Small Business Administration: The Commercial Marketing Representative Role Needs to Be Strategically Planned and Assessed
Released: 2002-11-01T00:00:00

Letter

Background

The federal government encourages federal prime contractors’ use of small businesses as subcontractors by requiring prime contractors to develop plans with stated goals for subcontracting to various types of small businesses. Federal regulations require a subcontracting plan for each contract or contract modification that exceeds $500,000 ($1 million for construction contracts) and has subcontracting possibilities.

The Subcontracting Assistance Program is SBA’s vehicle for increasing the percentage of subcontract awards to small businesses and ensuring that small businesses have the maximum practicable opportunity to participate in the performance of federal government contracts. SBA’s Office of Government Contracting (OGC) oversees this program. SBA/OGC has six Area Offices responsible for all prime contractors’ subcontracting performance.

The program is implemented by CMRs, who promote small business subcontracting in two primary ways, as described in SBA regulations.First, CMRs review prime contractors’ compliance with the requirements of their subcontracting plans. They conduct on-site compliance reviews at prime contractors’ facilities and validate how well the prime contractors are implementing their subcontracting plans. They also conduct “desk reviews,” which are reviews of relevant subcontracting reports that are submitted by prime contractors and completed without on-site visits.

Second, CMRs conduct various marketing activities, such as marketing small businesses to prime contractors or matching certain types of small business subcontractors with prime contractors. CMRs perform this “matchmaking” through both personal introductions and the use of Web- based tools that help to connect prime contractors and subcontractors. CMRs also provide various educational activities (e.g., seminars and workshops) for prime contractors, subcontractors, and agency officials as part of their marketing activities. In describing the duties required of CMRs, SBA regulations do not place a relative order of importance on any of these responsibilities.

In addition, CMRs work on various SBA special initiatives as part of their marketing activities. For example, CMRs promote SBA’s special 8(a) subcontracting initiative, which focuses on increasing the number of subcontracts to small disadvantaged businesses. CMRs also promote several special initiatives involving SBA’s Procurement Marketing and Access Network (PRO-Net). PRO-Net is a Web-based system that allows prime contractors to advertise potential subcontracting opportunities and small businesses to advertise their capabilities as subcontractors. CMRs install PRO-Net access stations at large prime contractor sites and public libraries, and train interested businesses and agencies in the use of PRO- Net to match prime contractors and subcontractors. Finally, CMRs conduct special training for agencies and contractors on SBA’s historically underutilized business zones (HUB-Zone) Empowerment Contracting Program, which encourages economic development in HUB Zones.

SBA/OGC also employs other contract specialists, who focus on small businesses as prime contractors rather than subcontractors. These include Procurement Center Representatives (PCRs), size determination specialists, and Certificate of Competency (COC) specialists. PCRs work with agencies to determine whether it is appropriate for acquisitions not set aside for small businesses to be set aside. Size determination specialists determine whether a small business meets existing size standards for all procurement programs for which status as a small business is required. COC specialists review a contracting officer’s determination that the small business in question is not competent to perform on a particular contract.

The CMR Role Is Conflicted and in Decline

The CMR role is conflicted and in decline. Over the past few years, the CMR role has become part-time, and CMRs now usually have additional roles that often take priority. CMRs appear to spend slightly more time on marketing activities than on compliance monitoring, and they now rely much more frequently on desk reviews than on-site visits for the latter. In addition, workloads and prime contractor coverage vary greatly between CMRs. SBA officials and CMRs have several concerns about the CMR role.

The CMR Role Is Usually Part-Time and Often Lower Priority

The CMR position is usually part-time. At the end of fiscal year 2001, about 90 percent of the CMRs had other substantial responsibilities in addition to their CMR duties. At that time, only 4 of the 39 CMRs were full-time CMRs. As figure 1 shows, the number of part-time CMRs has grown over time, increasing twelve-fold since 1992. (SBA officials anticipate the continued assignment of additional roles to CMRs and other contracting specialists.) In addition, despite the fact that a larger number of staff had CMR duties at the end of fiscal year 2001 than in fiscal 1992, the number of CMR full- time equivalents (FTEs) declined 28 percent—from 25 to about 18—during this period.

