Government Contracting: Federal Efforts to Assist Small Minority Owned Businesses
Published: 2012-09-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Each year, the government obligates billions in contracts to businessesnearly $537 billion in fiscal year 2011. About $104 billion (19.4 percent) was obligated to small businesses, and over $36 billion of this amount was obligated to small businesses that identified themselves as minority-owned (see figure). In this report, GAO describes (1) what federal agency officials and advocacy groups identified as challenges small, minority-owned businesses may face in seeking federal government contractsincluding any linguistic or cultural barriersand agencies efforts to address them, and (2) what information is available on federal efforts to assist small, minority-owned businesses in contracting with the federal government. For selected agencies, GAO analyzed data on obligations to minority-owned businesses, reviewed information on programs and resources that can assist minority-owned businesses, reviewed relevant information from the Department of Justice on agencies Limited English Proficiency plans, and interviewed officials from selected federal agencies and advocacy groups that provide assistance to minority-owned businesses. In written comments, Commerce said that GAO had not covered all federal efforts to support small, minority-owned business contracting. As GAO noted in the report, this study focused on selected agencies and contracting activities that accounted for about 70 percent of total federal obligations to small, minority-owned businesses in fiscal year 2010.
section_title: What GAO Found
paragraphs: While their views varied to some degree, federal agency officials and advocacy groups GAO contacted identified a number of challenges that small, minority-owned businesses may face in pursuing federal government contracts. For example, officials and advocacy groups pointed to a lack of performance history and knowledge of the federal contracting process as significant barriers. Officials from advocacy groups cited additional challenges, such as difficulty gaining access to contracting officials and decreased contracting opportunities resulting from contract bundlingthe consolidation of two or more contracts previously performed under smaller contracts, into a single contract. Officials from agencies that accounted for 70 percent of federal contracting with small, minority-owned businesses(the Departments of Defense, Health and Human Services, and Homeland Security, and the General Services Administration) told GAO that they conducted outreach to help small, minority-owned businesses with these challenges. Their outreach efforts include one-on-one interviews between contracting office staff and businesses seeking federal contracts. Linguistic and cultural barriers were identified as a challenge on a limited basis.
Federal agencies GAO contacted collected and reported some information on the contracting assistance provided to small disadvantaged businessesincluding those that are minority-owned. Two agencies GAO reviewed collected and reported data by minority group. The Minority Business Development Agency in the Department of Commercecreated to foster the growth of minority-owned businesses of all sizesreported that its business centers helped these businesses obtain 1,108 financings and contracts worth over $3.9 billion in fiscal year 2011. For the same fiscal year, the Small Business Administration (SBA) reported that more than 90 percent of its primary business development program participants were minority-owned businesses. Federal agencies that GAO contacted said that the goals SBA negotiated with federal agencies for contracting with various socioeconomic categories, including small disadvantaged businesses, provided some information on efforts to assist minority-owned businesses. In fiscal year 2011, agencies GAO contacted met their prime contracting goal and three out of four agencies met their subcontracting goals. GAO generally found limited data on participants in agency outreach efforts because the agencies are not required to, and therefore generally do not, collect data on the minority group or socioeconomic category of businesses that participate in outreach events for federal contracting opportunities.

section_title: Letter
paragraphs: The federal government has a long-standing policy of maximizing  procurement opportunities for small businesses owned and controlled by  socially and economically disadvantaged individuals (small  disadvantaged businesses).Business Act to require federal agencies to, among other things,  negotiate annually in good faith with the Small Business Administration  (SBA) to establish prime and subcontracting goals for these businesses,   In 1978, Congress amended the Small  which include businesses owned and controlled by various minority  groups.
U.S. Census data show that minority-owned businesses are among the  fastest growing businesses in the U.S. Business Owners—the most recent survey data available—minority- owned businesses numbered 5.8 million, an increase of 45.5 percent over  the 5 years prior to the survey and more than double the 17.9 percent  rate for all U.S. businesses over the same time period.
U.S. Census Bureau, 2007 Survey of Business Owners.
In its annual report on small business procurement goals, SBA excludes certain contract  dollars when calculating percentages of dollars obligated to small businesses. The primary  justification for these exclusions is that these contracts are not subject to the Federal  Acquisition Regulation. According to SBA, the total amount of contract dollars less these  exclusions was $423 billion in fiscal year 2011. To view reports on these goals and  exclusions see https://www.fpds.gov/fpdsng_cms/index.php/reports/63-small-business- goaling-report. identified themselves as minority-owned according to data from the  Federal Procurement Data System-Next Generation (FPDS-NG). To  foster participation by small disadvantaged and minority-owned small  businesses in federal contracting, federal agencies administer a number  of programs and conduct outreach activities for them. For example, SBA  administers programs that are designed to develop small businesses— including minority-owned businesses—and help them navigate the federal  contracting process. Federal agencies also participate in outreach  activities such as matchmaking events—one-on-one meetings—that bring  together agency contracting officials and businesses seeking contracts.  Further, all federal agencies with procurement authority are required by  law to have an Office of Small and Disadvantaged Business Utilization  (OSDBU) that works specifically on contracting issues for these  businesses.businesses seeking federal contracting opportunities.
