Small Business: Trends in Federal Procurement in the 1990s (Letter
Report, 01/18/2001, GAO/GAO-01-119).
This report focuses on the trends in federal procurement for small
businesses during the 1990s. Some organizations that represent small
businesses and others have expressed concerns over acquisition reforms
in the mid-1990s that may have reduced the opportunities for small
businesses to compete for federal government contracts. These reforms
sought to streamline acquisition processes to improve the government's
ability to acquire goods and services more efficiently. The reforms
included provisions to facilitate the increased use of certain types of
contracts. However, small business representatives believe that some of
these reforms could make it difficult for small businesses to compete
for federal contracts. For example, the Clinger-Cohen Act authorizes the
use of multiagency contracts. These contracts could potentially
consolidate agencies' requirements, which small businesses may not be
able to meet. At the same time, some procurement reforms have benefited
small businesses. The Federal Acquisition Streamlining Act, for example,
increased the value of contracts set aside exclusively for small
business participation. In addition, the Small Business Reauthorization
Act of 1997 increased the percentage of federal contracts to be awarded
to small businesses to 23 percent. Small Business Administration data
indicate that federal agencies met the legislative goal for procurement
from small businesses from fiscal years 1993 to 1999.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GAO-01-119
TITLE: Small Business: Trends in Federal Procurement in the 1990s
DATE: 01/18/2001
SUBJECT: Government contracts
Small business
Federal procurement
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GAO-01-119
A
Report to Congressional Requesters
January 2001 SMALL BUSINESS Trends in Federal Procurement in the 1990s
GAO- 01- 119
Letter 3 Appendixes Appendix I: Descriptions Of Contract Vehicles 26
Appendix II: Objectives, Scope, and Methodology 28 Appendix III: Comments
From SBA 30 Appendix IV: GAO Contacts and Staff Acknowledgements 32
Figures Figure 1: Key Changes in Federal Procurement Legislation, 1994- 1997
9 Figure 2: Total Federal Procurement Expenditures,
Fiscal Years 1993- 1999 10 Figure 3: Percentage of Federal Contract
Expenditures
Going to Small Businesses, Fiscal Years 1993- 1999 14 Figure 4: Federal
Expenditures for New Contracts Over $25,000 Going to Small Businesses,
Fiscal Years 1993- 1999 16
Figure 5: Federal Expenditures for New Contracts over $25,000 by Product and
Service Category, Fiscal Years 1993- 1999 18 Figure 6: Federal Purchase Card
Expenditures as a Percentage of
Total Federal Procurement, Fiscal Years 1993- 1999 22
Abbreviations
BPA blanket purchase agreement DOD Department of Defense FAR Federal
Acquisition Regulation FASA Federal Acquisition Streamlining Act FPDC
Federal Procurement Data Center FPDS Federal Procurement Data System GAO
General Accounting Office GSA General Services Administration GWAC
governmentwide agency contract IDIQ indefinite- delivery, indefinite-
quantity contract MAC multiple award contract OFPP Office of Federal
Procurement Policy OMB Office of Management and Budget SBA Small Business
Administration
Lett er
January 18, 2001 The Honorable Stephen Horn The Honorable Tom Davis House of
Representatives
The federal government spends about $200 billion annually on the acquisition
of goods and services and has established a legislative goal to provide at
least a 23 percent share of these expenditures to small
businesses. Some organizations that represent small businesses and others
have expressed concerns that acquisition reforms in the mid- 1990s may have
reduced the opportunities for small businesses to compete for federal
government contracts. These reforms focused on streamlining acquisition
processes to improve the government's capacity to acquire goods and services
in a more efficient manner. The reforms included provisions to facilitate
the increased use of certain types of contracts.
Concerned about the potential effect of these reforms on small businesses,
you asked us in your capacities as Chairman of the Subcommittee on
Government Management, Information, and Technology and as a Member of the
Subcommittee, to determine if there were any changes in the ability of small
businesses to obtain government contracts following the implementation of
the reforms and other changes in the acquisition environment during the
1990s. Specifically, we agreed to address (1) provisions in acquisition
reform legislation enacted in the 1990s and other
changes in procurement that took place during this time that could affect
small business contractors and (2) trends that might indicate possible
shifts in the ability of small businesses to obtain federal contracts in the
1990s. To identify the provisions of acquisition reform legislation and
possible shifts in procurement from small businesses, we analyzed key
legislative reforms and other changes and obtained the views of
representatives of several associations representing small businesses. To
determine the trends in federal procurement from small businesses, we
analyzed data from the General Services Administration's Federal Procurement
Data Center (FPDC), which collects procurement information from federal
agencies.
Results in Brief Legislation and other acquisition reforms in the 1990s
resulted in several changes to governmentwide procurement practices that
could be viewed as having the potential to both positively and negatively
affect small businesses' ability to receive federal contracts. For those
changes that
could adversely affect them, some organizations that represent small
businesses point to certain contract types, or vehicles, that were
authorized or developed through acquisition reform. Specifically, the
Federal Acquisition Streamlining Act of 1994 (FASA) 1 codified the authority
of agencies to enter into task- or delivery- order contracts 2 with multiple
firms
for the same or similar products, known as multiple award contracts (MAC).
