Small Business Administration: The Commercial Marketing 	 
Representative Role Needs to Be Strategically Planned and	 
Assessed (01-NOV-02, GAO-03-54).				 
                                                                 
Subcontracting on federal contracts is a large and growing	 
marketplace for small businesses. The Small Business		 
Administration's (SBA) Commercial Marketing Representatives	 
(CMRs) have long been considered to be key to fostering small	 
businesses' participation in subcontracts. GAO was asked to	 
assess the role that CMRs are playing in administering SBA's	 
subcontracting assistance program.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-54						        
    ACCNO:   A05425						        
  TITLE:     Small Business Administration: The Commercial Marketing  
Representative Role Needs to Be Strategically Planned and	 
Assessed							 
     DATE:   11/01/2002 
  SUBJECT:   Small business					 
	     Subcontracts					 
	     Small business assistance				 
	     SBA HUBZone Empowerment Contracting		 
	     Program						 
                                                                 
	     SBA Subcontracting Assistance Program		 

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GAO-03-54

Report to Congressional Requesters

United States General Accounting Office

GAO

November 2002 SMALL BUSINESS ADMINISTRATION The Commercial Marketing
Representative Role Needs to Be Strategically Planned and Assessed

GAO- 03- 54

Why GAO Did This Study

Subcontracting on federal contracts is a large and growing marketplace for
small businesses. The Small Business Administration*s (SBA) Commercial
Marketing Representatives (CMRs) have long been considered to be key to
fostering small businesses* participation in subcontracts. GAO was asked
to assess the role that CMRs are playing in administering SBA*s
subcontracting assistance program.

November 2002 SMALL BUSINESS ADMINISTRATION The Commercial Marketing
Representative Role Needs to Be Strategically Planned and Assessed

This is a test for developing highlights for a GAO report. The full
report, including GAO's objectives, scope, methodology, and analysis is
available at www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 54. For additional
information about the report, contact David E. Cooper (202) 512- 4841. To
provide comments on this test highlights, contact Keith Fultz (202- 512-
3200) or email HighlightsTest@ gao. gov.

Highlights of GAO- 03- 54, a report to Senator John Kerry, Chairman,
Senate Committee on Small Business and Entrepreneurship, and Senator Max
Cleland.

What GAO Recommends

GAO is recommending that SBA strategically assess, evaluate, and plan the
CMR role. In doing so, it should address such issues as the impact of
assigning multiple roles to CMRs and the effectiveness of compliance-
monitoring methods.

SBA neither concurred nor disagreed with GAO*s recommendations. However,
SBA did agree that it needs to rethink the CMR role and develop outcome
and impact measures to better assess CMRs* effectiveness. SBA also
objected to some of GAO*s conclusions but did not provide sufficient
evidence to support its objections.

United States General Accounting Office

What GAO Found

CMRs are supposed to promote small business subcontracting in two primary
ways. First, they review prime contractors* compliance with the
requirements of their subcontracting plans* either through on- site visits
to contractors or by simply reviewing their subcontractor activity
reports. Second, they conduct various marketing activities, such as
marketing small businesses to prime contractors.

In recent years, however, additional duties placed on CMRs have often
taken priority over these responsibilities. In fact, in fiscal year 2000,
87 percent of the CMRs had other substantial responsibilities. Moreover,
workloads and prime contractor coverage now vary greatly between CMRs.
Additionally, CMRs are relying more on *desk* reviews of subcontractors*
activity to monitor compliance with subcontracting plans as opposed to on-
site reviews. This is a concern to some SBA officials who believe that on-
site reviews are more thorough, though others believe the desk review
offers the potential for greater coverage.

Declines in staffing and travel funds have contributed to the changing
role of the CMR. With downsizing and retirements taking place and no staff
assigned to replace lost personnel, the number of CMR full- time
equivalents (FTEs) has decreased significantly and has resulted in
workload imbalances.

While there are concerns about the changing nature of the CMR role, SBA
has not strategically planned for these changes or assessed their
collective impact. Instead, it has implemented ad hoc measures to deal
piecemeal with resource declines. Unless steps are taken to better
evaluate and plan for the future of CMRs, SBA will continue to lack an
understanding of their contributions to small business subcontracting.

