GAO-06-791R COMMITS NexGen 

United States Government Accountability Office

Washington, DC 20548 

June 14, 2006 

Congressional Committees 

Subject: Commerce Information Technology Solutions Next Generation 

Governmentwide Acquisition Contract 

Concerns have been raised about the fairness of the “bid down” approach of the 

Department of Commerce’s Information Technology Solutions Next Generation 

(COMMITS NexGen) contract. In response to these concerns, the fiscal year 2006 

Science, the Departments of State, Justice, and Commerce, and Related Agencies 

appropriations conference report requested our review of COMMITS NexGen. This 

letter transmits the briefing document we provided to your staff on May 15, 2006, 

concerning a variety of issues related to the COMMITS NexGen contract. Specifically, 

we provided information on (1) how the COMMITS NexGen contract is structured to 

meet its intended goals, (2) what effect the tier system has on the task order 

competition process, and (3) what oversight and internal control procedures 

Commerce has implemented to address the risks of interagency contracting. 

The COMMITS NexGen tier structure, which includes a range of sizes of small 

business contractors and allows similar size contractors to compete against each 

other, is unique among other similar contracts. We found that many of the 

55 COMMITS NexGen contractors have grown significantly or have been acquired by 

larger businesses and may no longer meet small business size standards. In addition, 

small business accomplishments might be overstated since specific small business 

size standards are not identified for each task order. We also found that a significant 

portion of the task orders intended for the smallest contractors were issued to larger, 

incumbent contractors. However, because of the way in which the Department of 

Commerce has defined incumbency for this contract, an incumbent contractor may 

have obtained its initial work through a contracting vehicle other than COMMITS 

NexGen. With regard to oversight and internal controls, the COMMITS NexGen 

program has established procedures; however, it is unclear whether some of these 

controls are in place and others, such as performance measures, have yet to be 

established to ensure that the program is meeting its goals. Program officials said 

they will begin to collect specific performance data later this fiscal year. The Small 

Business Administration has proposed regulations that would address the issues we 

identified with contractors not meeting the small business size standards; therefore, 

we are not making any recommendations at this time. 

 

We provided a draft of this briefing to the Department of Commerce for review and 

comment. The Department of Commerce Director for Acquisition Management and 
Page 2 GAO-06-791R COMMITS NexGen 

Procurement Executive provided comments via e-mail. He stated that not assigning 

industry codes or requiring business size certification for each task order is a 

procedure that is used with other interagency contracts, but they agreed that a rule 

change could help with fairness in implementing the contract as intended. 

Concerning the contractors that may no longer meet small business size standards 

because they have grown significantly, Commerce stated that they will follow the 

final ruling when it is issued and made effective by the Small Business 

Administration; however, until then, Commerce will continue to require small 

business size recertification every three years. With regard to the contractors that 

have been acquired, Commerce commented that they are requesting each company to 

submit a novation package to determine eligibility to continue as a COMMITS 

NexGen contractor.1

 

We are sending copies of this briefing to interested congressional committees, the 

Secretary of Commerce, Director of the Office of Management and Budget, and the 

Administrators for General Services and Small Business. We also will make copies 

available to others upon request. In addition, the briefing will be available at no 

charge on GAO’s Web site at www.gao.gov. 

If you or your staff have questions regarding this briefing, please contact me at 

(202) 512-4841 or ShamesL@gao.gov. Contact points for our Office of Congressional 

Relations and Public Affairs may be found on the last page of this briefing. GAO staff 

who contributed to this briefing were Amelia Shachoy, Assistant Director; Sarah Jane 

Hise; Russ Reiter; and Karen Thornton. 

Lisa Shames 

Acting Director 

Acquisition and Sourcing Management 

Enclosure 

 

1

At the time of a novation or change of name agreement, the Small Business Administration regulations 