The SBA officials and CMRs we interviewed told us that part-time CMRs have a variety of additional responsibilities, including serving as PCRs, COC specialists, and/or size determination specialists. For example, in our survey, 87 percent of the CMRs responding reported that in fiscal year 2000, they served in one or even two additional roles, as figure 2 shows.PCR was the most frequent additional role; 59 percent of the part-time CMRs also served as PCRs.

The CMRs and SBA officials we interviewed also told us that part-time CMRs often give lower priority to their CMR work than to their PCR, COC, and/or size determination work. This is consistent with our survey—57 percent of the part-time CMR respondents reported spending 60 to 89 percent of their time in fiscal year 2000 performing non-CMR duties. Only 31 percent reported spending less than 30 percent of their time on non- CMR duties. Apparently, there are several reasons for this, including not only the workload demands of these other roles, but also the time frames within which they must be performed. Generally, these roles are tied to specific procurements, and staff performing them must meet the procurement schedule. Regulations and guidance also mandate tight time frames for certain tasks. In contrast, CMR work is generally not as time sensitive, and several CMRs who perform these other roles told us they “fit in CMR work” when they have time.

Time Spent on Compliance Monitoring Versus Marketing Varies

CMRs generally seem to spend slightly more time on marketing than on compliance monitoring. Figure 3 and table 1 show details of how CMRs spent their time in fiscal year 2000. However, the SBA officials and CMRs we interviewed told us that the amount of time that both full- and part- time CMRs spend on the two primary CMR duties—compliance monitoring and marketing—varies considerably between Area Offices and between individual CMRs.

Shift from On-Site to Desk Reviews

CMRs use desk reviews far more frequently than on-site reviews to monitor prime contractors’ compliance with subcontracting plans. In fiscal year 2001, 70 percent of all compliance reviews were desk reviews. Reliance on desk reviews has increased substantially since fiscal year 1992, when all compliance reviews were done on-site. Figure 4 and table 2 show more details.

Uneven CMR Workload and Prime Contractor Coverage

There is an uneven distribution of CMRs nationally and an uneven distribution of CMR workload. According to SBA, at the end of fiscal year 2001, there were about 18 CMR FTEs nationally to monitor the subcontracting activities of the 2,029 prime contractors under SBA’s cognizance. Figure 5 and table 3 illustrate the wide range in CMR workload.

The SBA officials and CMRs we interviewed also acknowledged wide variations in workload between individual CMRs, whether full-time or part-time, in different Area Offices or within the same Area Office. For example, in one Area Office, one CMR had 13 prime contractors to monitor, while another had 65. Both spend about 10 percent of their time as CMRs. Similarly, in another Area Office, one CMR had 120 prime contractors to monitor, while a CMR in another had only 2. Both spend about 20 percent of their time as CMRs.

Not surprisingly, the uneven distribution of CMRs and CMR FTEs has contributed to wide variations in the number of on-site reviews performed annually by Area Offices. For example, one Area Office conducted 15 on- site reviews in fiscal year 2001, while others conducted 40 or more. In addition, uneven workload distribution has contributed to the existence of large blocks of un-reviewed, that is, “uncovered,” prime contractors. For example, in one Area, there are no SBA reviews of any kind—on-site or desk—being done for 212 prime contractors, including all the prime contractors in one state and half of those in another. SBA officials told us that in fiscal year 2001, only 11.4 percent of the prime contractors nationwide received an on-site SBA review.

Concerns about the CMR Role

CMRs and SBA officials have a range of concerns about the focus of the CMR role—particularly with regard to how CMRs should spend their time. Some believe that CMRs should concentrate more on monitoring prime contractors’ compliance with their subcontracting plans. Others believe they should focus more on helping small businesses connect with prime contractors for subcontracting opportunities. There are also differences of opinion and concerns within the agency about the relative merits of the methods that CMRs use to monitor compliance as well as with the uneven distribution of the CMR workload.