The information technology acquisition reforms of the Clinger- Cohen Act of
1996 provided for the use of multiagency contracts and what have become
known as governmentwide agency contracts (GWAC) for federal agencies to
access each other's information technology contracts. 3 Some organizations
that represent small businesses have expressed concern that these contract
vehicles can diminish their ability to compete for federal contracts because
they could potentially consolidate multiple agencies' requirements or call
for performance over a wide geographic area.
Some organizations that represent small businesses are also concerned that
FASA exempted purchases of $2,500 or less from the range of contracts
previously reserved for small businesses. Federal agencies are encouraged to
use purchase cards, which are similar to corporate credit cards, for
purchases in this range. Some firms believe that this exemption and the use
of purchase cards to buy goods at companies other than small businesses have
eroded their market share of these purchases. Although contract bundling is
an acquisition practice that received additional attention during this time,
it did not result from acquisition reform legislation. Some organizations
that represent small businesses are concerned that bundled contracts impede
the ability of small businesses to compete for federal contracts. While some
organizations that represent small businesses believe that certain reforms
may have the potential to negatively affect them, other legislative changes
potentially benefit small businesses. For example, FASA
1 P. L. 103- 355, October 13, 1994. 2 Task- or delivery- order contracts
provide for the purchase of an indefinite quantity, within stated limits, of
supplies or services during a fixed period. Deliveries or performance of
tasks are scheduled by placing orders with the contractor.
3 The Clinger- Cohen Act was enacted as Divisions D and E of the National
Defense Authorization Act for Fiscal Year 1996 (P. L. 104- 106, Feb. 10,
1996).
increased the threshold of federal contracts exclusively reserved for small
businesses from contracts worth $25,000 or less to contracts over $2,500 up
to $100,000, although contracts can still be exempt from this exclusive
reservation if certain criteria are met. In addition, the Small Business
Reauthorization Act of 1997 4 increased the previous legislative goal that
at
least 20 percent of federal contract expenditures be awarded to small
businesses to 23 percent, effective fiscal year 1998. Other changes during
the 1990s also have the potential to affect small businesses. These changes
include the reduction in overall federal procurement expenditures and, less
directly, the downsizing of the acquisition workforce, which may have
contributed to the use of streamlined procurement practices.
Small Business Administration data indicate that although federal agencies
met the legislative goal for procurement from small businesses from fiscal
years 1993 to 1999, there was a slight decrease in the percentage of total
contract expenditures, which include new contracts and contract
modifications, going to small businesses from fiscal years 1997 to 1999.
Between fiscal years 1993 and 1997, when the legislative goal was 20
percent, small businesses received between 24 and 25 percent of total
federal contract expenditures. In fiscal years 1998 and 1999, when the goal
increased to 23 percent, small businesses received 23 percent of total
federal contract expenditures. Focusing on new contracts, where some
organizations that represent small businesses have expressed concern about
the ability of small businesses to compete, small businesses received
between 25 and 28 percent of the value of expenditures on new contract
awards worth more than $25,000 from fiscal years 1993 to 1999. 5 In
calculating the share of total expenditures on
new contracts going to small businesses, we used FPDC data on expenditures
for new contracts worth $25,000 or more and did not exclude certain types of
expenditures that SBA excludes to calculate the achievement of the small
business procurement goal. 6 4 P. L. 105- 135, December 2, 1997.
5 Federal agencies report procurement data to Federal Procurement Data
System in two categories (1) contract awards of $25, 000 or less and (2)
contract awards over $25,000. Each agency reports summary data on contracts
worth $25, 000 or less to FPDS. Agencies report greater detail on each
individual contract over $25,000. Federal agencies do not report detailed
data on purchase- card expenditures to FPDS.
In addition, despite the overall decline in total federal procurement in the
1990s, small businesses received a higher share in fiscal year 1999 of
expenditures on new contracts over $25,000 for most categories of goods and
services than they did in fiscal year 1993, including automatic data
processing services as well as research and development. Several contract
vehicles, such as MACs, aggregately accounted for about one quarter of all
governmentwide expenditures for contracts over $25,000 in fiscal year 1999,
up from approximately 16 percent in fiscal year 1994. For several types of
these contract vehicles, small businesses received between 26 and 55 percent
of expenditures for new contracts worth over $25,000 in fiscal year 1999.
The limited data on the extent of contract bundling as well as for
contracts over $2,500 up to $100,000, which are generally reserved
exclusively for small businesses, preclude assessment of any related shifts
in trends of procurement from small businesses. In addition, while
available information indicates that the use of purchase cards increased to
about 5 percent of federal procurement from fiscal years 1993 to 1999, data
were not available to determine the share of these purchases going to small
businesses or the impact of their increased use on small businesses.
We provided the Small Business Administration (SBA), General Services
Administration (GSA) and the Office of Management and Budget (OMB) with a
draft of this report for review and comment. In her written comments, SBA's
Chief Operating Officer agreed with the report's findings and suggested
minor technical changes that we have incorporated where appropriate. Also,
she pointed out that preliminary data from fiscal year
2000 show that federal agencies are finding it more difficult to meet the
legislative goal that 23 percent of the value of federal prime contracts be
awarded to small businesses. Officials from GSA's Office of Enterprise
Development and Office of Governmentwide Policy provided technical comments
that have been incorporated into the report, as appropriate. OMB had no
comments on our draft report. The written comments we received from SBA are
in appendix III.
