DOD’s Office of Small and Disadvantaged Business Utilization (OSADBU) is responsible for the mentor-protege program. A signed mentor-protege agreement for each mentor-protege relationship must be submitted to OSADBU and approved before developmental assistance costs may be incurred. OSADBU has reimbursed mentors through cooperative agreements where both the government and a contractor work together to achieve a common purpose. OSADBU also approved credit agreements that were negotiated on a nonreimbursable basis. In addition, the services and the defense agencies requested OSADBU’s approval of mentor-protege agreements that reimbursed mentors pursuant to separate contracts or line items in DOD contracts. OSADBU is to conduct periodic performance reviews of the progress and accomplishments realized under approved mentor-protege agreements. This report is one of a series we have issued on the mentor-protege program. In our first report, we recommended, among other things, that DOD develop and implement adequate internal controls in the application and approval process and in the oversight of protege development. In our second report, we were not able to recommend that the pilot program be extended because sufficient information was not available to determine whether the program’s purposes could be achieved or whether reauthorization and extension were warranted. In our prior two reports, we identified the lack of management data, oversight of individual agreements, and evaluation of results of program participation as major impediments to measuring progress toward accomplishing congressional goals. Within the last 16 months, OSADBU has initiated actions to evaluate program performance and improve administration of the program. Actions to evaluate program performance include conducting a survey of program participants and establishing a performance review process. However, low survey response rates and incomplete performance review data weaken OSADBU’s efforts to evaluate and report on the overall success of the program. Our 1992 report pointed out that DOD needed to develop and implement adequate internal controls in the application and approval process and in the oversight of protege development. In its response, OSADBU officials agreed to verify the progress reports, ensure the agreed upon assistance was provided, and evaluate (through communication with the proteges) whether the assistance had increased the number of subcontracts awarded. In our 1994 report, we again pointed out that OSADBU had neither (1) assessed progress and accomplishments realized under any of the agreements nor (2) evaluated program success. In its comments to our report, OSADBU acknowledged that monitoring and oversight of mentor-protege agreements had not occurred and added that it had plans to do so once resources were available and enough time had elapsed for significant activity under the agreements to have occurred. In November 1996, OSADBU, with contractor support, began a data collection effort by conducting a survey of program participants to evaluate program effectiveness. Also, OSADBU requested that the Defense Contract Management Command (DCMC) conduct performance reviews of all mentor-protege agreements approved since the program’s inception, and thereafter, to review all active agreements annually. The purpose of these reviews is to establish and maintain a regular performance review process. During our review, OSADBU was conducting a questionnaire survey of the program. OSADBU officials told us that the questionnaire responses will, in part, provide the data needed to ascertain and report overall progress toward achieving the program’s statutory goals. OSADBU plans to issue its report by late spring 1998. Separate questionnaires for mentors and proteges were sent to current participants as well as those who had completed or terminated agreements as of November 4, 1996. The questionnaires requested general background data on the participants and the agreements, information on types of assistance provided, data on the dollar value and number of contracts as well as subcontracts received and/or awarded during the agreements, and experiences of the participants and their views of the program. A successful survey relies on a high response rate, an analysis of why nonrespondents in the population did not respond, and an assessment of the validity and reliability of the data. As of January 1998, OSADBU’s response rates of about 60 percent for the mentor survey and about 40 percent for the protege survey were well below that which would be required to draw statistically meaningful conclusions about the population of program participants or the mentor-protege program as a whole.Further, OSADBU has not conducted a systematic analysis of why nonrespondents did not participate in the survey to assess any patterns for their lack of participation as compared to the respondents. Also, the financial data on contracting and subcontracting were not systematically verified with an independent source such as progress reports, contractor reports, or other records. Attempts were made to reconcile conflicting information between the mentors and proteges, but only if the discrepancies were large or if totally inconsistent information