(Title 13, Code of Federal Regulations, Section 121.404(i)) require contractors to submit a written selfcertification in order for the agency to count the award or orders issued pursuant to the contract 

towards its small business goals. 
Page 3 GAO-06-791R COMMITS NexGen 

List of Committees

The Honorable Richard C. Shelby 

Chairman 

The Honorable Barbara A. Mikulski 

Ranking Member 

Subcommittee on Commerce, Justice, Science 

 and Related Agencies 

Committee on Appropriations 

United States Senate 

The Honorable Frank R. Wolf 

Chairman 

The Honorable Alan B. Mollohan 

Ranking Member 

Subcommittee on Science, the Department of State, 

 Justice, and Commerce, and Related Agencies 

Committee on Appropriations 

House of Representatives 
1 

GAO-06-791R COMMITS NexGen 

Objectives 

• Concerns have been raised about the fairness of the “bid down” approach of the 

Department of Commerce’s Information Technology Solutions Next Generation 

(COMMITS NexGen) contract because it permits incumbent contractors to 

compete against smaller firms. In response to these concerns, the fiscal year 

2006 Science, the Departments of State, Justice, and Commerce, and Related 

Agencies appropriations conference report requested our review of the 

COMMITS NexGen governmentwide acquisition contract.1

 Specifically, we 

examined: 

ο how the COMMITS NexGen contract is structured to meet its intended 

goals; 

ο what effect the tier system has on the task order competiton process; and 

ο what oversight and internal control procedures Commerce has implemented 

to address the risks of interagency contracting. 

Scope and Methodology 

• To determine how the contract is structured to meet its intended goals, we:

ο reviewed and analyzed the business case documentation specifying the 

purpose and goals of the contract;

ο met with officials at the Department of Commerce, General Services 

Administration (GSA), Small Business Administration (SBA), the Office of 

Management and Budget’s Office of Federal Procurment Policy (OFPP), and 

four small COMMITS NexGen contractors that have been actively 

submitting work proposals;

ο compared COMMITS NexGen with other small business governmentwide 

acquisition contracts;

ο met with SBA officials concerning small business regulations affecting small 

business size determinations and compared all contractors’ current business 

size with SBA’s small business size standards as well as to the industry 

codes used to qualify for the contract; and

 

1

H.R. Rep. No. 109-272, p. 165. 

Commerce Information Technology Solutions Next 

Generation Governmentwide Acquisition Contract 

Engagement 

Objectives, Scope, 

and Methodology 
2 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

ο reviewed contractors’ current business size information obtained from 

Central Contractor Registration (CCR), including the SBA’s Dynamic Small 

Business database,2

 or other publicly available information.

• To determine the effect of the tier system on the task order competition 

process, we: 

ο identified the criteria used to place contractors into their respective tiers 

and analyzed data to determine under what industry codes contractors had 

performed prior government work; and 

ο reviewed each of the 19 task orders issued as of April 30, 2006, under 

COMMITS NexGen. 

• To identify the oversight and internal control procedures that Commerce has 

implemented to address the risks of interagency contracting we: 

ο obtained documentation and interviewed officials with regard to the 

definition of roles and responsibilities, training, and guidance on the use of 

the vehicle and compared this information with concerns identified in our 

prior work on interagency contracting. 

• We compared the data from the CCR and Federal Procurement Data System to 

other supporting documents to determine data consistency and reasonableness 

and found it sufficiently reliable for the purposes of this report. 

• We conducted our work from February 2006 through May 2006 in accordance 

with generally accepted government auditing standards. 

 

2

 Central Contractor Registration (CCR) is the primary vendor database for the federal government. CCR collects, validates, 

stores, and disseminates data in support of agency acquisition missions. Both current and potential federal government 

vendors are required to register in CCR in order to be awarded contracts by the federal government. The SBA’s Dynamic 

Small Business database is generally a self-certifying database. The SBA does not make any representation as to the 

accuracy of any of the data included, other than certifications relating to 8(a) Business Development, HUBZone or Small 

Disadvantaged Business status. 
3 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

Background 

• COMMITS NexGen is a governmentwide acquisition contract (GWAC) designed 

to offer information technology services to federal customers through a pool of 

highly-qualified small businesses. In January 2005, Commerce awarded 

55 contracts to small businesses grouped into three tiers based on their size. 

COMMITS NexGen small business contractors provide services to federal 

customers through task orders. The contract has an $8 billion ceiling over a 

10 year performance period. 

• COMMITS was originally established in 1999 to allow federal agencies to 

compete information technology solutions from a pool of small businesses. 

The original COMMITS contract reached its $1.5 billion ceiling in December 

2004. To continue the goals of COMMITS, Commerce established COMMITS 

NexGen. 

