the five statutory goals for fiscal year 2017. 

Senior Leader Involvement in Maximizing Small Business Participation 

The Army's Senior Leadership is wholly committed to maximizing Small Business 

participation. During FY17, the Secretary of the Army championed the Army's Small 

Business program by providing guidance and direction to the field: to include small 

business participation in mission support. The inclusion of small business in the Army's 
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acquisition plans for operational execution of mission requirements and contract support 

is vital. The Army Acquisition Executive (AAE) designated the deputy of each program 

executive office or program manager as the small business point of contact to support 

command small business specialist. Additionally, the AAE chairs the acquisition 

systems review board, which includes the Director of OSBP, Deputy Assistant Secretary 

of the Army (Procurement), the Heads of Contracting Activities, Army Principal Staff, 

and Senior Operational Commanders to ensure small business equities are 

appropriately considered. 

The Army's Senior Commanders have demonstrated their commitment to the Small 

Business Program by instituting policies focused on achieved and newly assigned 

program goals. For example, the Commanding General of the Army Material Command 

requires his subordinate commanders to develop five objectives and performance 

measures for small businesses. These metrics support the commands' priorities of 

Strategic Readiness, Future Force, Soldiers, and People. 

In FY17, the Commanding General of the US Army Corp of Engineers (USAGE), 

encouraged his commanders to continue to maximize small business opportunities and 

to educate their colleagues on the impact and value of small firms for USAGE and the 

nation. 

As a result of the Army's senior leadership's commitment and involvement, over the last 

five years, the Army has sustained its small business performance excellence and 

established effective market research consistently. Due to this focus and commitment, 

the Army has continued to meet or exceed the DoD assigned goals for the fifth 

consecutive year-and finish as DoD's number one Small Business performer. 

Small Business Outreach 

In October 2017, OSPB held its fifth annual Small Business Seminar. The seminar was 

headlined by Army Senior Leadership, which included the Under Secretary of the Army 

and Army Chief Information Officer speaking to the importance of Small Business to the 
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Army's mission and the industrial base and shared the Army's vision on information 

management, cyber and the critical need for innovative companies to assist in filling 

critical mission gaps. Furthermore, the Small Business Seminar and Matchmaking event 

focused on the following: 

Ensuring the small business community is up to date on new guidelines, 

processes, and regulations 

Offering the small business community the opportunity to network with federal 

agency and DoD Primes and other government organizations 

Similarly, The United States Army Corps of Engineers (USAGE) partnered with the 

Colorado Procurement Technical Assistance Center (PTAC) for a Virtual Industry Day. 

This event offered an alternative to the traditional brick and mortar format The Virtual 

Industry Day provided an overview of three specific acquisitions for base operations 

services-including ground maintenance, custodial services and waste removal at 

multiple sites throughout the United States Army Reserve 88th Regional Support 

Command. These services will cover 19 states. 

The event-including all presentations-was broadcast live to 32 participating PTACs. 

The Virtual Industry Day had 225 attendees: 97% were small businesses, and 3% were 

large businesses. 

Over 2500 attendees from a dozen federal agencies-including large and small 

businesses-convened at the Army Corps of Engineers at The Society of American 

Military Engineers (SAME) Small Business Conference. The SAME Small Business 

Conference gathers industry leaders from many professions like engineering, 

construction, architecture-along with federal agencies, and the Department of Defense 

to showcase best practices, share effective strategies and network around small 

business opportunities. These events demonstrated the Army's commitment to 

educating and informing the Small Business community about the numerous 

opportunities the Army makes available for them each year. 
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Mr. Chairman and distinguished Members of this Subcommittee, I sincerely appreciate 

your steadfast and strong support for small business which is a "Readiness Enabler" in 

support of the outstanding men and women in uniform, our Army Civilians, and their 

Families. 
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Testimony of 

Tiffany Scroggs, President 

Association of Procurement Technical 

Assistance Centers (APTAC) 

To the U.S. House of Representatives Committee on Small Business 

Subcommittee on Contracting and the Workforce 

"Hotline Truths II: Audit Reveals Inconsistencies in Defense Subcontracting" 

May 17,2018 

Chairman Knight, Ranking Member Murphy and distinguished Members of the Subcommittee, thank you 

for this opportunity to testify on the results of the recent report from the U.S. Department of Defense's 

Office of the Inspector General review of small business subcontracting practices at Army Contracting 

Command (ACC) Redstone and ACC Warren. 

My name is Tiffany Scroggs. I am Program Manager of the Washington State Procurement Technical 

Assistance Center (PTAC) and President of the Association of Procurement Technical Assistance Centers 

- APTAC- which is the professional organization of the 95 PTACs nationwide. 

As you may know, the Procurement Technical Assistance Program- and hence the PTACs- was created 

by Congress in 1985 to help small businesses compete for federal, state and local government contracts. 

PTACs are funded and administered through the Defense Logistics Agency and are supported by state or 

local governments, educational institutions, and non-profits which provide a funding match. Our 

purpose is to assist local small businesses at little or no cost by preparing them to become capable 

government contractors, on the belief that a broad and strong base of small business suppliers provides 

the highest quality and best value to government agencies while creating a strong and vibrant economic 

base for our communities. Last year alone, PTACs helped over 48,000 small businesses win and fulfill 

government contracts and subcontracts valued at nearly $20 billion. 

Mr. Chairman, Ranking Member Murphy, I want to express my thanks and appreciation to each of you 

for your support of the PTAP. In addition to our work helping small business secure prime contracts, 

PTACs are deeply engaged with subcontracting issues. Not only do we help small businesses identify 

subcontracting opportunities, and generally become responsible, "procurement ready" subcontractors, 

we are often contacted by large primes for assistance with developing subcontracting plans and locating 

small business vendors with the specific capabilities needed to meet their requirements. Every day, we 

witness our clients confronting the challenges of the subcontracting environment. My testimony today 

reflects input from some of our most experienced procurement professionals across the country. I am 

privileged to share their insights in the hope they will support your efforts to improve opportunities for 

our nation's small business contractors. 

The IG's findings are consistent with PTACs' experience across all agencies and buying activities. We 

often find that contracting officers and prime contractors alike fall into one of three categories. First, the 

extremely diligent, second, the well-intentioned (but who do not devote sufficient resources to small 

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business subcontracting), and third, those who simply don't pay attention to what happens at the 

subcontracting leveL 

In the broader context of government acquisitions, expanding access to small business subcontracting 

opportunities is often not treated as a priority at any level- not by buying offices, not by agency 

leadership, and not by policy; as a consequence, it is not a priority for prime contractors either. But it 

should be. 

It should be because the value that small businesses bring- the innovation, the agility, and the 

additional competition that results in better products and services at lower costs- are just as applicable 

to subcontracting as prime contracts. When we fail to establish and support practices that allow small 

businesses maximum opportunity for subcontracting, our nation's supply chain suffers. The products 

and services delivered solely under large, prime contracts (which represent an increasing share of 

government purchases) simply do not reflect the potential benefits that cutting-edge small businesses 

have to offer. Bottom line, our warfighters- actually everyone involved in or touched by government 

activities -are denied the rich contributions that small businesses can make. 

Denied access to subcontracts limits the number and capability of small business contractors that can 

qualify to enter the acquisition pipeline. Subcontracting is the most realistic entry point for many small 

businesses seeking to supply the Government. Subcontracts usually involve responsibility for a smaller 

sub-elements of work and, thus, are easier to fulfill and represent less risk. Subcontracting is also a way 

for a small business to establish a "Government track record" of performance; having a positive past 

performance record is an important consideration on the part of government decision-makers when 

awarding contracts. Failing to maximize access to subcontracting opportunities results in fewer capable 

suppliers in the government marketplace. 

I want to emphasize this: Maximizing access to subcontracting opportunities is not the same as 

maximizing subcontracting dollars awarded to small businesses, although that would be one result. 

Simply increasing awards to the same discreet set of small businesses- which often happens now- will 

not deliver the benefits I describe. We need to prioritize creating an open, vibrant environment that not 

only maximizes subcontracting opportunities but allows the greatest possible number of small 

businesses to compete for them. 

Congress and units of Government can affirm that robust small business participation in the supply chain 

is a priority by focusing on four elements: Education, Oversight, Transparency and Incentives. Each of 

these are explored in the following comments. I conclude with additional information as to how the 

PTAC can assist in the effort. 

Education 

Sufficient and ongoing training for agency contracting staff and primes: Ensuring that not only agency 

acquisition staff, but prime contractor contract managers and small business liaison officers (SBLOs) 

understand 1) the regulations with regard to subcontracting goals, plans, and reporting, 2) the resources 

available to support meeting these requirements, and 3) the underlying importance of robust 

subcontracting to the agency mission would go a long way toward remedying situations such as those 

identified in DODIG-2018-086. As a result of heavy turnover within contracting offices, Contracting 

Officers are sometimes less familiar with the FAR or DFARS than businesses (even small businesses) that 

interact with them. Suggestions include: 

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Developing high quality training modules for Contracting Officers that cover not only the 

specifics of FAR 19. 7, but how to evaluate subcontracting plans (including claims that there are 

no subcontracting opportunities-or no small subs that can do the work-for a particular 

requirement) and how to monitor compliance. 

Developing high quality training modules for prime contractors on the requirements of FAR 

19.7, on proper reporting and the use of eSRS (the electronic subcontract reporting system), on 

the small business programs generally- including the benefits that working with a wide diversity 

of small businesses can bring to their product and on strategies/methods for identifying 

capable small business subcontractors (market research). 

Institutionalizing referral of prime contractors to their local PTAC for assistance with 

subcontracting plan development and compliance, locating capable subcontractors, or general 

small business outreach. 

Oversight & Internal Controls 

Sufficient resources for subcontracting plan oversight and compliance activities: We believe a primary 

factor in agency subcontracting failures generally is an unrealistic overreliance on contracting officers to 

faithfully enforce FAR Subpart 19.7 with insufficient support and resources to do so. Suggested 

remedies include: 

Increasing the number of SBA Procurement Center Representatives (PCRs) and Commercial 

Market Representatives (CMRs) government-wide to expand their ability to oversee and 

advocate for small business participation in large procurements. 

Ensuring that agency Small Business Offices are adequately staffed to engage with, educate, and 

support their buying activities, including empowering them to review subcontracting plans and 

oversee monitoring of subcontracting compliance. 

Requiring government Contracting Officer Representatives (CORs) to conduct subcontracting 

plan compliance reviews, consistent with their performance of on-site labor law compliance 

interviews. 

Developing technology tools to support monitoring of subcontracting plan compliance. The 

current necessity for busy Contracting Officers to proactively and manually monitor 

subcontracting compliance creates an administrative burden that may be a major factor in their 

failure to do so. Strategic modification and integration of eSRS, FSRS, and other contracting data 

systems could provide to contracting officers and CMRs automated notices of failures to comply 

with eSRS reporting requirements, allowing officials to take immediate action with the 

contractor to spur compliance. 

Create a Subcontractor Ombudsman resource empowered to facilitate remedy for 

subcontractors subject to mistreatment by their primes and/or to bring offending practices to 

the attention of the primary Contracting Officer for consideration with regard to subcontracting 

plan compliance and/or past performance. 

Internal Controls: In the final analysis, the extent to which subcontracting opportunities are maximized 

in federal procurements depends upon Contracting Chain of Command commitment to ensuring that 

their activities carry out FAR Subpart 19.7, including actively investigating claims that subcontracting 

opportunities are not available is certain requirements. Should the Subcommittee wish to strengthen 

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processes to control for efforts to circumvent FAR 19.7, one of our members put forward the following 

suggestions: 

Just like Contracting Officers are required to post a Justification and Approval (J&A) whenever 

they intend to award a sole source contract based upon one of the seven FAR 6.3 exceptions to 

full and open completion, Contracting Officers should be required to post their market research 

results when they have made a determination that there are no subcontracting plan 

opportunities under an anticipated award to a large defense contractor that meets the current 

threshold requirement for a subcontracting plan. 