Background The federal government buys a myriad of goods and services from
contractors. Federal agency acquisitions must be conducted in accordance
with a set of statutes and regulations designed to accomplish several
objectives, including full and open competition and various social and 6 We
asked FPDC for data on new contracts over $25, 000 because FPDC does not
collect information on new contracts worth $25,000 or less going to small
businesses.
economic goals, such as encouraging small business participation. In the
late 1980s and early 1990s, some became convinced that the federal
procurement system had become complex, unwieldy, and overwrought with
tension between the basic goals of efficiency and fairness because of a
proliferation of requirements governing almost every aspect of the
acquisition process. In this environment, there were concerns about the
government's ability to take full advantage of the opportunities offered by
the commercial marketplace. In response to these concerns, Congress
enacted two major pieces of reform legislation, FASA and Clinger- Cohen,
aimed at creating a more efficient and responsive federal acquisition
system. Concerns remain about whether the changes brought about by
acquisition reform during the 1990s have come at the expense of placing
small business at a disadvantage. Legislative and Other
The federal procurement process underwent many legislative and Changes That
Could administrative changes during the 1990s, some of which have the
potential to affect the ability of small businesses to obtain federal
contracts. Other Affect the Ability of
changes occurred during this time, such as reductions in the amount the
Small Businesses to government spent on goods and services and the size of
its acquisition
Obtain Federal workforce, which agency officials believe have also
encouraged procurement streamlining. These changes included the use of
certain
Contracts contract vehicles, such as MACs. In addition, reforms have
modified the dollar range of contracts that are reserved for small
businesses and
encouraged the use of purchase cards, which are similar to corporate credit
cards, for the use of certain purchases. Some organizations that represent
small businesses are concerned that these changes could potentially erode
the ability of small businesses to receive federal contracts. Legislation
Modifies Federal
Three major laws enacted in the 1990s contain provisions that may affect
Procurement Process small business contractors: (1) FASA (2) Clinger- Cohen
and (3) the Small Business Reauthorization Act of 1997.
Among its many reform provisions, FASA codified the authority of agencies to
enter into multiple award, task- and delivery- order contracts for goods and
services. According to agency officials, these MACs are designed to provide
agencies with a great deal of flexibility in buying goods or services while
minimizing the burden on government contracting personnel to administer
contracts. Clinger- Cohen contained additional reform provisions,
particularly for purchases of information technology. The
legislation repealed the central authority of GSA for information technology
acquisitions, authorized the use of multiagency contracts for such
acquisitions, and authorized OMB to designate agency executive agents for
GWACs. Clinger- Cohen authorized federal agencies to make their information
technology contracts available for use by other agencies. Some organizations
that represent small businesses have expressed concern that these types of
contract vehicles can diminish the ability of small businesses
to compete for federal contracts since they potentially can consolidate
requirements, which small businesses may not have the capacity to meet and
may require a larger geographic coverage than they can accommodate.
FASA also amended the Small Business Act to create an exclusive reservation
for small businesses consisting of contracts valued at more than $2, 500 but
not more than $100, 000. However, agency contracting officers are not bound
to this exclusive reservation if they are unable to obtain offers from two
or more small businesses that are competitive with
market prices, quality and delivery of the goods or services being
purchased. Prior to FASA, procurements valued at $25,000 or less were
generally reserved for small businesses. FASA also took contracts of $2, 500
or less outside the range of the exclusive reservation for small businesses
with the creation of a micropurchase level of $2,500.
Government buyers do not have to obtain competition and are not required to
purchase goods or services from small businesses for micropurchases of $2,
500 or less. Nevertheless, FASA requires that these micropurchases be
distributed equitably among qualified contractors. In addition, ClingerCohen
provided greater flexibility to agencies in determining who may make
purchases of $2,500 or less without competition. Some organizations that
represent small businesses are concerned that buyers making micropurchases
may be less likely to seek small businesses for these purchases.
In addition, Congress acted to increase the goal of the share of federal
contracts for small businesses. The Business Opportunity Development Reform
Act of 1988 established an annual governmentwide goal that not less than 20
percent of the total value of prime contract awards for each fiscal year go
to small businesses. 7 The Small Business Reauthorization Act of 1997
increased this goal to not less than 23 percent. 8 This increase was
designed to encourage federal agencies to purchase more goods and
7 A prime contract is any direct contract between the government and a
contractor.
services from small businesses. Figure 1 highlights statutory changes
relevant to small businesses.
Figure 1: Key Changes in Federal Procurement Legislation, 1994- 1997
1994 1996 1997 Federal Acquisition Streamlining
Clinger- Cohen Act of 1996 Small Business Reauthorization Act of 1994
Act of 1997
Authorized federal agencies to enter into Authorized the Office of
Management and
Increased the small business multiple award contracts (MACs)
Budget to designate executive agents for contracting goal from not less than
governmentwide acquisitions of
20% to 23% information technology (GWACs)
A Small business exclusive reservation from
Authorized the use of multi- agency more than $2,500 up to $100,000
contracts for acquisitions of information technology
Introduction of micropurchase level up to Allowed agencies to authorize more
$2,500 employees to make purchases up to
$2,500
Source: GAO analysis of acquisition reform legislation.