CMRs are increasingly taking on other roles and responsibilities

G A O Accountability Integrity Reliability

Highlights

Page i GAO- 03- 54 SBA Contracting Assistance Letter 1

Results in Brief 2 Background 3 The CMR Role Is Conflicted and in Decline
5 Factors Affecting the CMR Role 15 Conclusions 18 Recommendations for
Executive Action 18 Agency Comments and Our Evaluation 18 Scope and
Methodology 19

Appendix I Comments from the U. S. Business Administration 21

Tables

Table 1: Detailed Data on Time That CMRs Spent in Compliance Monitoring
and Marketing in Fiscal Year 2000 9 Table 2: Number and Percentage of On-
Site Versus Desk Reviews

Performed by Year 10 Table 3: Number of Prime Contractors per CMR FTE by
Area

Office 11

Figures

Figure 1: Number of Full- Time and Number of Part- Time CMRs for Selected
Years 6 Figure 2: CMR Roles and Responsibilities in Fiscal Year 2000 7
Figure 3: Percentage of Time Spent in Compliance Monitoring and

Marketing in Fiscal Year 2000 8 Figure 4: Percentage of On- Site versus
Desk Reviews Performed 10 Figure 5: Variances in CMR Workload 11 Contents

Page ii GAO- 03- 54 SBA Contracting Assistance Abbreviations

CMR Commercial Marketing Representative COC Certificate of Competency FTE
full- time equivalent GAO General Accounting Office HCA Head Contracting
Authority HUB Zones historically underutilized business zones OGC Office
of Government Contracting OIG Office of the Inspector General PCRs
Procurement Center Representives PRO- Net Procurement Marketing and Access
Network SBA Small Business Administration

Page 1 GAO- 03- 54 SBA Contracting Assistance

November 1, 2002 The Honorable John F. Kerry Chairman, Committee on Small
Business

and Entrepreneurship United States Senate

The Honorable Max Cleland United States Senate

Subcontracting on large federal contracts is becoming increasingly
important to small businesses, principally because subcontracts may offer
the most opportunities for these businesses to participate in federal
procurement in the near future. 1 The number of prime contracts is
shrinking, and many prime contracts have become so large that small
businesses find it difficult to compete for them. Moreover, the Small
Business Administration (SBA) reported that dollars paid for subcontracts
increased 40 percent from fiscal year 1993 through fiscal 2001, growing
from $65 billion to $91.1 billion. 2

SBA*s Subcontracting Assistance Program focuses on increasing
subcontracting opportunities for small businesses through major prime
contractors. Historically, SBA staff known as Commercial Marketing
Representatives (CMRs) have administered and implemented this program.

You asked us to assess the CMR role, particularly with respect to (1) what
role CMRs are playing in administering and implementing the Subcontracting
Assistance Program and;( 2) what factors have affected this role. As part
of our evaluation, we used data from a recent survey we conducted of all
staff working as CMRs in fiscal year 2000. 3 Our overall response rate was
97 percent.

1 See the SBA Subcontracting Task Team Draft Recommendations, May 2001. 2
All dollar figures in this report have been adjusted to 2001 dollars to
account for inflation. 3 We conducted the survey for our report entitled
Small Business Subcontracting Validation Can Be Improved, GAO- 02- 166R
(Washington, D. C.: Dec. 13, 2001).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 54 SBA Contracting Assistance

The CMR role is conflicted and in decline. Most CMRs are now largely part-
time and have substantial additional roles and responsibilities that often
take priority over CMR duties. In addition, there are differences of
opinion and concerns within the agency about the focus of the CMR role.
Some SBA Area Directors, Supervisors, and CMRs believe that CMRs should
focus more on monitoring prime contractors* compliance with their
subcontracting plans. Other SBA officials believe that CMRs should focus
more on helping small businesses connect with prime contractors for
subcontracting opportunities.

There are also differences of opinion and concerns within the agency about
the relative merits of the methods CMRs use to monitor compliance. Some
SBA officials and many CMRs believe that going on- site to conduct
detailed reviews of prime contractors is more effective than simply
reviewing their subcontracting activity reports, which is now the most
frequently used monitoring method. Other SBA officials argue that relying
on report reviews is not only effective but also necessary because it is
more cost- efficient. Finally, CMRs* geographic distribution and workloads
are very uneven, as is their coverage of prime contractors.

Resource declines and the agency*s ad hoc, piecemeal response are the main
factors driving this situation. CMR roles and responsibilities have been
affected by cutbacks in staff and travel funds during the past decade. For
example, CMRs (and other staff) have been assigned multiple roles, and on-
site reviews of prime contractors have been curtailed as economy measures.
Workload distributions and prime contractor coverage have been affected in
turn. As resources have declined, the agency has struggled to make
adjustments piecemeal as particular situations have arisen, rather than
stepping back to strategically assess and plan the CMR role. Thus, role
change occurred not by design but by default.