Finally, a number of online resources are available to all  Given the growth in minority-owned business, you asked us to assess  procurement programs that assist minority-owned businesses. For this  report, we reviewed (1) what federal agency officials and advocacy  groups identified as challenges that small, minority-owned businesses  seeking federal government contracts may face—including linguistic or  cultural barriers—and agencies’ efforts to address them, and (2) what  information is available on the extent of federal efforts to assist small,  minority-owned businesses in contracting with the federal government.
To determine what federal agency officials and advocacy groups  identified as challenges that minority-owned businesses may face in  contracting with the federal government, we interviewed agency officials  from a purposive, non-representative sample of eight contracting offices  at four agencies that accounted for about 70 percent of total federal  obligations to small, minority-owned businesses in fiscal year 2010. The  officials included those from contracting offices (those responsible for  making acquisition decisions) and OSDBUs. The four agencies were the  Departments of Defense (DOD), Health and Human Services (HHS), and  Homeland Security (DHS), and the General Services Administration  (GSA). We also interviewed officials from SBA and the Minority Business  Development Agency (MBDA), a part of the Department of Commerce  that was set up specifically to assist minority-owned businesses of all  sizes. In addition, we interviewed officials from advocacy groups that  provide assistance to businesses owned by Asian-, Black-, Hispanic-, and  Native-Americans.
To describe the information available on the extent of federal agencies’  efforts to assist small, minority-owned businesses in contracting with the  federal government, we reviewed federal government prime contracting  and subcontracting goals, SBA procurement scorecards, and  documentation describing programs that can provide contracting  assistance to minority-owned businesses. We conducted interviews with  officials from the selected agencies and their contracting offices to identify  and obtain information available on their outreach efforts to contract with  minority-owned businesses. In addition, we conducted interviews with 12  advocacy groups that provided contracting assistance to the minority  groups in our scope. Appendix I provides additional details about our  objectives, scope, and methodology.
We conducted this performance audit from November 2011 through  September 2012 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Federal Goals for Contracting with Small Businesses
paragraphs: Under the Small Business Act, SBA plays an important role in ensuring  that small businesses gain access to federal contracting opportunities.  SBA negotiates specific agency-wide goals to ensure that the federal  government collectively meets the 23 percent statutory goal for contract  dollars awarded to small businesses. In addition, SBA negotiates goals  for the socioeconomic categories of businesses. The current goals are:
5 percent of prime contracts and subcontract dollars are to be  awarded to women-owned small businesses,
5 percent of prime contracts and subcontract dollars are to be  awarded to small disadvantaged businesses,
3 percent of prime contracts and subcontract dollars are to be  awarded to service-disabled veteran-owned small businesses, and
3 percent of prime and subcontract dollars are to be awarded to  HUBZone small businesses.
Appendix II provides more information on the extent that federal agencies  obligated federal contract dollars to minority-owned businesses by  various socioeconomic categories.
section_title: Federal Agency Contracting Assistance for Small Businesses
paragraphs: The federal government has established a number of programs that can  assist small and small disadvantaged businesses—including those that  may be minority-owned—that seek to contract with federal agencies.  MBDA promotes the growth and competitiveness of minority-owned  businesses of any size.clients identify federal procurement opportunities, analyze solicitations,  and prepare bids and proposals. It also facilitates relationships between  minority-owned businesses and federal agencies, and researches  contracting trends at federal agencies. MBDA’s Federal Procurement  Center (FPC) provides research on federal agency contracting trends,  identifies large federal contracts, and helps minority-owned businesses  identify possible contracting opportunities.
MBDA’s network of business centers helps  SBA administers programs that are targeted to small businesses and that  provide assistance with federal contracting opportunities. SBA’s 8(a)  Business Development Program is one of the federal government’s  primary means of developing small businesses owned by socially and  economically disadvantaged individuals. Participating businesses, which  are generally referred to as 8(a) firms, are eligible to participate in the  program for 9 years. Businesses receive technical assistance, mentoring,  counseling, and financial assistance so that they can become competitive  in the federal marketplace. Additionally, participating businesses may bid  on competitive federal contracts that are open only to 8(a) firms as well as  on noncompetitive federal contracts.
SBA’s Procurement Center Representatives (PCR) and Commercial  Market Representatives (CMR) play an important role in helping ensure  that small businesses gain access to contracting and subcontracting  opportunities. PCRs and CMRs are the primary SBA staff who  implement SBA’s prime contracts and subcontracting assistance  programs, which are intended to increase contracting opportunities for  small businesses and help ensure that small businesses receive a fair  and equitable opportunity to participate in federal prime contracts and  subcontracts. PCRs also can make recommendations to agency  contracting officers that proposed contracts be set aside for eligible small  businesses. In particular, a PCR’s key responsibilities include reviewing  potentially bundled or consolidated solicitations—those in which two or  more procurement requirements previously provided or performed under  separate smaller contracts are grouped into a solicitation for a single  contractcontracting officers.  —and making set-aside recommendations to agency  The OSDBU within federal agencies advocate on behalf of small  businesses. Section 15(k) of the Small Business Act describes the  functions of OSDBU directors—which include implementing and  executing the agency’s functions and duties related to the award of  contracts and subcontracts to small and small disadvantaged  businesses. Other responsibilities of the OSDBU include identifying bundled contracts, potentially revising them to encourage small business  participation, and facilitating small business participation in the contracts.  OSDBU directors also help small businesses obtain payments from  agencies and subcontractors, recommend set-asides, coordinate with  SBA, and oversee OSDBU personnel.