Other Factors Have At the same time that acquisition reform legislation was
enacted, other
Affected Federal factors changed how much the federal government bought as
well as the Procurement Practices
way it buys goods and services. During the 1990s, the federal government
decreased the amount spent on goods and services and downsized the
acquisition workforce. The total amount of goods and services that the
government purchased, including those bought with purchase cards, declined
by about 7 percent from an inflation- adjusted $224 billion in fiscal year
1993 to $209 billion in
fiscal year 1999. Consequently, all businesses had to compete for a reduced
total of federal contract expenditures. Figure 2 shows the trend in total
federal procurement expenditures during this period.
8 Since the 23 percent goal is governmentwide, some agencies' goals for
awarding prime contracts to small businesses may be below 23 percent while
others may be above 23 percent. SBA is responsible for coordinating goals
with all executive agencies to ensure that the federal government as a whole
meets the 23 percent goal.
Figure 2: Total Federal Procurement Expenditures, Fiscal Years 1993- 1999
Note: Amounts are shown in constant fiscal year 1999 dollars. Source: GAO
analysis of FPDS data.
Federal agencies also reduced their acquisition workforce personnel from
165,739 in fiscal year 1990 to 128, 649 in fiscal year 1998, or
approximately 22 percent, during this time, with many of these reductions
taking place at the Department of Defense (DOD). 9 According to agency
officials, contracting officials have sought ways to streamline procurement
practices within the applicable statutes and regulations partly as a result
of these workforce reductions; this includes the use of previously
authorized contracting vehicles such as blanket purchase agreements (BPA),
9 The National Defense Authorization Acts for fiscal years 1996, 1997, 1998,
and 1999 (P. L. 104- 106, P. L. 104- 201, P. L. 105- 85, and P. L. 105- 261)
directed the Secretary of Defense to reduce DOD's acquisition personnel.
indefinite- delivery indefinite- quantity (IDIQ) contracts, and GSA federal
supply schedule contracts. Appendix I provides a description of these
contract vehicles. Contract bundling is an acquisition practice that
received a lot of attention in the 1990s and is often associated with but,
in fact, is not actually contained in acquisition reform legislation enacted
during this period. Federal agencies combine existing contracts into fewer
contracts as a
means of streamlining as well as reducing procurement and contract
administration costs, a practice generally referred to as “contract
consolidation.” A subset of consolidated contracts is “bundled
contracts” that the Small Business Reauthorization Act of 1997 defines
as the consolidation of two or more procurement requirements for goods or
services previously provided or performed under separate, smaller
contracts into a solicitation of offers for a single contract that is likely
to be unsuitable for award to a small business concern due to
? the diversity, size, or specialized nature of the elements of the
performance specified; ? the aggregate dollar value of the anticipated
award; ? the geographic dispersion of contract performance sites; or ? any
combination of these three criteria.
This act requires each federal agency, to the maximum extent practicable, to
(1) promote participation of small businesses by structuring its contracting
requirements to facilitate competition by and among small businesses and (2)
avoid the unnecessary and unjustified bundling of contracts that are likely
to be unsuitable for small business participation as prime contractors. 10
Federal policy has also encouraged the use of governmentwide commercial
purchase cards for micropurchases. The purchase card, issued to a broad
range of authorized agency personnel to acquire and pay for goods and
services, is similar in nature to a corporate credit card and is the
preferred method for purchases of $2,500 or less. Some organizations that
represent small businesses believe that the purchase card makes it easier
for 10 To implement the act, SBA issued an interim rule in October 1999 and
a final rule in July 2000. In October 2000, the administration issued
Executive Order 13170 to increase opportunities for small disadvantaged
businesses in federal contracting. This order directs federal agencies to
submit, to the extent permitted by law, any contracts proposed to be bundled
to SBA for review.
government personnel to make purchases from sources other than small
businesses because that may be more convenient for the purchaser. Small
Businesses
Small businesses, as a group, have received the legislatively mandated goal
Continued to Achieve
for federal contract expenditures each fiscal year from 1993 to 1999.
Between fiscal years 1993 and 1997, when the legislative goal was at least
the Federal 20 percent, small businesses received between 24 and 25 percent
of total Procurement Goal in federal contract expenditures. In both fiscal
years 1998 and 1999, when the
The 1990s, Although goal increased to 23 percent, small businesses received
23 percent of total federal contract expenditures. Focusing on expenditures
for new contracts Their Share Has worth over $25,000, our analysis shows
that small businesses have received
Decreased Slightly between 25 and 28 percent of these expenditures during
this period. In addition, focusing on the various categories of goods and
services that the
federal government purchases, small businesses received a higher share in
fiscal year 1999 of expenditures in new contracts for most categories of
goods and services than they did in fiscal year 1993. Several contract
vehicles accounted for about one quarter of all governmentwide
expenditures for contracts over $25,000 in fiscal year 1999, and small
businesses received between 26 and 55 percent of expenditures for these
contract vehicles in that year. We could not determine the amount or impact
of contract bundling or the impact of the increased use of government
purchase cards on small businesses. Although FASA requires
that contracts over $2,500 up to $100, 000 generally be reserved exclusively
for small businesses, we could not determine the amount of expenditures for
these contracts because, in some cases, information is reported to FPDC on
contracts together with modifications.
