Federal Advertising: Established Programs Were Largely Used to Address Executive Order Directive to Ensure Small and Minority-Owned Business Participation
Released: 2007-08-13T00:00:00

Letter

Background

As reflected by federal statutes and a number of executive orders, it is the policy of the federal government to encourage the participation of small businesses, including businesses owned and controlled by socially and economically disadvantaged individuals, in the performance of federal procurement contracts. The Small Business Act established SBA as an independent agency of the federal government to aid, counsel, assist, and protect the interests of small business concerns; preserve free competitive enterprise; and maintain and strengthen the overall economy of the nation. Among other things, the act sets a minimum governmentwide goal for small business participation of not less than 23 percent of the total value of all prime contract awards for each fiscal year and makes SBA responsible for reporting annually on agencies’ achievements on their procurement goals. The act authorizes the President to establish the annual governmentwide goals.

To meet its responsibilities under the act, SBA negotiates annual procurement goals with each federal executive agency with the intent to ultimately achieve the 23 percent governmentwide goal. Some agencies have goals higher than 23 percent, while others may have goals that are lower than or equal to 23 percent—SBA negotiates all of them with the intent that the governmentwide small business participation rate will not be less than the goal of 23 percent. Among the agencies we reviewed for this report, annual small business procurement goals for fiscal year 2005 ranged from 16 percent (NASA) to 56 percent (Interior). DOD’s goal was set at 23 percent, Treasury’s at 24 percent, and HHS’s at 30 percent. The Small Business Act also sets annual prime contract dollar goals for participation by certain types of small businesses that agencies strive to meet as part of their efforts to meet their overall small business participation goal. Specifically, these include goals for participation by SDBs (5 percent), businesses owned and controlled by women or service- disabled veterans (5 and 3 percent, respectively), and, businesses located in historically underutilized business zones (HUBZones, 3 percent). “Each department or agency that contracts with businesses to develop advertising for the department or agency or to broadcast Federal advertising shall take an aggressive role in ensuring substantial minority-owned entities’ participation, including 8(a), SDB, and Minority Business Enterprise (MBE) in Federal advertising-related procurements.”

The criteria for determining a firm’s status as an 8(a) or SDB are set forth in section 8 of the Small Business Act and related regulations, while the definition of MBE is set forth in Executive Order 11625. Specifically, The 8(a) program, authorized by section 8(a) of the Small Business Act, was created to help small disadvantaged businesses compete in and access the federal procurement market. Generally, in order to be certified under SBA’s 8(a) program, a firm must satisfy SBA’s applicable size standards, be owned and controlled by one or more socially and economically disadvantaged individuals who are citizens of the United States, and demonstrate potential for success. Black Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans are presumptively socially disadvantaged for purposes of eligibility. The personal net worth of an individual claiming economic disadvantage must be less than $250,000 at the time of initial eligibility and less than $750,000 thereafter.

To qualify for SDB certification, a firm must be owned and controlled by one or more socially and economically disadvantaged individuals or a designated community development organization. Individuals presumed to be socially disadvantaged for purposes of the 8(a) program are also presumed to be socially disadvantaged for purposes of determining eligibility for SDB certification. In contrast to the 8(a) program applicants, businesses applying for SDB certification need not demonstrate potential for success, and the personal net worth of the owners may be up to $750,000 at the time of certification. SDBs are eligible for incentives such as price evaluation adjustments of up to 10 percent when bidding on federal contracts in certain industries. Prime contractors that achieve SDB subcontracting targets may receive evaluation credits for doing so. Section 8(a) firms automatically qualify as SDBs, but other firms may apply for SDB-only certification.