Consequently, we do not know whether the CMR role is effective or not.
Even though CMRs are considered to be critical to the successful
implementation of SBA*s Subcontracting Assistance Program, the agency does
not have a clear strategic vision of what CMR roles and responsibilities
should be and has not developed outcome or impact measures for the CMR
role. In addition, the agency has not assessed or evaluated the effects of
the various adjustments it has made to the CMR role in response to the
resource challenges.

We are recommending that the agency strategically assess, evaluate, and
plan the CMR role. This should include a careful assessment of such issues
as the impact of assigning multiple roles to staff, appropriate role
focus, Results in Brief

Page 3 GAO- 03- 54 SBA Contracting Assistance

the effectiveness of different methods of compliance monitoring, uneven
distributions of CMRs and CMR workloads, and uneven prime contractor
coverage.

SBA neither concurred nor disagreed with our recommendations. However, SBA
did agree that it needs to rethink the CMR role and develop outcome and
impact measures to better assess CMRs* effectiveness. SBA also objected to
some of our conclusions but did not provide sufficient evidence to support
its objections.

The federal government encourages federal prime contractors* use of small
businesses as subcontractors by requiring prime contractors to develop
plans with stated goals for subcontracting to various types of small
businesses. Federal regulations require a subcontracting plan for each
contract or contract modification that exceeds $500, 000 ($ 1 million for
construction contracts) and has subcontracting possibilities. 4

The Subcontracting Assistance Program is SBA*s vehicle for increasing the
percentage of subcontract awards to small businesses and ensuring that
small businesses have the maximum practicable opportunity to participate
in the performance of federal government contracts. 5 SBA*s Office of
Government Contracting (OGC) oversees this program. SBA/ OGC has six Area
Offices responsible for all prime contractors* subcontracting performance.
6

The program is implemented by CMRs, who promote small business
subcontracting in two primary ways, as described in SBA regulations. 7
First, CMRs review prime contractors* compliance with the requirements of
their subcontracting plans. They conduct on- site compliance reviews at
prime contractors* facilities and validate how well the prime contractors
are implementing their subcontracting plans. They also conduct *desk

4 See Federal Acquisition Regulation 19. 702. 5 SBA is authorized to
assist federal agencies and businesses in complying with their
subcontracting responsibilities and to evaluate prime contractors*
compliance with their subcontracting plans by 15 U. S. C. 637( d)( 10)(
C). 6 The Department of Defense*s Defense Contract Management Agency also
reviews

subcontracting plans for defense prime contractors. 7 See 13 C. F. R. 125.
3 (c)( d). Background

Page 4 GAO- 03- 54 SBA Contracting Assistance

reviews,* which are reviews of relevant subcontracting reports that are
submitted by prime contractors and completed without on- site visits.

Second, CMRs conduct various marketing activities, such as marketing small
businesses to prime contractors or matching certain types of small
business subcontractors with prime contractors. CMRs perform this

*matchmaking* through both personal introductions and the use of Webbased
tools that help to connect prime contractors and subcontractors. CMRs also
provide various educational activities (e. g., seminars and workshops) for
prime contractors, subcontractors, and agency officials as part of their
marketing activities. In describing the duties required of CMRs, SBA
regulations do not place a relative order of importance on any of these
responsibilities. 8

In addition, CMRs work on various SBA special initiatives as part of their
marketing activities. For example, CMRs promote SBA*s special 8( a)
subcontracting initiative, which focuses on increasing the number of
subcontracts to small disadvantaged businesses. CMRs also promote several
special initiatives involving SBA*s Procurement Marketing and Access
Network (PRO- Net). PRO- Net is a Web- based system that allows prime
contractors to advertise potential subcontracting opportunities and small
businesses to advertise their capabilities as subcontractors. 9 CMRs
install PRO- Net access stations at large prime contractor sites and
public libraries, and train interested businesses and agencies in the use
of PRONet to match prime contractors and subcontractors. Finally, CMRs
conduct special training for agencies and contractors on SBA*s
historically underutilized business zones (HUB- Zone) Empowerment
Contracting Program, which encourages economic development in HUB Zones.

SBA/ OGC also employs other contract specialists, who focus on small
businesses as prime contractors rather than subcontractors. These include
Procurement Center Representatives (PCRs), size determination specialists,
and Certificate of Competency (COC) specialists. PCRs work with agencies
to determine whether it is appropriate for acquisitions not set aside for
small businesses to be set aside. 10 Size determination specialists
determine whether a small business meets existing size

8 See C. F. R. 125. 3 (c)( d). 9 Small businesses may also advertise their
capabilities as prime contractors. 10 See 13 C. F. R. 125. 2( b).