Federal Government Is SBA and FPDC data indicate that federal agencies, as a
whole, have met Meeting Small Business
their annual governmentwide small business procurement goal from fiscal
Procurement Goal
years 1993 to 1999. This legislative goal increased from at least 20 percent
of total federal contract expenditures to 23 percent effective fiscal year
1998. Between fiscal years 1993 and 1997, when the legislative goal was at
least 20 percent, small businesses received between 24 and 25 percent of
total federal contract expenditures. 11 In fiscal years 1998 and 1999, when
the legislative goal increased to 23 percent, small businesses received 23
percent of total federal contract expenditures. 12 Figure 3 shows the share
of total federal contract expenditures going to small businesses for this
period.
11 The Small Business Act, as amended, establishes a policy that federal
agencies provide small businesses the maximum practicable opportunity to
participate in federal contracts. Federal agencies consult annually with SBA
to set goals for the percentage of dollars to be awarded to small
businesses. Although the legislative goal for fiscal years 1993 through 1997
was 20 percent, the governmentwide goals established by federal agencies and
SBA were 21. 2 percent in fiscal year 1993, 22. 9 percent in 1994, 22. 6
percent in 1995, 23. 5 in 1996,
and 23 percent in 1997. 12 SBA used two different methodologies to calculate
the achievement of the legislative goal during this time period. Prior to
fiscal year 1998, federal agencies submitted information on small business
procurement to SBA, which then calculated the percentage of federal
contracts governmentwide going to small businesses. In fiscal years 1998 and
1999, this information was calculated based on FPDS data. A more detailed
description of SBA's methodology is contained in Small Businesses: Limited
Information Available on Contract Bundling's Extent and Effects (GAO/ GGD-
00- 82).
Figure 3: Percentage of Federal Contract Expenditures Going to Small
Businesses, Fiscal Years 1993- 1999
Source: SBA.
Under the Small Business Act, SBA has authority to prescribe a method to
measure the participation of small businesses in federal procurement. In
calculating the actual achievement of small business procurement goals for
individual federal agencies, SBA excludes certain categories of procurements
from the base, or denominator. SBA has identified several categories of
procurements that are excluded from the base because SBA officials believe
that small businesses do not have a reasonable opportunity to compete for
them, including (1) foreign military sales; (2) procurement awarded and
performed outside the United States; (3) purchases from mandatory sources of
supplies as listed in the Federal Acquisition
Regulation; and (4) purchases for specific programs from the Departments of
State, Transportation, and the Treasury. SBA's Office of Advocacy disagrees
with SBA's approach of excluding categories of procurements in establishing
the base. Adding back the
categories of procurement that SBA excluded, the Office of Advocacy reported
that small businesses received about 21 percent of total federal procurement
in fiscal year 1998 (rather than the 23 percent that SBA reported) and that,
therefore, the governmentwide goal for small business procurement was not
met in fiscal year 1998. 13 Some organizations that represent small
businesses have expressed concerns that small businesses are at a
disadvantage when competing for
new federal contracts. Therefore, we analyzed the share of expenditures for
new contracts going to small businesses. These data do not include
modifications to existing contracts, which account for approximately half of
all governmentwide procurement expenditures during this time. Our analysis
of FPDS data of new contract expenditures shows that small
businesses have received between 25 and 28 percent of such expenditures for
contracts worth more than $25,000 between fiscal years 1993 and 1999. Figure
4 shows the results of our analysis. In calculating the share of total
expenditures on new contracts going to small businesses from fiscal years
1993 to 1999, we used FPDC data on expenditures for new contracts worth more
than $25,000 and did not exclude the types of expenditures that SBA excludes
to calculate the small business procurement goal.
13 Federal Procurement from Small Firms: National and State- by- State
Rankings of Federal Procurement Centers on Their Procurement From Small
Firms in FY 1998, March 1999, SBA, Office of Advocacy.
Figure 4: Federal Expenditures for New Contracts Over $25,000 Going to Small
Businesses, Fiscal Years 1993- 1999
Note: Expenditures are for new contracts over $25,000 only. Source: GAO
analysis of FPDS data.
Despite Decreased Overall As noted in figure 2, the federal government has
been spending less money
Expenditures, Small Businesses on goods and services since fiscal year 1993.
The only categories of goods
Receive an Increased Share of and services that experienced increases in
governmentwide purchases on Purchases on New Contracts for
new contracts worth more than $25,000 between fiscal years 1993 and 1999
Most Goods and Services
were real property and other services. Despite this overall decline in
contract purchases, small businesses received a higher share in fiscal year
1999 than in fiscal year 1993 of expenditures on new contracts worth $25,000
or more than for 5 of the 8 categories of goods and services of
government procurement: 14 equipment, research and development, architect
and engineering, automatic data processing services, and other services.
Figure 5 shows governmentwide trends for purchases under new contracts of
goods and services worth more than $25,000 and the share of these purchases
going to small businesses.