Agencies also conduct outreach activities for small and small  disadvantaged businesses, including minority-owned firms that are  seeking federal contracts. Some agencies host monthly vendor outreach  sessions, a series of appointments with either agency officials (such as  small business or procurement officials) or prime contractors that have  subcontracting needs. These sessions give the businesses an opportunity  to discuss their capabilities and learn about potential contracting  opportunities. One of MBDA’s primary outreach efforts is the Minority  Enterprise Development Week Conference. During this conference,  participants from minority-owned businesses that have been vetted and  designated by MBDA are offered appointments with federal and corporate  partners to discuss contracting opportunities that will be made available  within the next 6 to 18 months.
Finally, a number of online resources are also available to businesses  seeking to contract with the federal government. For example, federal  agencies list their contract solicitations of $25,000 or more on the Federal  Business Opportunities website (www.FedBizOpps.gov)–managed by  GSA. The website provides online business tools, training videos, and  event announcements for small business owners. USA Spending,  established by the Office of Management and Budget, also contains  information on federal spending trends across the government, including  grants and contracts. In addition, federal agencies such as SBA provide  online contracting courses designed to help small businesses understand  the basics of contracting with government agencies.provides a summary of selected programs, resources, and outreach  activities available to minority-owned businesses.
section_title: Agencies and Advocacy Groups Identified Various Contracting Challenges That Minority-Owned Businesses May Face
paragraphs: Agency and advocacy group officials we interviewed identified a number  of challenges that small businesses—including minority-owned  businesses—may face when seeking to contract with the federal  government. In particular, these officials generally agreed that the lack of  performance history and knowledge of the federal contracting process  were significant challenges minority-owned businesses may face in  contracting with the federal government. However, the officials offered  varying opinions on the extent to which minority-owned businesses faced  other challenges, such as a lack of access to contracting officials and a  lack of monitoring subcontracting plans, and difficulties accessing needed  resources such as capital. Some agency officials we contacted indicated  that outreach activities they conduct and practices they undertake in their  contract solicitation activities address some of these challenges.
subsections: section_title: Agency and Advocacy Group Officials Differed in Their Opinions on Contracting Challenges That Minority-Owned Businesses May Face
paragraphs: Federal agency and advocacy group officials that we interviewed differed  in their opinions on challenges that small businesses—including those  that are minority-owned—may face when seeking to contract with the  federal government. The challenges identified included a lack of  performance history and knowledge of the federal contracting process,  contract bundling, a lack of access to contracting officials, lack of  monitoring of subcontracting plans, and difficulties assessing capital.
Officials from federal agencies and advocacy groups we contacted cited  the lack of a performance history and a full understanding of the federal  contracting process as significant challenges that minority-owned  businesses may face. According to the statement of Guiding Principles of  the Federal Acquisition System, when selecting contactors to provide  products or perform services, the government will use contractors that  have a track record of successful past performance or that have  demonstrated a current superior ability to perform. SBA officials told us  that historically and currently, small, minority-owned businesses that  lacked a performance history have had difficulty entering the federal  contracting market. MBDA officials also said that lack of a past  performance record with government contracts or private contracts of  similar size, made obtaining federal contracts more difficult for minority- owned businesses because of the weight given to performance history.
However, some agency officials, including those from two DHS  contracting offices, noted that because prior commercial experience—not  just government contracting experience—was considered, the lack of  prior government experience would not necessarily make a minority- owned business noncompetitive. Officials from a GSA contracting office  said that most small businesses seeking to contract with its office had a  performance history with the private sector, not the federal government.  The officials said that they considered past performance with the private  sector when making contract award decisions, and thus would not  consider lack of past performance history with the federal government as  a challenge. Finally, officials from an HHS contracting office noted that  the Federal Acquisition Regulation (FAR) requires that businesses  receive a neutral rating if they do not have a performance history and that  some small businesses may not be aware of this requirement.  However,  some advocacy group officials indicated that certain prerequisites and  past performance requirements were difficult for minority-owned  businesses to meet. For example, officials from one group said that these  businesses might partner with other more established businesses to help  meet the performance requirements.
See 48 C.F.R. § 15.305(a)(2)(iv). The FAR states that offerors without a record of  relevant past performance may not be evaluated favorably or unfavorably on past  performance—in other words, they must be given a neutral rating for the past performance  evaluation factor. bidding process works, and learning how to secure a government  contract. Further, MBDA officials noted that the federal contracting  process was very different from contracting with private sector  companies. They added that although federal agencies spend time and  money holding sessions on doing business with the federal government,  these sessions offered general information that could not be transferred  to bidding on specific projects. Similarly, agency officials also cited the  lack of understanding of agencies’ contracting needs. For example, an  OSDBU official from HHS emphasized that businesses that did not  understand the mission of the agency with which they were seeking a  contract or did not know what the agency bought and acquired might not  know how to market their product or service appropriately to win the  contract.
