    Hurricane Katrina: Agency Contracting Data Should Be More
    Complete Regarding Subcontracting Opportunities for Small
    Businesses (01-MAR-07, GAO-07-205).

    In response to Hurricane Katrina, the Departments of Homeland
    Security (DHS) and Defense (DOD), the General Services
    Administration (GSA), and the U.S. Army Corps of Engineers
    (Corps) were responsible for 94 percent of the federal funds
    awarded for relief efforts via contracting as of May 2006. This
    report, which GAO conducted under the Comptroller General's
    Authority, describes (1) the amounts that small businesses
    received from prime contracts with these agencies, (2) the extent
    of subcontracting, (3) and the extent to which Disadvantaged
    Business Enterprises (DBEs) received Department of Transportation
    funds for Katrina-related projects. In conducting this study, GAO
    analyzed agency contract data, reviewed federal acquisition
    regulations, and interviewed agency procurement officials.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-205
        ACCNO:   A66365
      TITLE:     Hurricane Katrina: Agency Contracting Data Should Be More
    Complete Regarding Subcontracting Opportunities for Small
    Businesses
         DATE:   03/01/2007
      SUBJECT:   Contract administration
    	     Data collection
    	     Data integrity
    	     Federal procurement
    	     Federal procurement policy
    	     Federal regulations
    	     Government information
    	     Hurricane Katrina
    	     Procurement regulations
    	     Reporting requirements
    	     Small business
    	     Small business contractors
    	     Small business contracts
    	     Subcontracts
    	     Program goals or objectives
    	     DOT Disadvantaged Business Enterprise
    	     Program

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    GAO-07-205

         * [1]Results in Brief
         * [2]Background

              * [3]Federal Goals for Contracts with Small and Local Businesses
              * [4]Federal Rules for Contracts with Businesses
              * [5]Agency and Governmentwide Contract Data
              * [6]DOT's Disadvantaged Business Enterprise Program

         * [7]Small Businesses Received Varied Amounts of the Contracting
         * [8]Selected Corps Contractors Awarded Most Subcontracting Dolla

              * [9]Corps Contractors Reported Awarding the Majority of their Su
              * [10]Subcontracting Accomplishment Information Is Not Consistentl
              * [11]Incomplete Agency Information on Subcontracting Plan Require

         * [12]Disadvantaged Business Enterprises Participated in FHWA- and

              * [13]DBEs Received about 4 Percent of FHWA Dollars for Katrina-Re
              * [14]DBEs Received About 10 Percent of the FAA Dollars Awarded fo

         * [15]Conclusions
         * [16]Recommendations for Executive Action
         * [17]Agency Comments and Our Evaluation
         * [18]GAO Contact
         * [19]Staff Acknowledgments
         * [20]GAO's Mission
         * [21]Obtaining Copies of GAO Reports and Testimony

              * [22]Order by Mail or Phone

         * [23]To Report Fraud, Waste, and Abuse in Federal Programs
         * [24]Congressional Relations
         * [25]Public Affairs

    Report to Congressional Addressees

    United States Government Accountability Office

    GAO

    March 2007

    HURRICANE KATRINA

    Agency Contracting Data Should Be More Complete Regarding Subcontracting
    Opportunities for Small Businesses

    GAO-07-205

    Contents

    Letter 1

    Results in Brief 3
    Background 5
    Small Businesses Received Varied Amounts of the Contracting Dollars
    Awarded by Four Agencies 10
    Selected Corps Contractors Awarded Most Subcontracting Dollars to Small
    Businesses, but Information on Subcontracting Plans for All Four Agencies
    Was Incomplete 16
    Disadvantaged Business Enterprises Participated in FHWA- and FAA-Funded
    Contracts and Subcontracts Related to Hurricane Katrina 28
    Conclusions 31
    Recommendations for Executive Action 32
    Agency Comments and Our Evaluation 33
    Appendix I Scope and Methodology 39
    Appendix II Comments from the Department of Homeland Security 43
    Appendix III Comments from the General Services Administration 46
    Appendix IV Comments from the Department of Defense 53
    Appendix V GAO Contact and Staff Acknowledgments 56

    Tables

    Table 1: Dollar Amount of Katrina-Related Contracts Awarded Directly to
    Businesses in All States and in States Primarily Affected by Hurricane
    Katrina 13
    Table 2: Small Businesses Received the Majority of Contracting Dollars
    Awarded Directly to Local Businesses 14
    Table 3: Awards of Selected Corps Contractors to Small Businesses as a
    Percent of the Subcontracting Dollars Awarded to All Businesses 18
    Table 4: Amounts Small Businesses Received as Subcontractors as a Percent
    of Total Dollars Obligated for Selected Katrina-Related Contracts 19
    Table 5: Subcontracting Plan Requirements by Dollar Amount Awarded 24
    Table 6: DBE Participation in Katrina-Related State DOT Contracts Awarded
    With FHWA Funds 29
    Table 7: DBE Participation in Contracts Awarded by Airports with FAA
    Grants 30

    Figures

    Figure 1: Amount and Percentage of Katrina-Related Contract Dollars
    Awarded to Businesses by DHS, GSA, DOD, and the Corps 11
    Figure 2: Number of Katrina-Related Contract Actions Awarded Directly to
    Businesses by Business Size 12
    Figure 3: Dollar Amount of Katrina-Related Contracts Awarded Directly to
    Small Businesses, by Type of Businesses 13
    Figure 4: Katrina-Related Contracting Dollars by Location 15

    Abbreviations

    Corps U.S. Army Corps of Engineers
    DBE Disadvantaged Business Enterprise
    DCMA Defense Contract Management Agency
    DHS Department of Homeland Security
    DOD Department of Defense
    DOT Department of Transportation
    eSRS Electronic Subcontracting Reporting System
    FAA Federal Aviation Administration
    FAR Federal Acquisition Regulation
    FHWA Federal Highway Administration
    FPDS-NG Federal Procurement Data System--Next Generation
    FTA Federal Transit Administration
    HUBZone Historically Underutilized Business Zone
    MOU Memorandum of Understanding
    GSA General Services Administration
    SBA Small Business Administration
    SDB Small Disadvantaged Business

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    United States Government Accountability Office

    Washington, DC 20548

    March 1, 2007

    Congressional Addressees

    Hurricane Katrina caused billions of dollars in damage and affected about
    1.5 million people in Alabama, Louisiana, and Mississippi.^1 In response
    to the widespread destruction, Congress provided emergency supplemental
    disaster appropriations totaling about $88 billion to 23 different federal
    agencies. As of May 2006, these 23 agencies had awarded nearly $11 billion
    for Katrina-related relief and recovery contracts, with the Departments of
    Homeland Security (DHS) and Defense (DOD) as well as the U.S. Army Corps
    of Engineers (Corps) and General Services Administration (GSA) accounting
    for 94 percent of these dollars, according to official governmentwide
    procurement data.^2 The agencies were to use the funds to, among other
    things, award contracts for a range of services related to hurricane
    relief and recovery. Some in Congress have raised concerns about how much
    access small businesses had to these contracting opportunities, especially
    small businesses in the areas that were affected by the hurricane. In
    addition, because of substantial damage to the region's transportation
    networks and the role of the Department of Transportation (DOT) in
    assisting the states with their rebuilding, there has been congressional
    interest regarding the extent to which Disadvantaged Business Enterprises
    (DBE)^3 received funds from DOT for projects related to Hurricane Katrina.

    We have prepared this report under the Comptroller General's authority to
    conduct evaluations on his own initiative as part of a continuing effort
    to assist Congress in reviewing federal activities related to Hurricane
    Katrina. Specifically, this report discusses (1) the amounts that small
    and local businesses received directly from federal agencies through
    contracts for relief and recovery efforts related to Hurricane Katrina,
    (2) the extent to which selected large prime contractors subcontracted
    with small businesses for relief and recovery efforts, and (3) the extent
    to which DBEs received funds through DOT for transportation projects
    related to reconstruction and recovery from Hurricane Katrina.^4

    1GAO, Disaster Relief: Governmentwide Framework Needed to Collect and
    Consolidate Information to Report on Billions in Federal Funding for the
    2005 Gulf Coast Hurricanes, [26]GAO-06-834 (Washington, D.C.: Sept. 6,
    2006).

    ^2We are reporting on the Corps and the rest of DOD separately because of
    the four supplemental appropriations measures for Department of Defense
    activities relating to Hurricane Katrina relief (Pub. L. Nos. 109-61,
    109-62, 109-148, and 109-234), the latter three specifically directed
    certain funds to the Corps for its disaster relief activities.

    ^3The definition of a DBE is set forth in DOT Regulation 49 C.F.R. S 26.5.
    In general terms, DBEs are small businesses owned and controlled by
    socially and economically disadvantaged individuals.