Disagreements about the Balance between Compliance Monitoring and Marketing

There are disagreements within SBA about the most appropriate focus for the CMR role, that is, the balance between compliance monitoring and marketing. The Area Directors, Supervisors, and CMRs we interviewed had different views about CMR work priorities. For example, one Area Director stated that compliance monitoring should be the first priority for CMRs and matchmaking (i.e., marketing) should be secondary. Another Area Director said that the CMR role should be a combination of compliance monitoring and matchmaking but that matchmaking should get more emphasis.

In contrast, the May 2001 report of the SBA Subcontracting Task Team clearly identifies compliance monitoring as the CMRs’ main function. The report concludes that over the past several years, CMRs have spent a disproportionate amount of their time on special initiatives. The report recommends that compliance reviews become the CMRs’ primary focus and that less emphasis be placed on ancillary duties, such as matchmaking or special initiatives. The report even proposes a new job title for the CMR, adding that “marketing” gives the wrong impression that matchmaking is the CMR’s main role.

In contrast again, SBA’s Web site does not mention compliance monitoring as part of the CMR role. Rather, the Web site, which is an important means of communicating with both prime contractors and small businesses, describes the CMR role as “assisting small businesses in obtaining subcontracts by marketing small businesses and matching them with large prime contractors.”

Concerns about the focus of the CMR role are not new. SBA’s Office of the Inspector General (OIG) issued a report in October 1995 citing the need to focus CMR efforts more effectively with respect to compliance monitoring and matchmaking.

Concerns about Desk Reviews

SBA introduced desk reviews in fiscal year 1996 as an economy measure. Because desk reviews take place in the CMRs’ offices rather than at the prime contractors’ locations, CMRs do not have to travel. In addition, the desk review takes substantially less time to accomplish than does the on- site review. Consequently, relying on desk reviews saves both travel money and CMR time.

SBA staff opinions differ about the relative merits of on-site versus desk reviews. Some SBA officials and many CMRs believe that on-site reviews are more effective and question the relative value of desk reviews as a means of monitoring compliance. During on-site reviews, CMRs determine if prime contractors are complying with their subcontracting plans by going to the prime contractor’s location, reviewing files and documentation that support reported summaries of subcontracting activities, and interviewing officials. The CMRs we spoke with said that this type of in-depth review is one of their best tools to encourage the maximum use of small businesses as subcontractors. In contrast, other SBA officials believe that using desk reviews not only saves resources but also increases the total amount of monitoring that CMRs can do. SBA officials said they have never evaluated the effectiveness of the two types of reviews.

Concerns about CMR Workload and Prime Contractor Coverage

SBA’s OIG observed the uneven workload distribution problem in October 1995. Noting the limited subcontracting resources and variable staffing levels and workloads, the OIG concluded that the unequal distribution of workload among CMRs was correlated with the uneven coverage of prime contractors. Accordingly, the OIG recommended that SBA more evenly distribute prime contractors among CMRs to improve coverage. However, SBA officials told us that where CMRs are located is driven by factors other than the location of prime contractors with subcontracting plans. For example, they said that although they can request CMRs to relocate to provide better coverage, they cannot require staff to relocate.

It is likely that the full extent of the uneven workload and coverage problems has not yet been identified. SBA officials have estimated that as many as 1,500 additional prime contractors with subcontracting plans are not presently captured by SBA’s data systems. While SBA officials told us they are working to improve the methods and databases for identifying and tracking prime contractors, progress appears to be very slow. Again in October 1995, the SBA OIG noted that the number of federal prime contractors with subcontracting plans was unknown, complicating SBA’s efforts to focus subcontracting program activities and likely resulting in lost small business opportunities.

Factors Affecting the CMR Role

Two primary factors have affected the CMR role: declines in resources and an ad hoc, piecemeal response to resource challenges. Both staffing and travel funds declined substantially over the past several years. With downsizing and retirements taking place and no staff assigned to replace lost personnel, the number of CMR FTEs declined significantly and resulted in workload imbalances across and even within SBA’s Area Offices. Travel fund reductions have meant fewer on-site visits and greater reliance on desk reviews. Staff at all levels agreed that insufficient resources—particularly staffing and travel funds—are the biggest obstacles to greater CMR coverage of prime contractors.