• For COMMITS NexGen, Commerce created three tiers of similar size 

businesses to allow them to compete against each other. Contractors are 

placed in a tier based on their size as well as the type of service. The type of 

service is defined by the North American Industry Classification System 

(NAICS). Commerce used 19 different NAICS codes. The size standards are 

drawn from SBA, which publishes a table of small business size standards 

matched to each of the NAICS codes.3

 

• As of April 30, 2006, 19 task orders totaling about $419 million had been issued. 

• In 2005, GAO designated management of interagency contracting as a 

governmentwide high-risk area. In recent years, federal agencies have been 

making a major shift in the way they procure many goods and services. Rather 

than spending a great deal of time and resources contracting for goods and 

services themselves, they are making greater use of existing contracts, such as 

GWACs, already awarded by other agencies. These contract vehicles offer the 

benefits of improved efficiency and timeliness; however, they need to be 

effectively managed. If not properly managed, a number of factors can make 

these interagency contract vehicles high risk. For example, these vehicles: 

ο attract rapid growth of taxpayer dollars; 

ο are administered and used by some agencies that have limited expertise 

with this contracting method; and 

ο contribute to a more complex contracting environment in which 

accountability has not always been clearly established. 

Findings

• The COMMITS NexGen tier structure is unique among GWACs. 

• Many COMMITS NexGen contractors have grown significantly or been 

acquired by larger businesses since their small business certification with 

COMMITS NexGen and may no longer meet the small business size standards. 

• COMMITS NexGen permits incumbent contractors to compete for task orders 

otherwise designated for lower tier competition. Commerce defines an 

 

3

 NAICS codes classify commercial activity into industry categories, e.g., internet service providers, computer system design 

services, and wireless telecommunications. 

Summary 
4 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

“incumbent” as a firm that is currently the prime contractor for work that will 

be continued under a new task order. The prime contractor may have obtained 

the initial work through a contracting vehicle other than COMMITS NexGen. 

• Only 30 percent, about $125 million, of the total task order value was competed 

among the smallest contractors. A significant portion of this was placed with 

larger incumbent contractors. 

• Because COMMITS NexGen does not include NAICS codes on individual task 

orders the program does not verify that contractors meet a particular size 

standard for that work. This may result in overstating small business 

contracting accomplishments. 

• COMMITS NexGen lacks measures for assessing performance. 

• Commerce’s goals included: 

ο having a range of small business size contractors; 

ο establishing tiers to allow similar size contractors to compete against each 

other; and 

ο supporting the smallest of the small businesses through the tier structure. 

• To accomplish these goals, Commerce used NAICS codes to differentiate small 

business sizes as shown in table 1. 

Tier Structure 

Seeks 

Competition 

among Similar 

Size Businesses 
5 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

Table 1: Qualifying Industry Codes Used to Determine COMMITS NexGen 

Small Business Contractor Eligibility

Tier North American Industry Classification System Codes 

and Type of Service 

Small 

business size 

standards 

518112 – Web search portals 

519120 – Libraries and archives 

519190 – All other information services 

541690 – Other scientific and technical consulting services 

541990 – All other professional, scientific and technical 

services 

$6.5 million

maximum 

revenues

517410 – Satellite telecommunications 

517510 – Cable and other program distributions 

One 

517910 – Other telecommunications 

$13.5 million 

maximum 

revenues

518111 – Internet service providers 

518210 – Data processing, hosting and related services 

541511 – Custom computer programming services 

541512 – Computer system design services 

541513 – Computer facilities management services 

541519 – Computer related services 

$23 million 

maximum 

revenues

Two 

516110 – Internet publishing and broadcasting 500 maximum 

employees 

(regardless of 

revenue)

517110 – Wired telecommunications carriers 

517211 – Paging

517212 – Cellular and other wireless telecommunications

Three 

517310 – Telecommunications resellers

1,500 maximum 

employees 

(regardless of 

revenue)

Source: Commerce (data); GAO (presentation). 

Notes: Revenue size standards effective December 2005. 

 Revenue values are averaged over 3 years. 

 The number of employees is calculated on an average, 12-month basis. 

 Businesses may not exceed the size standards to be considered a small business. 

• Our review of other small-business GWACs found that the COMMITS NexGen 

tier structure is unique. GSA manages a number of GWACs intended for small 

businesses. These GWACs are not structured into tiers and require contractors 

to meet the specific small business NAICS code(s) for the task order. 

ο The 8(a) Streamlined Technology Acquisition Resources for Services 

(STARS) and the Historically Underutilized Business Zone (HUBZone) 

GWACs are small business set-aside contracts for technology solutions. 