Include a new SAM Exception that depicts a large business that has not met its previous small 

business subcontracting plan requirements over the last three years. 

o Require any contacting activity's Contracting Officer to make a determinations and 

findings (D&F) that must be approved at least one level above the Contracting Officer if 

that activity wants to issue a prime contract to any contractor that has a "Small Business 

Subcontract Plan Exception" listed in SAM. 

o Before a contracting activity can award a contract to a large defense contractor that has 

a SAM "Small Business Subcontract Plan Exception", the Contracting Officer shall require 

the large business to submit and negotiate an Individual Subcontract Plan and the 

contractor shall provide a certification that it will meet those small business subcontract 

plan requirements versus just making a good faith effort. 

Transparency 

Maximize transparency with regard to subcontracting opportunities. One of the biggest barriers to 

small business access to subcontracts is lack of information about opportunities. Unlike agency 

solicitations, which are posted on FBO.gov and perhaps even included in agency forecasts, there is no 

centralized listing of subcontracting opportunities or mechanism for identifying and connecting with 

potential buyers. Many large primes have established online "supplier portals" through which aspiring 

subcontractors can register, but these often serve as gatekeepers, preventing small businesses from 

connecting with users/decision makers to explore their potential for becoming a subcontractor/supplier. 

It is also common for primes to work with the same small businesses over and over, rather than 

competing new opportunities or re-competing continuing requirements. Suggestions include: 

Establishing a public platform (similar to FBO.gov; perhaps funded via some kind of Industrial 

Funding Fee) to which subcontracting opportunities can be posted. While SBA's SUBnet could 

theoretically be used for this purpose, at present it is in poor technological condition and is not 

up to date, with the latest list posted dated 2016. 

Encourage that all subcontracting plans be publicly posted (on a platform such as above), to 

include information on subcontract opportunities available with detailed information about 

where the solicitation can be accessed and the due date for response. 

Encourage/require large prime contractors to post a current and detailed acquisition forecast of 

upcoming subcontract opportunities, including when they are going tore-compete existing 

subcontract opportunities. 

Require SBLOs, Subcontract Plan Managers, and/or Small Business Mentor-Protege Program 

Managers to register their contact information and areas of responsibility in a centralized, 

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searchable online database. One suggestion is to create new POC headings in SAM for these 

purposes. DoD OSBP maintains and publishes a list of SBLO personnel, but is not resourced 

sufficiently to keep the list current or complete. Critical (and required) information is not 

included in the Jist, particularly information that delineates the "area of responsibility" of the 

listed individuals. Frequently, the Jist is populated with individuals who are retired, deceased or 

who have never been engaged with small business subcontracting. 

Maximize transparency with regard to compliance. Transparency is not only a powerful motivator for 

compliance, it expands the ability of other interested parties to support enforcement. Suggestions 

include: 

Make subcontracting plan information publicly available upon prime contract award to allow 

small business subcontractors themselves, who have arguably the most powerful interest in 

effective subcontracting programs, to participate in policing the compliance of primes. 

• Make subcontractors privy to the content of their prime's subcontracting reports to allow them 

to validate that the achievements are true and correct. 

Require a new Federal System for Award Management (SAM) certification that requires a large 

business to certify that it has complied with all small business subcontract plan requirements. 

• Require each federal agency to publish a semi-annual report of all contractors that failed to 

meet their small business subcontracting plan requirements and indicate whether the agency 

imposed liquidated damages, to include agency rationale if no liquidated damages were 

imposed. Falsified reports of small business participation should be pursued under the False 

Claims Act. 

Incentives 

Creating incentives to encourage greater small business subcontracting: Creating an environment that 

rewards robust subcontracting may be more effective at expanding subcontracting opportunities than 

one that focuses on penalties. Some suggestions from our members include: 

Provide formal, professional recognition for Contracting Officers- and prime contractorsthat meet or exceed small business contracting and subcontracting goals. 

Tie a prime contractor's subcontracting plan compliance to their past performance record. 

Provide monetary incentives for awarding subcontracts to qualified targeted small business 

concerns (i.e., establish Incentive Programs similar to the current DoD Indian Incentive 

Program). 

Provide a price preference to large prime contractors that meet or exceed their negotiated small 

business plan goals. To reduce the administrative burden associated with such a program, the 

SBA could be required to issue an annual goaling report on all large prime contractors that were 

required to file subcontracting plans during the report year. Those large prime contractors that 

meet or exceeded their subcontract plan goals for the year would be afforded a ten percent 

price preference over large business offerors that did not meet their subcontract plan goals 

during the report period. The price preference could go on indefinitely if the prime continued to 

meet or exceed their annual subcontract plan goals in subsequent years. This approach would 

not require additional direct budget outlays, however SBA would most likely need additional 

resources to implement the program. The subcontract plan goaling reports should be posted 

publicly on SBA's website. 

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PTACs' Role 

PTACs play an important role in supporting subcontracting. Not only do we train small businesses with 

regard to regulations, certifications, marketing, bidding, contract administration and issues specific to 

subcontracting (like flow down provisions, back-bonding, and the potential for payment delays), we 

regularly work with prime contractors who come to us for help with small business outreach and 

subcontracting plan development. Some of our activities in this regard include: 

broadcasting "Opportunity Alerts" regarding subcontract opportunities or RFis, 

supporting Industry Days and other prime contractor outreach activities, 

sponsoring Matchmaker events, allowing prime contractors and agency contracting officers the 

opportunity to connect with many small business owners, and 

working one-on-one with SBLOs and prime contractor personnel with regard to developing 

subcontracting plans. 

Despite PTACs' active involvement with small businesses, far too few prime contractors work with 

PTACs, and PTACs are hampered by the same lack of transparency and access to information that limit 

our small business clients. We could deliver much greater benefit across the board if more prime 

contractors would contact and utilize us, and there was greater transparency with regard to current and 

upcoming subcontracting opportunities. 

The value of the PTACs as an essential bridge between small business contractors and DoD was 

highlighted earlier this year in the Report of the Advisory Panel on Streamlining and Codifying 

Acquisitions Regulations (Section 809 panel) created in the FY2016, FY2017, and FY2018 National 

Defense Authorization Acts to find ways to streamline and improve the defense acquisition process. 

The 809 Panel identified the PTAP as the only DoD-wide program or system designed to conduct 

outreach to bring small businesses into the defense market and noted that PTACs can help address the 

need for greater and more effective communication with small businesses seeking entry into the 

defense market, recommending a number of provisions that would expand funding available for 

individual PTACs and the PTAP overall. Just last week, the House Armed Services Committee Chairman's 

Mark echoed this sentiment in the F¥2019 National Defense Authorization Act, which includes an 

authorization of $50 million for the PTAP (up from $38.5 million in FY18) and directs the Secretary of 

Defense to conduct enhanced outreach under the Procurement Technical Assistance Program to enable 

and promote activities to provide coordinated outreach to small business concerns through the PTAP 

While these measures focus largely on DoD contracting- the same principles hold true for PTAC 

support for small business contractors across all agencies. 

Thank you again for the opportunity to testify and for your support of the PTAP. APTAC members are 

privileged to be able to support our Government and our small businesses- by helping to bring small 

business capabilities to the service of our country. We are always seeking ways to expand our reach and 

support small businesses more effectively, and we are gratified by this Committee's commitment to 

maximizing small business participation in the government marketplace. I hope that our input today has 

been helpful, and we stand ready to support the Committee's work in any way that we can. 

Thank you. 

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!'OR OJTJCIAL L:SE O?iL'i 

INTEGRITY* EffiCIENCY* ACCOUNTABILITY* EXCELLENCE 

Mission 

Our mission is to provide independent, relevant, and timely oversight 

of the Department of Defense that supports the warfighter; promotes 

accountability, integrity and efficiency; advJ~<es the Secretary of 

Defense and Congress; and informs the public. 

Vision 

Our vision is to be a model oversight organization in the 

Federal Government by leading change, speaking truth, 

and promoting excellence-a diverse organization, 

working together as one professional team, recognized 

as leaders in our field. 

For more information about whistleblower protection, please see the inside back cover. 

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March 19, 201!1 

We determined'Wh(!the~ ~rmy C.qntract~ng 

Command (ACC)·Redsto)le and ACC·Warren 

contradi'ng Offtcials too~ appro-priate 

actions, to ensure prime cOrttf?ctOr:s met 

~helr s~an bUsine-ss s~bcontra-c~tJ:ig ~oak 

we tP~~~,VJ!itd -~ no,ns:tatiS~~ca,l s~~p!e of 

5~ C~ntractS:wlth ~stimated ,co-mple~ion 

dates in FY~ 2,015 q-r 201,6 Jind 3(! contracts 

awari!ed i~ FY 7016 .. This a~dit is the 

fourth arid last in a>seriC:s, pf oUr audits on 

DoD srnaU business contr'a.C:ting. 

Finding 

ACC{!:t~d:Stone afid' ~GC:~at:r~n :cOntnlcting 

offic~~ls e~sur~~ t~at prhtie contra;;tQrs 

p:rovideti' smalH;n.isln-esses with adequate 

subcontrac~ing apportunltie$. for: 

?1 ,of SO cOntraCtS we niviewed,. valued a~ 

$693.5 million and $1.6 bt1Jton, ~espectively, 

Howeyer, ACC·•Redstone $.~d ACJ>Warren 

contractin~ ,'~~~~ls, di~, ??~ensure th'a~ prime C~J1~act~~s:prpYi?ed, s~all bus,ine:sses 

with ~deqpate subco.~tra~t~~~ ?PP.Ortirnities 

fqr, the t:e~~tni~g 2~ ~Ontt~e~s., va1,ue,d 

at $914.S millf~n. Spe,cifieally; At<>RedStone and ACc.-wa.t,rim coptraCting officialS~ 

• awarded $ix cqntracts, yalU:ed 

at $3.30~7 ,'million1 ,Without a 

subcontr:acting plan, Or a -contracting 

offiq'er'S determination that rto, 

subC9Q~racting pos~ibilitle~ existed; 

did flat. monitor pr:ime,,contractors' 

cOmpU,ance with subcontracting 

pfaris fat 11 'tOntr~cts, valued 

at $480.'3. million; 

Visit us at www.dodig,mil 

Finding (cont'd} 

did not determine why prime contractors with 

individual subcontracting plans did not meet their small 

business subcontracting goals for five contracts, valued 

at $81.6 million; and 

accepted an individual subcontracting report for 

one contract, valued at $22.1 million, that may have 

misreported subcontract awards. 

ACC·Redstone and ACC·Warren contracting officials stated 

that this occurred because contracting officials did not 

understand subcontracting plan requirements and because 

administering subcontracting plans was not a high priority. 

In addition, ACC·Redstone and ACC·Warren had high turnover 

among their contracting staffs, and subcontracting plan 

administration guidance at both locations did not address 

the transfer of duties from one contracting officer to another. 

Also, ACC~Redstone contracting management did not provide 

adequate training or standard operating procedures on 

requirements for administering subcontracting plans. 

As a result, small businesses may have been denied 

subcontracting opportunities that prime contractors were 

required to make a good-faith effort to provide. ACC-Redstone 

and ACC-Warren contracting officials did not obtain 

subcontracting reports, did not follow up on reports that 

showed contractors were not meeting their small business 

goals, and did not determine whether prime contractors made 

good-faith efforts to comply with negotiated subcontracting 

goals. Therefore, ACC·Redstone and ACC·Warren may 

have missed opportunities to recoup liquidated damages 

(the amount paid by a contractor that fails to make a 

good· faith effort to comply with its subcontracting plan) of up 

to $82.3 million. 

Recommendations 

We recommend that the ACC·Redstone and ACC·Warren 

Executive Directors determine whether the contractor made 

a good-faith effort to meet its subcontracting goals for 

16 contracts and assess liquidated damages, as appropriate. 