SBA did not formulate a strategic plan for dealing with the impact of resource reductions on the CMR role. Without such a plan, SBA implemented ad hoc measures to deal piecemeal with resource declines. Nonetheless, these measures collectively have redefined the CMR role.

Declining Resources

SBA/OGC resources have declined substantially over the past few years. From fiscal year 1991 through fiscal 2000, staff declined 52 percent, from 333 to 159. During this same period, travel funds declined 54 percent, from $440,000 to $201,000. SBA officials agreed that these resource declines have significantly affected the CMR role. For example, SBA Area Directors told us that the need to assign multiple roles to field staff has increased since SBA experienced significant budget and staff cuts in the mid-1990s. Prior to these cuts, most field staff for both the prime and subcontracting programs were hired as specialists for one program. Now most, including CMRs, work on multiple programs. Similarly, the Subcontracting Task Team report pointed out that the merging of the CMR/PCR positions was workload driven and reflected the fact that positions were not being filled when incumbents retired. Finally, several SBA officials told us that to cope with the loss of staff and lack of travel funds, as well as the increased number of special initiatives, the assignment of multiple roles to staff became necessary and the desk review was created to replace the on-site review, when necessary.

The decline in travel funds has especially affected on-site compliance monitoring. The lack of travel funds has become a critical factor in decisions about which prime contractors receive on-site reviews, particularly in those Area Offices that cover large geographic areas. For example, in one Area, one CMR said that one major factor determining which contractors receive on-site visits was whether they could be reached on a tank of gas, since travel funds are so limited. In another Area, the Director said that travel funds have been a problem for a long time, and that for many months of the fiscal year, CMRs do not have access to any travel money. This prevents them from being able to effectively select prime contractors for on-site review.

Our survey indicated that the lack of travel funds also affected on-site reviews in fiscal year 2000. For example, 76 percent of the responding CMRs rated their Area Office’s travel budget as very important in determining which prime contractors to review on-site. In comparison, fewer—66 percent—rated problems with contractor reports as very important. Still fewer—58 percent and 50 percent, respectively—rated poor/marginal ratings of the contractor during the last on-site review and the fact that the contractor had never had an on-site review as very important. Similarly, 78 percent rated the lack of travel funds as a significant barrier to conducting on-site prime contractor reviews.

Finally, the Task Team’s report expressed concern that without the requisite travel money and other resources, SBA will continue to monitor (on-site) about 12 percent of the total prime contractor portfolio, thus limiting the effectiveness of the Subcontracting Assistance Program.

Ad Hoc, Piecemeal Response to Resource Challenges

SBA’s response to these resource challenges has been largely ad hoc and reactive. As resources have declined, the agency has struggled to keep up with subcontracting program demands by making various piecemeal adjustments to address specific problems, such as assigning multiple roles to CMRs and instituting desk reviews to cover staffing shortages and travel fund declines. SBA has not stepped back—at either the agency or program level—and taken a broader, more strategic look at the CMR role, particularly in the context of today’s resource-constrained environment.

Strategic planning, assessment, and evaluation are essential elements of good management. This has been recognized for federal agencies since 1993, when the Government Performance and Results Act became law. Effective management requires the establishment of goals and objectives as well as impact or outcome performance measures.

SBA has not extended such planning to the CMR role to help address the difficult challenges that declining resources pose for the Subcontracting Assistance Program. SBA’s agency-level plan does not address the CMR role at all. Furthermore, SBA officials told us that SBA’s current strategic- planning process does not deal with the CMR role in subcontracting or provide for assessments, evaluations, or planning for the CMR role. In addition, they told us that neither OGC nor the Subcontracting Assistance Program has conducted strategic assessments or planning for the CMR role.