Executive Order 11625 defines minority business enterprises as those businesses that are owned or controlled by one or more socially or economically disadvantaged persons. The order states that disadvantages could arise from cultural, racial, or chronic economic circumstances or background or from similar causes. Under the order, socially or economically disadvantaged individuals include, but are not limited to, African-Americans, Puerto Ricans, Spanish-speaking Americans, American Indians, Eskimos, and Aleuts. While the definition of “MBE” is similar to the definition of “socially and economically disadvantaged small business” for purposes of the 8(a) and federal SDB programs, unlike these programs, the order does not limit the term “MBE” to small businesses.

Executive Order 13170 spells out specific responsibilities for SBA, OMB, and executive agencies with procurement authority. Generally, the order gives SBA responsibility for setting goals with agencies and publicly reporting the progress toward those goals. Although the order gives OMB general oversight responsibility for implementing the order, OMB and SBA officials told us that the two agencies had agreed that SBA would take on the oversight responsibilities because SBA already had programs in place to oversee the small business programs of federal agencies. Section 2(b) of the order directed federal agencies with procurement authority to develop long-term, comprehensive plans to, among other things, aggressively seek to ensure that businesses classified as 8(a), small disadvantaged, and minority-owned are aware of contracting opportunities and report annually on efforts to increase utilization of these businesses. Section 2(b) also directed OMB to review each of these plans and report to the President on the sufficiency of each plan to carry out the terms of the executive order.

The federal government awards contracts for advertising-related services for a variety of reasons, but primarily to deliver messages about its programs and services. According to Advertising Age, the largest amount of federal advertising spending goes to procure television and magazine advertising. Within the federal government, as we noted earlier, the biggest buyer of these services is DOD, which is very often doing so as part of ongoing recruiting campaigns by the military services. Additionally, for example, the Treasury’s Bureau of Engraving and Printing procures the services of an advertising firm to promote public awareness and acceptance of changes to U.S. currency (e.g., the introduction of the redesigned currency). Similarly, NASA also uses advertising firms to help plan and carry out a variety of events held around the country intended to publicize its programs and ongoing space research as well to support internal purposes, such as organizing off-site conferences.

Agencies Responded to Executive Order 13170 by Emphasizing Existing Programs and Initiating Some New Activities Targeted to Advertising

The five agencies we reviewed implemented Executive Order 13170 primarily by continuing their existing efforts to broadly identify potential contracting opportunities with all types of small businesses, while three of the agencies addressed section 4 of the order by initiating new actions specific to advertising-related contracts. For example, HHS and NASA cited ongoing training efforts directed to procurement staff or small businesses as one way their agencies addressed the order. The five agencies’ focus on ongoing efforts was consistent with SBA’s and OMB’s views that several provisions of the order duplicated program requirements under existing legislation. Specific to advertising, Treasury officials indicated that the agency was building on existing relationships with trade associations in order to identify advertising contracting for SDBs. Earlier this year, Treasury also established new outreach efforts and reporting requirements for advertising contracts with 8(a), SDB, and minority-owned businesses.

Agencies Are Generally Using Existing Programs to Address the Requirements of the Order

Rather than develop plans focused specifically on section 4 of the executive order, for the most part the five agencies that we reviewed said that they already had programs in place to address similar requirements in previous legislation and that these activities were consistent with the expectations of the order. In response to the order, agencies generally reemphasized to procurement officers in subagencies around the country (who are responsible for awarding contracts) each agency’s small business program policies and goals. While not directed specifically toward advertising contracts, these existing programs were designed to encourage the participation of small and minority-owned businesses in federal procurement.

Treasury, HHS, and NASA spelled out their strategies for addressing the executive order in written implementation plans that they prepared pursuant to the requirements of section 2(b) of the order. DOD and Interior did not, as directed, prepare such plans at that time, but agency officials from those departments described to us the efforts they undertook. More specifically, to ensure that 8(a)s, SDBs, and minority- owned businesses were aware of contracting opportunities: Treasury indicated in its implementation plan that it would continue to maintain a Web site for small business procurement and would post annual forecasts of contracting opportunities there. Further, the agency stated that it would publicize contracting opportunities in the Commerce Business Daily and FedBizOpps (an Internet-based point-of-entry for federal government procurement opportunities) and use its existing relationship with a variety of trade associations to foster the development of small minority-owned and women-owned businesses to increase awareness of contracting opportunities.