Page 5 GAO- 03- 54 SBA Contracting Assistance

standards for all procurement programs for which status as a small
business is required. 11 COC specialists review a contracting officer*s
determination that the small business in question is not competent to
perform on a particular contract. 12

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

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

11 See 13 C. F. R. 121. 401. 12 See 13 C. F. R. 125. 5( f). The CMR Role
Is

Conflicted and in Decline

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

Page 6 GAO- 03- 54 SBA Contracting Assistance

Figure 1: Number of Full- Time and Number of Part- Time CMRs for Selected
Years

Source: SBA*s personnel records.

The SBA officials and CMRs we interviewed told us that part- time CMRs
have a variety of additional responsibilities, including serving as PCRs,
COC specialists, and/ or size determination specialists. 13 For example,
in our survey, 87 percent of the CMRs responding reported that in fiscal
year 2000, they served in one or even two additional roles, as figure 2
shows. 14 PCR was the most frequent additional role; 59 percent of the
part- time CMRs also served as PCRs.

13 Most of these positions are GS- 13 positions. 14 Since fiscal year
2000, SBA has assigned 6 additional part- time CMRs. Our survey includes
85 percent of the current population of 39 CMRs.

Page 7 GAO- 03- 54 SBA Contracting Assistance

Figure 2: CMR Roles and Responsibilities in Fiscal Year 2000

Source: GAO survey.

The CMRs and SBA officials we interviewed also told us that part- time
CMRs often give lower priority to their CMR work than to their PCR, COC,
and/ or size determination work. This is consistent with our survey* 57
percent of the part- time CMR respondents reported spending 60 to 89
percent of their time in fiscal year 2000 performing non- CMR duties. Only
31 percent reported spending less than 30 percent of their time on nonCMR
duties. Apparently, there are several reasons for this, including not only
the workload demands of these other roles, but also the time frames within
which they must be performed. Generally, these roles are tied to specific
procurements, and staff performing them must meet the procurement
schedule. Regulations and guidance also mandate tight time frames for
certain tasks. 15 In contrast, CMR work is generally not as time
sensitive, and several CMRs who perform these other roles told us they
*fit

in CMR work* when they have time. 15 See Federal Acquisition Regulation
19. 4 and 19. 6, SBA SOP 60 04 4, SOP 60 02 6.

Page 8 GAO- 03- 54 SBA Contracting Assistance

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

Figure 3: Percentage of Time Spent in Compliance Monitoring and Marketing
in Fiscal Year 2000

Source: GAO survey.

Time Spent on Compliance Monitoring Versus Marketing Varies

Page 9 GAO- 03- 54 SBA Contracting Assistance

Table 1: Detailed Data on Time That CMRs Spent in Compliance Monitoring
and Marketing in Fiscal Year 2000

Compliance monitoring Marketing Percent of time spent Number

of CMRs Percent of CMRs Number

of CMRs Percent of CMRs

0 3 100 0 1- 9 4 136 20 10- 19 12 40 9 30 20- 29 3 105 17 30- 39 6 205 17
40- 49 1 31 3 50- 59 0 01 3 60- 69 0 02 7 70- 79 0 00 0 80- 89 1 30 0 90-
99 0 01 3

Total 30 99 30 100

Note: Two of the CMRs surveyed did not respond completely to this question
and therefore were omitted. Percents do not add to 100 because of
rounding. Marketing includes outreach and marketing activities, special
initiatives, and ongoing prime contractor assistance.

Source: GAO survey.

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

Reviews

Page 10 GAO- 03- 54 SBA Contracting Assistance

Figure 4: Percentage of On- Site versus Desk Reviews Performed

Source: SBA*s CMR database and SBA*s Area records.

Table 2: Number and Percentage of On- Site Versus Desk Reviews Performed
by Year

Fiscal year All compliance reviews On- site reviews a Desk reviews

1992 380 380 (100%) 0 1993 458 458 (100%) 0 1994 470 470 (100%) 0 1995 484
484 (100%) 0 1996 777 441 (57%) 336 (43%) 1997 1,786 290 (16%) 1, 496
(84%) 1998 1,497 233 (16%) 1, 264 (84%) 1999 1,425 345 (24%) 1, 080 (76%)
2000 1,096 252 (23%) 844 (77%) 2001 896 269 (30%) 627 (70%) a Includes
follow- up reviews, which are return visits to a contractor to determine
whether

recommendations from the original on- site review have been made. Source:
SBA*s CMR database and SBA*s Area records.

Page 11 GAO- 03- 54 SBA Contracting Assistance

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

Figure 5: Variances in CMR Workload

Source: SBA*s workload analysis.