14 FPDC categorizes all federal contract expenditures over $25,000 into
eight categories of goods and services. The categories and their share of
total federal procurement for new contracts and modifications in fiscal year
1999 are other services, 35 percent; supplies and equipment, 32 percent;
research and development, 13 percent; construction, 9 percent; ADP services,
6 percent; ADP equipment, 4 percent; architect and engineering, 1 percent;
and real property, less than 1 percent. The percentages do not add up
exactly to 100 due to rounding.
Figure 5: Federal Expenditures for New Contracts over $25,000 by Product and
Service Category, Fiscal Years 1993- 1999
Other services Research and development Construction Equipment
Real Property ADP Equipment
(in billions) (in (in billions) billions)
Architect and engineering ADP services
(in (in billions) billions) (in (in billions) billions)
Note: Amounts are in constant fiscal year 1999 dollars and are for new
contracts over $25,000 only. Source: GAO analysis of FPDS data.
The Share of Expenditures Going We analyzed FPDS data on the governmentwide
use of certain contract
to Small Businesses Under vehicles for contracts over $25,000, including
those that became popular Selected Contract Vehicles Has during the 1990s.
We found that these vehicles represent a small but Increased
growing share of federal procurement expenditures. Because FPDS only
captures data for some of these contract vehicles, we had to limit our
analysis to MACs, IDIQs, BPAs, and GSA schedules. 15 Expenditures for the
four types of contract vehicles we analyzed
represented 25 percent of federal procurement expenditures on contracts over
$25,000 in fiscal year 1999, compared with 16 percent in fiscal year 1994.
16 Small businesses received 32 percent of expenditures for these contract
vehicles in fiscal year 1999 compared with 24 percent in fiscal year 1994.
For each of the four types of contract vehicles in our analysis, the share
of expenditures going to small businesses was between 26 and 55 percent in
fiscal year 1999, depending on the type of contract vehicle. For example,
expenditures going to small businesses for MACs increased from $524 million
in fiscal year 1994, or 8 percent of all expenditures for MACs,
to $2 billion in fiscal year 1999, or 26 percent of all expenditures for
MACs. Expenditures going to small businesses for IDIQs from fiscal years
1994 to 1999 remained relatively stable, near $7 billion. The percentage of
total expenditures for IDIQs going to small businesses increased from 24
percent of total expenditures for IDIQs in fiscal year 1994 to 28 percent
in 1999. The small business share of GSA schedules increased from 27 percent
in fiscal year 1994 to 36 percent in fiscal year 1999, from $523 million to
$3 billion. Finally, the small business share of BPAs fell from 97 percent
in fiscal year 1994 to about 55 percent in fiscal year 1999, although the
expenditures increased for small businesses from about $141 million in
fiscal year 1994 to about $2 billion in fiscal year 1999.
15 FPDS did not collect information on bundled contracts for fiscal years
1993 through 1999. Although FPDS does not have a data category for GWACs,
information on GWACs may be included under MACs and IDIQs. 16 Because FPDS
officials told us that they began collecting information on MACs in fiscal
year 1994, we limited our analysis of MACs, IDIQs, BPAs, and GSA schedules
to fiscal years 1994 through 1999.
Data on Contract In conducting a review of contract bundling in 2000, 17 we
found that there
Bundling and Its Effect are only limited governmentwide data on the extent
of contract bundling
and its actual effect on small businesses. Federal agencies do not currently
on Small Businesses
report information on contract bundling to FPDC; therefore, FPDC does Are
Very Limited
not have data on this topic. 18 Our review of consolidated contracts worth
$12.4 billion at 3 procurement centers showed that the number of contractors
and the contract dollars were generally reduced due to consolidation as
agencies sought to streamline procurement and reduce its
associated administrative costs. SBA determined that the consolidation of
the contracts we reviewed did not necessarily constitute bundling. In fact,
2 of the largest consolidated contracts involved only large businesses and
the remaining 11 consolidated contracts were awarded to small businesses.
Purchase Card We analyzed the total amount of governmentwide purchase- card
Expenditures Are expenditures for fiscal years 1993 to 1999 and found that
in fiscal year 1999 such expenditures totaled $10 billion, or about 5
percent, of all federal Increasing
procurement purchases. As figure 6 shows, these purchases have steadily
increased since 1993, when the total amount bought with purchase cards was
$527 million. These data include expenditures for all purchase- card
transactions, both under and over $2,500.
17 Small Businesses: Limited Information Available on Contract Bundling's
Extent and Effects (GAO/ GGD- 00- 82, Mar. 31, 2000). 18 The Small Business
Reauthorization Act of 1997 requires that FPDS be modified to collect data
on bundled contracts anticipated to exceed $5 million. However, FPDC did not
begin collecting information on bundling until fiscal year 2001 because
these data could not be collected until final regulations were issued.
Figure 6: Federal Purchase Card Expenditures as a Percentage of Total
Federal Procurement, Fiscal Years 1993- 1999
Note: Dollar amounts are shown in constant fiscal year 1999 dollars. Source:
GAO analysis of FPDS data.
FASA permits purchases for goods or services up to $2,500 from any qualified
suppliers. Since FPDS does not collect detailed data on purchasecard
expenditures, we could not determine what share of such governmentwide
expenditures are going to small businesses.