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We also recommend that the Deputy Assistant Secretary 

of the Army for Procurement, in coordination with the 

Director, Army Office of Small Business Programs: 

train contracting officials on Federal Acquisition 

Regulation Subpart 19.7 responsibilities for 

administering subcontracting plans, 

revise Army Federal Acquisition Regulation 

Supplement Subpart 5119,7 to incorporate 

guidance on administering subcontracting plans 

and procedures for transferring subcontracting 

plan administration duties when a contract 

is transferred from one contracting officer to 

another, and 

issue a policy alert to notify contracting 

officials of the revision to Army Federal 

Acquisition Regulation Supplement Subpart 

5119.7 incorporating guidance on administering 

subcontracting plans and procedures for 

transferring subcontracting plan administration 

duties when a contract is transferred from one 

contracting officer to another. 

Actions Taken 

The Executive Directors agreed with our 

recommendations and took corrective action for some 

of the contracts. ACC·Redstone and ACC·Warren 

contracting officials determined that the contractors 

met, exceeded, were on pace to meet, or made 

a good·faith effort to meet their small business 

subcontracting goals for 9 of 16 contracts. 

Management Comments 

and Our Response 

The ACC Deputy to the Commanding General, 

responding for the ACC-Redstone and ACC·Warren 

Executive Directors, agreed with the recommendations. 

Specifically, ACC·Redstone and ACC-Warren will 

determine whether the contractor made a goodMfaith 

effort to meet its subcontracting goals for the remaining 

seven contracts. Therefore, the recommendations 

are resolved but remain open. We will close the 

recommendations once we verify that ACC·Redstone 

and ACC-Warren completed their good·faith effort 

determinations and assessed liquidated damages, 

as appropriate. 

The Army Office of Small Business Programs Director, 

responding for the Deputy Assistant Secretary 

of the Army for Procurement, agreed with the 

recommendations. The Army Office of Small Business 

Programs implemented training and is developing a 

schedule to train contracting officials and small business 

professionals. ln addition, the Army Office of Small 

Business Programs, in coordination with the Deputy 

Assistant Secretary of the Army (Procurement), is 

drafting the revised language for incorporation into the 

Army Federal Acquisition Regulation Supplement and 

the policy alert to notify all contracting officials and 

small business professionals of the revision to the Army 

Federal Acquisition Regulation Supplement Subpart. 

Therefore, the recommendations are resolved but remain 

open. We will close the recommendations once we 

verify that the training has been provided and the policy 

change and alert have been issued. 

Please see the Recommendations Table on the next page 

for the status of the recommendations. 

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Recommendations Table 

Executive Director, Army Contracting 

Command-Redstone 

Executive Director, Army Contracting 

Command-Warren 

ron 01 IICL\L ua: m:1 x 

None l.a, l.b 

None 2.c 

None 

2.a, 2.b 

Note: The following categories are used to describe agency management's comments to individual recommendations. 

Unresolved- Management has not agreed to implement the recommendation or has not proposed actions that 

will address the recommendation_ 

Resolved- Management agreed to implement the recommendation or has proposed actions that wi!! address the 

underlying finding that generated the recommendation. 

Closed- OIG verified that the agreed upon corrective actions were implemented. 

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I Oil OIT!CL\1.. UT OYJ Y 

INSPECTOR GENERAL 

DEPARTMENT OF DEFENSE 

4800 MARK CENTER DRIVE 

ALEXANDRIA, VIRGINIA 22350-1500 

MEMORANDUM FOR UNDER SECRETARY OF DEFENSE FOR ACQUISITION, 

TECHNOLOGY, AND LOGISTICS 

ASSISTANT SECRETARY OF THE ARMY (FINANCIAL 

MANAGEMENT AND COMPTROLLER) 

March 19, 2018 

SUBjECT: Small Business Subcontracting at Two Army Contracting Command Locations 

(Report No. DODIG-2018-086) 

We are providing this report for review and comment on the recommendations and the 

report's public release. We conducted this audit in accordance with generally accepted 

government auditing standards. 

We considered management comments on a draft of this report when preparing the final 

report. Comments from the Army Contracting Command and the Army Office of Small 

Business Programs conformed to the requirements of DoD Instruction 7650.03; therefore, 

we do not require additional comments. 

We appreciate the courtesies extended to the staff. Please direct questions to me at 

(703) 604-9187 (DSN 664-9187). 

/;~~:k*t~""' : 

Michael j: Roark 

Assistant Inspector General 

Readiness and Global Operations 

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Contents 

Introduction 

Objective 

Background 

roR OITICIAL USE miLY 

Electronic Subcontracting Reporting System 

Contracts Reviewed 

Review of Internal Controls 

ACC-Redstone and ACC-Warren Did Not 

f'n,n<:id,Pn't!v Ensure Snhr•nntr::J,rti'tur 

Were Provided for Small Business, 

The Army Ensured Small Businesses Had Adequate Subcontracting 

Opportunities for 27 Contracts 

ACC-Redstone and ACC-Warren Did Not Comply With Requirements for 

Subcontracting Plans for 23 Contracts 

4 

Contracting Officials Did Not Understand Subcontracting Plan Requirements 13 

Administering Subcontracting Plans Was Not a 

High Priority '15 

Guidance Did Not Address Transfer of Subcontracting Plan Administration 

Duties to a New Contracting Officer 15 

Opportunities to Recoup Liquidated Damages May Have Been Missed 17 

Other Matters of Interest on Subcontracting With Small Businesses for Contracts 

Awarded in FY 2016 , 19 

Recommendations, Management Comments, and Our Response 20 

26 

Appendix A Scope and Methodology 26 

Work Performed 27 

Use of Computer-Processed Data 28 

Prior Coverage 29 

Appendix B, Summary of Contracts Estimated to Be Completed in FYs 2015 

or 2016 

Appendix C. Summary of Contracts Awarded in FY 2016 

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Contents (cont'd) .~~----------------------

M;m<l!!:e;miE!nt Comments 

Army Contracting Command Comments 

Army Office of Small Business Programs Comments 

Acronyms and Abbreviations 

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Introduction 

We determined whether Army Contracting Command (ACC)-Redstone and 

ACC-Warren contracting officials took appropriate actions to ensure that prime 

contractors met their small business subcontracting goals. This audit is the fourth 

and last in a series of audits on DoD small business contracting. See Appendix A 

for scope, methodology, and prior audit coverage. 

Army Contracting Command 

The Army Contracting Command (ACC) is a major subordinate command of the 

Army Materiel Command. ACC performs contracting work for the Army and 

consists of two subordinate commands and six contracting centers responsible for 

installation and expeditionary services. We visited two ACC contracting centers 

located in Redstone, Alabama, and Warren, Michigan. ACC-Redstone supports the 

development, acquisition, and fielding of aviation and missile systems. ACC-Warren 

supports the development, acquisition, and fielding of soldier and ground systems. 

Small Business Subcontracting 

Contracts over $700,000, awarded to an other than small business must have a 

small business subcontracting plan if there are subcontracting opportunities so 

that small businesses can get work on larger contracts.' There are three types of 

subcontracting plans. 

Individual Subcontracting Plan. This type of plan covers the entire 

contract period, applies to a specific contract, and has goals that are 

based on the contractor's planned subcontracting efforts. A contractor 

may also develop a "master subcontracting plan," which is a template 

that includes all the information required for an individual plan except 

subcontracting goals. A master plan may be incorporated into an 

individual subcontracting plan, but a master plan cannot itself serve as a 

subcontracting plan for a contract.2 

Commercial Subcontracting Plan. This type of plan covers a contractor's 

fiscal year and applies to the entire production of commercial items sold 

by the contractor.' It applies to all Government contracts in effect during 

1 Federal Acquisition Regulation {FAR) Part 19, "Small Business Programs," Subpart 19.7, "The Small Business 

Subcontracting Program," 19.702, "Statutory Requirements." The threshold changed from $650,000to $700,000, 

effective0ctober1, 2015. 

2 FAR Part 19, "Small Business Programs," Subpart 19.7, "The Small Business Subcontracting Program," 19.701, 

"Definitions." and 19.704, "Subcontracting Plan Requirements." 

3 FAR 19.701. 

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the contractor's fiscal year. The contracting officer who approves the plan 

administers the plan.~ 

Comprehensive Subcontracting Plan. This type of plan is similar 

to a commercial subcontracting plan in that it applies to all of the 

contractor's DoD contracts in effect during the Government fiscal 

year. A comprehensive plan is administered by the Defense Contract 

Management Agency.' 

Electronic 

The Electronic Subcontracting Reporting System (eSRS) is a 

Government-wide, web-based system used by Federal contractors to report 

subcontracting program information. Contractors are required to enter their 

subcontracting accomplishments for Federal contracts into the eSRS rather than 

provide them to the contracting officer. However, before a contractor can enter a 

subcontracting report into the eSRS, the contracting officer must correctly code the 

contract with the proper type of subcontracting plan in the Federal Procurement 

Data System-Next Generation (FPDS-NG) to indicate that a subcontracting plan 

was required. 6 When the contractor enters a subcontracting report into the eSRS, 

the report includes the e-mail address of the contracting officer responsible for 

administering the plan. The contracting officer then receives an e-mail notification 

that the contractor has submitted a report. If the contractor enters the e-mail 

address incorrectly, or the e-mail address is for the wrong contracting officer or for 

a contracting officer no longer with the organization, then the current contracting 

officer does not receive a notification that the contractor has submitted a report. 

Contracts Reviewed 

We used the FPDS-NG to identify the universe of Army contracts. According to 

the FPDS-NG, the Army awarded 1,336 contracts, valued at $24.9 billion, with 

estimated completion dates in FYs 2015 or 20161 to other than small businesses:' 

We selected three contracting offices to audit: two ACC-Redstone contracting 

offices and one ACC·Warren contracting office, based on the number of contracts 

awarded and the dollar value of contracts. The two ACC-Redstone contracting 

offices awarded 121 contracts, valued at $5.4 billion, and the ACC-Warren 

contracting office awarded 95 contracts, valued at $2.2 billion. 

4 FAR19-704. 

5 Defense Federal Acquisition Regulation Supplement, Part 252, "Solicitation Provisions and Contract Clauses," Clause 

2S2.219·7004, "Smat! Business Subcontracting Plan (Test Program)." 

6 The FPDS-NG is a web-based too! that contracting personnel use to report contract actions. 

7 For this audit, we limited our universe to definitive contracts, indefinite-delivery indefinite-quantity contracts, and 

purchase orders performed within the United States. ln addition, we Hmited our universe to contracts awarded during 

FY 2010 through 2015. 

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We nonstatistically selected 50 contracts, valued at $1.6 billion, with estimated 

completion dates in FYs 2015 or 2016 to determine whether contracting officials 

ensured prime contractors provided small businesses with adequate subcontracting 

opportunities.' We selected 30 contracts, valued at $1.3 billion, awarded by 

ACC-Redstone and 20 contracts, valued at $318.0 million, awarded by ACC-Warren. 

We selected the highest dollar value contracts because these contracts could have a 

high risk of non-compliance with Federal Acquisition Regulation (FAR) Subpart 19.7, 

"The Small Business Subcontracting Program." Specifically, we selected 

contracts that: 

required a small business subcontracting plan, but had no 

reports in the eSRS; 

contained reports in the eSRS that showed the contractor did not meet its 

small business subcontracting percentage goals; and 

did not require a subcontracting plan. 

See Appendix B for a summary of the 50 contracts we reviewed. 

In addition, we nonstatistically selected 30 contracts, valued at $4.3 billion, 

awarded in FY 2016 to determine whether the contracts had an approved 

subcontracting plan or a determination that no subcontracting possibilities existed. 

We selected 20 contracts, valued at $2.8 billion, awarded by ACC-Redstone and 

10 contracts, valued at $1.5 billion, awarded by ACC-Warren. We selected the 

highest-dollar value contracts from each contracting office. See Appendix C for a 

summary of the 30 contracts we reviewed. 