HHS’s plan stated that the agency would continue to train program and procurement officials through the HHS Acquisition Training Program on policies that affect federal procurement awards to 8(a), small disadvantaged, and minority-owned businesses.

NASA’s plan stated that it would continue to provide a 3-day course, “Training and Development of Small Businesses in Advanced Technologies,” that was designed to increase the knowledge base of small businesses—including disadvantaged, 8(a), and women-owned businesses, and minority educational institutions—by improving their ability to compete for contracts in NASA’s technical and complex environment.

Interior officials told us that they had disseminated information on future contracting opportunities to small businesses through the Internet, developed an advanced procurement plan, and conducted quarterly outreach meetings with potential small business contractors.

DOD officials noted that the department’s Small Business Program adhered to the requirements set forth in the Small Business Act and other applicable statutory provisions and federal regulations. The officials further explained that they used FPDS-NG and the department’s internal database to monitor DOD’s progress toward meeting its small business program goals.

The five agencies’ focus on enhancing their ongoing small business procurement programs to address section 4 of Executive Order 13170 was consistent with SBA’s and OMB’s views that some requirements in the order reflected previous legislation. Specifically, officials from SBA and OMB told us that several provisions of the executive order paralleled procurement program requirements under the Small Business Act and other existing legislation. As a result, these two agencies, which were assigned certain oversight and reporting responsibilities in section 2 of the order, agreed that SBA should address such responsibilities as part of its ongoing oversight activities under the Small Business Act. For example, the order requires SBA to conduct semiannual evaluations of the achievements in meeting governmentwide prime and subcontracting goals and the actual prime and subcontract awards to 8(a)s and SDBs for each agency and to make the information publicly available. However, prior to the issuance of the order, SBA was already evaluating awards to SDBs and publishing the information in its annual reports on the goals and achievements of each agency’s procurement efforts. SBA’s goaling requirements were previously established by the Small Business Act.

Our comparison of the order to existing legislation also showed that almost all of the requirements in the order had already been reflected in previous legislation. For example, the order required agencies to ensure that minority-owned businesses are aware of future prime contracting opportunities, an existing requirement under the Small Business Act and the Federal Acquisition Regulation (FAR). Similarly, the order requires that the directors of the Offices of Small and Disadvantaged Business Utilization (OSDBU) carry out their responsibilities to maximize the participation of 8(a)s and SDBs in federal procurement, a requirement that was previously set forth in the Small Business Act. Specifically, the Small Business Act requires each covered agency to establish an OSDBU to be responsible for, among other things, the implementation and execution of the functions and duties under the sections of the act that pertain to the 8(a) and SDB programs in each agency. We found that many of the activities mentioned in the agencies’ implementation plans or described to us highlighted actions that the agencies already had in place in their small business programs.

Some Agencies Planned New Activities to Direct Federal Advertising Contracts to 8(a)s, SDBs, or Minority-Owned Businesses

Although agency officials at all five agencies indicated that their current small business programs broadly addressed procuring services from 8(a)s, SDBs, and minority-owned businesses, including advertising-related services, three of the five agencies we reviewed—HHS, Treasury, and Interior—planned new activities to increase federal advertising contracting opportunities for these businesses. For example, HHS stated in its implementation plan that it would make every effort to develop alternative strategies to maximize small and minority business participation in its advertising contracts at both the prime contracting and subcontracting levels. HHS also directed staff from its OSDBU to work with its operational divisions to ensure that all advertising efforts were properly structured under the Federal Acquisition Regulation.