Advocacy group officials cited contract bundling as a significant  challenge, although a majority of agency officials disagreed. Advocacy  group officials whom we interviewed said that contract bundling could  reduce the number of contracting opportunities available for small and  minority-owned businesses. MBDA officials said that they believe that  many contracts are bundled unnecessarily and agreed that this practice  limited minority-owned businesses’ ability to compete for these contracts.
However, other federal agency officials we interviewed said that they did  not believe that contract bundling was a significant challenge for minority- owned businesses at their agencies. In addition, some agency officials  told us that they had specific policies regarding contract bundling. For  example, HHS and DOD contracting officials noted that their offices had  policies that prohibited contract bundling and added that small businesses  could protest a contract that they believed was unjustifiably bundled.  Further, officials from one HHS contracting office indicated that they  worked with small business specialists to determine if contracts should be  separated.
Advocacy group officials cited a lack of access to contracting officials as a  significant challenge. Officials from six advocacy groups that we  interviewed stated that the agency officials present at outreach events,  such as matchmaking events, often did not have the authority to make  decisions about awarding a contract. However, with the exception of  MBDA, none of the federal agency officials we contacted said that access  to contracting officers was a challenge at their agencies. The officials  emphasized efforts that their agencies were making to assist businesses.  For example, officials participate in industry days, where businesses can  meet prime contractors as well as interact with agency procurement staff,  and also conduct one-on-one appointments with businesses that seek to  contract with their agencies. Some federal contracting officials did note  that limited resources might pose a challenge in accessing the contracting  officers.  For example, contracting officials from DHS and GSA indicated  that any perceived access issues would be due to limited resources in  contracting offices. GSA contracting officials said that when the office had  a large number of contracts to complete, they could not meet with each  business owner seeking contract opportunities.
Advocacy group officials also cited a lack of monitoring of subcontracting  plans by federal agencies as a significant challenge for minority-owned  businesses, although SBA officials noted that this issue was a challenge  for all small businesses, not just those owned by minorities. Officials from  five advocacy groups described instances in which prime contractors did  not use the small, minority-owned business subcontractors that they  initially said they would use. Further, one advocacy group official said that  because federal contracting officials generally had relationships with  prime contractors and not subcontractors, small, minority-owned  subcontractors often had no recourse when a problem arose. An official  from another advocacy group stated that contracting officers have no  accountability to federal agencies to justify any subcontractor changes.  SBA officials noted that prime contractors’ “dropping” of subcontractors  from their plans after the contracts were obligated was not an issue  exclusive to minority-owned businesses but was a challenge for small  subcontractors in general.
In addition, we previously reported that CMRs cited a lack of authority to  influence subcontracting opportunities. was difficult to enforce prime contractors’ performance under  subcontracting plans because determining that a contractor was not  acting in good faith was difficult. Officials from one DOD contracting office  said that they did not communicate with subcontractors directly and that  prime contractors did have the right to pick a subcontractor of their choice  throughout the duration of a contract. An OSDBU official from DOD added  that the contracting officer would review and approve a replacement  subcontractor under certain circumstances. If a prime contractor’s  subcontracting plan included a certain percentage of work that was  designated for a small disadvantaged business, the contracting officer  might not approve the proposed replacement subcontractor if the change  did not adhere to the original percentage.
GAO, Improvements Needed to Help Ensure Reliability of SBA’s Performance Data on  Procurement Center Representatives, GAO-11-549R (Washington, D.C.: June 15, 2011). less likely to apply for loans because they feared their applications would  be denied.
Further, officials from two advocacy groups noted that bonding  requirements could prevent small, minority-owned businesses from  competing for large contracts. Bonding is required to compete for certain  contracts to ensure that businesses have the financial capacity to perform  the work and pay for labor and supplies. advocacy group indicated that to be considered for large contracts,  businesses may be required to obtain $25 million to $50 million in  bonding capacity. Since few small businesses can obtain this bonding  capacity, this official said that these businesses rely on “teaming”  arrangements—two or more businesses that collectively pursue larger  procurement contracts—to expand their opportunities.
For example, an official at one  In general, advocacy groups identified linguistic and cultural barriers as a  challenge for minority-owned businesses on a limited basis. One  advocacy group official said that linguistic barriers may be a challenge  because business owners with strong accents could have difficulty  communicating. Officials from a few Asian-American advocacy groups  noted that business owners with limited English proficiency (LEP)  may experience challenges. For example, one official said that business  owners in the construction industry may have difficulty obtaining a  required design certification if English was not the business owner’s first  language. Another advocacy group official cited challenges such as  discrimination against subcontractors by prime contractors because of  accents or LEP. Officials from advocacy groups also cited examples of  cultural barriers. For example, one noted that some first generation  Americans might have an aversion to working with the federal  government and therefore would not be willing to seek government  contracts. Some officials from Hispanic advocacy groups said Hispanic  contracting officials were underrepresented in the federal government.
A surety bond is form of insurance that guarantees contract completion.