Review of Internal Controls 

DoD Instruction 5010.40 requires DoD organizations to implement a comprehensive 

system of internal controls that provides reasonable assurance that programs 

are operating as intended and to evaluate the effectiveness of the controls.9 

We identified internal control weaknesses in ACC-Redstone and ACC-Warren 

contracting officials' compliance with requirements for awarding and administering 

contracts that require subcontracting plans. Specifically, ACC·Redstone and 

ACC-Warren contracting officials did not ensure that prime contractors provided 

small businesses with adequate subcontracting opportunities for 23 of 50 contracts 

with estimated completion dates in FYs 2015 or 2016. We will provide a copy 

of the final report to the senior official responsible for internal controls in the 

Department of the Army. 

8 When contracts are completed, contracting officials can determine whether the contractor met its small business 

subcontracting goals and, if not, whether the contractor made a good-faith effort to meet the goals. If the contractor 

did not make a good-faith effort to meet its goals, then contracting officials can assess liquidated damages. 

9 DoD Instruction 5010.40, "Managers' Internal Control Program Procedures," May 30, 2013. 

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ACC-Redstone and ACC-Warren Did Not rnr1<:i<:.t,.r1tlv 

Ensure Were Provided 

for Small Business 

ACC-Redstone and ACC-Warren contracting officials ensured that prime contractors 

provided small businesses with adequate subcontracting opportunities for 

27 of 50 contracts, valued at $693.5 million and $1.6 billion respectively, with 

estimated completion dates in FYs 2015 or 2016. However, ACC-Redstone and 

ACC-Warren contracting officials did not ensure that prime contractors provided 

small businesses with adequate subcontracting opportunities for the remaining 

23 contracts, valued at $914.8 million. Specifically, ACC-Redstone and ACC-Warren 

contracting officials: 

awarded six contracts, valued at $330.7 million, without a subcontracting 

plan or a determination that no subcontracting possibilities existed; 

did not monitor prime contractors' compliance with subcontracting plans 

for 11 contracts, valued at $480.3 million; 

did not determine why prime contractors with individual subcontracting 

plans did not meet their small business subcontracting goals for five 

contracts, valued at $81.6 million; and 

accepted an individual subcontracting report (ISR) for one contract, 

valued at $22.1 million, that may have misreported subcontract awards. 

ACC-Redstone and ACC-Warren contracting officials stated that this occurred 

because contracting officials did not understand subcontracting plan requirements 

and because administering subcontracting plans was not a high priority. 

In addition, ACC-Redstone and ACC-Warren had high turnover among their 

contracting staffs, and subcontracting plan administration guidance at both 

locations did not address the transfer of duties from one contracting officer to 

another. Also1 ACC-Redstone contracting management did not provide adequate 

training or standard operating procedures on requirements for administering 

subcontracting plans. 

As a result, small businesses may have been denied subcontracting opportunities 

that prime contractors were required to make a good-faith effort to provide." 

In addition, ACC-Redstone and ACC-Warren contracting officials did not determine 

whether prime contractors made good-faith efforts to comply with negotiated 

10 According to FAR 19.702{b){1), small businesses are not required to provide small business subcontracting plans, 

Therefore, we reviewed only prime contractors that were other than small businesses. 

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subcontracting goals on 17 contracts and whether up to $82.3 million in potential 

liquidated damages should be assessed." For nine contracts, ACC-Redstone and 

ACC~Warren contracting officials determined that prime contractors met their 

small business subcontracting goals or made a good-faith effort to comply with 

negotiated subcontracting goals; therefore, no liquidated damages are due." 

Ensured Small Businesses Had 

for 27 Contracts 

ACC-Redstone and ACC-Warren contracting officials ensured 

that prime contractors provided small businesses with 

adequate subcontracting opportunities for 27 of 50 

contracts, valued at $693.5 million and $1.6 billion 

respectively, with estimated completion dates in 

FYs 2015 or 2016. Specifically, ACC-Redstone and 

ACC-Warren contracting officials: 

verified that prime contractors met their 

small business subcontracting goa]s or made 

a good faith effort for three contracts, valued at 

$258.6 million, with individual subcontracting plans;" 

awarded 11 contracts, valued at $253.5 million, with approved 

comprehensive subcontracting plans; 14 

awarded three contracts, valued at $17.7 million, with commercial 

subcontracting plans approved by other contracting offices;" and 

awarded nine contracts, valued at $148.8 million, that did not require 

subcontracting plans. 1

" 

ln addition, an ACC-Warren contracting official rejected an ISR for one contract, 

valued at $14.9 million. On the rejected ISR, the contracting official noted 

that the contractor may have inappropriately included indirect costs in its 

subcontracting awards. 

11 FAR 19.705-7 states that when a contractor does not make a good-faith effort to comply with a subcontracting plan, the 

contractor wl!l pay liquidated damages equal to the amount by which the contractor failed to achieve its 

subcontracting goats. 

12 ACC-Redstone contracting officials awarded three contracts, and ACC-Warren contracting officials awarded 

six contracts. 

n ACC·Redstone contracting officials awarded one contract, and ACC-Warren contracting officials awarded two contracts. 

14 ACC-Redstone contracting offlcials awarded nine contracts, and ACC-Warren contracting officials awarded 

two contracts. 

15 ACC-Redstone contracting officials awarded one contract, and ACC·Warren contracting officials awarded two contracts. 

16 ACC-Redstone contracting officials awarded six contracts, and ACC-Warren contracting officials awarded three 

contracts. Contract W56HZV-12-C-0286. 

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Contracting Officials Verified That Prime Contractors Met 

Their Small Business Subcontracting Goals or Made a 

Good-Faith Effort to Meet the Goals for Three Contracts 

fF9Y91 ACC-Redstone and ACC-Warren contracting officials verified that prime 

contractors met their small business subcontracting goals or made a good-faith 

effort to meet the goals for three contracts, valued at $258.6 million, with 

individual subcontracting plans. For example, ACC-Warren contracting officials 

awarded a contract for $110.5 million, which included an individual subcontracting 

plan." The plan stated that the contractor intended to subcontract····· 

to small businesses -percent of total planned subcontracting dollars of 

······" The contractor submitted an ISR, which stated that the contractor subcontracted a total of-million to small businesses during performance of the 

contract. Although this only represented -percent of actual subcontracting 

dollars, the contractor exceeded the -million small business subcontracting 

goal by-million. 

Contracting Officials Awarded 11 Contracts With Approved 

Comprehensive Subcontracting Plans 

ACC·Redstone and ACC·Warren contracting officials awarded 11 contracts, 

valued at $253.5 million, with comprehensive subcontracting plans approved and 

administered by the Defense Contract Management Agency. For example, 

ACC·Redstone contracting officials awarded a contract for $22.7 million." 

ACC-Redstone contracting officials verified that the Defense Contract Management 

Agency approved the contractor's comprehensive subcontracting plan for FY 2015, 

which covered all of the contractor's DoD contracts for the fiscal year. 

Contracting Officials Awarded Three Contracts With 

Commercial Subcontracting Plans Approved By 

Contracting Offices 

ACC-Redstone and ACC-Warren contracting officials awarded three contracts, 

valued at $17.7 million, with commercial subcontracting plans approved by 

other contracting offices. For example, ACC-Warren contracting officials 

awarded a contract for $9.2 million." The contractor had a commercial 

subcontracting plan, which covered this contract as well as other contracts. 

17 Contract WSGHZV-12-C-0286. 

18 The percentages depicted !n the report were based on rounded numbers and may not equal the actual subcontracting 

goal percentage, unless otherwise noted, 

19 Contract W31P4Q-15-C-0104. 

w Contract WSGHZV-15-C-0019. 

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The Defense Logistics Agency approved and administered the plan; therefore, 

ACC-Warren contracting officials did not need to take any further action to 

administer the subcontracting plan. 

Contracting Officials Awarded Nine Contracts That Did Not 

Require a Subcontracting Plan 

ACC-Redstone and ACC-Warren contracting officials awarded nine contracts, 

valued at $148.8 million, which did not require subcontracting plans because 

there were no subcontracting possibilities, the work was performed outside of 

the United States, or the contractor's business size changed from large to small 

after contract award. For example, ACC-Redstone contracting officials awarded a 

contract for $55.6 million, which exceeded the threshold for contracts to require 

a subcontracting plan." However, the FAR states that a subcontracting plan 

is not required for contracts where work is performed entirely outside of the 

United States and its outlying areas.22 The work for this contract was performed in 

Iraq; therefore, a subcontracting plan was not required. 

Contracting Official Rejected the Individual Subcontracting 

Report for One Contract 

~ An ACC-Warren contracting official rejected the ISR for a contract, 

valued at $14.9 million." The contract had an individual subcontracting plan, 

which stated that the contractor intended to subcontract-million to small 

businesses -percent of total planned subcontracting dollars of-million). 

On the rejected ISR, the contracting official noted that the contractor may have 

inappropriately included indirect costs in its reported subcontract awards. 

On October 31, 2017, the contractor submitted a revised final ISR showing that the 

contractor met its small business subcontracting goal. The ACC-Warren contracting 

official accepted the revised !SR. 

ACC-Redstone and ACC-Warren Did Not 

c:o1mnlv With for 

hn~ntr~t·tirlo- Plans for 23 Contracts 

ACC-Redstone and ACC-Warren contracting officials 

did not ensure that prime contractors provided 

small businesses with adequate subcontracting 

opportunities for 23 of SO contracts, valued at 

21 Contract WSSRGHS-C-0070, 

12 FAR19.702. 

23 Contract WS6HZV-14-C-0073. 

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$914.8 million and $1.6 billion respectively, with estimated completion dates in 

FYs 2015 or 2016. Specifically, ACC-Redstone and ACC-Warren contracting officials: 

awarded six contracts, valued at $330.7 million, without a subcontracting 

pJan or a determination that no subcontracting possibilities existed; 24 

did not monitor prime contractors' compliance with subcontracting plans 

for 11 contracts, valued at $480.3 million;" 

did not determine why prime contractors with individual subcontracting 

plans did not meet their small business subcontracting goals for five 

contracts, valued at $81.6 million; and" 

accepted an ISR for one contract, valued at $22.1 million, that may have 

misreported subcontract awards. 

Contracting Officials Awarded Six Contracts Without 

a Subcontracting Plan or a Determination That No 

Subcontracting Possibilities Existed 

ACC·Redstone and ACC-Warren contracting officials awarded six contracts, valued 

at $330.7 million, without a subcontracting plan or a determination that no 

subcontracting possibilities existed. For contracts exceeding $700,000 [$650,000 

prior to October 1, 2015), the FAR generally requires contracting officials to 

award the contract with a subcontracting plan or to make a determination that 

no subcontracting possibilities exist." The subcontracting plan must include a 

statement of total dollars planned to be subcontracted and a statement of the total 

dollars planned to be subcontracted to small businesses as a percentage of total 

subcontract dollars. 28 

For example, ACC-Redstone contracting officials awarded a contract for 

$234.7 million." The original contracting officer awarded the contract without 

a subcontracting plan or a determination that no subcontracting possibilities 

existed. The current contracting officer stated that the contract was extended until 

May 2018. Because of this audit, the current contracting officer requested and was 

provided a proposed subcontracting plan from the contractor. The contractor and 

24 ACC-Redstone contracting officials awarded four contracts, and ACC-Warren contracting officials awarded 

two contracts. 

25 ACC-Redstone contracting officials awarded seven contracts, and ACC-Warren contracting officials awarded 

four contracts. 

26 ACC-Redstone contracting officials awarded two contracts, and ACC-Warren contracting officials awarded 

three contracts. 

27 FAR Part 19, "Small Business Programs," Subpart 19.7, ~The Small Business Subcontracting Program," 19.705, 

"Responsibilities of the Contracting Officer Under the Subcontracting Assistance Program," 19.70S-2, "Determining 

the Need for a Subcontracting Plan." FAR 19.702(b) states that subcontracting plans are not required from small 

businesses, for personal services contracts, or for contracts or modifications that w!ll be performed entirely outside of 

the United States. 

28 FAR 19.704. 

29 WSSRGZ-14-C-0082. 

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the contracting officer are currently negotiating the small business subcontracting 

goals in the subcontracting plan, and the contracting officer will incorporate the 

plan into the contract when negotiations are complete. 