In sum, while regulations and operating procedures describe a variety of duties and responsibilities that CMRs may perform, SBA has not developed goals and objectives for the CMR role. For example, the agency analyzed what might be desirable levels of prime contractor coverage or subcontracting plan compliance in today’s environment and how CMRs might contribute to achieving these goals. In addition, although SBA has productivity measures (e.g., the number of on-site and desk reviews conducted) to track CMRs’ performance, it does not have impact or outcome measures—or even such expectations—for CMRs. Finally, SBA has not strategically assessed, evaluated, or planned how best to address critical CMR role issues that have emerged during the past few years, such as the effect of multiple role assignments for CMRs, disagreements about the focus of the CMR role, the relative merits of on-site and desk reviews, and the impact of uneven distributions of CMRs and CMR workloads.

Consequently, we do not know how effective the CMR role is. Effectiveness cannot be assessed without outcome and impact measures tied to program goals and objectives. These do not exist for the CMR role.

Conclusions

Subcontracting on federal contracts is a large and growing marketplace for small businesses. CMRs have been long considered to be key to fostering small business participation in such subcontracting. However, the value of the CMR role and the effect of recent changes in it are unknown. Unless steps are taken to better assess, evaluate, and plan for the future of the CMR role, SBA will continue to lack an understanding of CMR contributions to small business subcontracting. Moreover, its approach to addressing challenges that CMRs face will continue to be ad hoc and piecemeal.

Recommendations for Executive Action

We recommend that the Administrator of SBA assess, evaluate, and plan the CMR role, including addressing such issues as the impact of assigning multiple roles to CMRs, the appropriate CMR role focus, the effectiveness of compliance- monitoring methods, and the impact of uneven CMR workloads and prime contractor coverage; develop specific outcome and impact measures for CMRs’ clearly communicate the strategic plan and expectations for the CMR role to both SBA staff and small businesses.

Agency Comments and Our Evaluation

SBA provided us with written comments on a draft of this report. The comments, along with our responses, appear in appendix I.

SBA neither concurred nor disagreed with our recommendations. However, SBA said that our report will be extremely helpful as it seeks ways to strengthen and improve its Subcontracting Assistance Program. In addition, SBA agreed that it needs to rethink the CMR role in today’s environment and noted that some aspects of the role may change in the future. SBA also agreed that it needs to develop outcome or impact measures to better assess the effectiveness of the CMR role. Furthermore, SBA noted that it has changed its Web site to include compliance monitoring as part of the CMR role.

SBA objected to some of our conclusions, particularly (1) that SBA’s response to the challenges posed by declining resources has been ad hoc and piecemeal; (2) that SBA lacks a clear, strategic vision of the CMR role; and (3) that CMRs’ effectiveness is unknown. We continue to believe that our conclusions are correct. They are based on evidence that SBA has not strategically assessed, evaluated, or planned the CMR role in light of the current environment, including developing goals and objectives for the role and impact and outcome measures for CMRs.

SBA’s comments do not provide any new evidence to the contrary. For example, the task force study that SBA cites as evidence of planning identified some specific problems with the CMR role and recommended some specific solutions. However, it did not strategically assess or plan the CMR role, nor was it tied to any SBA strategic-planning effort. In addition, the study did not use or establish measurable goals and objectives or outcome and impact measures for the CMR role. Similarly, the regulations and operating procedures that SBA references as evidence of vision are not tied to measurable goals and objectives and associated outcome and impact measures. Rather, they simply describe a variety of duties and responsibilities that CMRs are required to perform. In addition, the conditions that SBA cites as evidence of CMRs’ effectiveness may be the result of many factors other than CMRs’ efforts alone. SBA has not conducted the assessments and evaluations necessary to determine what effect CMRs actually had on these conditions. Finally, SBA’s agreement that it needs to rethink the CMR role and develop impact or outcome measures further supports our conclusions.