Table 3: Number of Prime Contractors per CMR FTE by Area Office Area
Offices CMR FTEs Number of prime

contractors Number of

prime contractors per CMR FTE

1 4. 20 314 75 2 2. 40 474 198 3 1. 75 234 134 4 1. 63 237 145 5 4. 95 277
56 6 2. 85 493 173

Total 17.78 2,029 114

Source: SBA*s workload analysis.

Uneven CMR Workload and Prime Contractor Coverage

Page 12 GAO- 03- 54 SBA Contracting Assistance

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

Not surprisingly, the uneven distribution of CMRs and CMR FTEs has
contributed to wide variations in the number of on- site reviews performed
annually by Area Offices. 16 For example, one Area Office conducted 15
onsite reviews in fiscal year 2001, while others conducted 40 or more. In
addition, uneven workload distribution has contributed to the existence of
large blocks of un- reviewed, that is, *uncovered,* prime contractors. For
example, in one Area, there are no SBA reviews of any kind* on- site or
desk* being done for 212 prime contractors, including all the prime
contractors in one state and half of those in another. SBA officials told
us that in fiscal year 2001, only 11. 4 percent of the prime contractors
nationwide received an on- site SBA review. 17

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

16 Differing emphasis by Area Directors and CMRs on compliance monitoring
versus marketing and the lack of travel funds (especially in
geographically large areas) also appear to be contributing factors. 17 SBA
officials told us that agency- wide on- site review goals have not been
set because of

travel fund restrictions. Concerns about the CMR

Role

Page 13 GAO- 03- 54 SBA Contracting Assistance

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

In contrast, the May 2001 report of the SBA Subcontracting Task Team
clearly identifies compliance monitoring as the CMRs* main function. 18
The report concludes that over the past several years, CMRs have spent a
disproportionate amount of their time on special initiatives. The report
recommends that compliance reviews become the CMRs* primary focus and that
less emphasis be placed on ancillary duties, such as matchmaking or
special initiatives. The report even proposes a new job title for the CMR,
adding that *marketing* gives the wrong impression that matchmaking is the
CMR*s main role.

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

Concerns about the focus of the CMR role are not new. SBA*s Office of the
Inspector General (OIG) issued a report in October 1995 citing the need to
focus CMR efforts more effectively with respect to compliance monitoring
and matchmaking. 19

SBA introduced desk reviews in fiscal year 1996 as an economy measure.
Because desk reviews take place in the CMRs* offices rather than at the
prime contractors* locations, CMRs do not have to travel. In addition, the
desk review takes substantially less time to accomplish than does the on

18 See SBA Subcontracting Task Team Draft Recommendations, May 1, 2001. 19
See SBA*s Inspector General report Prime Contracts and Subcontracting
Program, October 1995. Disagreements about the

Balance between Compliance Monitoring and Marketing

Concerns about Desk Reviews

Page 14 GAO- 03- 54 SBA Contracting Assistance

site review. Consequently, relying on desk reviews saves both travel money
and CMR time.

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

SBA*s OIG observed the uneven workload distribution problem in October
1995. 20 Noting the limited subcontracting resources and variable staffing
levels and workloads, the OIG concluded that the unequal distribution of
workload among CMRs was correlated with the uneven coverage of prime
contractors. Accordingly, the OIG recommended that SBA more evenly
distribute prime contractors among CMRs to improve coverage. However, SBA
officials told us that where CMRs are located is driven by factors other
than the location of prime contractors with subcontracting plans. For
example, they said that although they can request CMRs to relocate to
provide better coverage, they cannot require staff to relocate.

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

20 See SBA*s Inspector General report Prime Contracts and Subcontracting
Program, October 1995. Concerns about CMR

Workload and Prime Contractor Coverage

Page 15 GAO- 03- 54 SBA Contracting Assistance

efforts to focus subcontracting program activities and likely resulting in
lost small business opportunities. 21

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

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

SBA/ OGC resources have declined substantially over the past few years.
From fiscal year 1991 through fiscal 2000, 22 staff declined 52 percent,
from 333 to 159. During this same period, travel funds declined 54
percent, from $440,000 to $201,000. SBA officials agreed that these
resource declines have significantly affected the CMR role. For example,
SBA Area Directors told us that the need to assign multiple roles to field
staff has increased since SBA experienced significant budget and staff
cuts in the mid- 1990s. Prior to these cuts, most field staff for both the
prime and subcontracting programs were hired as specialists for one
program. Now most, including CMRs, work on multiple programs. Similarly,
the Subcontracting Task Team report pointed out that the merging of the
CMR/ PCR positions was workload driven and reflected the fact that
positions were not being filled when incumbents retired. 23 Finally,
several SBA officials told us that to cope with the loss of staff and lack
of travel funds, as well as the increased