In another example, ACC-Redstone contracting officials awarded a contract for 

$71.9 million." The original contracting officer awarded the contract without 

an individual subcontracting plan or a determination that no subcontracting 

possibilities existed. The contractor did submit a master subcontracting plan, 

which the FAR defines as "a subcontracting plan that contains all the required 

elements of an individual subcontracting plan, except goals, and may be 

incorporated into individual subcontracting plans."31 However, the contract did 

not have an individual subcontracting plan with small business subcontracting 

goals as a part of the master plan. The contracting officer currently assigned 

to the contract believed that the original contracting officer did not understand 

the difference between a master subcontracting plan and a comprehensive 

subcontracting plan, which does include small business subcontracting goals. 

Contracting Officials Did Not Monitor Compliance with 

Small Business Subcontracting Goals for 11 Contracts With 

Subcontracting Plans 

ACC-Redstone and ACC-Warren contracting officials did not monitor prime 

contractors' compliance with subcontracting plans for 11 contracts, valued 

at $480.3 million. Specifically, the contracting officials were not aware that 

contractors did not submit subcontracting reports to the eSRS for their review. 

The FAR requires contractors to enter subcontracting reports into the eSRS 

showing whether the contractor is meeting its small business subcontracting 

goals for the contract." In addition, the FAR states that it is the responsibility of 

the contracting officer to acknowledge or reject the subcontracting reports in the 

eSRS. 33 The FAR also states that contractors that do not make a good~faith effort 

to meet their small business subcontracting goals may be liable for liquidated 

damages." The FAR defines a failure to make a good-faith effort as a willful 

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

subcontracting plan. The contracting officers who were initially responsible for 

0 WSSRGl-15-C-0085. 

31 FAR 19.701. 

32 FAR19.704, 

33 FAR Part 19, "Small Business Programs," Subpart 19.7, "The Small Business Subcontracting Program," 19.705, 

"Responsibilities of the Contracting Officer Under the Subcontracting Assistance Program,~ 19.705·6, "Postaward 

Responsibilities of the Contracting Officer." 

34 FAR Part 19, "Small Business Programs," Subpart 19.7, "The Small Business Subcontracting Program," 19.705, 

"Responsibilities of the Contractmg Officer Under the Subcontracting Assistance Program," 19.705·7, 

"Liquidated Damages." 

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administering the plans were no longer assigned to 9 of the 11 contracts, so their 

responsibilities passed to the contracting officers who replaced them. However, 

the contracting officials who were currently assigned to the contracts were 

unaware that the contractors had not entered subcontracting reports into the 

eSRS. The following examples are contracts for which contractors had not entered 

subcontracting reports. 

~ Contract W58RGZ-12-C-0010 (ACC-Redstone). The contract, 

valued at $373.1 million, had an individual subcontracting plan, which 

stated that the contractor intended to subcontract-million to small 

businesses -percent of total planned subcontracting dollars of 

-million). 

• ~ Contract W56HZV-14·C·0031 (ACC-Warren). The contract, 

valued at $1.9 million, had a commercial subcontracting plan, which 

stated that the contractor intended to subcontract-million to small 

businesses -percent of all of its subcontracting dollars covered 

by the subcontracting plan, totaling-million during calendar 

year 2013). The FAR definys a commercial plan as "a subcontracting 

plan [including goals) that covers the offeror's fiscal year and that 

applies to the entire production of commercial items sold by either 

the entire company or a portion thereof."35 Contracts awarded under 

commercial subcontracting plans do not require the contractor to report 

on subcontracting activities for a specific contract. The contractor is 

required to submit one summary subcontracting report for all contracts 

covered by the commercial subcontracting plan at the end of the fiscal 

year. The contracting officer who approved the plan must review the 

summary subcontracting reports. Because an ACC~Warren contracting 

officer approved the subcontracting plan, that contracting officer was 

responsible for monitoring the plan. The contractor is no longer in 

business, so ACC-Warren cannot obtain the reports to determine whether 

the contractor met the plan's small business subcontracting goalsY· 

~ Contract W31P4Q-15-C-0078 (ACC·Redstone). The contract, 

valued at $4.5 million, had an individual subcontracting plan, which 

stated that the contractor intended to subcontract-million to 

small businesses -percent of total planned subcontracting dollars 

of-million). 

ACC-Redstone contracting officials should ensure ISRs are entered into the 

eSRS for contracts WSSRGZ-12-C-0010, WSSRGZ-13-C-0086, WSSRGZ-14-C-0037, 

W31P4Q-15-C-0078, W31P4Q-13-C-0023, W31P4Q-15-C-0002, and 

W31P4Q-13-C-0046. If the ISRs show that the contractors did not meet the 

36 We are not recommending any follow-up action for this contract because the contractor has gone out of business. 

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contract's subcontracting goals, the contracting officials should determine whether 

the contractor made a good-faith effort to meet its subcontracting goals and, if not, 

whether liquidated damages can be imposed against the contractor. 

ACC-Warren contracting officials should ensure lSRs are entered into the eSRS for 

contracts W56HZV-15-C-0222, W56HZV-15-C-0213, and W56HZV-14-C-L713. If the 

lSRs show that the contractors did not meet the contract's subcontracting goals, 

contracting officials should determine whether the contractor made a good-faith 

effort to meet its subcontracting goals and, if not, whether 

liquidated damages may be imposed against the contractor. 

Contracting Officials Did Not Determine 

Why Subcontracting Goals for Five 

Contracts Were Not Met 

ACC-Redstone and ACC-Warren contracting officials did 

not determine why prime contractors did not meet their 

small business subcontracting goals for the following five 

contracts, valued at $81.6 million. 

~ Contract WSSRGZ-13-C-0127 (ACC·Redstone). The 

contract, valued at $29.6 million, had an individual subcontracting plan 

which stated that the contractor intended to subcontract-

-percent of total planned subcontracting dollars of-million) 

to small businesses. Based on the lSR, the contractor did not meet 

the small business subcontracting goal. The contractor subcontracted 

-to small businesses, 0.8 percent of total subcontracting dollars 

of-million. 

~ Contract W31P4Q·13-C-0069 (ACC-Redstone). The contract, 

valued at $7.1 million, had an individual subcontracting plan which 

stated that the contractor intended to subcontract-to small 

businesses for the base year of the contract -percent of total planned 

subcontracting dollars of-). The contracting officer did not 

exercise the contract option year. Based on the lSR, the contractor did 

not meet the small business subcontracting goal. The contractor did not 

subcontract to any small businesses. 

~ Contract W56HZV-14-C-0302 (ACC-Warren). The contract, 

valued at $12.6 million, had an individual subcontracting plan that 

stated that the contractor intended to subcontract .million • 

percent of total planned subcontracting dollars of-million) to small 

businesses." Based on the lSR, the contractor did not meet the small 

37 Difference due to rounding. 

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fFGH-81 business subcontracting goal. The contractor subcontracted 

-million to small businesses, -percent of total subcontracting 

dollars awarded. 

fH}Yet Contract W56HZV-12-C-0092 (ACC-Warren}. The contract, 

valued at $17.1 million, had an individual subcontracting plan that stated 

that the contractor intended to subcontract a total of-million to 

small businesses -percent of total planned subcontracting dollars 

of-million). From April 2015 to April 2016, the contractor entered 

ISRs into the eSRS, but the ISRs remained in "pending" status because 

no ACC·Warren contracting officials reviewed them. We brought the 

pending reports to the attention of the contracting officer currently 

assigned to the contract. He reviewed the final ISR and found that 

the goals on the ISR were for the base year of the contract instead 

of the period of performance for the base and option years of the 

contract. The contracting officer rejected the !SR and requested that 

the contractor submit a new !SR. According to the revised ISR, the 

contractor only awarded -million to small businesses -percent of 

total subcontracting dollars of-million), falling short of its small 

business subcontracting goal by-million. 

fH}Yet Contract W56HZV-14-C-0239 (ACC-Warren}. The contract, 

valued at $15.2 million, had an individual subcontracting plan which 

stated that the contractor intended to subcontract -million 

-percent of total planned subcontracting dollars of-million) to 

small businesses. Based on the ISR, the contractor did not meet the small 

business subcontracting goal. The contractor subcontracted -million 

to small businesses,.percent of total subcontracting dollars awarded. 

ACC-Redstone contracting officials should determine whether the contractors for 

contracts WSSRGZ-13-C-0127 and W31P4Q-13-C-0069 made a good-faith effort to 

meet the small business subcontracting goals in their subcontracting plans and, 

if not, contracting officials should determine whether liquidated damages can be 

imposed against the contractor. 

ACC-Warren contracting officials should determine whether the contractors 

for contracts W56HZV-14-C-0302, W56HZV-12-C-0092, and W56HZV-14-C-0239 

made a good-faith effort to meet the small business subcontracting goals in their 

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subcontracting plans and, if not, contracting officials should determine whether 

liquidated damages can be imposed against the contractor. 

Contracting Officials Accepted a Potentially Erroneous 

Subcontracting Report for One Contract 

fl'9\let ACC-Warren contracting officials accepted an ISR that may have 

misreported subcontract awards for one contract.38 The contract, valued at 

$22.1 million, had an individual subcontracting plan which stated that the 

contractor intended to subcontract-million to small businesses -percent 

of total planned subcontracting dollars of-million). The most recent 

lSR stated that the contractor had subcontracted a total of-million to small 

businesses. However, the contracting officer stated that the -million "had to 

be a mistake" because the ISR showed that the contractor awarded-million 

to service-disabled veteran owned small businesses, which seemed to be excessive. 

She stated that the contractor probably entered information from the wrong 

contract. The contracting officer stated that she would instruct the contractor to 

prepare a corrected ISR for the period ending September 30, 2017, when the next 

ISR is due. ACC-Warren contracting officials should instruct the contractor to enter 

a corrected ISR into the eSRS for contract W56HZV-15·C·0092 for the period ending 

September 30, 2017, when the next ISR is due. If the ISR shows the contractor did 

not meet the contract's subcontracting goals, contracting officials should determine 

whether the contractor made a good-faith effort to meet its subcontracting goals 

and, if not, whether liquidated damages can be imposed against the contractor. 

Officials Did Not Understand 

Plan w .... .., .. ,,,..,.,rn.,.nT<: 

ACC·Redstone and ACC-Warren contracting officials stated that some 

members of the contracting staff did not understand subcontracting plan 

requirements. For example: 

An ACC·Redstone contracting officer stated that a former contracting 

officer awarded a contract without an individual subcontracting plan 

because the former contracting officer did not understand the difference 

between the types of subcontracting plans. Specifically, the current 

contracting officer stated that she believed the former contracting officer 

thought that the contract did not need an individual subcontracting plan 

because the contractor had a master subcontracting plan. 

38 Contract WS6HZV·1S·C-0092, 

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An ACC-Redstone contract specialist stated that she thought that the 

Defense Contract Management Agency was responsible for monitoring 

subcontracting plans. However, the FAR states that the contracting officer 

who awarded the contract is responsible for monitoring the plan. 

An ACC-Redstone contracting officer stated that she thought there were no 

subcontracting reports in the eSRS for one contract because the contract 

was complete. However, the eSRS does not delete subcontracting reports 

when a contract is completed. 

An ACC-Warren contracting officer was not aware that a contract's 

"Subcontract Plan" field in the FPDS-NG must state that a plan is required 

in order for the contractor to submit subcontracting reports to the eSRS. 