Agency Comments and We requested comments on a draft of this report from the
Administrator of Our Evaluation
SBA, the Director of OMB, and the Administrator of GSA. SBA's Chief
Operating Officer provided written comments in concurrence with our report.
She pointed out that preliminary data for fiscal year 2000 show that federal
agencies are finding it more difficult to meet the legislative goal of
ensuring that 23 percent of the value of federal prime contracts go to small
businesses. We did not include data for fiscal year 2000 in our review
because these data are preliminary. Another area of concern was that since
detailed data on purchase- card expenditures are not included in the FPDS
database, trend analyses of these expenditures were not included in our
report. As we note in our report, purchase- card expenditures have
increased, but data are not available to determine the share of these
purchases going to small businesses. In addition, SBA's Chief Operating
Officer made several technical comments that we have reflected in this
report, as appropriate.
Officials from GSA's Offices of Enterprise Development and Governmentwide
Policy provided technical comments that we have addressed in this report, as
appropriate. OMB had no comments on our draft report. The comments we
received from SBA are in appendix III.
Objectives, Scope, and To identify procurement changes that could affect
small business
Methodology contractors, we reviewed FASA, the Clinger- Cohen Act, the Small
Business Reauthorization Act of 1997, and the Federal Acquisition
Regulation. We also identified other changes that occurred during the 1990s
that might have an effect on small businesses by interviewing agency
officials and
representatives of industry associations, and by reviewing agency documents.
We met with officials from GSA, SBA, OMB's Office of Federal Procurement
Policy (OFPP), and the Procurement Executives Council. We also met with
representatives of the U. S. Chamber of Commerce, Small
Business Legislative Council, and Independent Office Products and Furniture
Dealers Association.
To determine the trends in federal procurement from small businesses, we
analyzed data from the Federal Procurement Data Center's (FPDC) Federal
Procurement Report for fiscal years 1993 through 1999 and other data we
requested from FPDC and SBA for those same years. FPDC administers the
Federal Procurement Data System (FPDS) within GSA. 19 Since FPDC relies on
federal agencies to report their procurement information, these data are
only as reliable, accurate, and complete as the agencies report. In 1998,
FPDC conducted an accuracy audit and reported that the average rate of
accurate reporting in the FPDS database was 96 percent. Our analyses focused
on total contract expenditures for federal procurement and the percentage of
expenditures going to small businesses for new contracts and for certain
contract vehicles. Unless otherwise noted, all expenditures were adjusted
for inflation and represent constant fiscal year 1999 dollars.
19 FPDC collects procurement data from approximately 70 executive branch
agencies. The U. S. Postal Service and the legislative and judicial branches
are not required to report their procurement activities to FPDS.
We conducted our review between March and October 2000 in accordance with
generally accepted government auditing standards. A detailed discussion of
our objectives, scope, and methodology is presented in appendix II.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report for 30 days. At that
point, copies of this report will be sent to appropriate congressional
committees and other interested Members of Congress; the Administrator of
the Small Business Administration; the Administrator of the General Services
Administration; the Director of the Office of Management and
Budget; and other interested parties. We will also make copies available to
others on request. Staff acknowledgements are listed in appendix IV. If you
or your staff have any questions about this report, please contact me at
(202) 512- 8984 or Hilary Sullivan at (214) 777- 5652.
JayEtta Z. Hecker Director Physical Infrastructure Team
Appendi Appendi xes x I
Descriptions Of Contract Vehicles Indefinite- Delivery, Indefinite- Quantity
Contract: This type of contract provides for an indefinite quantity, within
stated limits, of goods or services during a fixed period of time. Agencies
place separate task or delivery orders for individual requirements that
specify the quantity and delivery terms associated with each order. The
Federal Acquisition Regulation (FAR) expresses a preference for multiple
awards of these contracts, which allows orders to be placed using a
streamlined, commercial style selection process where consideration is
limited to the contract awardees. The competition between the multiple
awardees is designed to encourage better prices and responses than if the
agency were negotiating with a single contractor. Contractors are to be
afforded a fair opportunity to be considered for award of task and delivery
orders but cannot generally
protest the award of such orders. Indefinite- delivery, indefinite- quantity
contracts include GWACs and GSA federal supply schedule contracts.
Federal Supply Schedules: Under the schedule program, GSA enters into
indefinite- delivery, indefinite- quantity contracts with commercial firms
to provide commercial goods and services governmentwide at stated prices for
given periods of time. Authorized buyers at agencies place separate orders
for individual requirements that specify the quantity and delivery terms
associated with each order, and the contractor delivers products or services
directly to the agency. The program is designed to provide federal agencies
with a simplified process for obtaining millions of commonly used commercial
supplies and services at prices associated with volume buying. The program
consists of single award schedules with one supplier and
multiple award schedules, in which GSA awards contracts to multiple
companies supplying comparable services and products, often at varying
prices. When agency requirements are to be satisfied through the use of
multiple award schedules, the small business provisions (such as the
exclusive reservation for small businesses for contracts over $2,500 up to
$100,000) of the FAR do not apply.