21 See SBA*s Inspector General report Prime Contracts and Subcontracting
Program, October 1995. 22 Fiscal year 2000 is the most recent year for
which both staff and travel data were

available from SBA. 23 See SBA Subcontracting Task Team Draft
Recommendations, May 1, 2001. Factors Affecting the

CMR Role Declining Resources

Page 16 GAO- 03- 54 SBA Contracting Assistance

number of special initiatives, the assignment of multiple roles to staff
became necessary and the desk review was created to replace the on- site
review, when necessary.

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

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

Finally, the Task Team*s report expressed concern that without the
requisite travel money and other resources, SBA will continue to monitor
(on- site) about 12 percent of the total prime contractor portfolio, thus
limiting the effectiveness of the Subcontracting Assistance Program. 24

SBA*s response to these resource challenges has been largely ad hoc and
reactive. As resources have declined, the agency has struggled to keep up
with subcontracting program demands by making various piecemeal
adjustments to address specific problems, such as assigning multiple roles
to CMRs and instituting desk reviews to cover staffing shortages and
travel fund declines. SBA has not stepped back* at either the agency or
program

24 See SBA Subcontracting Task Team Draft Recommendations, May 1, 2001. Ad
Hoc, Piecemeal

Response to Resource Challenges

Page 17 GAO- 03- 54 SBA Contracting Assistance

level* and taken a broader, more strategic look at the CMR role,
particularly in the context of today*s resource- constrained environment.

Strategic planning, assessment, and evaluation are essential elements of
good management. This has been recognized for federal agencies since 1993,
when the Government Performance and Results Act 25 became law. Effective
management requires the establishment of goals and objectives as well as
impact or outcome performance measures.

SBA has not extended such planning to the CMR role to help address the
difficult challenges that declining resources pose for the Subcontracting
Assistance Program. SBA*s agency- level plan does not address the CMR role
at all. 26 Furthermore, SBA officials told us that SBA*s current
strategicplanning process does not deal with the CMR role in
subcontracting or provide for assessments, evaluations, or planning for
the CMR role. In addition, they told us that neither OGC nor the
Subcontracting Assistance Program has conducted strategic assessments or
planning for the CMR role.

In sum, while regulations and operating procedures describe a variety of
duties and responsibilities that CMRs may perform, 27 SBA has not
developed goals and objectives for the CMR role. For example, the agency
analyzed what might be desirable levels of prime contractor coverage or
subcontracting plan compliance in today*s environment and how CMRs might
contribute to achieving these goals. In addition, although SBA has
productivity measures (e. g., the number of on- site and desk reviews
conducted) to track CMRs* performance, it does not have impact or outcome
measures* or even such expectations* for CMRs. Finally, SBA has not
strategically assessed, evaluated, or planned how best to address critical
CMR role issues that have emerged during the past few years, such as the
effect of multiple role assignments for CMRs, disagreements about the
focus of the CMR role, the relative merits of on- site and desk reviews,
and the impact of uneven distributions of CMRs and CMR workloads.

25 See P. L. 103- 62. 26 See SBA Strategic Plan FY 2001- 2006. 27 See 13
C. F. R. Part 125, 3( c)( d), SBA SOP 60 03 5.

Page 18 GAO- 03- 54 SBA Contracting Assistance

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

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

We recommend that the Administrator of SBA

 assess, evaluate, and plan the CMR role, including addressing such
issues as the impact of assigning multiple roles to CMRs, the appropriate
CMR role focus, the effectiveness of compliancemonitoring methods, and the
impact of uneven CMR workloads and prime contractor coverage;

 develop specific outcome and impact measures for CMRs* effectiveness;
and

 clearly communicate the strategic plan and expectations for the CMR role
to both SBA staff and small businesses.

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

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

Recommendations for Executive Action

Agency Comments and Our Evaluation

Page 19 GAO- 03- 54 SBA Contracting Assistance

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

SBA*s comments do not provide any new evidence to the contrary. For
example, the task force study that SBA cites as evidence of planning
identified some specific problems with the CMR role and recommended some
specific solutions. However, it did not strategically assess or plan the
CMR role, nor was it tied to any SBA strategic- planning effort. In
addition, the study did not use or establish measurable goals and
objectives or outcome and impact measures for the CMR role. Similarly, the
regulations and operating procedures that SBA references as evidence of
vision are not tied to measurable goals and objectives and associated
outcome and impact measures. 28 Rather, they simply describe a variety of
duties and responsibilities that CMRs are required to perform. In
addition, the conditions that SBA cites as evidence of CMRs* effectiveness
may be the result of many factors other than CMRs* efforts alone. SBA has
not conducted the assessments and evaluations necessary to determine what
effect CMRs actually had on these conditions. Finally, SBA*s agreement
that it needs to rethink the CMR role and develop impact or outcome
measures further supports our conclusions.