The GWACs are structured according to distinct functional areas 
6 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

designated by the NAICS codes. The small business contractors must meet 

the small business size standard for the appropriate functional area. Each 

task order is then identified for a specific functional area. 

ο GSA is also in the process of awarding two additional small business 

GWACs. The Veterans Technology Services (VETS) GWAC designed to 

provide worldwide information technology solutions to federal agencies 

and Alliant Small Business, a broadly scoped contract offering a suite of 

information technology services. Both of these GWACs use only one 

qualifying NAICS code, 541512-computer systems design services, which 

has a size standard of $23 million. 

• Some businesses have grown substantially.4

 As shown in table 2, we found 16 

(over 27 percent) of the COMMITS NexGen contractors do not meet the small 

business size standards for their current tier, or in some cases, any tier. 

Table 2: Contractor Eligibility Based on Current Size Information

Tier Current number 

of contractors 

Current size 

falls in another 

tier 

Current size does 

not meet any tier 

size 

One 20 5 1 

Two 27 3 4 

Three 8 0 3 

Total 55 8 8 

Source: Commerce, CCR, public available information (data); GAO (analysis and presentation). 

• We also found that six small businesses have been acquired or merged with 

large contractors, but small business size recertification did not occur. 

• Recent studies by the SBA’s Office of the Inspector General, SBA’s Office of 

Advocacy, and our own review have found that agencies are counting awards 

to large firms toward their small business procurement goals. In May 2003, we 

reported that large companies are reported as small businesses on contracts 

such as GWACs.5

 Regulations allow companies to be considered small over the 

life of the contract even if the company has grown into a large business or been 

acquired by a large company. 

SBA’s Recertification Rules

• In April 2003, SBA published a proposed rule requiring contractors that receive 

a multiple award contract (such as a GWAC) to certify annually on the 

anniversary date of the contract award to continue to be considered a small 

 

4

 For example, a tier one contractor, whose revenues should not exceed $13.5 million, now has projected revenues of $150 

million for 2006. A tier three contractor, who should not have more than 1,500 employees, had over 4,000 employees in 2005. 5

 GAO, Contract Management: Reporting of Small Business Contract Awards Does Not Reflect Current Business Size,

GAO-03-704T (Washington, D.C.: May 7, 2003). 

Some Businesses 

Have Grown 

Substantially 
7 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

business for a specified size standard.6 As of May 2006, this rule has not been 

finalized. 

ο Commerce officials suggested that annual recertification would reduce 

COMMITS’ effectiveness. 

ο A small business representative said that allowing large businesses to 

qualify as small businesses could deprive small businesses of contract 

opportunities. 

• SBA issued a final rule amending its small business size determinations 

effective December 21, 2004, which requires that at the time a novation or 

change-of-name agreement has been executed, the new entity must submit a 

written self-certification that it is small.7

 If the acquisition or merger does not 

result in contract novation or name change, a business concern need not 

recertify. 

• COMMITS NexGen contractors are required to recertify their small business 

size after the initial 3 years and prior to the exercise of the options to extend 

the GWAC period for an additional year. We found that GSA also requires its 

small business contractors to recertify prior to exercising any options. 

However, this time frame can vary between 2 to 5 years, depending on the 

contract. Agency officials may request size recertification for individual task 

orders. 

• We found cases in which contractors may be receiving task orders and not 

meeting the small business size standards because: 

ο incumbent contractors are allowed to compete for lower tier work; and 

ο individual task orders do not identify a specific NAICS code and the 

corresponding small business size standard. 

• Incumbent contractors in COMMITS NexGen are permitted to compete for task 

orders designated for lower tier competition, even if the incumbents exceed 

the size standards for the designated tier of competition. 

• As shown in figure 1, only about 30 percent of the total value of COMMITS 

NexGen orders was placed for competition in tiers one and two. 

 

6

 68 Fed. Reg. 20350. 

7

 69 Fed. Reg. 29192 (implemented at 13 CFR 121.404(i)), 29198. 

Task Orders May 

Be Issued to 

Businesses Not 

Meeting Size 

Standards 
8 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

Figure 1: Dollar Value of Task Orders Meeting Tier Level Criteria

• As shown in figure 2, task orders were issued to incumbent contractors 

exceeding the size standards. 