Blanket Purchase Agreement: A simplified method of filling anticipated
repetitive needs for supplies or services by establishing “charge
accounts” with qualified sources of supply, and may include federal
supply schedule contractors. Under such an agreement, the contractor and the
agency agree
to contract clauses applying to future orders between the parties during its
term. Future orders would incorporate, by reference or attachment, clauses
covering purchase limitations, authorized individuals, itemized lists of
supplies or services furnished, date of delivery or shipments, billing
procedures, and discounts. Under the FAR, the existence of a blanket
purchase agreement does not justify purchasing from only one source or
avoiding small business preferences.
Appendi x II
Objectives, Scope, and Methodology Our objectives were to identify (1)
provisions in acquisition reform legislation enacted in the 1990s and other
changes in procurement taking place during this time that could affect small
business contractors and (2) trends that might indicate possible shifts in
the ability of small businesses to obtain federal contracts in the 1990s.
To achieve our first objective, we analyzed several pieces of legislation
enacted in the 1990s, federal acquisition regulations, governmentwide
procurement data, and interviewed federal officials at several agencies. We
examined the Federal Acquisition Streamlining Act of 1994 (FASA), the
Clinger- Cohen Act of 1996, the Small Business Reauthorization Act of 1997,
and the Federal Acquisition Regulation. We analyzed governmentwide
procurement data reported by GSA's Federal Procurement Data Center (FPDC)
and data on the governmentwide acquisition workforce reported by GSA's
Federal Acquisition Institute in its Report on the Federal Acquisition
Workforce for fiscal years 1991 and 1998. We interviewed officials at GSA,
OFPP, SBA, and the Procurement Executives Council. We also interviewed
representatives of the U. S. Chamber of Commerce, Small Business Legislative
Council, and Independent Office Products and
Furniture Dealers Association. To achieve our second objective, we gathered
governmentwide data on federal procurement from FPDC and SBA for fiscal
years 1993 through 1999. We could not determine the direct impact of
legislative changes and other trends on small businesses because of the
numerous concurrent factors and the insufficiency of governmentwide data to
directly measure the effect of these changes on small business contractors.
Federal agencies report procurement data to FPDC in two categories, (1)
contract awards of $25,000 or less each and (2) contract awards greater than
$25,000. Each
agency reports summary data on contracts worth $25,000 or less to FPDC and
includes information such as type of contractor and procurement methods.
Agencies report greater detail on each individual contract over
$25,000 or more, including type of contract action, type of contractor, and
product or service purchased. We analyzed aggregate data reported in FPDC's
Federal Procurement Report for each of the years. We requested
additional data from FPDC for contracts over $25,000 to include information
on expenditures going to small businesses for new contracts; total
expenditures going to small businesses, including for new contracts
and contract modifications, for specific contract vehicles; and expenditures
going to small businesses for new contracts for all products and services.
The data on new contracts that FPDC provided includes
expenditures on original contract actions, as opposed to expenditures on
modifications to existing contracts.
FPDC categorizes all federal contract expenditures into eight broad
categories of products and services. According to FPDC officials, FPDS is
updated constantly as federal agencies report updated procurement
information. The data we received from FPDC are as of July 2000. In
addition, we analyzed the summary information on government purchasecard
transactions from the Federal Procurement Report for each year. We also
collected data from SBA and FPDC on the achievement of the
governmentwide federal procurement goal for small businesses. The SBA data
on the achievement of this goal for fiscal years 1993 through 1997 are from
The State of Small Business. Because the most recent version The State of
Small Business was published in fiscal year 1997, we used FPDC
data published in its annual Federal Procurement Report on the achievement
of the legislative goal for fiscal years 1998 and 1999. As indicated
earlier, SBA began using FPDS data to calculate the achievement of the small
business legislative goal as of fiscal year 1998. Although FASA requires
that contracts over $2,500 up to $100,000 be exclusively reserved for small
businesses, we could not determine the amount of expenditures or share going
to small businesses for these contracts because, in some cases, information
is reported to FPDC on contracts commingled with
modifications. Unless otherwise noted, we adjusted all dollar amounts using
a gross domestic product price index from the Bureau of Economic Analysis
using fiscal year 1999 as the base year.
We did not independently verify FPDC or SBA data. FPDC relies on agencies to
report their procurement information. Therefore, data are only as reliable,
accurate, and complete as the agencies report. In 1998, however, FPDC
conducted an accuracy audit of some of its data elements and reported that
the average rate of accurate reporting in the FPDS
database was 96 percent. We performed our work at SBA headquarters, OFPP,
and GSA headquarters. We conducted our review between March and October 2000
in accordance with generally accepted government auditing standards.
Appendi x II I Comments From SBA
Appendi x I V
GAO Contacts and Staff Acknowledgements GAO Contacts JayEtta Hecker, (202)
512- 8984, or Hilary Sullivan, (214) 777- 5652 Acknowledgements Jason Bair,
William Chatlos, James Higgins, Maria Santos, Adam Vodraska,
and Wendy Wilson made key contributions to this report.
(240384) Lett er
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Appendix I
Appendix I Descriptions Of Contract Vehicles
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Appendix II
Appendix II Objectives, Scope, and Methodology
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Appendix III
Appendix III Comments From SBA
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Appendix IV
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