was provided by each respondent. On November 6, 1996, OSADBU, in an effort to conduct annual performance reviews of all mentor-protege agreements, requested DCMC to review all 305 agreements that had been approved since the program’s inception. In response, DCMC sent a memorandum dated January 2, 1997, to its districts setting out its policy on conducting the performance reviews. The reviews were to include evaluations of costs, planned and actual mentor assistance, and data on protege firms’ business development (contract awards and improvements in technical capabilities) resulting from program participation. Although DCMC requested that all the reports be sent to OSADBU by December 31, 1997, OSADBU had received only 138 reports on the 305 agreements, or about 45 percent, as of that date. We reviewed 66 of the 138 DCMC reports and found that many of the reports were missing information or did not address all the required areas outlined in the DCMC policy memorandum. The differences in reporting all information, as well as incomplete data, will limit the usefulness of the performance reviews in analyzing trends, tracking performance of program agreements, and assessing the program’s effectiveness. OSADBU’s support contractor is reviewing the reports to identify those that are missing and the general quality and consistency of the reviews to determine what additional DCMC guidance is necessary for its districts. The funding appropriated from fiscal year 1992 to 1998 was generally obligated through either cooperative agreements, separate contracts, or in a line item in DOD prime contracts. While OSADBU has managed cooperative agreements in the past, it has decided that the services and the defense agencies should be responsible for managing reimbursable mentor-protege agreements. In addition, the services were inconsistent in paying fees to mentors and reimbursing proteges for various expenses. Mentor-protege funding of about $233 million was generally obligated through cooperative agreements, separate contracts, or line items in DOD contracts. OSADBU spent about $88.3 million on 50 cooperative agreements that resulted in 99 mentor-protege agreements ranging in value from $135,000 to about $3 million, or an average of about $892,000 per mentor-protege agreement. In addition, the services and the defense agencies have reimbursed costs amounting to about $108.5 million,pursuant to 143 separate contracts or line items in DOD contracts that have ranged in value from $38,525 to $6.9 million, or an average of about $759,000 per mentor-protege agreement. Funds amounting to about $7.2 million were also disbursed by OSADBU for historically Black colleges and universities and minority institutions, contractor support, and other miscellaneous expenses. As of February 1998, the remaining funds of $28.9 million included $10.6 million that had been sent to the services but not yet obligated, $16.6 million that had not been distributed, and $1.7 million that had expired. According to the OSADBU program manager, centrally managed cooperative agreements were useful for initially getting the program started because they successfully produced interest in the program. OSADBU used a “program announcement” whereby potential mentors submitted proposals for funding a mentor-protege agreement through a cooperative agreement. OSADBU has decided to discontinue its use of centrally managed cooperative agreements. The OSADBU program manager informed us that the level and type of technical assistance provided to the proteges were primarily business in nature, and not related to DOD-specific program areas. The program manager further pointed out that OSADBU does not have the staff to centrally manage, review, monitor, and serve as the responsible official on multiple cooperative agreements. OSADBU has decided that the services and the defense agencies should be responsible for managing reimbursable mentor-protege agreements. The OSADBU program manager informed us that by linking the agreements to a service or a defense agency, the likelihood of a protege receiving technical assistance that is mission related increases significantly. Further, by incorporating the program into the acquisition process, it becomes an integral part of that process, thus mitigating the need for additional resources to administer the program and monitor program performance. Neither the mentor-protege program legislation nor the implementing regulation specifically addresses either the payment of fees to mentors or the reimbursement of proteges for their costs in participating in the program. In our March 1992 report, issued shortly after the program actually began, we noted low mentor participation and recommended that DOD consider ways to enhance program incentives for mentor participation. At that time, we noted that the appeal of the cash reimbursement incentive was diminished because mentors were prohibited by regulation from earning a fee on the development assistance provided to proteges. In 1992, DOD eliminated the regulatory prohibition. In our current review, we found that the payment of fees to mentors varied among the services. We found no instance where the Navy has paid a fee, while the Army and the Air Force have paid fees to mentors.