In addition, ACC-Redstone contracting management did not provide adequate 

training or standard operating procedures on the administration of subcontracting 

plans. The FAR states that contracting officers' responsibilities include determining 

whether the contract requires a subcontracting plan, reviewing the subcontracting 

plan for adequacy, acknowledging receipt of subcontracting reports in the eSRS, 

and determining whether the contractor made a good-faith effort to meet its 

subcontracting goals." Based on documentation provided by ACC-Redstone 

and discussions with ACC-Redstone personnel, the ACC-Redstone training and 

standard operating procedures focused primarily on pre-contract award evaluation 

of subcontracting plans and provided little guidance on a contracting officer's 

post-award responsibilities for administering subcontracting plans. Specifically, 

ACC-Redstone's standard operating procedures simply stated that the contracting 

officer who approved the plan was responsible for the post-award responsibilities 

outlined in FAR 19.705-6 and FAR 19.705-7. In addition, the Army Federal 

Acquisition Regulation Supplement (AFARS) did not include guidance on the 

contracting officers' responsibilities for administering subcontracting plans.40 

During a meeting between the audit team and the Office of the Deputy Assistant 

Secretary of the Army for Procurement (DASA[P)), the Acting Deputy Director 

requested that all policy and training-related recommendations in this report be 

directed to her office for Army-wide implementation. The Army Office of Small 

Business Programs Deputy Director requested that all recommendations in this 

report related to small business subcontracting issues be coordinated with her 

office. In addition, the Army Office of Small Business Programs Deputy Director 

stated that her office plans to issue a policy alert and update AFARS 5119.7 to 

ensure that contracting officers are aware of their responsibilities for accepting 

individual subcontracting reports in the eSRS. The DASA(P), in coordination 

39 FAR Subpart 19.7, "The Smal! Business Subcontracting Program." 

40 AFARS Part 5119, "Smat! Business Programs," Subpart 5119.7, "The Small Business Subcontracting Program:'' 

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with the Director of the Army Office of Small Business Programs, should train 

contracting officials on their FAR Subpart 19.7 responsibilities for administering 

subcontracting plans. The DASA(P), in coordination with the Director of the 

Army Office of Small Business Programs, should revise AFAR$ Subpart 5119.7 to 

incorporate guidance on administering subcontracting plans. The DASA(P), in 

coordination with the Director of the Army Office of Small Business Programs, 

should issue a policy alert to notify contracting officials of the revision to AFAR$ 

Subpart 5119.7 incorporating guidance on administering subcontracting plans. 

ACC-Redstone and ACC-Warren contracting officials stated that administering 

subcontracting plans was not a high priority. Contracting officials stated that 

low priority was the reason their offices did not ensure that contractors entered 

subcontracting reports into the eSRS and why their offices did not determine 

whether contractors made good~faith efforts to meet sma11 business subcontracting 

goals. One ACC-Redstone contracting officer stated that administering 

subcontracting plans is not a high priority because contracting officials are busy 

trying to fulfill customer requirements. Another ACC-Redstone contracting 

officer inherited a contract, which had been awarded as an undefinitized contract 

action without a subcontracting plan.41 The contracting officer did not request 

a subcontracting plan from the contractor until this audit. Although it was an 

oversight by the contracting officer not to request a subcontracting plan, this also 

indicates that the subcontracting plan was not a high priority. One contract with 

an individual subcontracting plan was missing ISRs; the ACC-Warren contracting 

officer stated he overlooked the ISRs for the contract. 

Guidance Did Not Address Transfer of 

Pian Administration Duties to a New 

r·n,rur:>rtu.,,. Officer 

ACC-Redstone and ACC-Warren contracting officials experienced heavy turnover 

among their contracting officers. However, subcontracting plan administration 

guidance at both locations did not address the transfer of subcontracting plan 

administration duties described in the FAR when a contract is assigned to a 

new contracting officer." In addition, the AFARS did not address the transfer of 

41 An undefinit!zed contract action is a contract action where the contracting officer and the contractor have not fully 

agreed on the contract terms, specifications, or price before performance begins. 

42 FAR 19.705·6 states that contracting officer administration duties include acknowledging receipt of or rejecting reports 

in the eSRS and assessing liquidated damages, if applicable. 

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subcontracting plan administration duties when a contract is assigned to a new 

contracting officer.43 For several of the contracts we reviewed, the contracting 

officer who approved the subcontracting plan was no longer assigned to the 

contract, and a different contracting officer became responsible for monitoring the 

plan. For two contracts, administration of the plans stopped when new contracting 

officers were assigned to the contracts.44 The contracting officers reviewed the 

contractors' subcontracting reports during the early periods of the contracts. 

However, when the contracts were transferred to new contracting officers, they 

did not review the reports for the later contract periods. Contracting officers 

not reviewing the subcontracting reports is particularly problematic because 

the report the contractor enters at contract conclusion is the one that shows 

whether the contractor ultimately met its small business subcontracting goals. 

The contracting officials currently assigned to the contracts that had missing ISRs 

for individual subcontracting plans typically were not aware that reports were 

missing. DASA(P}, in coordination with the Director of the Army Office of Small 

Business Programs, should revise AFARS Subpart 5119.7 to incorporate guidance 

for transferring subcontracting plan administration duties when a contract is 

assigned from one contracting officer to another. DASA(P}, in coordination with 

the Director of the Army Office of Small Business Programs, should issue a policy 

alert to notify contracting officials of the revision to AFARS Subpart 5119.7 

incorporating guidance for transferring subcontracting plan administration duties 

when a contract is assigned from one contracting officer to another. 

43 AFARS Subpart 5119.7. 

44 ACC·Redstone awarded one contract (W31P4Q·13·C·0069), and ACC·Warren awarded one contract 

(WS6HZV·12·C-0092). 

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to 

Have Been Missed 

Small businesses may not have received subcontract work that prime contractors 

were required by the FAR to make a good-faith effort to provide." 

In addition, because ACC-Redstone and ACC-Warren 

contracting officials did not obtain subcontracting 

reports and did not follow up on reports that showed 

contractors were not meeting their small business 

goals, contracting officials did not determine whether 

prime contractors made good-faith efforts to comply 

with negotiated subcontracting goals. Therefore, 

ACC-Redstone and ACC-Warren may have missed 

opportunities to recoup liquidated damages of up to 

$82.3 million. FAR Subpart 19.7 discusses the requirement 

for complying with subcontracting plans, and provides the statutory basis for 

obtaining liquidated damages, stating: 

Maximum practicable utilization of small business, veteran~owned 

small business, service-disabled veteran-owned small business, 

HUBZone [Historically Underutilized Business Zone] small business, 

small disadvantaged business, and women-owned small business 

concerns as subcontractors in Government contracts is a matter 

of national interest with both social and economic benefits. When 

a contractor fails to make a good faith effort to comply with 

a subcontracting plan, these objectives are not achieved, and 

15 U.S.C. 637(d)(4)(F) directs that liquidated damages shall be paid 

by the contractor.4b 

FAR Subpart 19.7 further states, "The amount of damages attributable to the 

contractor's failure to comply shall be an amount equal to the actual dollar amount 

by which the contractor failed to achieve each subcontracting goal." The following 

table shows that the contractors may owe up to $82.3 million in liquidated 

damages to ACC-Redstone and ACC-Warren. 

45 FAR 19.702. 

46 FAR 19.705-7. J'OR O!T!CIAL l'SE Ol>ii:Y 
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fF9iJ9j Table, Potential Liquidated Damages 

i W56HZV·1S·C·0092 22,142,270-r • ~·-~- ... 

17,139,296 ! '''' ' ' ,,, "' "" '"' ·:.1'. 1,005,639 

15,285,190 - Unknown' i 727,~43 

: - i - ' ' 454,444 '' ' '.''C ·····- ''~''"";"'3~~~1~ I 

""-~~"' Unknown

1 

i 254,863"-i ••• 

.. Unknown1 

Unknown1 

fffi\let 

22,233 

! 5,750,000 

1 szz,155,883 1 

1 $82,263,634 J Note: All figures in this table are rounded to the nearest dollar. 1 The contracting officer did not ensure that the contractor entered subcontracting reports into the eSRS. 

Therefore, the amount of actual subcontracting dollars is unknown. 2The contractor submitted an !SR; however, the contracting officer stated that the contractor may 

have entered incorrect information. Therefore, the actual subcontracting dollars are unknown until the 

contractor submits a revised ISR for the period ending September 30, 2017. 

>Commercia! Subcontracting P!an. 

Source: The DoD OIG. 

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During the audit, we notified ACC-Redstone and ACC-Warren contracting officials 

about the contracts with potential liquidated damages that we identified. 

Contracting officials determined that the prime contractors met their small 

business subcontracting goals or made a good-faith effort to comply with 

negotiated subcontracting goals for nine contracts and no liquidated damages 

are due for those nine contractsY Additionally, the contractor for one contract 

was out of business; therefore, ACC-Warren contracting officials could not 

determine whether the contractor met its small business subcontracting goals.48 

ACC-Redstone and ACC-Warren still need to assess whether liquidated damages are 

due for the other seven contracts. 49 

Other Matters of Interest on With Small 

Businesses for Contracts Awarded in FY 2016 

ACC-Redstone and ACC-Warren contracting officials ensured that 29 of 30 

contracts, valued at $3.7 billion, had an ·approved subcontracting plan or a 

justification that a subcontracting plan was not required. 5

{) 

f!'Gtl91 For example, ACC-Redstone contracting officials awarded a contract for 

$71.2 million." Tbe contract had a 3-year period of performance. The contract 

included an individual subcontracting plan, which stated that the contractor would 

subcontract a total of-million to small businesses during the contract. This 

represented .percent of total planned subcontracting dollars of-million. 

In another example, ACC-Redstone contracting officials awarded a contract for 

$73.0 million." Contracting officials prepared a memorandum explaining that there 

were no subcontracting possibilities because the requirement was based upon the 

contractor's role as sole developer of the software and its in-depth knowledge of 

interoperability requirements that could not be provided to another contractor. 

f!'Gtl91 In another example, ACC-Warren contracting officials awarded a contract 

for $60.2 million." The contract included an individual subcontracting plan, which 

stated that the contractor would subcontract a total of-million to small 

businesses. This represented .percent of total planned subcontracting dollars 

of-million. 

47 Contracts WSBRGZ-13-C-0086, WS8RGz.13-C-0127, WSSRGl-14-C-0037, W56HZV-12·C-0092, W56HZV·15-C-0222, 

WSGHZV-14-C-0239, WSGHZV-14-C-0302, W56HZV·15-C-0213, and W56HZV-14-C-l7U 

48 Contract WSGHZV-14-C-0031. 

49 Contracts W58RGZ-12·C·0010, W31P4Q-13-C·0069, W31P4Q-15-C-0078, W31P4Q-13-C·0023, W31P4Q-13-C-0046, 

W31P4Q-15-C-0002, and W56HZV·15-C-0092. 

so For one of the 29 contracts, the contracting officer did not approve the subcontracting plan in a timely manneL For 

another of the 29 contracts, the justification that a subcontracting plan was not required was missing a signature. 

51 Contract W31P4Q-16·D-0018. 

52 Contract W31P4Q·16·D·0040. 

53 Contract W56HZV-16-0·006l. 

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Recommendation 1 We recommend that the Executive Director, Army Contracting Command-Redstone: 

a. Ensure individual subcontracting reports are entered into the Electronic 

Subcontracting Reporting System for contracts W58RGZ·12·C·0010, 

W58RGZ·13·C·0086, W58RGZ·l4·C·0037, W31P4Q·15·C·0078, 

W31P4Q·13·C·0023, W31P4Q·15·C·0002, and W31P4Q·13·C·0046. If 

the individual subcontracting reports show that the contractors did not 

meet the contract's subcontracting goals, contracting officials should 

determine whether the contractors made a good-faith effort to meet 

their subcontracting goals and, if not, whether liquidated damages can be 

imposed against the contractors. 

Management Actions Taken During the Audit fiJr Recommendation 

We verified that ACC-Redstone contracting officials obtained information from the 

contractors that included their subcontracting achievements for two of the seven 

contracts. The information showed that the contractors met or exceeded their 

small business subcontracting goals. 

~ For contract WSBRGZ-14-C-0037, ACC·Redstone contracting officials 

obtained information that showed that the contractor met its small business 

subcontracting goal of-percent. Specifically, the contractor subcontracted a 

total o-all of which was awarded to small businesses. The amount was 

less than the small business subcontracting goal of- The contracting 

officer stated that the contract scope of work was reduced by-million and the 

contractor completed the work in 7.5 months rather than 12; therefore, there were 

fewer subcontracting opportunities than originally anticipated. 