    To describe the amounts that small and local businesses received directly
    from federal contracts, we analyzed data on contracts awarded or used by
    DHS, GSA, DOD, and the Corps for Katrina-related projects in Alabama,
    Louisiana, and Mississippi from August 1, 2005, through June 30, 2006. Our
    analysis included contract data from the Federal Procurement Data
    System-Next Generation (FPDS-NG), the governmentwide database of
    contracting activity, and DD-350, the Department of Defense database that
    contains data on individual contracting actions. Although we could not
    independently verify the reliability of these data, we reviewed system
    documentation, conducted electronic data testing for inconsistency errors
    and completeness and compared it with supporting documentation when
    available, and interviewed agency officials about each of the systems. On
    the basis of these efforts, we determined the data on amounts received
    directly from federal contracts to be sufficiently reliable for the
    purposes of this report. To describe the extent to which prime contractors
    subcontracted with small businesses, we identified contracts that were
    awarded or used between August 1, 2005, and June 30, 2006, for activities
    related to Hurricane Katrina and that required subcontracting plans. We
    obtained and analyzed documentation of subcontracting awards for selected
    DOD and Corps contractors that received the most dollars from
    Katrina-related contracts from August 1, 2005, through June 30, 2006. For
    those DHS and GSA contracts with subcontracting plan requirements, we
    looked for documentation of prime contractors' March 31, 2006,
    subcontracting awards report in the Electronic Subcontracting Reporting
    System (eSRS), a governmentwide database for capturing this information.
    In addition, we interviewed officials from each of the four agencies to
    gather additional information relating to the use of subcontracting plans.
    To describe the extent to which DBEs received funds for DOT-assisted
    transportation projects related to reconstruction and recovery from
    Hurricane Katrina, we obtained and analyzed data on Federal Highway
    Administration (FHWA) and Federal Aviation Administration (FAA) contracts
    awarded for Katrina-related projects from August 1, 2005, through June 30,
    2006 (only FHWA and FAA awarded DOT funds to which DBE requirements
    applied). A more detailed description of our scope and methodology is
    presented in appendix I. We conducted our work in Washington, D.C.,
    between March 2006 and February 2007 in accordance with generally accepted
    government auditing standards.

    ^4For the purposes of this report, we refer to "contract dollars" that
    agencies have awarded when, to be precise, agencies do not award dollars
    but instead award contracts or enter into contract actions that are either
    valued at certain dollar amounts or which, for example, might have a range
    of possible values, depending on how much work the contractor ultimately
    performs. We discuss the agencies' activities in terms of contract dollars
    because the dollar amount or value of contract actions is one of the key
    factors in deciding whether agencies must require a subcontracting plan
    and also is the measure used to gauge small business participation in
    federal procurement.

    Results in Brief

    Small businesses received 28 percent of the $11 billion in contracting
    dollars DHS, GSA, DOD, and the Corps awarded directly for relief and
    recovery from Hurricane Katrina. DHS awarded the highest dollar amount to
    small businesses (about $1.6 billion), and GSA awarded the highest
    percentage of its Katrina-related contracting dollars directly to small
    businesses (72 percent of about $658 million). Of the contracting dollars
    that the four agencies awarded directly to small businesses, those
    classified as disadvantaged businesses received 24 percent of the
    approximately $3 billion that the four agencies awarded to small
    businesses. Local businesses, or businesses located in the states
    primarily affected by Hurricane Katrina (Alabama, Louisiana, and
    Mississippi), received 18 percent, or $1.9 billion, of the $11 billion the
    four agencies awarded overall. Small businesses received approximately 66
    percent of the $1.9 billion awarded to all local businesses. Outside of
    this area, businesses in California and Florida received 17 and 15
    percent, respectively, of the Katrina-related contracting dollars the four
    agencies awarded.

    For the military agencies, 4 of the top 10 recipients--all large
    businesses--of prime contracting dollars for projects related to Hurricane
    Katrina reported awarding from 88 to 100 percent of their subcontracting
    dollars to small businesses. The amounts subcontracted ranged from $11,000
    to $201 million. These 4 prime contractors received their contracting
    dollars from the Corps. For the other 6 recipients of contract dollars
    from DOD and the Corps, subcontracting plan requirements did not apply or
    contracting activities related to Hurricane Katrina could not be separated
    from unrelated activities. Information on subcontracting accomplishments
    associated with 4 of 7 DHS contracts shows that small businesses received
    from 14 to 83 percent of the dollars awarded through subcontracts as of
    March 31, 2006. Information on subcontracting accomplishments for the
    remaining DHS contracts and all 11 GSA contracts awarded to large
    businesses was generally not available because contractors had not
    reported the data, the agencies had not finalized the data, or the
    available data included both Katrina-related and other contract
    activities. While we could document this information, additional key
    information about small business subcontracting plans was not consistently
    available in official procurement data systems for the four agencies.
    These plans, which detail goals for subcontracting to small businesses,
    are generally required for acquisitions by executive agencies of more than
    $500,000.^5 For DHS and GSA, information on whether the two agencies
    required subcontracting plans is generally not available in the data
    systems for nearly three-fourths of the contracting dollars each agency
    awarded. DHS officials could not explain the lack of subcontracting
    information on $861 million in agency contracting dollars; DOD officials
    were unable to explain the lack of subcontracting information on $3.3
    million in agency contracting dollars. Also, according to official
    procurement data systems, the four agencies determined that subcontracting
    plans were not required from their large prime contractors for 12 percent
    (GSA) to 77 percent (DOD) of their contracting dollars. However,
    information on the agencies' reasons for not requiring these plans, which
    should be readily available, is incomplete. The lack of information on the
    four agencies' compliance with subcontracting plan requirements limits
    determining the extent to which they followed federal contracting rules
    designed to give small businesses maximum opportunities to participate in
    their contracts.^6

    To ensure compliance with federal contracting regulations and to more
    transparently disclose the extent to which subcontracting opportunities
    were available to small businesses, we recommend that the Secretary of
    Homeland Security, the Secretary of Defense, and the Administrator of
    General Services issue guidance to the appropriate procurement offices and
    personnel reinforcing, among other things, the necessity for documenting
    in publicly available sources the agencies' decisions regarding
    subcontracting plan requirements. The Secretaries of DHS and DOD along
    with the GSA Administrator should also consider asking their Inspectors
    General to conduct a review at an appropriate future date to ensure that
    this guidance and related requirements are being followed. In written
    comments on a draft of this report, the agencies generally agreed with our
    recommendations and described various steps they are taking to implement
    them (see appendixes II, III, and IV).

    ^5For acquisitions related to construction, the amount is $1 million
    unless a statutory exception applies. See Federal Acquisition Regulation
    (FAR) S 19.702(a).

    ^6Under FAR S 19.702, a contractor receiving a contract for more than the
    simplified acquisition threshold (generally $100,000 for contracts in the
    United States) must agree to give small businesses "the maximum
    practicable opportunity to participate in contract performance consistent
    with (the contract's) efficient performance."

    DBEs were awarded about 4 percent, or about $53 million, of the
    approximately $1.3 billion that FHWA funded for Katrina-related contracts
    in Alabama, Louisiana, and Mississippi between August 1, 2005, and June
    30, 2006. The Mississippi DOT awarded about 64 percent of the FHWA dollars
    that DBEs were awarded. DBEs also were awarded about 10 percent, or about
    $2.4 million, of the $24 million that FAA awarded for Katrina-related
    contracts and subcontracts at airports in the three states between August
    1, 2005, and June 30, 2006.

    Background

    When the President declares a state of emergency after a natural or other
    major disaster, the declaration gives the federal government the authority
    to engage in various emergency response activities, many of which the
    agencies provide through contracts with private businesses.^7 Such
    activities include, among other things, debris removal, temporary housing
    assistance, reconstruction, and the provision of supplies. These contracts
    are subject to federal procurement regulations.

    Federal Goals for Contracts with Small and Local Businesses

    Federal agencies' contracts with private businesses, whether made in the
    normal course of agency operations or specifically related to a natural
    disaster declaration, are, in most cases, subject to certain goals to
    increase participation by various types of small businesses. The Small
    Business Act, as amended, defines a small business generally as one that
    is "independently owned and operated and that is not dominant in its field
    of operation."^8 In addition, a business must meet the size standards
    published by SBA to be considered "small"; these standards use businesses'
    annual revenue or their number of employees as criteria for determining
    size. The act sets a governmentwide goal for small business participation
    of not less than 23 percent of the total value of all prime contract
    awards--contracts that are awarded directly by an agency--for each fiscal
    year.^9 The Small Business Administration (SBA) is responsible for
    reporting annually to the President and Congress on agencies' achievements
    relative to the goals.

    ^7The Robert T. Stafford Disaster Relief and Emergency Assistance Act,
    Pub. L. 93-288, as amended, defines an emergency as "any occasion or
    instance for which, in the determination of the President, federal
    assistance is needed to supplement State and local efforts and
    capabilities to save lives and to protect property and public health and
    safety, or to lessen or avert the threat of a catastrophe in any part of
    the United States." 42 U.S.C. S 5122(1).