Figure 2: Percent of Total Task Orders Won by Higher Tier Incumbent 

Contractors
9 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

• COMMITS NexGen task orders are not assigned NAICS codes. Not assigning 

NAICS codes to task orders can result in orders being issued to businesses not 

meeting the specific size standard for that type of service. Because competition 

for task orders is based on the total value of the order and not on the type of 

service size standard, contractors are allowed to compete for work with 

smaller size standards. If won, the task order is recorded as going to a small 

business. 

ο Tier three contractors can compete for any task orders valued greater than 

$40 million. 

ο Tier two contractors can compete for any task orders valued greater than 

$5 million. 

ο Task orders with a value of $5 million or less are reserved for tier one 

contractors. 

• We found evidence that suggests that task orders may be issued to contractors 

not meeting the size standards for the category of work. 

• SBA recognized that multiple award contracts, including GWACs, have multiple 

NAICS codes with different small business size standards. In April 2003, SBA 

proposed that contracting officers must assign an appropriate NAICS code to 

each order issued under a GWAC to help ensure that, when applicable, a 

contractor is a small business.8

 As of May 2006, a final rule had not been 

issued. 

Primary Small Business Size Standard Is $23 Million in Revenue

• We determined that the primary NAICS codes for computer-related services 

and software development have a small business size standard of $23 million. 

• We determined that all but one of the 19 task orders (valued at over $419 

million) would most likely have been categorized as computer related services 

and software development having a small business size standard of $23 million. 

• Based on public information, we found 31 (over 56 percent) of the 55 

contractors currently exceed the $23 million size standards (table 3). 

Table 3: COMMITS NexGen Contractors Currently Meeting $23 million 

Size Standard

COMMITS 

contractors by tier 

Currently meet $23 million 

NAICS codes 

Currently exceed $23 million 

NAICS codes 

Tier one (20) 18 2 

Tier two (27) 6 21 

Tier three (8) 0 8 

Total (55) 24 31 

Source: Commerce (data); GAO (analysis and presentation). 

 

8

 68 Fed. Reg. 20350, 20355. 

Not Using NAICS 

Codes May Result 

in Overstating 

Small Business 

Accomplishments 
10 

GAO-06-791R COMMITS NexGen 

Briefing on COMMITS NexGen

Effect of Not Using NAICS Codes in Individual Task Orders Overstates 

Small Business Accomplishments 

• Only five of the task orders have been issued to contractors that currently meet 

the $23 million size standard (falling under tiers one and two). 

• Eleven of the task orders were issued to contractors certified as small 

businesses under size standards for 500 or 1,500 employees (falling under tiers 

two and three). 

• 92 percent of the total value of task orders issued went to contractors currently 

exceeding the $23 million size standard. 

The COMMITS NexGen ordering guide and business plan include oversight and 

internal control procedures to: 

ο ensure the task is appropriate for small business, prior to issuance of any 

task orders; 

ο establish a risk management approach to monitor cost, schedule, and 

performance measurement throughout the life of this program; 

ο require random post-award reviews of task orders; 

ο place emphasis on ensuring the fair-opportunity competition is received 

and that task order prices are fair and reasonable; 

ο require agency’s contracting officers to attend training prior to receiving 

delegation of procurement authority; 

ο require task orders to include performance metrics that are modified 

annually; and 

ο establish a fee structure that is monitored and assessed on an annual basis 

to determine whether it is in alignment with program cost. 

• However, it is unclear whether these controls are in place. 

ο The program office was not able to document the 55 contractors’ small 

business size certifications and contacted the contractors to obtain these 

certifications during our review. 

ο At the time we completed our review, certifications were not obtained from 

nine contractors. 

ο We identified six contractors that were placed in tiers lower than those for 

which they had certified. The program office was not aware that the six 

contractors inadvertently certified under incorrect NAICS codes. However, 

the program office believes that the contractors were placed in the correct 

tiers. Based on our review, the contracting officer has requested that 

contractors recertify immediately under the proper NAICS code. 

ο In addition, the program has only issued 19 task orders, most within the 

past year. 

• The program has not developed performance measures to ensure that that the 

program is meeting its goals. Appropriate performance measures help ensure 

that policies and processes are implemented and have the desired outcomes. 

ο Program office officials stated that COMMITS NexGen specific 

performance data will be collected starting this fiscal year. 

(120567) 

Effectiveness of 

Internal Controls 

and Oversight 

Is Unclear 
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