~ For contract WSSRGZ-13-C-0086, ACC-Redstone contracting officials 

obtained an ISR showing that the contractor subcontracted a total of-million 

to small businesses .percent of total subcontracting dollars of-million), 

which exceeded the subcontracting goal of-million .percent of total planned 

subcontracting dollars of-million). In addition, the contracting officer 

prepared a memorandum, which stated that he reviewed the ISR and confirmed 

that the contractor met all of the small business subcontracting goals in its small 

business subcontracting plan. 

ACC-Redstone contracting officials still need to obtain the ISRs for the remaining 

five contracts. 

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Army Contracting Command Comments 

The ACC Deputy to the Commanding General, responding for the ACC-Redstone 

Executive Director, agreed, stating that ACC-Redstone will ensure that ISRs are 

entered into the Electronic Subcontracting Reporting System for the five contracts. 

If the ISRs show that the contractors did not meet any contract's subcontracting 

goals, the cognizant contracting officer will determine whether the contractors 

made a good-faith effort to meet their subcontracting goals and, if not, whether 

liquidated damages can be imposed against the contractors. 

Our Response 

Comments from the Deputy to the Commanding General addressed all specifics 

of the recommendation. This recommendation is resolved but remains open. 

We will close the recommendation once we verify that the ISRs are entered into 

the Electronic Subcontracting Reporting System and that the contracting officers 

determined whether the contractors made a good-faith effort to meet the small 

business subcontracting goals in their subcontracting plan and, if not, whether 

liquidated damages can be imposed against the contractors. 

b. Determine whether the contractors for contracts W58RGZ-13·C·0127 and 

W31P4Q·13·C·0069 made a good-faith effort to meet the small business 

subcontracting goals in their subcontracting plans and, if not, determine 

whether liquidated damages can be imposed against the contractors. 

Management Actions Taken During the Audit ji>r Recommendation Lb 

We verified that ACC-Redstone contracting officials determined that the contractor 

for contract WSSRGZ-13-C-0127 made a good-faith effort to meet the small business 

subcontracting goals and, therefore, did not assess liquidated damages against the 

contractor. Specifically, the contractor explained to the ACC-Redstone contracting 

officials that the project went through a series of configurations and design 

changes that adversely affected the opportunities to utilize the small business 

subcontractors the contractor had originally planned to use. 

ACC-Redstone contracting officials still need to determine whether the contractor 

for contract W31P4Q-13-C-0069 made a good-faith effort to meet the small 

business subcontracting goals in its subcontracting plan and, if not, determine 

whether liquidated damages may be imposed against the contractor. 

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Army Contracting Command Comments 

The ACC Deputy to the Commanding General, responding for the ACC-Redstone 

Executive Director, agreed, stating that the cognizant ACC-Redstone contracting 

officer will determine whether the contractor for contract W31P4Q-13-C-0069 

made a good-faith effort to meet the small business subcontracting goals in its 

subcontracting plan and, if not, determine whether liquidated damages can be 

imposed against the contractor. 

Our Response 

Comments from the Deputy to the Commanding General addressed all specifics of 

the recommendation. This recommendation is resolved but remains open. We will 

close the recommendation once we verify that the contracting officer determined 

whether the contractor made a good-faith effort to meet the small business 

subcontracting goals in its subcontracting plan and, if not, whether liquidated 

damages can be imposed against the contractor. 

Recommendation 2 

We recommend that the Executive Director, Army Contracting Command-Warren: 

a. Ensure that Individual subcontracting reports are entered into 

the Electronic Subcontracting Reporting System for contracts 

W56HZV·15·C·0222, WS6HZV·1S·C·0213, and WS6HZV·14·C·L713. 

If the individual subcontracting reports show tbat the contractors did 

not meet the contract's subcontracting goals, contracting officials should 

determine whether the contractors made a good-faith effort to meet their 

subcontracting goals and, if not, whether liquidated damages may be 

imposed against the contractors. 

Management Actions Taken During the Audit for Recommendation 2.a 

We verified that ACC-Warren contracting officials obtained the ISRs for the three 

contracts. The contracting officials determined that the contractors for those three 

contracts exceeded their small business subcontracting goals or were on pace to 

meet the goals if the contract was ongoing. 

~ For contract W56HZV-15-C-0222, ACC-Warren contracting 

officials contacted the contractor and obtained a final !SR. The ISR 

showed that the contractor subcontracted a total 

businesses -percent of total subcontracting dollars 

which exceeded the small business subcontracting goal 

.percent of total planned subcontracting dollars 

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f!'tlY9t For contract W56HZV-15-C-0213, ACC-Warren contracting 

officials contacted the contractor and obtained an lSR for the most 

recent reporting period. The contract is still ongoing. The small 

business subcontracting goal was--percent of total planned 

subcontracting dollars o-): The ISR showed that the contractor 

subcontracted a total of to small businesses as of March 31, 2017 

-percent of total subcontracting dollars of-. 

f!'tlY9t For contract W56HZV-14-C-L713, ACC-Warren contracting 

officials obtained summary which showed that 

the contractor subcontracted a total 

-percent of total subcontracting 

the small business subcontracting 

planned subcontracting dollars officer 

stated that the subcontract awards were significantly higher than 

the goals because the contractor identified additional subcontracting 

opportunities after the contract was awarded. 

Our Response 

The management actions taken adequately addressed Recommendation 2.a; 

therefore, this recommendation is closed. 

b. Determine whether the contractors for contracts W56HZV-14·C·0302, 

W56HZV-12-C-0092, and W56HZV-14-C·0239 made a good-faith effort to 

meet the small business subcontracting goals in their subcontracting 

plans and, if not, determine whether liquidated damages cau be imposed 

against the contractors. 

Management Actions 1l1kcn During the Audit for Recommendation 2.b 

We verified that ACC-Warren contracting officials determined that the contractors 

for the three contracts made a good-faith effort to meet the small business 

subcontracting goals and, therefore, did not assess liquidated damages against 

the contractors. 

For contract W56HZV-14-C-0302, ACC-Warren contracting officials 

determined that the contractor did not meet its small business 

subcontracting goals as a result of a series of contract modifications 

that changed the contract scope of work and reduced small business 

subcontracting opportunities. 

For contract W56HZV-12-C-0092, the ACC-Warren contracting officer 

currently assigned to the contract requested information from the 

contractor to determine if the contractor made a good-faith effort to meet 

the subcontracting goals. The contractor stated that it could provide 

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only limited information because the contractor personnel responsible 

for subcontracting on this contract were no longer with the company. 

Based on the available information, the contracting officer determined 

that the contractor made a good-faith effort to meet the small business 

subcontracting goals. 

For contract W56HZV-14-C-0239, the ACC-Warren contracting officer 

determined that the contractor based its small business goals 

on past commitments which did not include former Government 

furnished equipment. In addition, the contractor met or exceeded 

subcontracting goals for women-owned small businesses and 

veteran-owned small businesses. The contracting officer determined 

that the contractor made a good-faith effort to comply with its 

subcontracting goals. 

Our Response 

The management actions taken adequately addressed Recommendation 2.b; 

therefore, this recommendation is closed. 

c. Require the contractor to submit a corrected individual subcontracting 

report in the Electronic Subcontracting Reporting System for contract 

W56HZV·15·C·0092 for the period ending September 30, 2017, when 

the next report is due. If the individual subcontracting report shows 

the contractor did not meet the contract's subcontracting goals, 

determine whether the contractor made a good-faith effort to meet its 

subcontracting goals and, if not, whether liquidated damages can be 

imposed against the contractor. 

Army Contracting Command Comments 

The ACC Deputy to the Commanding General, responding for the ACC-Warren 

Executive Director, agreed, stating that ACC-Warren will request the contractor to 

submit a corrected final lSR1 to include the option year subcontracting goals 1 in the 

Electronic Subcontracting Reporting System for the contract. Once ACC-Warren has 

the corrected ISR, the contracting officer will determine whether the contractor 

made a good-faith effort to meet the small business subcontracting goals in its 

subcontracting plan. 

Our Response 

Comments from the Deputy to the Commanding General addressed all specifics of 

the recommendation. This recommendation is resolved but remains open. We will 

close the recommendation once we verify that the lSR is entered into the Electronic 

Subcontracting Reporting System and that the contracting officer determined 

whether the contractor made a good-faith effort to meet the small business 

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subcontracting goals in its subcontracting plan, and if not, whether liquidated 

damages can be imposed against the contractor. 

Recommendation 3 

We recommend that the Deputy Assistant Secretary of the Army for Procurement, 

In coordination with the Director, Army Office of Small Business Programs: 

a. Train contracting officials on Federal Acquisition Regulation Subpart 19.7 

responsibilities for approving and administering subcontracting plans. 

b. Revise Army Federal Acquisition Regulation Supplement Snbpart 5119.7 

to incorporate guidance on administering subcontracting plans and 

procedures for transferring subcontracting plan administration duties 

when a contract is transferred from one contracting officer to another. 

c. Issue a policy alert to notify contracting officials of the revision to Army 

Federal Acquisition Regulation Supplement Subpart 5119.7incorporating 

guidance on administering subcontracting plans and procedures for 

transferring subcontracting plan administration duties when a contract is 

transferred from one contracting officer to another. 

Army Ojjice of" Small Business Programs Comments 

The Army Office of Small Business Programs Director, responding for the 

Deputy Assistant Secretary of the Army for Procurement, agreed with the 

recommendations. The Director stated that the Army Office of Small Business 

Programs, in coordination with the DoD Office of Small Business Programs, 

implemented training and is developing a schedule to train contracting officials and 

small business professionals. The Director stated that the Army Office of Small 

Business Programs, in coordination with the Deputy Assistant Secretary of the 

Army (Procurement), is drafting the revised language for incorporation into the 

AFARS Subpart 5119.7 and the policy alert to notify all contracting officials and 

small business professionals of the revision to the AFARS. 

Our Response 

Comments from the Army Office of Small Business Programs Director addressed all 

specifics of the recommendations. The recommendations are resolved but remain 

open. We will close the recommendations once we verify that the training has been 

provided and the AFARS change and policy alert have been issued. 

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Appendix A 

We conducted this performance audit from April 2017 through january 2018 

in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We determined what actions the Army Contracting 

Command contracting officials took to ensure prime contractors met their small 

businesses subcontracting goals. We reviewed 80 Army Contracting Command 

contracts, valued at $5.9 billion." 

Universe and Sample 

We used the FPDS-NG to identify the universe of Army contracts. According to 

the FPDS-NG, the Army awarded 1,336 contracts, valued at $24.9 billion, with 

estimated completion dates in FYs 2015 or 2016, to other than small businesses." 

We selected three contracting offices to audit: two ACC-Redstone contracting 

offices and one ACC-Warren contracting office, based on the number of contracts 

awarded and the dollar value of contracts awarded, for a total of 216 contracts, 

valued at $7.6 billion. The two ACC-Redstone offices awarded 121 contracts, 

valued at $5.4 billion, and the ACC-Warren office awarded 95 contracts, valued 

at $2.2 billion. We eliminated five contracts that were duplicate entries 

in the FPDS-NG. 

To refine our universe, we reviewed the remaining 211 contracts to determine 

whether the contracting officer's business size selection in the FPDS-NG was 

accurately coded as "other than small business." We determined that the 

contracting officer miscoded 10 of the 211 contracts as being awarded to "other 

than small businesses." We eliminated those 10 contracts from our audit universe. 

We queried the eSRS for the remaining 201 contracts to determine whether there 

were subcontracting reports in the system and whether the report indicated that 

the contractor met its small business subcontracting goals. 