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

28 See13 C. F. R. Part 125, SBA SOP 60 03 5. Scope and

Methodology

Page 20 GAO- 03- 54 SBA Contracting Assistance

population. Our overall response rate was 97 percent. On our survey, we
asked a variety of questions about CMRs* roles and responsibilities.

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

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

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

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

David E. Cooper Director, Acquisition and Sourcing Management

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

Page 21 GAO- 03- 54 SBA Contracting Assistance

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

Note: GAO*s comments supplementing those in the report*s text appear at
the end of this appendix.

See comment 2. See comment 1.

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

Page 22 GAO- 03- 54 SBA Contracting Assistance

See comment 5. See comment 5.

See comment 5. See comment 4.

See comment 3.

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

Page 23 GAO- 03- 54 SBA Contracting Assistance

See comment 7. See comment 6.

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

Page 24 GAO- 03- 54 SBA Contracting Assistance

See comment 10. See comment 9.

See comment 8.

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

Page 25 GAO- 03- 54 SBA Contracting Assistance

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

Page 26 GAO- 03- 54 SBA Contracting Assistance

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

1. We do not agree that 80- percent time is essentially equivalent to 100-
percent time. Four staff that work 80 percent of their time as Commercial
Marketing Representatives (CMRs) constitute about three full- time
equivalents (FTEs), not four FTEs. This is a difference of about 20
percent. As we point out in our report, SBA*s use of part- time CMRs for
whom the CMR role is, as SBA comments, *a collateral duty,* has not meant
an increase in CMR staff resources. Rather, total CMR FTEs declined 28
percent from fiscal year 1992 through fiscal 2001.

2. SBA*s task force study identified some specific problems with the CMR
role and recommended some specific solutions, and SBA*s efforts to
implement some of these solutions can possibly lead to some incremental
improvements. However, the task force study did not strategically assess
or plan the CMR role, nor was it tied to any SBA strategic- planning
effort. In addition, the study did not use or establish measurable goals
and objectives or outcome and impact measures for the CMR role. In other
words, the study did not address the larger issues of CMR strategic role
assessment and planning. In the absence of such planning, SBA*s approach
to addressing challenges that CMRs face will continue to be ad hoc and
piecemeal.

3. Delegating decisions about the focus of the CMR role to Area Directors
may be appropriate. However, SBA has not conducted any assessments or
evaluations that address what Area Office factors and characteristics make
such delegation essential or effective. Furthermore, SBA has not evaluated
the effectiveness of local decisions regarding the balance between
compliance monitoring and marketing. The resource pressures on the CMR
role heighten our concern. It may be that local decisions about the focus
of the CMR role are more influenced by the realities of local resource
constraints than by local compliance monitoring and marketing needs.
Without sound assessment and evaluation, however, this and many other
issues of role focus will remain clouded.

4. The regulations and operating procedures that SBA references do not
constitute a strategic vision tied to measurable goals and objectives.
GAO*s Comments

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

Page 27 GAO- 03- 54 SBA Contracting Assistance

Rather, as we discuss in our report, they simply describe a variety of
duties and responsibilities that CMRs are required to perform. 1 Since the
regulations and guidance do not place a relative order of importance on
these duties, and the Small Business Act and the Federal Acquisition
Regulations do not mention CMRs, there is no law, regulation, or guidance
requiring or suggesting that CMRs prioritize their work according to a
strategic vision.

In contrast, a strategic vision is broader and more comprehensive. It is
expressed in an overall strategic plan that articulates a mission and
specific plans to fulfill that mission, including measurable goals and
objectives and associated outcome and impact measures. SBA also appears to
recognize at least to some degree the limitations of the regulations and
operating procedures as a strategic vision because it agrees that it needs
to rethink the CMR role and develop outcome or impact measures.

5. SBA recognizes that on- site reviews are both more effective than and
preferable to desk reviews but asserts that they are *less costeffective*
and *not always necessary.* However, SBA does not offer persuasive
evidence to support these assertions. During our review, SBA officials
told us that they had not conducted assessments or evaluations of either
of these compliance review methods or of their comparative effectiveness.
Furthermore, SBA has not identified the criteria* that is, the strategic
goals and objectives and associated impact or outcome measures* necessary
to guide such assessments and evaluations.