In order to direct federal advertising procurement opportunities to 8(a)s, SDBs, and minority-owned businesses, Treasury stated in its implementation plan that it would identify contracting opportunities for SDBs in advertising and information technology by building on its existing relationships with trade associations. Treasury had previously established a memorandum of understanding (MOU) with several trade associations, including the Minority Business Summit Committee and the U.S. Pan Asian American Chamber of Commerce. Treasury intended the MOU to foster an environment that would allow small and minority-owned firms to compete successfully for Treasury contracts and subcontracts. According to Treasury officials, the focus on advertising in Executive Order 13170 allowed the department to leverage an existing program by adding a component specifically for advertising and information technology services.

In addition to the efforts to partner with trade organizations that it began in 2001, Treasury issued an acquisition bulletin in January 2007 establishing additional outreach efforts and reporting requirements relating to the procurement of federal advertising services from 8(a)s, SDBs, and minority-owned businesses. The bulletin requires (1) small business specialists located at Treasury’s bureaus to use databases and other sources to identify minority-owned entities to solicit for advertising- related services, and (2) Treasury’s bureaus to report all contract actions related to federal advertising to the Office of Procurement Executive for contracts awarded from March 1, 2007, through September 30, 2007.

Interior, which had previously relied on its existing small business program to address the order, is currently drafting an implementation plan that will, according to the department’s OSDBU officials, propose activities to increase advertising opportunities for 8(a)s, SDBs, and minority-owned businesses. Interior plans to convey through its efforts that the department’s OSDBU is available to make the process of doing business with Interior simpler and more consistent across Interior’s component subagencies. Interior plans to target all small businesses whose owners include representatives from socioeconomic groups identified as disadvantaged in the Small Business Act.

Advertising Obligations and Contract Actions Awarded to 8(a), Small Disadvantaged, and Minority-Owned Businesses Varied across Agencies

Overall, from fiscal years 2001 through 2005, 8(a), small disadvantaged, and minority-owned businesses received about 5 percent of the $4.3 billion in advertising-related obligations awarded by DOD, Interior, HHS, Treasury, and NASA. These businesses accounted for 12 percent of the contract actions that the five agencies awarded, but the percentages the agencies awarded varied substantially. For example, Treasury awarded less than 2 percent of its advertising-related dollars to 8(a)s, SDBs, and minority-owned businesses over the 5-year period, while HHS awarded about 25 percent to these business types. Advertising dollars also varied from one year to the next at individual agencies, sometimes significantly, primarily because of large advertising campaigns that the respective agencies undertook to publicize new programs or promote their mission (e.g., public health). The extent to which agencies’ yearly increases in overall advertising obligations affected obligations to 8(a), small disadvantaged, and minority-owned firms also varied.

Participation of 8(a), Small Disadvantaged, and Minority-Owned Businesses Varied Widely among the Five Agencies

According to federal procurement data, the federal government obligated about $4.8 billion to contractors for advertising-related services from fiscal years 2001 through 2005. During this period, the five agencies obligated $4.3 billion for advertising-related services—about 92 percent of total advertising-related obligations for the federal government (this amount consists of $3.4 billion of their own funds, and another $919 million on behalf of other agencies). As shown in figure 1, DOD accounted for over half of all advertising-related obligations during this period.

Treasury (Other agency funded)

From fiscal years 2001 through 2005, the five agencies we reviewed collectively obligated about $218 million to businesses designated as 8(a), small disadvantaged, or minority-owned; individually, their utilization of these businesses varied widely (fig. 2). Specifically, HHS awarded the highest dollar amount to 8(a), SDB, and minority-owned businesses during the 5-year period—about $122 million—and NASA awarded the highest percentage of its dollars to these businesses—89 percent, or about $41 million.

During this period, the five agencies awarded a total of 6,279 contract actions, about 12 percent of which (725) were awarded to businesses with these designations (fig. 3). Individually, the extent to which agencies awarded contract actions to 8(a), SDB, and minority-owned businesses varied widely, with Treasury awarding none on behalf of other agencies to these types of businesses and NASA awarding 45 percent. The number of contract actions awarded to 8(a)s, SDBs, and minority-owned businesses ranged from 0 at Treasury (administered for other agencies) to 449 at DOD.