    ^8Public Law 85-536, as amended, 15 U.S.C. S 632(a).

    Because some agencies' activities lend themselves to contracting
    opportunities more than others, SBA negotiates goals in annual procurement
    with federal executive agencies to achieve the 23 percent governmentwide
    goal for contract dollars awarded directly by a federal agency.^10 As a
    result, some agencies have goals higher than 23 percent, while others may
    have goals that are lower than or just at 23 percent. For example, the
    agencies we reviewed had different goals for awarding contract dollars
    directly to small businesses in fiscal years 2005 and 2006. DHS's goals
    were 23 and 30 percent for 2005 and 2006, respectively. GSA's goals were
    43 and 45 percent, respectively, and DOD's (including the Corps) goal was
    23 percent for both years. The Small Business Act also sets annual prime
    contract dollar goals for participation by five specific types of small
    businesses: small businesses (23 percent); small disadvantaged businesses
    (5 percent); women-owned or service-disabled, veteran-owned, (5 and 3
    percent, respectively); and businesses located in historically
    underutilized business zones (HUBZones, 3 percent).^11 The Small Business
    Act^12 defines these businesses as follows:

               o Small businesses are those that are independently owned and
               operated, and are not dominant in their field of operations.
               o Small disadvantaged businesses must be owned and controlled by
               socially and economically disadvantaged individuals, such as
               African Americans, Hispanic Americans, Asian Pacific Americans,
               Subcontinent Asian Americans, or Native Americans. These owners
               must have at least a 51 percent stake in the business.
               o Women-owned small businesses must have at least 51 percent
               female ownership. For publicly owned businesses, one or more women
               must hold at least 51 percent of the stock and control both
               management and daily business operations.
               o Service-disabled, veteran-owned small businesses must be
               owned--also at least 51 percent--by one or more veterans with a
               service-related disability. In addition, the management and daily
               operations of the business must be controlled by one or more
               veterans with a service-related disability.
               o HUBZone small businesses must have their principal offices
               physically located in these historically underutilized business
               zones, which are economically distressed metropolitan or
               nonmetropolitan areas--that is, areas with low-income levels or
               high unemployment rates--and must employ some staff who live in
               these zones.^13

               Finally, the Stafford Act sets forth requirements for the federal
               response to presidentially declared disasters. It requires federal
               agencies to give contracting preferences, to the extent feasible
               and practicable, to organizations, firms, and individuals residing
               or doing business primarily in the area affected by a major
               disaster or emergency.^14

    			  Federal Rules for Contracts with Businesses

               The general rules governing procurement for executive agencies are
               set out in federal procurement statutes and in the Federal
               Acquisition Regulation (FAR). Individual agencies may also have
               additional acquisition regulations to supplement the FAR. The FAR
               requires agencies to measure small business participation in their
               acquisition programs. A small business may participate via
               contracts that are awarded directly by a federal agency or through
               subcontracts with the businesses that receive contracts directly
               from a federal agency. Any business receiving a contract directly
               from a federal executive agency for more than the simplified
               acquisition threshold^15 must agree to give small business the
               "maximum practicable opportunity" to participate in the contract
               "consistent with its efficient performance."^16 Additionally, for
               contracts (or modifications to contracts) that (1) are
               individually expected to exceed $500,000 ($1 million for
               construction contracts) and (2) have subcon	tracting possibilities,
               the prime contractor generally must have in place a subcontracting
               plan.^17 The subcontracting plan must identify the types of work
               the prime contractor believes it is likely to award as
               subcontracts as well as the percentage of subcontracting dollars
               it expects to direct to the specific categories of small
               businesses for which the Small Business Act sets specific
               goals.^18 For contracts that have individual subcontracting plans,
               prime contractors must semiannually and at project completion
               report on their progress toward reaching the goals in their
               subcontracting plans. Contractors that meet or exceed their goals
               may receive monetary incentives if the contract included such
               incentives. Contractors that fail to meet their subcontracting
               goals may be assessed damages if the contracting officer for the
               contract (i.e., the agency official responsible for awarding and
               monitoring the contract) determines that the contractor failed to
               make a good-faith effort to comply with a subcontracting plan.

    			  Agency and Governmentwide Contract Data

               When they award contracts, federal agencies collect and store
               procurement data in their own internal systems--typically called
               contract writing systems. The FAR requires federal agencies to
               report the information about procurements directly to the Federal
               Procurement Data System-Next Generation (FPDS-NG), GSA's
               governmentwide contracting database, which collects, processes,
               and disseminates official statistical data on all federal
               contracting activities of more than $2,500.^19 This system
               automatically obtains from other systems or online resources
               additional information that is important to the procurement, such
               as the contractor's location. According to GSA, nearly all
               civilian agencies have directly linked their contract writing
               systems to FPDS-NG so that information about their contracting
               activities is available in "real time." DOD also reports its
               contracting information to FPDS-NG via its system, DD-350, but GSA
               does not publicly reveal these data for 90 days due to security
               considerations.

    			  DOT�s Disadvantaged Business Enterprise Program

               The Disadvantaged Business Enterprise Program^20 (DBE Program) of
               DOT was enacted to help ensure nondiscrimination in the award and
               administration of DOT-assisted contracts in the department's
               highway, transit, and airport financial assistance programs. State
               DOTs, transit authorities, and airports receiving DOT funding for
               transportation projects are to have a goal-oriented program for
               small businesses owned and controlled by socially and economically
               disadvantaged individuals to participate on DOT-assisted
               contracts. The objectives of the DBE Program are to ensure that
               these businesses have an equitable opportunity to participate in
               contracts awarded by the recipients of DOT financial assistance,
               and that they receive a share of the resulting contract awards.
               Within DOT, the three major operating administrations--FHWA, FAA,
               and the Federal Transit Administration (FTA)--oversee the DBE
               Program. DOT requires that the state and local transportation
               agencies and airports that receive its funds set two kinds of
               goals for DBE participation: (1) annual goals for the percentage
               of dollars that DBEs would be expected to receive through contract
               and subcontract awards of all DOT-assisted contracts for the year
               absent the effects of discrimination^21 and (2) when appropriate
               and as needed to meet the annual goal for the year,
               contract-specific goals for DBE participation as subcontractors on
               prime contracts that have subcontracting possibilities. According
               to DOT officials, there were no overall DBE goals set for
               Katrina-related contracts as a whole.

               DOT also requires that the state and local agencies certify the
               eligibility of the DBE firms participating in DOT-assisted
               contracts through on-site visits, personal interviews, and reviews
               of business licenses and stock ownership. The purpose of
               certification is to ensure that the firms that state and local
               agencies certify as DBEs are owned and controlled by individuals
               who are socially and economically disadvantaged as the statute and
               implementing regulations define those terms.^22 SBA's Small
               Disadvantaged Business Program (SDB) and DOT's DBE Program share
               many common certification requirements. According to DOT
               officials, a memorandum of understanding (MOU) is presently under
               consideration for renewal that establishes processes and
               procedures to streamline the certification of firms certified
               under DOT rules in SBA programs and participation of firms
               certified under SBA rules in DOT programs.^23

    			  Small Businesses Received Varied Amounts of the Contracting
    			  Dollars Awarded by Four Agencies

               Overall, small businesses received 28 percent of the $11 billion
               that DHS, GSA, DOD, and the Corps awarded for Katrina-related
               projects, but the percentages varied among the four.^24 These four
               agencies awarded about $3 billion of their Katrina-related
               contracting dollars directly to small businesses and over $8
               billion to large businesses between August 1, 2005, and June 30,
               2006 (fig. 1). Assessed individually, DHS awarded the highest
               dollar amount to small businesses--about $1.6 billion dollars--and
               GSA awarded the highest percentage of its dollars to small
               businesses--72 percent of about $658 million.

               Figure 1: Amount and Percentage of Katrina-Related Contract
               Dollars Awarded to Businesses by DHS, GSA, DOD, and the Corps

               Note: Dollars are rounded to the nearest hundred thousand and
               percentages were calculated from unrounded numbers.

               While small businesses received 28 percent of the funds that DHS,
               GSA, DOD, and the Corps awarded, they received 55 percent of
               contract actions for activities related to Hurricane Katrina,
               awarded directly by these agencies (fig. 2).^25 Individually, the
               agencies awarded from 41 to 68 percent of their contract actions
               to small businesses, with DHS awarding the lowest percentage and
               GSA awarding the highest. In relation to Hurricane Katrina, small
               businesses have received contracts directly from the four agencies
               to provide a variety of products, such as trailers and sewage
               treatment equipment, and services, such as construction, data
               entry, and housing.

               Figure 2: Number of Katrina-Related Contract Actions Awarded
               Directly to Businesses by Business Size

               Among categories of small businesses, small disadvantaged
               businesses received 24 percent of the approximately $3 billion
               that the four agencies awarded to small businesses. Other
               categories of small businesses, including women- and veteran-owned
               businesses and businesses located in HubZones, received from 2 to
               16 percent (fig. 3).