Scope and Methodology

To determine CMRs’ duties and responsibilities, we analyzed pertinent legislation, regulations, and operating procedures and reviewed other agency documentation, including staffing profiles and workload analyses. We extracted information from the General Services Administration’s Federal Procurement Data System database on prime and subcontractors. We also interviewed officials at SBA headquarters and Area Directors and CMRs located in all six SBA Area Offices. We interviewed all six Area Directors and several Area Supervisors. We also interviewed 15 of the 39 current CMR staff, accounting for about 51 percent of the total CMR FTEs. Finally, we analyzed data from a GAO survey of all 33 staff working as CMRs in fiscal year 2000, who constitute 85 percent of the current CMR population. Our overall response rate was 97 percent. On our survey, we asked a variety of questions about CMRs’ roles and responsibilities.

To identify the factors affecting the CMR role, we reviewed pertinent legislation, SBA staffing information, workload analyses, and travel budget fund submissions. We also interviewed SBA headquarters and Area Office personnel and reviewed agency audit reports and task force studies. We also met with SBA officials responsible for strategic planning.

We conducted our work from November 2001 through July 2002 in accordance with generally accepted government auditing standards.

We are sending copies of this report to interested congressional committees; the Administrator, SBA; and the Director, Office of Management and Budget. We will also make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions concerning this letter, please call me at (617) 565-7555. Key contributors to this review were Catherine Baltzell, Art Fine, David Bennett, Christina Chaplain, and Sylvia Schatz.

Appendix I: Comments from the U.S. Business Administration

The following are GAO’s comments on the Small Business Administration’s letter dated October 8, 2002.

GAO’s Comments

1. We do not agree that 80-percent time is essentially equivalent to 100- percent time. Four staff that work 80 percent of their time as Commercial Marketing Representatives (CMRs) constitute about three full-time equivalents (FTEs), not four FTEs. This is a difference of about 20 percent. As we point out in our report, SBA’s use of part-time CMRs for whom the CMR role is, as SBA comments, “a collateral duty,” has not meant an increase in CMR staff resources. Rather, total CMR FTEs declined 28 percent from fiscal year 1992 through fiscal 2001. 2. SBA’s task force study identified some specific problems with the CMR role and recommended some specific solutions, and SBA’s efforts to implement some of these solutions can possibly lead to some incremental improvements. However, the task force study did not strategically assess or plan the CMR role, nor was it tied to any SBA strategic-planning effort. In addition, the study did not use or establish measurable goals and objectives or outcome and impact measures for the CMR role. In other words, the study did not address the larger issues of CMR strategic role assessment and planning. In the absence of such planning, SBA’s approach to addressing challenges that CMRs face will continue to be ad hoc and piecemeal. 3. Delegating decisions about the focus of the CMR role to Area Directors may be appropriate. However, SBA has not conducted any assessments or evaluations that address what Area Office factors and characteristics make such delegation essential or effective. Furthermore, SBA has not evaluated the effectiveness of local decisions regarding the balance between compliance monitoring and marketing. The resource pressures on the CMR role heighten our concern. It may be that local decisions about the focus of the CMR role are more influenced by the realities of local resource constraints than by local compliance monitoring and marketing needs. Without sound assessment and evaluation, however, this and many other issues of role focus will remain clouded. 4. The regulations and operating procedures that SBA references do not constitute a strategic vision tied to measurable goals and objectives.

Rather, as we discuss in our report, they simply describe a variety of duties and responsibilities that CMRs are required to perform. Since the regulations and guidance do not place a relative order of importance on these duties, and the Small Business Act and the Federal Acquisition Regulations do not mention CMRs, there is no law, regulation, or guidance requiring or suggesting that CMRs prioritize their work according to a strategic vision.

In contrast, a strategic vision is broader and more comprehensive. It is expressed in an overall strategic plan that articulates a mission and specific plans to fulfill that mission, including measurable goals and objectives and associated outcome and impact measures. SBA also appears to recognize at least to some degree the limitations of the regulations and operating procedures as a strategic vision because it agrees that it needs to rethink the CMR role and develop outcome or impact measures. 5. SBA recognizes that on-site reviews are both more effective than and preferable to desk reviews but asserts that they are “less cost- effective” and “not always necessary.” However, SBA does not offer persuasive evidence to support these assertions. During our review, SBA officials told us that they had not conducted assessments or evaluations of either of these compliance review methods or of their comparative effectiveness. Furthermore, SBA has not identified the criteria—that is, the strategic goals and objectives and associated impact or outcome measures—necessary to guide such assessments and evaluations.