Individually, the agencies we reviewed awarded different percentages of their advertising-related contracting dollars and actions to these types of small businesses. For example, on average, NASA awarded more than 80 percent of its total advertising-related obligations to businesses in each of these categories for the 5-year period. Except for 8(a)s and SDBs in 2001, NASA consistently awarded 66 percent or more of its advertising-related obligations to the three types of businesses. In contrast, Treasury and DOD on average awarded 1.7 percent or less of their advertising-related obligations to 8(a), SDB, or minority-owned businesses. Figure 4 shows the amount of advertising-related obligations awarded by each agency to each of the three business types for 5 fiscal years as well as the total for the 5-year period. Similarly, figure 5 shows the number of advertising- related contact actions awarded by each agency to each of the three business types for each year and the total for the 5-year period. Contracting dollars and actions awarded directly to businesses can be counted in more than one category, so the dollars and actions awarded to various types of small businesses are not mutually exclusive.

Year-to-Year Variations in Agencies’ Advertising Obligations Were Due to Advertising Campaigns Specific to the Agency

As we noted earlier in this report, federal agencies award contracts for advertising-related services for a variety of reasons, the primary one being to deliver messages about the agencies’ programs and services. The advertising services that agencies procured ranged from recruiting and public service announcements to public relations. We found that advertising dollars for agencies sometimes varied significantly from one year to the next (table 1) and that these differences were mostly the result of large advertising campaigns specific to the individual agencies.

While we noted the year-to-year variations in agencies’ overall advertising obligations, we also observed that these variations did not always translate into a direct effect on the share of agencies’ advertising obligations that went to 8(a)s, SDBs, or minority-owned businesses (fig. 4). For example, during the 5-year period under review, DOD showed an upward trend of increasing obligations for advertising-related procurement, with the largest increase occurring in fiscal year 2005 (about 31 percent). DOD officials attributed the increase in advertising expenses to confronting the challenge of continuing to fill the military ranks with recruits and reenlistees in the midst of war. More specifically, during fiscal year 2005 DOD awarded multiple actions on four ongoing unrelated large contracts with obligations ranging from about $60 million to $175 million. None of these new fiscal year 2005 contract actions used 8(a)s, SDBs, or minority- owned businesses. Overall, however, DOD increased its advertising-related obligations to each of the three business types (from 2004 to 2005).

HHS officials told us that HHS’s higher advertising-related obligations in fiscal years 2001 and 2003 were mostly attributable to the Centers for Disease Control and Prevention’s (CDC) development of a Youth National Media Program. In support of this initiative, two advertising programs were conceived: the National Youth Media Campaign and the Targeted Communities-Youth Media Campaign. HHS obligated $151 million for these two campaigns. A portion of these obligations—just over $48 million—was awarded to two minority-owned businesses, one of which was also certified as a SDB. These campaigns included HHS’s VERB advertisement targeted toward children and teens to promote more physical activity (fig. 6).

The increase in HHS’s overall advertising obligations from 2002 to 2003 did not have a uniformly similar effect on the obligations the agency directed to 8(a)s, SDBs, and minority-owned firms, even though, as we note, some of the spending for the youth initiative was directed to small disadvantaged and minority-owned firms. Specifically, as a percentage of the agency’s total advertising obligations, HHS’s total obligations to 8(a) and minority-owned firms decreased from 2002 to 2003, and its obligations to SDBs showed an increase of less than 1 percent.