               Individually, the agencies we reviewed awarded different
               percentages of their contracting dollars directly to various types
               of small businesses. For example, DHS, DOD, and the Corps awarded
               more than 10 percent of their contracting dollars directly to
               HUBZone and women-owned businesses, and from 23 percent to 29
               percent to disadvantaged businesses. GSA awarded 3 percent to
               HubZone businesses, 12 percent to women-owned businesses, and 8
               percent to disadvantaged businesses. Contracting dollars awarded
               directly to businesses can be counted in more than one category,
               so the dollars awarded to various types of small businesses are
               not mutually exclusive.

    ^915 U.S.C. S 644(g). Under this provision, the President must annually
    establish governmentwide goals for, among other things, procurement
    contracts awarded to small business concerns. The governmentwide goal for
    participation by small business concerns must be not less than 23 percent
    of the total value of all prime contract awards for each fiscal year. As
    stipulated in the Small Business Act, procurement goals are established as
    a percentage of the total value of all contracts directly awarded by the
    federal government in a fiscal year.

    ^10See Goaling Guidelines for the Small Business Preference Programs For
    Prime and Subcontract Federal Procurement Goals and Achievements, SBA
    Office of Government Contracting (July 3, 2003) (SBA Goaling Guidelines).

    ^1115 U.S.C. S 644(g).

    ^12The small business regulations implementing the Small Business Act
    further define these businesses. See 13 C.F.R. SS 121.401 - 121.413.

    ^13These classifications are set forth at 15 U.S.C. S 632.

    ^1442 U.S.C. S 5150. In this report we do not assess agency compliance
    with Stafford Act requirements.

    ^15FAR section 201.1 defines "simplified acquisition threshold" to mean
    $100,000, except when the acquisition of supplies or services is used to
    support a contingency operation or facilitate defense against nuclear,
    biological, chemical, or radiological attack. In those instances, the term
    means $250,000 for contracts to be awarded and performed inside the United
    States and $1 million for contracts to be awarded and performed outside
    the United States.

    ^16FAR SS 19.702, 2.101.

    ^17Id. The dollar threshold was changed to $550,000 on September 28, 2006.
    71 Fed. Reg. 57363 (Sept. 28, 2006).

    ^18These and other aspects of the small business subcontracting plan
    requirement are set forth at FAR Part 19.7.

    ^19The FPDS-NG reporting threshold in FAR 4.602(c) was raised from $2,500
    to $3,000. 71 Fed. Reg. 57,364 (Sept. 28, 2006).

    ^20DOT Regulation 49 C.F.R. S 26.1. Congress most recently reauthorized
    the DBE Program under the Safe, Accountable, Flexible, Efficient
    Transportation Equity Act: A Legacy For Users, Pub. L. No. 109-59 S
    1101(b) (2005).

    ^21For fiscal years 2005 and 2006, the state DOTs of Alabama, Louisiana,
    and Mississippi set annual DBE goals at about 10 percent for contracts
    awarded with FHWA dollars. For the same fiscal years, airports across the
    three states that set an annual DBE goal and awarded contracts that we
    reviewed had goals that ranged from about 7 percent to 20 percent.

    ^22See C.F.R. Parts 23, 26.

    ^23While the MOU between DOT and SBA has expired, according to DOT
    officials, DOT's regulations, specifically 49 CFR S26.84 and S26.85,
    prescribe the same requirements as contained in the MOU. Among other
    requirements, DOT recipients must accept SBA certification applications in
    lieu of requiring an applicant to complete their own application
    documents.

    ^24Each of the agencies we reviewed establishes annual goals for small
    business participation. Among the agencies, these goals ranged from 23 to
    45 percent in fiscal years 2005 and 2006, as we note in the background
    section of this report. The agencies, and SBA, track their progress in
    meeting these goals on an annual (federal fiscal year) basis--that is, in
    terms of all of an agency's contract actions in a year rather than on a
    case-by-case basis. Because of this, and because the agencies did not set
    Katrina-specific small business participation goals, the data we report in
    this section should not be used to assess the agencies' accomplishments
    with respect to their fiscal years 2005 or 2006 small business
    participation goals.

    ^25Contract actions include actions resulting in a new contract, as well
    as actions for additional supplies or services. We excluded contract
    modifications that were administrative, or did not adjust the dollar
    amount of the contract in order to focus our analysis on modifications of
    dollar values.

    Figure 3: Dollar Amount of Katrina-Related Contracts Awarded Directly to
    Small Businesses, by Type of Businesses

    Note: Percentages cannot be totaled across columns because under SBA
    Guidelines, contracting dollars awarded directly to businesses can be
    counted in more than one category--for example, a small disadvantaged
    business owned by a woman can be counted as both disadvantaged and
    women-owned. Dollars are rounded to the nearest hundred thousand and
    percentages were calculated from unrounded numbers.

    ^aThe service-disabled category is a subset of the veteran-owned business
    category.

    Local businesses, or businesses of all sizes located in the states
    primarily affected by Hurricane Katrina--Alabama, Louisiana, and
    Mississippi--received 18 percent, or $1.9 billion, of the $11 billion in
    contracting dollars that the four agencies directly awarded between August
    1, 2005, and June 30, 2006. Louisiana businesses received the most
    contracting dollars--about $1 billion, or 10 percent of the total amount
    of dollars the four agencies awarded during this time period (see table
    1).

    Table 1: Dollar Amount of Katrina-Related Contracts Awarded Directly to
    Businesses in All States and in States Primarily Affected by Hurricane
    Katrina

    Dollars in millions
                  All states^a        Alabama        Louisiana      Mississippi
                  Dollar           Dollar          Dollar          Dollar
    Agency     amount  Percent  amount Percent  amount Percent  amount Percent
    DHS^b      $6,418     100%    $160      2%    $460      7%    $138      2%
    GSA           658      100      77      12      48       7     210      32
    DOD           987      100      10       1       7       1      45       5
    Corps       3,110      100      84       3     609      20     114       4
    Total^a   $11,173     100%    $331       3  $1,124      10    $508       5

    Source: FPDS-NG and DD-350 data on contract actions awarded between August
    1, 2005, and June 30, 2006.

    Note: Dollars are rounded to the nearest hundred thousand, and percentages
    were calculated from unrounded numbers.

    ^aThe total includes dollars awarded to businesses in all states and the
    District of Columbia as well as businesses located outside of the United
    States.

    ^bDHS data are missing information on the contractor's state for 3.5
    percent of its records. Where possible, GAO used available information on
    the contractor's city and place of performance to identify the state in
    which the contractor was located.

    Small businesses in these states received 66 percent of the $1.9 billion
    in Katrina-related contracting dollars awarded to local businesses by the
    four agencies we reviewed. Among the three states, Mississippi saw the
    largest proportion (75 percent) of Katrina-related contracting dollars
    awarded to small businesses (see table 2). Although small businesses in
    Louisiana received the smallest proportion of Katrina-related contracting
    dollars (62 percent) awarded directly by the four agencies, the actual
    amount these businesses received was nearly double what small businesses
    received in Mississippi, and more than three times what they were awarded
    in Alabama. In general, these small local businesses received contracting
    dollars directly from the four agencies to provide trailers,
    administrative and service buildings, restoration activities, and other
    supportive services.

    Table 2: Small Businesses Received the Majority of Contracting Dollars
    Awarded Directly to Local Businesses

    Dollalrs in millions
                     Alabama                   Louisiana                 Mississippi
                   All     Small              All     Small              All     Small
            businesses   businesses    businesses   businesses    businesses   businesses
                Dollar Dollar              Dollar Dollar              Dollar Dollar
    Agency      amount amount Percent      amount amount Percent      amount amount Percent
    DHSa          $160   $119     75%        $460   $345     75%        $138   $138    100%
    GSA             77     72      92          48     26      54         210    194      92
    DOD             10     10      27           7      6      89          45      9      20
    Corps           84     16      19         609    320      53         114     42      36
    Total         $331   $217     65%      $1,124   $697     62%        $508   $383     75%

    Source: FPDS-NG and DD-350 data on contract actions awarded between August
    1, 2005 and June 30, 2006.

    Note: Dollars are rounded to the nearest hundred thousand and percentages
    were calculated from unrounded numbers.

    ^aDHS data are missing information on the contractor's state for 3.5
    percent of its records. Where possible, GAO used available information on
    the contractor's city and place of performance to identify the state in
    which the contractor was located.

    The remaining 82 percent of the approximately $11 billion awarded by the
    four agencies went to businesses throughout the United States (including
    Puerto Rico and the U.S. Virgin Islands) and Canada. For example, the
    agencies directly awarded 17 percent of their Katrina-related contracting
    dollars, or almost $1.9 billion, to businesses located in California, and
    15 percent, or approximately $1.7 billion, to businesses located in
    Florida (fig. 4). Businesses located in Virginia received about 9 percent
    of the funds the four agencies awarded, or about $996 million.