Officials from another group also said that some minority groups,  including those in nonmetropolitan areas, could lack the infrastructure  needed (e.g., Internet service and transportation) to conduct business in  these areas.
Officials from all but one federal agency—SBA—that we contacted said  that they did not know of any linguistic or cultural issues that posed a  barrier for minority-owned businesses seeking to contract with the  government. SBA officials told us that cultural barriers may be a  challenge for minority-owned businesses seeking federal government  contracts and emphasized that minority-owned businesses would be  hesitant to reveal any linguistic barriers. The officials noted that some  cultural barriers existed for Asian-Americans, Alaskan Natives, Native- Americans, and Native Hawaiians, because their traditional ways of  conducting business involved intangibles that did not translate well into a  “faceless” electronic contracting community. These officials also said that  some minority-owned businesses may have informal business  practices—for example, they may obtain financing from a friend or family  member instead of through a bank—and therefore a business owner  might not have the documentation required by some federal programs.
section_title: Agency Outreach Efforts Help Address Some Challenges Facing Small and Minority-Owned Businesses
paragraphs: As we have previously noted, federal agencies conduct outreach to help  minority-owned businesses seeking federal government contracts. For  example, federal contracting officials with whom we spoke cited “industry  days,” conferences, and meetings with businesses as efforts to help  businesses address challenges they could face in seeking federal  contracts. During industry days small businesses are invited to meet  prime contractors in their industries and potentially obtain subcontracts.  Businesses can also interact directly with contracting office staff. For  example, contracting officers said that they participated in panel  discussions to provide business owners with information on the  acquisition process and forecasts of contract opportunities. Contracting  officers also accept requests from business owners that schedule  meetings to discuss their business capabilities. Many agency officials,  including an OSDBU official and contracting officials, told us they also  work with and refer businesses to Procurement Technical Assistance  Centers (PTAC) so that the businesses may receive one-on-one  assistance.
Agency outreach to businesses is generally directed by agency OSDBUs,  the agencies’ advocates for small businesses. OSDBU directors use a  variety of methods—including internal and external collaboration,  outreach to small businesses, and oversight of agency small business  contracting—to help small businesses overcome challenges they may  face such as understanding the federal contracting process. OSDBU  officials from three federal agencies we contacted indicated that they  collaborate with several agency offices, such as acquisition and small  business specialists, and with organizations such as MBDA. We  previously reported that nearly all of the OSDBU directors saw outreach  activities as a function of their office. For example, 23 of the 25 OSDBU  directors we surveyed between November and December 2010 viewed  hosting conferences for small businesses as one of their responsibilities,  and 23 had hosted such conferences. More specifically, these 23  agencies had hosted an average of 20 conferences within the previous 2  years. In addition, 20 of the 25 OSDBU directors surveyed saw  sponsoring training programs for small businesses as one of their  responsibilities, and 18 had hosted such events in the last 2 years.
section_title: Federal Agencies Collect Some Information on Contracting Assistance Provided to Minority-Owned Businesses
paragraphs: Federal agencies we contacted generally collect and report information  on contracting assistance they provide to small and small disadvantaged  businesses. Federal agencies are required to report annually to SBA on  participation in the agency’s contracting activities by small disadvantaged  businesses, veteran-owned small businesses (including service-disabled  veterans), qualified HUBZone small businesses, and women-owned small  businesses. SBA compiles and analyzes the information and reports the  results to the President and Congress.report to SBA plans to achieve their contracting goals, which can include  outreach activities. In addition, Executive Order 11,625 requires the  Secretary of Commerce—the umbrella agency of MBDA—and other  agencies to report annually on activities related to minority business  development and to provide other information as requested. Finally,  federal agencies are also required to develop and implement systematic   Agencies are also required to  data collection processes and provide MBDA with current data that will  help in evaluating and promoting minority business development efforts.
A majority of the federal agencies we contacted told us that the extent to  which they met SBA prime and subcontracting goals for the various  socioeconomic categories of businesses (including the small  disadvantaged business goal) provided a measure of their efforts to assist  minority-owned businesses in contracting with the federal government. As  figure 1 shows, in fiscal year 2011 the federal government met its 5  percent goal for prime contracting and subcontracting with small  disadvantaged businesses. In addition, all four agencies we reviewed met  their prime contracting goals of 5 percent, and three met their 5 percent  subcontracting goals for this category. Contracting officials at these  agencies generally attributed their success in contracting with small  businesses—including small disadvantaged businesses—to a variety of  factors, including support from the agency OSDBU and upper  management, staff commitment, and the use of set-asides. They also  noted several other factors that contributed to their contracting  performance, including market research, a strategy for small businesses,  and outreach efforts. Federal agency officials also said that some  outreach activities might be targeted to certain socioeconomic categories  to assist in meeting agency SBA goals. For example, DHS contracting  office officials said that as a result of monitoring their progress in meeting  SBA goals, they conducted outreach to women-owned and HUBZone  businesses with contract set-asides.