About 84 percent of NASA’s obligations were related to two contracts. The first of these was a contract NASA’s Langley Research Center awarded in fiscal year 2001 to an SDB for a variety of public relations activities. For example, this contractor provided services such as preparing written and photographic materials for media and selected internal and external communications programs and administrative support for outreach and special events. The contractor also developed, installed, and maintained exhibits for events and provided logistical and general services to plan and conduct conferences, symposia, peer reviews, and workshops for off-site conferences and events. From fiscal years 2001 through 2005, NASA obligated over $5 million for this contract.

The second NASA contract was awarded in fiscal year 2002 as a multiple- year contract by its Marshall Space Flight Center. The contract was originally awarded to a business classified as minority-owned that was later admitted to the 8(a) and SDB programs. The contractor was primarily responsible for providing support services to human resources, educational programs, government and community relations, public exhibits, internal communications, employee training, and organizational development. More recently, the contractor has helped with several public events, including an air show called Thunder in the Valley in Columbus, Georgia, in March 2007 and the X-Prize Cup in Las Cruces, New Mexico, in October 2006. Between fiscal years 2002 and 2005, NASA obligated over $33 million for this contract.

Generally, agency officials told us that the procurement decisions reflected in their overall contracting data and specifically the advertising contracting data we present here were more often driven by needs identified at the subagency or local area level than by the departments’ needs. These decisions are made by contracting officers at procurement offices, which are located around the country. For example, NASA has contracting officers at each of its 10 field centers. Each center specializes in different areas of research and technology specific to NASA. The Marshall Space Flight Center in Huntsville, Alabama, for example, focuses on space exploration, with specific emphasis on completing the international space station and returning to the moon. Contract-related needs for the Marshall Space Flight Center seek to advance technology in the space exploration area, and officials at the center identify contracting opportunities to meet those needs. Officials in NASA’s OSDBU told us that they did not tell contracting officers what services should be directed to small businesses, because the businesses that were selected to provide a service were chosen based on need (as identified by the centers’ contracting officers and other officials) and ability to meet the center’s requirements.

Agency Comments and Our Evaluation

We provided SBA, OMB, GSA, DOD, Treasury, HHS, Interior, and NASA with a draft of this report for review and comment. After reviewing the report, all agencies responded that they did not have any comments, including any of a technical nature.

As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. At that time, we will send copies of this report to the Ranking Member of the Senate Committee on Small Business and Entrepreneurship, the Chair and Ranking Member of the House Committee on Small Business, and other interested congressional committees. In addition, we will send copies to the Secretaries of Defense, Treasury, Health and Human Services, and Interior, as well as NASA’s Administrator, the Administrator of General Services, the Administrator of the Small Business Administration, and the Director of the 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 or your staff have any questions regarding this report, please contact me at (202) 512-8678 or 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 II.

Appendix I: Scope and Methodology

In this report, we describe (1) strategies that the Departments of Defense (DOD), Interior, Health and Human Services (HHS), Treasury, and National Aeronautics and Space Administration (NASA) used to address section 4 of Executive Order 13170, and (2) the total obligations, the number of contract actions, and the percentage of total obligations represented by these contract actions that each of the five agencies awarded to businesses in the Small Business Administration’s (SBA) 8(a) and federal small disadvantaged business (SDB) programs and to minority- owned businesses for advertising-related services. We queried the Federal Procurement Data System-Next Generation (FPDS-NG) using the product service codes for advertising and public relations to identify advertising- related activity. Using these data, we judgmentally selected the four agencies that had obligated the most funds (DOD, Interior, HHS, and Treasury) and one that had a high participation of 8(a), small disadvantaged, and minority-owned businesses (NASA), based on identification in the FPDS-NG of awards to 8(a)s, SDBs, and minority- owned businesses for advertising-related contracts for fiscal years 2001 to 2005. In total, these agencies represented about 92 percent of all federal advertising-related obligations for this 5-year period.