SBA also says that it uses the results of desk reviews to determine which
prime contractors should receive on- site reviews. However, as we discuss
in our report, the lack of travel funds is the primary driver of decisions
about which prime contractors receive on- site reviews.

6. SBA observes that in fiscal year 2000, small businesses, in general;
small disadvantaged businesses; and women- owned small businesses received
*much higher* percentages of all subcontract awards than of prime contract
awards. 2 SBA also observes that the percentage of

1 See C. F. R. Part 125. 3( c)( d), SBA SOP 60 03 5. 2 SBA did not provide
data on prime contract awards, so we were unable to assess the magnitude
of the differences between subcontract and prime contract awards to these
types of businesses.

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

Page 28 GAO- 03- 54 SBA Contracting Assistance

subcontract dollars awarded to small disadvantaged businesses has improved
steadily over the past two decades. 3 SBA then attributes both of these
conditions solely to CMR efforts.

SBA has not conducted the assessments and evaluations necessary to support
this conclusion. Moreover, while CMRs* efforts may well have contributed
to these conditions, a number of other factors likely have had a
significant impact. As we note in our report, federal regulations require
a subcontracting plan for each contract or contract modification that
exceeds $500, 000 ($ 1 million for construction contracts) and has
subcontracting possibilities. 4 Federal agencies are independently
responsible for complying with these regulations. Agencies may even
conduct their own subcontract- monitoring efforts. For example, DOD
reviews subcontracting plans for defense prime contractors. In fact, SBA
commented that it has delegated the primary responsibility for monitoring
the subcontracting plans of most DOD contractors to the responsible DOD
agency so that SBA can focus its limited resources on monitoring civilian
agencies* plans. Since DOD accounted for 65 percent of all subcontracted
dollars awarded in 2001, it is not likely that CMRs alone are responsible
for all small business subcontracting achievements.

There are also inherent business incentives for prime contractors to
subcontract voluntarily with small businesses. For example, small business
subcontractors can provide important specialized capabilities that the
prime contractor does not have or wish to invest in developing. Small
business subcontractors may also be able to provide some general services
faster and more economically, thus saving prime contractor resources.
Subcontracting also allows prime contractors to avoid permanent staffing
increases that may not be sustainable in the face of market shifts.
Finally, as we note in our report, the nature of federal contracting has
changed. The number of prime contracts is shrinking, and many prime
contracts have become so large that small businesses find it difficult to
compete for them. This change alone may heavily influence the conditions
that SBA cites as markers of CMRs* effectiveness.

3 SBA did not provide data on subcontract dollars awarded over time to
small businesses in general or to women- owned businesses. 4 See Federal
Acquisition Regulation 19. 702.

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

Page 29 GAO- 03- 54 SBA Contracting Assistance

7. We do not agree that our report leaves a mistaken impression with
regard to the goals and objectives assigned to CMRs. Rather, we state
clearly that SBA has productivity measures (such as the number of onsite
and desk reviews conducted) to track CMRs* performance but that it does
not have impact or outcome measures* or even such expectations* for CMRs.
SBA agrees that it needs to develop outcome or impact measures to better
measure CMR effectiveness.

8. We continue to believe that SBA*s development of its new database
appears to be slow. SBA began developing this new database in early 2001,
after experiencing repeated problems with its original database. In
October 2001, the SBA officials we interviewed told us that the new
database would be operational in January 2002. In February 2002, SBA told
us that it would be operational by June. Now, in October 2002, SBA says
that it is only in test mode and acknowledges that it will not have a
complete list of prime contractors with subcontracting plans until the end
of the second quarter of fiscal year 2003.

9. While SBA*s original database does provide some useful information, the
SBA officials we interviewed told us that the data were not complete. The
database did not contain a complete list of prime contractors with
subcontracting plans.

10. We continue to have concerns about CMRs* workload and prime contractor
coverage. As we discuss in our report, about 18 CMR FTEs nationally
monitor the subcontracting activities of the 2,029 prime contractors
currently identified. In addition, CMRs have various marketing duties. (In
fiscal year 2000, CMRs generally seemed to spend slightly more time on
marketing than on compliance monitoring.) CMR compliance monitoring Area
Office workloads currently range from 56 to 198 prime contractors per CMR
FTE. There are wide variations in CMR workloads both between Area Offices
and within more than one Area Office. This situation may be exacerbated
when additional contractors with subcontracts are identified and added to
CMR workloads.

(120113)

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