    Figure 4: Katrina-Related Contracting Dollars by Location

    Note: Dollars are rounded to the nearest hundred thousand and percentages
    were calculated from unrounded numbers.

    ^a"Other" includes other states, the U.S. Virgin Islands, Puerto Rico, and
    Canada.

    Selected Corps Contractors Awarded Most Subcontracting Dollars to Small
    Businesses, but Information on Subcontracting Plans for All Four Agencies Was
    Incomplete

    We found that the four Corps contractors that we reviewed awarded the
    majority of their Katrina-related subcontracting dollars to small
    businesses. However, viewed in terms of the total amounts obligated, we
    found that the selected Corps contractors awarded from less than 1 percent
    in one case to over half of the total amounts obligated as of March 31,
    2006, to small businesses. In addition, subcontracting accomplishment
    information was not consistently available for the DHS and GSA contracts
    that were awarded to large businesses, and that, according to agency
    officials or FPDS-NG, required subcontracting plans. This information was
    not consistently available because contractors failed to submit it,
    agencies had not finalized the data, or the information could not be
    isolated from non-Katrina activities. Also, key information about small
    business subcontracting plans was not consistently available in official
    procurement data systems even though federal contracting rules state that
    the information should be documented there. Specifically, for significant
    amounts of contracting dollars, primarily at DHS and GSA, the systems had
    no information at all on whether or not the agencies required these plans.
    Also, at all four agencies, when they did not require subcontracting
    plans, to varying degrees there was no information on the reason for the
    agencies' decision even though the FAR requires that contract files
    contain "justifications and approvals, determinations and findings, and
    associated documents."^26 The incomplete information on subcontracting
    plan requirements limits determining the extent to which agencies complied
    with contracting rules designed to give small businesses maximum
    opportunities to win subcontracts.

    ^26FAR S 4.803 (a)(2), (14).

    Corps Contractors Reported Awarding the Majority of their Subcontracting Dollars
    to Small Businesses

    We reviewed 4 of the top 10 recipients of prime contracting dollars from
    DOD and the Corps for projects related to Hurricane Katrina.^27 Together,
    these 10 contractors accounted for 60 percent of these agencies' prime
    contracting dollars. Of these top 10 recipients, only 4 received contracts
    that were strictly for Hurricane Katrina-related projects and were
    required to submit small business subcontracting plans for these
    projects.^28 These 4 contractors were large businesses and received eight
    contracts from the Corps that accounted for $928 million of the Corps'
    contracting dollars as of March 31, 2006.^29 In accordance with federal
    requirements for reporting of subcontracting information, the contractors
    reported the amounts they subcontracted to businesses by business size and
    type. According to the reports submitted for the period ending March 31,
    2006, these 4 contractors awarded from 88 to 100 percent of their
    subcontracting dollars to small businesses, or from about $11,000 to $201
    million (table 3).^30 According to their subcontracting plans, the 4
    contractors we reviewed intended to use subcontractors to assist with a
    variety of clean-up and repair activities, including excavation, debris
    removal, and temporary roofing installation.

    ^27Because DOD does not electronically aggregate information on the
    subcontracting accomplishments of all military contractors, we chose to
    look at the top 10 military contractors. This is a nonprobability sample
    of military contractors because we did not consider including contractors
    other than the top 10.

    ^28Four prime contractors were not required to identify subcontracting
    opportunities because they were small businesses or the contract lacked
    subcontracting possibilities. Under FAR, a contract is not required to
    have a subcontracting plan if, among other things, the contract is with a
    small business or if no subcontracting possibilities exist. See FAR SS
    19.702(b)(1), 19.705-2(b). Of the remaining six contractors, two had
    contracts for both Katrina and other activities, and we excluded these
    contractors from our analysis because we could not isolate only the
    Katrina-related subcontracting accomplishments using the information that
    was available.

    ^29The four contractors received a total of 15 contracts from the Corps,
    but we excluded 7 from our analysis because they either had
    non-Katrina-related actions against them or were not required to include
    subcontracting plans.

    ^30We analyzed subcontracting awards to small businesses as of a specific
    point in time. However, these contracts may extend past March 31, 2006.
    Subcontracting accomplishments may vary over time if the amount prime
    contractors award to all businesses, and small businesses specifically,
    changes over the life of a contract.

    Table 3: Awards of Selected Corps Contractors to Small Businesses as a
    Percent of the Subcontracting Dollars Awarded to All Businesses

    Dollars in millions
                             Amount contractor        Amount contractor
    Prime        Contract    awarded to all         awarded to small
    contractor     number    subcontractors           subcontractors Percent^a
    Contractor A      A-1              $228                     $201       88%
    Contractor B      B-1                 3                        3       100
                         B-2               0.6                      0.6       100
                         B-3                 1                        1       100
                         B-4               0.4                      0.4       100
                         B-5              0.01                     0.01       100
    Contractor C      C-1                24                       23        95
    Contractor D      D-1              $212                     $188       89%

    Source: Individual subcontracting reports as of March 31, 2006.

    Note: Dollars are rounded to the nearest hundred thousand and percentages
    were calculated from unrounded numbers.

    ^aThe percent of all subcontracting dollars awarded that were awarded to
    small businesses.

    We also conducted additional analysis on the four selected Corps
    contractors. This analysis shows that the percentages of contracting
    dollars that small businesses received through subcontracts from the four
    Corps contractors are smaller when analyzed in broader terms than those
    used for federal reporting requirements. The federal government requires
    that, when subcontracting plan requirements apply, contractors must agree
    to report the percentages and amounts of the total subcontracting dollars
    that small businesses receive, and the four contractors we analyzed met
    this reporting requirement.^31 However, as we have previously reported,
    because a contractor could decide to subcontract only a small amount of
    its total federal contract, the portion of subcontracted dollars going to
    small businesses--if reported as a percentage of total subcontracted
    dollars rather than of total contract dollars--could appear to be
    large.^32 We compared the amounts each of the four selected Corps
    contractors subcontracted to small businesses through eight
    Katrina-related contracts as of March 31, 2006, with the total amount
    obligated for each contract as of March 31, 2006 (table 4). This
    comparison, using the total amounts obligated, showed that the contractors
    awarded small businesses from less than 1 to 54 percent of the total
    amounts obligated. As we have noted, these percentages could change over
    time if the contractors award additional dollars to small businesses over
    the life of the contracts and if the total amounts obligated change.

    ^31See, e.g., FAR SS 19.704(a)(10), 52.219-9(d); see also GSA Form 294.

    ^32GAO, Department of Energy: Improved Oversight Could Better Ensure
    Opportunities for Small Business Subcontracting, [27]GAO-05-459
    (Washington, D.C.: May 13, 2005).

    Table 4: Amounts Small Businesses Received as Subcontractors as a Percent
    of Total Dollars Obligated for Selected Katrina-Related Contracts

    Dollars in millions
                                                      Amount each prime
    Prime        Contract                      contractor awarded to
    contractor     number Total obligated^a           small business Percent^b
    Contractor A      A-1      $447,025,736                     $201       45%
    Contractor B      B-1         7,130,002                        3        39
                         B-2        15,189,862                      0.6         4
                         B-3        28,283,410                        1         4
                         B-4         8,662,500                      0.4         4
                         B-5        14,817,225                     0.01      0.08
    Contractor C      C-1        60,000,000                       23        38
    Contractor D      D-1      $347,390,830                     $188       54%

    Source: Individual subcontracting report as of March 31, 2006, DD-350, and
    Corps data.

    Note: Dollars are rounded to the nearest hundred thousand and percentages
    were calculated from unrounded numbers.

    ^aThis total amount obligated as of March 31, 2006.

    ^bThe percent of the total amount obligated that was awarded to small
    businesses.

    Subcontracting Accomplishment Information Is Not Consistently Available for the
    DHS and GSA Contracts Related to Hurricane Katrina That Required Subcontracting
    Plans

    Subcontracting accomplishment information is not consistently available
    for the DHS and GSA contracts that were awarded to large businesses for
    activities related to Hurricane Katrina, and that, according to agency
    officials or FPDS-NG, required subcontracting plans. Contractors that have
    individual subcontracting plans are generally required to report on their
    subcontracting goals and accomplishments twice a year to the federal
    government through eSRS. Furthermore, the agencies' contracting officers
    are responsible for monitoring the prime contractors' activities and
    ensuring, among other things, that they submit complete and timely
    information in accordance with the terms of their federal contract.