To describe strategies used by the five federal agencies to address section 4 of Executive Order 13170, we obtained documentation from the agencies outlining the actions they planned to take to implement the order, interviewed agency officials regarding their plans and actions taken, and compared both their planned actions as well as actions taken to the requirements presented in the order. We also interviewed officials at SBA and Office of Management and Budget (OMB) regarding the oversight responsibilities each was given in implementing the order. Furthermore, we identified a number of federal statutes and regulations pertaining to executive agency procurement and small business programs, including the Small Business Act and the Federal Acquisition Regulations, that were consistent with the requirements of section 2 of the Executive Order 13170.

To determine the total dollar amount for each of the five agency’s advertising-related obligations for fiscal years 2001 through 2005 and the dollar amount and percentage for obligations and contract actions awarded to businesses designated as 8(a)s, SDBs, or minority-owned during that same time period, we extracted key data fields from FPDS-NG. These data fields included contracting department, procurement instrument identifier (contract/order number), advertising-related product or service codes (R701 and R708), SDB firm designation, 8(a) firm designation, minority-owned designation, and funding agency. We then analyzed the data to identify the total amount of advertising-related obligations for each agency for each fiscal year and the amount and percentage of the total for obligations and number of contract actions awarded to 8(a)s, SDBs, and minority-owned businesses. We did not use FPDS data from before fiscal year 2001 because agencies did not consistently report certain data elements important to our analysis, such as minority ownership. Even after the General Services Administration (GSA) upgraded the system to FPDS-NG in 2003 (to capture, among other things, a data element for minority ownership from fiscal year 2004 forward), agencies varied in the extent to which they modified earlier years’ data to reflect this information.

In assessing the reliability of federal contracting data, we interviewed officials from GSA, the agency responsible for maintaining FPDS-NG. Additionally, we performed specific steps using the FPDS-NG data. First, we compared FPDS-NG advertising totals to the Federal Procurement Data System, the previous governmentwide contracting system, for the five agencies for fiscal years 2001 through 2003. For the DOD data, we also compared FPDS-NG advertising totals to DD-350 (DOD’s internal contracting database) totals for fiscal years 2001 through 2005. In these comparisons, we found some differences between the databases that we determined could be attributed to the fact that FPDS-NG was a real-time system that allowed for editing and updates, such as updates to the primary purpose of a multiple-year contract in later years. FPDS and DD- 350 did not allow for such real-time changes. On the basis of this assessment, we concluded that FPDS-NG data were sufficiently reliable for the purposes of our report.

Next, we tested the reliability of the 8(a), SDB, and minority-owned designations in FPDS-NG. To do this, we electronically compared the FPDS-NG designations for 8(a) and SDB to SBA’s list of certified 8(a)s and SDBs. We found a small number of certified 8(a) businesses that were not designated as such in FPDS-NG. For DOD contractors that the DD-350 also identified as being 8(a), we modified our data to reflect the certified 8(a) status. To determine the reliability of the minority-owned data in FPDS- NG, we compared FPDS-NG contractor data for fiscal years 2004 and 2005 to the self-reported minority-owned designations in SBA’s Small Disadvantaged Businesses file and the Central Contractor Registration database (the DOD database that also serves as the primary vendor database for the U.S. government). We found that the number of minority- owned businesses that received advertising-related contracts from these five agencies was undercounted in the FPDS-NG for fiscal years 2004 and 2005. We could not determine the degree of undercounting because our analysis was not based on a sample that could be generalized to the population of advertising-related contractors. Other than the minor differences that we found, we determined that the business designations were sufficiently reliable for the purposes of our report.

We conducted our work in Washington, D.C., between October 2006 and June 2007 in accordance with generally accepted government auditing standards.

Appendix II: GAO Contact and Staff Acknowledgments

Staff Acknowledgments

In addition to the individual named above, Bill MacBlane, Assistant Director; Johnnie Barnes; Michelle Bracy; Emily Chalmers; Julia Kennon; Lynn Milan; Marc Molino; Omyra Ramsingh; and Rhonda Rose made key contributions to this report.