SBA also says that it uses the results of desk reviews to determine which prime contractors should receive on-site reviews. However, as we discuss in our report, the lack of travel funds is the primary driver of decisions about which prime contractors receive on-site reviews. 6. SBA observes that in fiscal year 2000, small businesses, in general; small disadvantaged businesses; and women-owned small businesses received “much higher” percentages of all subcontract awards than of prime contract awards. SBA also observes that the percentage of subcontract dollars awarded to small disadvantaged businesses has improved steadily over the past two decades. SBA then attributes both of these conditions solely to CMR efforts.

SBA has not conducted the assessments and evaluations necessary to support this conclusion. Moreover, while CMRs’ efforts may well have contributed to these conditions, a number of other factors likely have had a significant impact. As we note in our report, federal regulations require a subcontracting plan for each contract or contract modification that exceeds $500,000 ($1 million for construction contracts) and has subcontracting possibilities. Federal agencies are independently responsible for complying with these regulations. Agencies may even conduct their own subcontract-monitoring efforts. For example, DOD reviews subcontracting plans for defense prime contractors. In fact, SBA commented that it has delegated the primary responsibility for monitoring the subcontracting plans of most DOD contractors to the responsible DOD agency so that SBA can focus its limited resources on monitoring civilian agencies’ plans. Since DOD accounted for 65 percent of all subcontracted dollars awarded in 2001, it is not likely that CMRs alone are responsible for all small business subcontracting achievements.

There are also inherent business incentives for prime contractors to subcontract voluntarily with small businesses. For example, small business subcontractors can provide important specialized capabilities that the prime contractor does not have or wish to invest in developing. Small business subcontractors may also be able to provide some general services faster and more economically, thus saving prime contractor resources. Subcontracting also allows prime contractors to avoid permanent staffing increases that may not be sustainable in the face of market shifts. Finally, as we note in our report, the nature of federal contracting has changed. The number of prime contracts is shrinking, and many prime contracts have become so large that small businesses find it difficult to compete for them. This change alone may heavily influence the conditions that SBA cites as markers of CMRs’ effectiveness. 7. We do not agree that our report leaves a mistaken impression with regard to the goals and objectives assigned to CMRs. Rather, we state clearly that SBA has productivity measures (such as the number of on- site and desk reviews conducted) to track CMRs’ performance but that it does not have impact or outcome measures—or even such expectations—for CMRs. SBA agrees that it needs to develop outcome or impact measures to better measure CMR effectiveness. 8. We continue to believe that SBA’s development of its new database appears to be slow. SBA began developing this new database in early 2001, after experiencing repeated problems with its original database. In October 2001, the SBA officials we interviewed told us that the new database would be operational in January 2002. In February 2002, SBA told us that it would be operational by June. Now, in October 2002, SBA says that it is only in test mode and acknowledges that it will not have a complete list of prime contractors with subcontracting plans until the end of the second quarter of fiscal year 2003. 9. While SBA’s original database does provide some useful information, the SBA officials we interviewed told us that the data were not complete. The database did not contain a complete list of prime contractors with subcontracting plans. 10. We continue to have concerns about CMRs’ workload and prime contractor coverage. As we discuss in our report, about 18 CMR FTEs nationally monitor the subcontracting activities of the 2,029 prime contractors currently identified. In addition, CMRs have various marketing duties. (In fiscal year 2000, CMRs generally seemed to spend slightly more time on marketing than on compliance monitoring.) CMR compliance monitoring Area Office workloads currently range from 56 to 198 prime contractors per CMR FTE. There are wide variations in CMR workloads both between Area Offices and within more than one Area Office. This situation may be exacerbated when additional contractors with subcontracts are identified and added to CMR workloads.