    For DHS, in response to our inquiries, agency officials researched
    contracts that appeared to meet the regulatory criteria for requiring a
    subcontracting plan (i.e., awarded to a large business for over $500,000
    or $1,000,000 for construction) but which FPDS-NG indicated either did not
    require one or the system was missing information on a plan requirement
    altogether. For every contract that an agency awards, the agency is
    required to indicate in FPDS-NG whether a subcontracting plan is required.
    These officials found that subcontracting plans were, in fact, required
    for seven contracts, but that this had not been entered into FPDS-NG. DHS
    officials determined that subcontracting accomplishment information was
    available on four of the seven contracts.^33 For the four contracts, the
    contractors reported awarding from 14 to 83 percent of their
    subcontracting dollars, which ranged from $154 to $520 million, to small
    businesses as of March 31, 2006. For the remaining three contracts,
    subcontracting information was not available either because the prime
    contractor had not, as required, reported subcontracting accomplishment
    information to the electronic subcontracting reporting system (eSRS) as of
    March 31, 2006, or the contractor was not required to report on individual
    contracts.^34

    For GSA, information is generally unavailable on the subcontracting
    activities associated with the 11 contracts the agency awarded to large
    businesses for Katrina-related activities and which included
    subcontracting plans. According to FPDS-NG, GSA awarded 11 Katrina-related
    contracts (worth a total of about $9.6 million) for which subcontracting
    information was not available because contractors had failed to report it,
    the data had not been finalized, or, in one case, the contractor had
    reported aggregated figures for both Katrina-related and other
    subcontracts. Specifically, information was unavailable on 9 GSA-awarded
    contracts because the contractors had not submitted data into eSRS, and on
    1 other contract because the data were still in "draft" form in eSRS.^35
    While subcontracting information was available on 1 of the GSA-awarded
    contracts related to Hurricane Katrina, we could not isolate data related
    solely to that disaster, as the contract had been used for other unrelated
    activities and the available subcontracting information was reported for
    the entire contract. Because subcontracting accomplishments were reported
    for the contract as a whole, and not for individual contract actions, it
    is not possible, with available data, to disaggregate Katrina and
    non-Katrina-related subcontracting accomplishments.

    ^33The FPDS-NG data for DHS initially showed that a subcontracting plan
    was required for two contracts the department awarded for Katrina-related
    activities which we could not find in eSRS. DHS officials subsequently
    researched these contracts and determined that neither required a
    subcontracting plan--one was an award to a small business (for which the
    requirement does not apply) and the other indicated that there were no
    subcontracting possibilities.

    ^34One of the contracts DHS awarded was for a commercial item. For
    commercial item contracts, contractors are only required to annually
    report on their subcontracting activities for all of their government
    contracts. These annual reports do not identify subcontracting activities
    by individual contracts.

    Agency officials could not entirely explain what caused certain DHS and
    GSA prime contractors, whose contracts did include subcontracting plans,
    to fail to submit the required documentation of their activities and
    accomplishments into eSRS for the period ending March 31, 2006. However,
    one possible reason may have to do with the effect that incomplete
    information about prime contracts in FPDS-NG can have when it carries over
    into eSRS. Specifically, eSRS only allows contractors to submit
    information on their subcontracting activities when contracts are
    correctly coded in FPDS-NG as requiring a subcontracting plan. As a
    result, if a contract is not in FPDS-NG or has not been entered correctly
    as requiring a subcontracting plan, the contractor will not be able to
    submit information about subcontracting activities into eSRS. Without
    timely and complete information on the extent to which contractors are
    subcontracting with small businesses, the eSRS is less useful as a tool
    for providing transparency on the extent to which small businesses are, as
    intended, receiving opportunities to participate in federal contracts. In
    addition, the ability of eSRS to accurately produce reports on
    subcontracting achievements is compromised.

    ^35Data in eSRS that are in "draft" form means that a contractor has
    started creating a subcontracting accomplishment report, but has not yet
    submitted it to the government.

    Incomplete Agency Information on Subcontracting Plan Requirements Raises
    Concerns about Compliance with Contracting Rules and Opportunities for Small
    Businesses

    As was the case with certain agency data on subcontracting
    accomplishments, in two respects, key information on small business
    subcontracting plans was not consistently available in official
    procurement data systems for the four agencies. First, the official
    procurement data system, primarily for DHS and GSA, had no information at
    all on whether or not they required subcontracting plans for 70 percent or
    more of their contracting funds. DHS and GSA officials were, to varying
    degrees, unable to explain the lack of information on subcontracting plan
    requirements associated with their Katrina-related contracting dollars.
    Second, the four agencies, according to procurement data systems,
    determined that subcontracting plans were not required for contracts
    representing 12 to 77 percent of the dollars they awarded to large
    businesses for Katrina-related projects that appeared to meet the criteria
    for including such plans. Data on the four agencies' reasons for their
    determinations about not requiring these plans, which should be in the
    data systems or readily available, were incomplete.

    For the types of contracts we reviewed, executive agencies generally must
    require subcontracting plans when they award federal contracts of more
    than $500,000 to large businesses.^36 According to the FAR, agencies must
    make the maximum practical opportunities available for small businesses to
    participate in federal procurements and agencies must take steps to ensure
    that prime contractors play a role in ensuring those opportunities are
    made available.^37 Additionally, the FAR requires that federal executive
    agencies must maintain public files of data on their procurement
    activities, such as whether or not they have required prime contractors to
    submit and report on subcontracting plans.^38 We also note that the FAR
    requires that federal agencies have readily accessible information on each
    of the contracts that they have awarded.^39 Finally, under the FAR, a
    contractor is not required to submit a subcontracting plan if the
    contracting officer determines that no subcontracting possibilities
    exist.^40 The contracting officer's determination must be approved at a
    level above the contracting officer and documented in the contract
    file.^41 This information is to be captured in FPDS-NG for civilian
    agencies and in its military counterpart, DD-350, for military agencies.
    By capturing the reason for decisions about forgoing subcontracting plans,
    such as the lack of subcontracting possibilities, these systems provide
    transparency into a process intended to ensure maximum opportunities for
    small businesses to participate in federal procurements.

    ^36As we previously noted, the dollar threshold was changed to $550,000 on
    September 28, 2006. 71 Fed. Reg. 57363 (Sept. 28, 2006).

    ^37In July 2006, the Civilian Agency Acquisition Council and the Defense
    Acquisition Regulations Council published, with a request for comments,
    interim rules establishing Part 18 of FAR, which are intended "to provide
    a single reference to acquisition flexibilities that may be used to
    facilitate and expedite acquisitions of supplies and services during
    emergency situations." 71 Fed. Reg. 38247 (July 5, 2006). According to GSA
    officials, these interim rules do not specifically address the
    subcontracting plan requirements discussed in this report. The FAR is
    available at http://acquisition.gov/far/index.html.

    ^38See FAR S 4.601(a); see also FPDS-NG User's Manual, SBA Goaling
    Guidelines.

    As we noted, information about whether the four agencies met the criteria
    for requiring subcontracting plans and, when they did not require a plan,
    their reasons for doing so were incomplete. Specifically, for contracts
    representing the majority of the dollars that DHS and GSA awarded to large
    businesses for contracts valued over $500,000, no information was
    available in FPDS-NG on whether the two agencies required subcontracting
    plans or had waived this requirement (see table 5, column 6). Also, for
    contracts representing 12 to 77 percent of the funds they awarded to large
    businesses through contracts for over $500,000, the procurement system
    showed that the agencies determined that subcontracting plans were not
    required (table 5, column 5). Agency officials were unable to explain why
    subcontracting plans were not required for contract dollars ranging from
    at least $16 million to $861 million.

    ^39The FAR states that agencies must transmit procurement information into
    FPDS-NG in accordance with the system's procedures. The FPDS-NG User Guide
    states that contracting officers shall submit complete and accurate data
    on contract actions to FPDS-NG within 3 business days after contract
    award. Moreover, under FAR subpart 4.8, agency contract files are to
    contain specified information about the contract and agencies should be
    able to locate them promptly. See FAR SS 4.801 - 4.803.

    ^40FAR S 19.705-2. According to the FAR, in determining whether
    subcontracting possibilities exist, a contracting officer must determine
    relevant factors such as: (1) whether firms engaged in the business of
    furnishing the types of items to be acquired customarily contract for
    performance of part of the work or maintain sufficient in-house capability
    to perform the work; and (2) whether there are likely to be product
    prequalification requirements (a qualification requirement means a
    requirement for testing or other quality assurance demonstration that must
    be completed before award of a contract).

    ^41Id.

    Table 5: Subcontracting Plan Requirements by Dollar Amount Awarded

    Dollars in millions
                                                         Percent of     Percent of
                                                        total amount   total amount
                   Total   Percent of     Percent of    awarded and    awarded and
                  amount  total amount   total amount  dollar amount  dollar amount
              awarded to  awarded and    awarded and    reported as      with no
                   large dollar amount  dollar amount  not requiring  information on
              businesses  requiring a      with no           a        subcontracting
                    over subcontracting subcontracting subcontracting      plan
    Agency $500,000^a      plan      possibilities       plan       requirements
    DHS      $4,866.2   1%     $27.2    0%    $16.3  29%  $1,406.0  70%  $3,416.7
    GSA         127.1    7       8.9     4      4.7   12      15.1   77      98.4
    DOD         631.2   22     141.4     0            77     483.6    1       6.2
    Corps    $2,468.7  76%  $1,880.1    0%           23%    $574.5   1%     $14.1

    Source: GAO analysis of FPDS-NG and DD-350 data for contract actions
    awarded between August 1, 2005, and June 30, 2006.