We nonstatistically selected 50 contracts, valued at $1.6 billion, from the 

201 contracts with estimated completion dates in FYs 2015 or 2016, to determine 

whether contracting officials ensured prime contractors provided small businesses 

54 Value includes not-to-exceed values of undefinltized contract actions. This amount may not reflect the actual base and 

al! options value once the contract is deflnitized, 

55 For this audit, we limited our universe to definitive contracts, indefinite-delivery indefinite-quantity contracts, and 

purchase orders performed within the United States because the small business competition requirements in FAR Part 

19 apply to these types of contracts. In addition, we limited our universe to contracts awarded in FY 2010 through 2015. 

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with adequate subcontracting opportunities." We selected 30 contracts, valued at 

$1.3 billion, awarded by ACC·Redstone and 20 contracts, valued at $318.0 million, 

awarded by ACC-Warren. 

We selected the highest dollar value contracts that could have a high risk of 

non-compliance with FAR subpart 19.7, "The Small Business Subcontracting 

Program." Specifically, we selected contracts that: 

required a small business subcontracting plan, but had no 

reports in the eSRS; 

contained reports in the eSRS which showed that the contractor did not 

meet its small business subcontracting percentage goals; and 

did not require a subcontracting plan or had an individual subcontracting 

plan with 0 percent goals. 

In addition, we nonstatistically selected 30 contracts, valued at $4.3 billion, 

awarded in FY 2016 to determine whether the contracts had an approved 

subcontracting plan or a determination that no subcontracting possibilities existed. 

We selected 20 contracts, valued at $2.8 billion, awarded by ACC-Redstone and 

10 contracts, valued at $1.5 billion, awarded by ACC-Warren. We selected the 

highest-dollar value contracts from each contracting office. 

Work Performed 

We collected, reviewed, and analyzed documents for 80 contracts to determine 

whether ACC-Redstone and ACC-Warren contracting officials held prime contractors 

accountable for meeting small business subcontracting goals. We reviewed 

documentation dated between November 2001 and November 2017. 

Review of Subcontracting Plans for Contracts Estimated to Be 

Completed in FYs 2015 or 2016 

To determine whether ACC-Redstone and ACC-Warren contracting officials 

monitored compliance with small business subcontracting goals, we reviewed 

50 prime contracts, valued at $1.6 billion, with estimated completion dates in 

FYs 2015 or 2016. We reviewed documents from those contract files, including: 

small business coordination records; 

solicitations or request for proposals; 

small business subcontracting plans; 

56 When contracts are completed, contracting officials can determine whether the contractor met its small business 

subcontracting goats and, if not, whether the contractor made a good·faith effort to meet the goals. If the contractor 

did not make a good-faith effort to meet its goals, then contractmg officials can assess !lquidated damages, 

roR OITICIAL USIO Ol>ll.Y 

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determinations of no subcontracting possibilities, if applicable; and 

contract action reportsY 

In addition, we interviewed ACC-Redstone and ACC-Warren contracting officials 

and obtained subcontracting reports from the eSRS. We also met with officials 

in the Office of the Deputy Assistant Secretary of the Army for Procurement and 

the DoD Office of Small Business Programs to discuss subcontracting deficiencies 

we identified during our review of contracts and meetings with ACC-Redstone and 

ACC-Warren contracting officials. 

Review of Subcontracting Plans for Contracts Awarded in 

FY2016 

To determine whether contracts awarded in FY 2016 had an approved 

subcontracting plan or a determination that no subcontracting possibilities existed, 

we reviewed 30 contracts, valued at $4.3 billion. We reviewed small business 

coordination records, solicitations or request for proposals, small business 

subcontracting plans or a determination of no subcontracting possibilities, and 

contract action reports. In addition, we interviewed ACC contracting officials. 

Criteria 

We reviewed the following sections of the FAR relevant to our audit objectives. 

FAR Subpart 19.7, "The Small Business Subcontracting Program," 

establishes requirements for contracting officials to provide 

subcontracting opportunities for small businesses. 

FAR Clause 52.219-9, "Small Business Subcontracting Plan," requires 

contractors to submit a small business subcontracting plan and to upload 

periodic subcontracting reports to the eSRS. 

FAR Clause 52.219-16, "Liquidated Damages- Subcontracting Plan," 

requires the contracting officer to assess liquidated damages if 

the contractor did not make a good-faith effort to comply with its 

subcontracting plan. 

Use of 

We relied on the contracting officer's business size selection field in the FPDS-NG 

to select contracts awarded to other than small businesses. We reviewed 

documentation from the Electronic Document Access system and the System for 

Award Management to determine whether the contracts were awarded to other 

51 A contract action report contains data that is required to be reported in the FPOS-NG. 

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than small businesses. 58 To assess the accuracy of computer-processed data, 

we compared the FPDS-NG data to documents in the contract files and to data 

from the System for Award Management. Of the 211 contracts we reviewed, the 

contracting officers miscoded 10 contracts as being awarded to other than small 

businesses. We notified ACC-Redstone and ACC-Warren contracting officials 

about the 10 coding errors, and we verified that they made the corrections 

to the FPDS-NG. 

We also used computer-processed data from the eSRS to determine whether 

the contractor uploaded ISRs into the system for the contracts we reviewed. 

We reviewed the ISRs to identify whether the contractor met its subcontracting 

goals and compared the lSRs to the subcontracting plans obtained from the 

contract file. We determined that the data obtained from the FPDS-NG and eSRS 

were sufficiently reliable to accomplish our audit objectives. 

Prior 

During the last 5 years, the Department of Defense Office of Inspector General 

(DoD OIG) issued four reports discussing small business contracting. Unrestricted 

DoD OIG reports can be accessed at hl!J1.:1Lwww.dodig.mil/reports.html/. 

DoDO/G 

Report No. DODIG-2017-072, "Two Air Force Centers Adequately Considered Small 

Businesses When Awarding Prime Contracts, but Small Business Subcontracting 

Needs Improvement," March 31, 2017 

Air Force Life Cycle Management Center (AFLCMC) and Air Force Nuclear 

Weapons Center (AFNWC) contracting officials generally ensured that 

prime contractors provided small businesses with adequate subcontracting 

opportunities for 13 of 20 contracts, valued at $325.3 million and $350.2 million 

respectively, with estimated completion dates in FY 2014 or FY 2015. However, 

AFLCMC contracting officials did not ensure that prime contractors provided 

small businesses with adequate subcontracting opportunities for the other 

seven contracts, valued at $24.9 million. The report recommended that 

AFLCMC contracting officials correct the FPDS-NG and require the contractors 

to submit ISRs in the eSRS for three contracts; the Chief, Product Support 

Contracting Division, AFLCMC, determine whether the contractors for three 

contracts made a good~faith effort to meet the small business subcontracting 

goals in their subcontracting plans and, if not, assess liquidated damages 

58 The System for Award Management is a Federal Government-owned and operated website where a contractor makes 

several self-certifications, Including self-certification of its small business status. The system transmits contractor data 

to the FPDS·NG, but contracting personnel must manually input the contractor's business size. 

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against the contractor; and the Director, Contracting Directorate, Air Force 

Sustainment Center, Hill Operating Location, direct his staff to train AFLCMC 

and AFNWC, contracting officials on FAR subpart 19.7 responsibilities for 

administering subcontracting plans, and update the FPDS-NG training to include 

how to complete the "Subcontract Plan" field in the FPDS-NG. 

Report No. DODIG-2016-117, "Marine Corps Installations National 

Capital Region-Regional Contracting Office Generally Implemented 

Recommendations," July 29, 2016 

This audit determined whether the Marine Corps Installations National 

Capital Region-Regional Contracting Office (MCINCR·RCO) implemented the 

recommendations in Report No. DODIG-2015-095. MCINCR·RCO contracting 

officials addressed all four recommendations in the report and, therefore, those 

recommendations are closed. 

Report No. DODIG-2016·019, "Small Business Contracting at Marine Corps Systems 

Command Needs Improvement," November 10, 2015 

Marine Corps Systems Command (MCSC) contracting officials generally 

provided small businesses an adequate opportunity to compete for prime 

contracts, but did not ensure prime contractors provided small businesses with 

adequate opportunities for prime contracts. The report recommended that 

MCSC officials determine whether the contractors for the six specified contracts 

made a good-faith effort to meet their subcontracting goals and, if not, 

whether liquidated damages may be imposed against the contractor; establish 

guidance for contracting officers for reviewing, approving, and administering 

subcontracting plans; and train contracting officials on their responsibilities for 

evaluating and administering subcontracting plans. 

Report No. DODIG-2015-095, "Small Business Contracting at Regional Contracting 

Office-National Capital Region Needs Improvement, "March 20, 2015 

Regional Contracting Office-National Capital Region (RCO-NCR) contracting 

officials generally provided small businesses an adequate opportunity to 

compete for prime contracts, but did not ensure prime contractors provided 

small businesses with adequate subcontracting opportunities. The report 

recommended that RCO-NCR officials establish policy requiring contracting 

officials to obtain adequate subcontracting plans from contractors when the 

FAR requires subcontracting plans and verify that contractors submit the 

required subcontracting reports to the eSRS; implement training to ensure that 

contracting officials understand their responsibilities; and determine whether 

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the contractors for the two specified contracts made a good-faith effort to 

meet the small business subcontracting goals in their subcontracting plans 

and, if not, determine whether liquidated damages can be imposed against 

the contractor. 

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Subtotal $1,2901303,900 

1111 

i 3L W56HZV·12·C-0286 $110,486,276' Individual Plan Yes 

1 Estimated not~to-exceed value of undefinitized contract action. This amount may not reflect the actual 

base and all options value once the contract is definltized. 

<The contracting officer determined that no subcontracting possib1Hties existed for the contract 

"A subcontracting plan was not required because the work was performed outside of the United States. 4 A subcontracting plan was not required because the contractor's business size changed from large 

to small. 

'A((,Warren approved the commercial subcontracting plan. 

Source: The DoD O!G. 

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I App•oved 

Qase & Options llalue ~ <>f Subcontracting 'CI!ntract Numbl!r (rounded to nearest ctollar); Subcontraotlnglllan Plan or Ju:sti:flta:tu»n for No Plan 

1 26. WS6HZV-16-D-0061 60,156,831 Individual Plan Yes 

1 Estimated not-to-exceed value of undefinitized contract action. This amount may not reflect the actual 

base and all options value once the contract is definitized. 

J A subcontracting plan was not required because the work was performed outside of the United States. 3 The contracting officer determined that no subcontracting possibHlties existed for the contract. 

Source: The DoD OIG. 

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I.IEOOAANOtiMFOI'<I----~"'<li'li<>o,~ 

U.S.MivtM-~fl<l,il400-f!OIId.--.ol,At.-

1. rlOOlO IIBilQII. DoD I~-. l• J0i1Wll!l)'lil18, ""*'* --- 2. l1'!eAtmyCootToetillg-(ACCj~U..---il> ,..._mll>o.--

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Management Comments 
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Command Comments 

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Command Comments 

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Acronyms and Abbreviations 

ACC Army Contacting Command 

AFARS Army Federal Acquisition Regulation Supplement 

DASA(P) Deputy Assistant Secretary of the Army for Procurement 

eSRS Electronic Subcontracting Reporting System 

FAR Federal Acquisition Regulation 

FPDS-NG Federal Procurement Data System- Next Generation 

ISR Individual Subcontracting Report 

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Whistle blower Protection 

U.S. DEPARTMENT OF DEFENSE 

The Whistleblower Protection Ombudsman's role is to educate agency 

employees about prohibitions on retaliation and employees' rights and 

remedies available for reprisal. The DoD Hotline Director is the designated 

ombudsman For more information, please visit the Whist/eblower webpage at 

www.dodig.miljComponentsjAdministrative-JnvestigationsjDoD-Hotlinej. 

For more information about DoD OIG 

reports or activities, please contact us: 

Congressional Liaison 

703.604.8324 

Media Contact 

public.affairs@dodig.mil; 703.604.8324 

DoD OIG Mailing Lists 

www.dodig.mil/Mailing-Lists/ 

Twitter 

www.twitter.com/DoD_IG 

DoD Hotline 

www.dodig.mil/hotline 

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