SBA also issues an annual scorecard as an assessment tool to measure  how well federal agencies reach their small business and socioeconomic  prime contracting and subcontracting goals, to provide accurate and  transparent contracting data, and to report agency-specific progress. An  overall grade assesses an agency’s entire small business procurement  performance, and three quantitative measures show achievements in  prime contracting, subcontracting, and plan progress, or an agency’s  efforts and practices to meet its contracting goals.given for government-wide performance, and individual agencies receive  their own grades. For fiscal year 2011, SBA gave a grade of “B” for  overall government-wide performance. For the federal agencies that we  included in our analysis, GSA scored an overall grade of A+, DHS and  HHS scored an overall grade of A, and DOD scored an overall grade of B.
Two agencies we reviewed collected and reported data by minority group.  For example, MBDA reports data categorized by minority group, on  contracting assistance that its business centers provide as required by  executive order. For fiscal year 2011, MBDA reported that its business  centers helped minority-owned businesses obtain 1,108 transactions (the  sum of contracts and financings) totaling over $3.9 billion (see table 1).
SBA also collects some information for its various programs, including  information by minority group for the 8(a) Business Development  Program, as required by statute. For example, SBA reported that of the  7,814 8(a) program participants in fiscal year 2011—the most recent data  available—more than 90 percent of the participants were minority-owned  businesses (see fig. 2). SBA also reported that 8(a) program participants  reported total year-end revenues exceeding $21.7 billion in fiscal year  2010, with 43.4 percent of these revenues coming from 8(a) contracts.  During that same year, SBA provided technical assistance to 2,000 8(a)  businesses. SBA officials we interviewed said that SBA generally did not  collect information by minority group for any of its other programs.
Most federal agencies that we contacted indicated that they collected  some general information on outreach events and activities and some  demographic data, although collecting such data was not required. For  example, for outreach events such as the Minority Enterprise  Development week conference, MBDA officials told us that they collect  general demographic information from participants on their businesses  and experience, but not by minority group. The officials told us that they  also collect aggregated data on its outreach activities for minority-owned  businesses, such as number of meetings and participants. For example,  MBDA officials told us that they conducted 119 of the 129 one-on-one  meetings scheduled between minority-owned and small businesses and  corporations and prime contractors during this event.
Officials from DOD, DHS, GSA, and HHS said that they asked  participants in their outreach events questions (sometimes by survey or  evaluation) about the value or helpfulness of the events. Officials from  three agencies noted that they used the survey results to determine the  effectiveness of, or how to improve, the event. In addition, agencies may  ask questions to obtain general information about a business and  potentially its socioeconomic status. Officials also said that they collected  some information by socioeconomic group, but none by minority group.
Finally, the OSDBU Council—which comprises OSDBU officials from  various federal agencies—hosts an annual procurement conference that  provides assistance to businesses seeking federal government contracts,  and some information is collected for this event. According to the  council’s website, more than 3,500 people registered for the 2012  conference, and more than 130 matchmaking sessions were conducted.  According to the council’s president, 2012 is the first year that such  information was collected.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to Commerce, DHS, DOD, GSA, HHS,  and SBA for review and comment and received comments only from  Commerce. Commerce provided written comments which are reprinted in  appendix V.
Commerce made two observations on our draft report. First, the  department stated that the report was a good start at capturing the federal  government’s effort to support small, minority-owned businesses, but did  not include all federal programs that supported federal contracting with  minority-owned businesses. The department added that GAO had missed  an opportunity to provide a more comprehensive picture of the federal  government’s efforts in this area, noting, for example, that the  Departments of Agriculture, Housing and Urban Development, and  Transportation had programs (other than OSDBUs) geared toward  increasing federal contracts with minority-owned firms. In addition, the  department stated that an Office of Minority and Women Inclusion was  recently established at each of the financial regulatory agencies. While  providing support to minority-owned businesses, these agencies and  offices were outside of the scope of our review, which as we stated in our  report, focused on the four agencies—DHS, DOD, GSA, and HHS—that  accounted for about 70 percent of total federal obligations to small,  minority-owned businesses in fiscal year 2010. We also included SBA  and Commerce’s MBDA in our review because of their roles in assisting  minority-owned businesses. We are reviewing the efforts of the Office of  Minority and Women Inclusion in an ongoing study that will be issued in  2013.
Second, Commerce noted that although the dollar amount of federal  contracts obligated to small, minority-owned businesses was  encouraging, the report did not analyze the number of minority-owned  firms that actually secured federal contracts. The department said that it  was possible that a handful of minority-owned firms had secured sizable  federal contracts but that the majority of minority-owned firms continued  to fail in obtaining them. However, data are not available on the total  universe of small, minority-owned businesses that entered bids in  response to federal contract solicitations. Just as with our reporting of  funds obligated for contracts, data on the number of minority-owned  businesses that secured federal contracts would not provide information  on the number of such businesses that did not obtain them. Likewise,  while we do report MBDA’s statistics on contracting assistance provided  to minority-owned businesses, again such data do not provide information  on how many businesses sought but did not obtain federal contracts. We  conducted interviews with officials from MBDA, SBA, contracting offices  at the federal agencies in our scope, and advocacy groups to obtain their  perspectives on the challenges minority-owned businesses may face in  seeking to contract with the federal government.