    Note: Dollars are rounded to the nearest hundred thousand and percentages
    were calculated from unrounded numbers.

    ^aOne million dollars for construction.

    Overall, procurement officials from the four agencies were able to explain
    some of the missing or incomplete subcontracting plan information, for
    example, by identifying data entry errors or providing evidence of
    additional justification for not requiring the subcontracting plans.
    Nonetheless, for each agency, there remain contracting dollars for which
    the subcontracting plan information is incomplete and which agency
    officials have not been able to explain. Specifically:

               o For DHS, table 5 shows that $3.4 billion in contracting dollars
               lacked any information on whether a subcontracting plan was
               required. DHS officials stated that information was missing for
               $3.2 billion of these dollars due to data entry errors. For
               example, for nearly $3 billion of these dollars, subcontracting
               plans were in fact required.^42 DHS officials were unable to
               explain the lack of information on subcontracting plan
               requirements associated with the remaining $191 million of the
               dollars for which subcontracting plan requirement information is
               missing. Table 5 also shows that DHS did not require
               subcontracting plans for $1.4 billion of the funds it awarded. DHS
               officials indicated $545 million of these funds were miscoded and
               should have been entered in FPDS-NG as having "no subcontracting
               possibilities." DHS officials were unable to explain why the
               remaining $861 million were not required to have subcontracting
               plans.
               o According to GSA officials, contracting officers did not require
               subcontracting plans for the Katrina-related contracts awarded to
               large businesses for over $500,000 in some cases because of a
               temporary increase (to $10 million) in the threshold for requiring
               these plans and in other cases because the emergency nature of the
               situation required a faster response than normal contracting
               procedures would have allowed.^43 Table 5 shows that GSA awarded a
               total of almost $114 million through acquisitions that were coded
               in FPDS-NG as either not requiring a subcontracting plan or for
               which there was no information on whether a subcontracting plan
               was required (columns 5 and 6 of table 5, which round to $114
               million); of this amount, GSA officials indicated that $72 million
               was awarded at amounts below the $10 million threshold.^44 Of the
               remaining $42 million, GSA determined that a subcontracting plan
               was not required for a $26 million contract for ice because the
               urgent nature of the situation required procuring and delivering
               the ice faster than normal contracting procedures would have
               allowed. According to GSA officials, contracts such as this and
               others for which GSA did not require subcontracting plans, such as
               one for ambulance services to transport people from nursing homes,
               illustrate their point about the need to expedite contracting in
               an emergency situation. The ambulance services contract they cited
               was valued high enough that they ordinarily would have had to
               include a subcontracting plan which, in the normal course of
               operations, would require review by the SBA's Procurement Center
               Representatives for advisory purposes as well as a certain amount
               of market research to determine if subcontracting possibilities
               existed for potential prime contractors. In the judgment of the
               GSA contracting officials, the urgency of the situation requiring
               the ambulances was sufficient justification for forgoing the
               subcontracting plan requirements and procedures. GSA officials
               were unable to explain the lack of information on subcontracting
               plan requirements associated with the remaining $16 million.^45
               o Table 5 shows that DOD's data system, DD-350, had no information
               at all on subcontracting plan requirements for $6.2 million of its
               Katrina-related contracts. Based on our queries, DOD officials
               determined that these contracts actually did require such plans.
               The system lacked this information because the DFARS instructions
               do not require this information for orders under a supply schedule
               contract. Of the $483.6 million that table 5 shows as not
               requiring a subcontracting plan, based on our inquiries, DOD
               officials determined that $475.9 million of these contract actions
               represented data entry errors and did, in fact, require such plans
               or should have been coded as having "no subcontracting
               possibilities." Moreover, DOD officials stated that about $4.4
               million in contract actions were correctly coded as not requiring
               subcontracting plans because they were awarded as blanket purchase
               agreements, purchase orders, or were awarded to a small business.
               DOD officials were unable to explain why the remaining $3.3
               million in contracting dollars coded as not requiring
               subcontracting plans were not required to have such plans.
               o For the Corps, table 5 shows $14 million for which DD-350
               contained no information on subcontracting plan requirements.
               Corps officials determined that these were orders against existing
               GSA federal supply schedule contracts and for which, according to
               these officials, the FAR does not require subcontracting plans.
               Table 5 also shows $574.5 million for which the Corps determined
               that subcontracting plans were not required; according to Corps
               officials, data entry errors explain $437.2 million of these
               funds--some small businesses (which do not have to have
               subcontracting plans) were miscoded as large, some contracts were
               miscoded as not requiring a subcontracting plan when they actually
               did, and some should have been coded as having "no subcontracting
               possibilities." Corps officials were unable to explain why
               subcontracting plans were not required for the remaining $102
               million in contracting dollars that were coded as not requiring a
               subcontracting plan.

               More than 1 year after Hurricane Katrina, key information about
               subcontracting plan requirements remains incomplete, as we show in
               table 5. As we noted in reporting on the agencies' efforts to
               respond to our inquiries, data entry errors explain some of what
               we found. Additionally, officials from GSA and DOD stated that in
               the emergency situation that Hurricane Katrina presented, they
               placed priority on awarding contracts for vital supplies with the
               expectation that data entry would be completed at a later time.
               However, as we noted, these agencies were still unable to explain
               why data were missing on subcontracting plan requirements, or why
               subcontracting plans were not required for from $3.3 million to
               $861 million in contract dollars. The incomplete information
               limits using the agencies' procurement data systems and publicly
               reported contracting data to tell the extent to which agencies
               complied with federal contracting rules designed to give small
               businesses the maximum practical opportunity to participate in
               federal contracts.

    			  Disadvantaged Business Enterprises Participated in FHWA� and
    			  FAA�Funded Contracts and Subcontracts Related to Hurricane Katrina

               Through contracts and subcontracts, DBEs were awarded about 4
               percent of almost $1.3 billion of FHWA funding for Katrina-related
               contracts awarded between August 1, 2005, and June 30, 2006, in
               the three states primarily affected by Hurricane Katrina.^46 The
               Mississippi Department of Transportation awarded the majority of
               the FHWA dollars DBEs received in these three states. DBEs were
               awarded about 10 percent of FAA dollars that airports in these
               three states awarded for Katrina-related contracts during the same
               period of time.^47 FTA officials said that FTA did not fund any
               grants to transit agencies for Katrina-related recovery
               projects.^48

    			  DBEs Received about 4 Percent of FHWA Dollars for Katrina-Related
    			  Contracts in Mississippi, Alabama, and Louisiana

               DBEs were awarded about 4 percent of the total dollar value of
               Katrina-related contracting dollars awarded by three state
               transportation agencies through contracts and subcontracts between
               August 1, 2005, and June 30, 2006. The DOTs in the three states
               primarily affected by Katrina (Alabama, Louisiana, and
               Mississippi) awarded 76 FHWA-funded, Katrina-related contracts,
               totaling about $1.3 billion (table 6). DBEs were awarded
               approximately $53 million of this amount as prime contractors and
               subcontractors. Specifically, DBEs were prime contractors on 2 and
               subcontractors on 10 of the 76 contracts awarded.

    ^42Of the other dollars for which information was missing, DHS stated that
    some were awarded through purchase orders, to small businesses, or had no
    subcontracting opportunities--all of which would exclude the contracts
    from subcontracting plan requirements. As noted previously in this report,
    FAR does not require subcontracting plans for contracts with small
    businesses and when no subcontracting possibilities exist. FAR does not
    contain an explicit exception for purchase orders. Under FAR, a purchase
    order is a type of contract that, by definition, involves the use of
    simplified acquisition procedures. See FAR S 2.101 (definitions of
    "Contract" and "Purchase Order"). The simplified acquisition procedures
    apply where the contract amount does not exceed the simplified acquisition
    threshold. See FAR S 13.000.

    ^43Additionally, according to GSA officials, data entry errors explain
    some of the information missing from their procurement systems.
    Specifically, GSA reported that about $18 million were awarded through
    purchase agreements, against existing contracts, and to a small business
    that was miscoded as a large business--and therefore were not required to
    have subcontracting plans.

    ^44According to GSA officials, under GSA Acquisition Letter V-05-17
    (effective September 9, 2005) certain contracts for amounts not exceeding
    $10 million were subject to simplified acquisition procedures that did not
    require submission of a subcontracting plan. They referred to the
    following paragraph in the Sept. 9 letter:

    In accordance with section 101(1) of Pub. L. 109-62, the threshold in FAR
    13.500(e) ($10 million) is applicable to procurements in support of
    Hurricane Katrina rescue and relief operations. In addition, under section
    101(2), the micro-purchase threshold for actions in support of Hurricane
    Katrina rescue and relief efforts is $250,000.