We are sending copies of this report to appropriate congressional  committees; the Attorney General; the Secretaries of Defense, Homeland  Security, and Health and Human Services; the Acting Secretary of  Commerce; and the Administrators of the General Services  Administration and Small Business Administration. In addition, this report  will be available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions on the matters discussed in this  report, please contact me at (202) 512-8678 or by email at  shearw@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.
GAO staff who made major contributions to this report are listed in  appendix VI.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to describe: (1) what federal agency officials and  advocacy groups identified as challenges that small, minority-owned  businesses may face in seeking to contract with the federal government— including any linguistic or cultural barriers—and agencies’ efforts to  address them, and (2) what information is available on federal efforts to  assist small, minority-owned businesses in contracting with the federal  government.
To determine which programs and resources to include in our scope, we  conducted a web-based search for initial information on programs and  resources available from federal government agencies using terms such  as contracting assistance for minorities. We analyzed information on  programs that provide federal contracting assistance and resources on  contracting opportunities, and are available to minority-owned  businesses. We describe programs and resources provided by the  Minority Business Development Agency (MBDA) as they are tasked with  the growth and promotion of minority-owned businesses. We also  describe programs and resources available from the Small Business  Administration (SBA), as this agency is responsible for providing  assistance to small businesses—which can be minority owned—and  programs and resources available from other selected federal agencies  based on the criteria described below. Finally, we interviewed officials  from these selected agencies and advocacy groups that provide  assistance to businesses owned by Asian-, Black-, Hispanic-, and Native- Americans. We selected these minority groups because they received the  largest share of federal obligations to small, minority-owned businesses  based on business owners self-identifying as a member of these groups.
To select agencies to include in our scope, we reviewed data from  Federal Procurement Data System-Next Generation (FPDS-NG) on  contract awards to small businesses owned by the minority groups in our  scope by federal agency. Although we could not independently verify the  reliability of these data, we reviewed system documentation and  conducted electronic data testing for obvious errors in accuracy and  completeness. On the basis of these efforts, we determined that the  FPDS-NG data on federal contract dollars to socioeconomic groups by  self-reported minority group were sufficiently reliable for purposes of our  review. We selected the top four agencies that accounted for about 70  percent of total federal obligations to small, minority-owned businesses in  fiscal year 2010—the most recent data available at the time of our  selections. These agencies were the Departments of Defense (DOD),  Health and Human Services (HHS), and Homeland Security (DHS), and,  the General Services Administration (GSA).
To select a purposive, non-representative sample of contracting offices  for purposes of conducting interviews, we first selected the top two  divisions within DOD, DHS, and HHS in terms of the percentage of their  agency’s obligations to small, minority-owned businesses. Those  divisions included the Departments of the Army and Navy for DOD; the  Bureau of Customs and Border Protection and the United States Coast  Guard for DHS, and the National Institute of Health and the Centers for  Medicaid and Medicare for HHS. We selected only one division for  GSA—the Public Buildings Service—as this division represented over 76  percent of GSA’s funds obligated for contracts to small, minority-owned  businesses. Using this approach, we selected a total of seven divisions  within the four agencies in our scope. Within each division, we selected  one of the top contracting offices based on the office’s percentage of their  division’s obligations to businesses owned by the minority groups in our  scope. We selected two contracting offices from the Department of the  Army because the percentage of obligations to small, minority-owned  businesses by any of its top contracting offices was small. Our final  sample consisted of eight contracting offices.
To describe the challenges that small, minority-owned businesses may  face in contracting with the federal government, we interviewed agency  officials—including those from contracting offices and the Office of Small  Disadvantaged Business Utilization—from the purposive, non- representative sample of eight contracting offices. We also interviewed  officials from MBDA and SBA. Further, we conducted interviews with  officials from 12 advocacy groups. We selected groups that provided  assistance to businesses owned by the minority groups in our scope  based on a web-based search on national organizations that represent  and provide assistance to minority-owned businesses in obtaining federal  contracts. To describe information on improving access to services for  persons with limited English proficiency, we reviewed Executive Order  13,166—Improving Access to Services for Persons with Limited English  Proficiency (LEP)—to understand its applicability to outreach activities  associated with federal contracting. We reviewed guidance from the  Department of Justice (DOJ), as well as existing LEP plans for each  agency in our scope. We could not review the LEP plans for DOD and for  SBA, as the plan for each agency had not yet been completed. We also  obtained and reviewed written responses from DOJ.
To describe the information available on the extent of federal efforts to  assist small, minority-owned businesses in contracting with the federal  government, we reviewed federal government prime contracting and  subcontracting goals and SBA procurement scorecards for fiscal year  2011 for DOD, HHS, DHS and GSA. We also reviewed documentation for  programs that assist small businesses owned and controlled by socially  and economically disadvantaged individuals—which can include  businesses that are minority-owned—to determine the types of  contracting assistance available. We conducted interviews with officials  from the selected agencies and contracting offices to identify and obtain  available information on their outreach efforts to assist minority-owned  businesses. In addition, we conducted interviews with officials from 12  advocacy groups that provide contracting assistance to the minority  groups in our scope.
For information on the percentage of funds obligated for contracts in fiscal  year 2011 to each socioeconomic category of small businesses by  minority group—including small disadvantaged, women-owned, service- disabled veteran-owned, and Historically Underutilized Business Zone  (HUBZone)—we analyzed data from FPDS-NG, which receives data from  the Central Contractor Registration System (CCR)—the system in which  all businesses seeking federal government contracts must register. In  CCR, registrants (i.e., business owners) can self identify as minority- owned and can specify a minority group(s). Registrants can select from  the following six categories: Asian Pacific, Subcontinent Asian, Black- American, Hispanic-American, Native-American, and Other. We  conducted electronic testing for obvious errors in accuracy and  completeness. As a part of this assessment, we analyzed the FPDS-NG  data to determine cases in which contracting firms were identified as  belonging to a particular minority group, such as Subcontinent Asian, but  did not designate the firm as being minority-owned. This occurred in less  than 3 percent of the cases. We conducted the same assessment within  different socioeconomic categories, such as small disadvantaged  business, and found a potential undercount of the minority-owned  designation in less than 4 percent of the cases. In addition, businesses  that selected “other minority” and those that self-identified as more than  one minority group were categorized as other minority. We determined  the minority-owned designations data were sufficiently reliable for the  purposes of our report. However, because we cannot verify the minority  group that contractors self-report, we characterize these data as self- reported.
We conducted this performance audit from November 2011 through  September 2012 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
section_title: Appendix II: Percentage of Obligated Funds for Contracts to Socioeconomic Categories by Minority Group, Fiscal Year 2011
paragraphs: We analyzed data from the Federal Procurement Data System – Next  Generation to determine the amount of obligated funds for contracts that  federal agencies made to small businesses by minority group for fiscal  year 2011. As figure 3 shows, the federal government obligated over $36  billion (35.1 percent) to small, minority-owned businesses in fiscal year  2011.
Figure 4 shows the amount of federal obligated funds for contracts to  small disadvantaged businesses. For example, about $28.8 billion (85.6  percent) was obligated to small disadvantaged businesses that were  minority-owned.
Figures 5 shows the amount of federal obligated funds for contracts to  small women-owned businesses. For example, $8.2 billion (45.7) percent  were obligated to small women-owned businesses that were minority- owned.
Figure 6 shows the amount of federal obligated funds for contracts to  small HUBZone businesses. For example, nearly $5.5 billion (54.3  percent) were obligated to small HUBZone businesses that were minority-  owned.
Figure 7 shows the amount of federal obligated funds for contracts to  small service-disabled veteran-owned businesses. For example, nearly  $3.9 billion (33 percent) were obligated to small service-disabled veteran- owned businesses that were minority-owned.
section_title: Appendix III: Selected Federal Government Contracting Programs, Resources, and Outreach Activities
paragraphs: This table shows programs, resources, outreach activities, and examples  of contracting assistance that agencies provide to assist minority-owned  businesses in contracting with the federal government.
section_title: Appendix IV: Potential Applicability of the Limited English Proficiency Executive Order to Federal Contracting
paragraphs: Executive Order 13,166, Improving Access to Services for Persons with  Limited English Proficiency, issued on August 11, 2000, requires federal  agencies to prepare a plan to improve access to federally conducted  programs and activities for those with limited English proficiency (LEP).
Under the order, federal agencies must take reasonable steps to provide  meaningful access to persons with LEP for federally conducted programs  and activities. In addition, the Department of Justice (DOJ) serves as a  central repository for agency plans to address LEP and provides  guidance to agencies for developing such plans.
According to DOJ guidance issued on August 16, 2000 and available at  LEP.GOV, the four factors to be considered in determining what  constitutes “reasonable steps to ensure meaningful access” include   (1) the number or proportion of such individuals in the eligible population,  (2) the frequency with which they come into contact with the program,   (3) the importance of the service provided by the program, and (4) the  resources available to the recipients. In May 2011, DOJ also issued a  Language Access Assessment and Planning Tool for Federally  Conducted and Federally Assisted Programs to provide guidance to  recipients of federal financial assistance and federal agencies. The first  step in the assessment tool is a self-assessment that determines what  type of contact an agency has with the LEP population and describes the  elements that are part of effective language access policy directives and  implementation plans. “Generally, current practice with regard to announcing federal government contracts and  grants would not be altered under the Executive Order. In determining what is required,  the focus of the analysis in this situation is on the first factor—the number or proportion of  eligible LEP persons. Except, perhaps, in territories, it is reasonable to expect that the  number or proportion of eligible contract or grant recipients who are LEP and are  themselves attempting to find and respond to announcements of grants and contracts is  negligible.”
Federal agency officials and advocacy groups we spoke with cited  linguistic barriers as a challenge on a limited basis. In addition, few  agencies had taken action to address possible linguistic barriers, and  most told us that they had not taken such action because they had not  encountered this challenge. For example, based on its efforts as of July  2012, GSA found that only one region reported significant contact with  persons with LEP.
section_title: Appendix V: Comments from the Department of Commerce
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Marshall Hamlett (Assistant  Director), Emily Chalmers, Pamela Davidson, Meredith Graves, Julia  Kennon, Shamiah T. Kerney, Katherine Leigey, and Andrew J. Stephens  made key contributions to this report.