    The GSA officials did not provide a clear explanation of the extent to
    which GSA relied on the threshold amount. One official stated that
    subcontracting plans were not required for acquisitions of commercial
    items in which the contract amount was $10 million or less. Subsequently,
    another official indicated that GSA relied on the threshold amount for
    Katrina-related contracts generally, without referring specifically to
    contracts for commercial items.

    ^45The dollar amount for which it is unclear why GSA did not require
    subcontracting plans may be greater than $16 million. As we indicated
    earlier, GSA officials were unclear whether its increase in the threshold
    for requiring the plans applied to all contract actions under the $10
    million or just those involving commercial items. If the threshold
    increase applied to all contract actions, $16 million in GSA contract
    dollars remains unexplained. If the threshold increase only applied to
    commercial items (a subset of all contract actions), then the dollar
    amount for which we do not have information on why GSA did not require a
    subcontracting plan is likely greater than $16 million.

    ^46The state DOTs of Alabama, Louisiana, and Mississippi set annual goals
    for DBE participation in FHWA-assisted contracts at about 10 percent for
    fiscal years 2005 and 2006, as we note in the background section of this
    report. Because these goals are based on DBE participation on an annual
    basis using data from all FHWA-assisted contracts in each state, and
    because DOT did not set Katrina-specific overall DBE participation goals,
    the data we present in this section do not represent noncompliance or the
    failure of any of the states to meet annual DBE participation goals.

    ^47Airports receiving FAA funds set annual DBE participation goals. The
    airports' FAA-assisted contracts that we reviewed had goals that ranged
    from about 7 percent to 20 percent, as we note in the background section
    of this report. Because these goals are based on DBE participation on an
    annual basis using data from all FAA-assisted contracts, and because DOT
    did not set Katrina-specific DBE participation goals, the data we present
    in this section do not represent noncompliance or the failure of any of
    the airports to meet annual DBE participation goals.

    ^48Repairs to transit for damage caused by Hurricane Katrina have been
    paid for with FEMA funds that were administered by FTA. According to FTA
    officials, DBE participation requirements do not apply to the funds they
    provided transit agencies in the affected states because the funds were
    FEMA's, not FTA's.

               Table 6: DBE Participation in Katrina-Related State DOT Contracts
               Awarded With FHWA Funds

    Dollars in millions
                                        Total dollars  Percentage of total dollar
                     Total dollar value    awarded to  value of contracts awarded
    State       of contracts awarded        DBEs^a                     to DBEs
    Mississippi               $790.0         $34.2                        4.3%
    Louisiana                  490.0          18.8                         3.8
    Alabama                      2.9           0.1                         4.0
    Total                   $1,282.9         $53.1                        4.1%

               Source: GAO analysis of Mississippi, Louisiana, and Alabama DOT
               data for contracts awarded between August 1, 2005, and June 30,
               2006.

               Note: Dollars are rounded to the nearest hundred thousand and
               percentages were calculated from unrounded numbers.

               ^aIncludes amount paid to DBEs for completed projects and amount
               committed to DBEs for ongoing projects through prime contracts and
               subcontracts.

               In Mississippi, DBEs were awarded a total of about $34 million, or
               4.3 percent of the $790 million that the Mississippi DOT awarded
               in FHWA-funded, Katrina-related contracts. The Mississippi DOT
               awarded the $790 million through 55 contracts. DBEs were the prime
               contractor on 2 of these contracts, which totaled about $2
               million, and subcontractors on 6 others. Almost all of the 8
               contracts that DBEs participated in were for debris removal and
               work on U.S. Highway 90, which runs along the Mississippi coast
               and received substantial damage from the hurricane. As of October
               2006, of the approximately $34 million awarded to DBEs in
               Mississippi, about $3 million had been paid for completed work and
               $31 million is committed for work in progress.

               DBEs were awarded a total of about $19 million, or 3.8 percent of
               the $490 million that the Louisiana DOT awarded in FHWA-funded,
               Katrina-related contracts. The Louisiana DOT awarded a total of 19
               contracts, and DBEs were subcontractors on 3 of them. The 3
               subcontracts included work for bridge repair and work on
               Interstate Highway 10, which received significant damage from
               Hurricane Katrina between New Orleans and Slidell, Louisiana. As
               of October 2006, of the approximately $19 million awarded to DBEs,
               approximately $700,000 had been paid for completed work, and a
               little more than $18 million had been committed for work in
               progress.

               DBEs were awarded a total of about $100,000, or 4 percent, of the
               nearly $3 million that the Alabama DOT awarded in FHWA-funded,
               Katrina-related contracts. Two contracts accounted for the nearly
               $3 million and two DBEs were subcontractors on one of the
               contracts.^49 As of October 2006, the two DBEs had received over
               half of their awarded amounts, and the remainder was committed for
               the rest of the project, which was designed to repair a ramp on a
               section of Interstate Highway 10.

    			  DBEs Received About 10 Percent of the FAA Dollars Awarded for
    			  Katrina-Related Contracts

               DBEs were awarded about $2.4 million of the nearly $24 million in
               Katrina-related contracts that airports in Alabama, Louisiana, and
               Mississippi awarded with FAA funds for Katrina-related contracts
               during the period of our analysis (table 7). This $24 million was
               awarded by airports through 44 contracts, and DBEs participated in
               1 contract as a prime contractor and in 10 contracts as
               subcontractors.

               Table 7: DBE Participation in Contracts Awarded by Airports with
               FAA Grants

    Dollars in
    millions
                   Total dollar value  Total dollar    Percentage of total dollar
                     of all contracts value awarded value of contracts awarded to
    State                  awarded     to DBEs^a                          DBEs
    Airports in
    Mississippi              $21.1          $2.3                         11.0%
    Airports in
    Louisiana                  2.6           0.1                           4.1
    Airports in
    Alabama                    0.3         ^---b                         ^---b
    Total                    $24.0          $2.4                         10.1%

               Source: GAO analysis of FAA data for contracts awarded by airports
               between August 1, 2005 and June 30, 2006.

               Note: Dollars are rounded to the nearest hundred thousand and
               percentages were calculated from unrounded numbers.

               ^aIncludes amount paid to DBEs for completed projects and amount
               committed to DBEs for ongoing projects through prime contracts and
               subcontracts.

               ^bAirports in Alabama awarded a total of nearly $300,000 in three
               FAA-funded, Katrina-related contracts, and DBEs participated in
               one of the three contracts. For contracts awarded with FHWA or FAA
               funds, we determined that contract values were sufficiently
               reliable to report aggregated contract amounts rounded to the
               nearest $100,000. Because the dollar value awarded to DBEs in
               Alabama was less than $50,000 and rounding this figure would
               require reporting it as zero, we chose not to report on the amount
               or percentage of total dollars DBEs received in Alabama. See the
               detailed discussion of our methodology in appendix I for more
               information.

               DBEs were awarded approximately $2.3 million (11 percent) of about
               $21 million that airports in Mississippi awarded in FAA-funded,
               Katrina-related contracts. DBEs participated in 8 out of 27
               contracts awarded by airports in Mississippi. The contracts
               included repair work for terminal areas and runway lighting, as
               well as construction of a new cargo building.

               DBEs were awarded a total of about $100,000, all through
               subcontracts, of nearly $2.6 million that airports in Louisiana
               awarded in FAA-funded, Katrina-related contracts. The $100,000
               DBEs received accounted for approximately 4 percent of the $2.6
               million that the Louisiana airports awarded. Overall, DBEs
               participated in 2 of 14 contracts that included work to update one
               airport's master plan and consulting services provided to another
               airport.

    			  Conclusions

               There is little doubt that Hurricane Katrina posed challenges to
               federal agencies to award contracts expeditiously while adhering
               to federal acquisition regulations, including those governing
               subcontracting plans. We recognize that the response to Katrina
               was unprecedented for most agencies and that complying with
               certain requirements, such as negotiating subcontracting plans and
               documenting compliance with subcontracting requirements, may have
               understandably been deferred to a later time, as GSA and DOD
               officials said was the case. Nonetheless, a substantial amount of
               information about the four agencies' subcontracting requirements
               remains incomplete over a year after the hurricane. Conclusively
               demonstrating compliance with the rules about subcontracting plans
               is important for reasons beyond just documentation. By requiring
               these plans, agencies commit prime contractors to specific goals
               for providing opportunities to small businesses and give
               themselves tools--incentives as well as sanctions--that they can
               use to ensure the contractors engage in good faith efforts to meet
               their small business subcontracting goals. In doing so, the
               agencies ensure compliance with federal procurement regulations
               and that small businesses have all of the practical opportunities
               to participate in federal contracts that they are supposed to
               have. Because so much key information about subcontracting plans
               was incomplete in federal procurement data systems and, at the
               conclusion of our review, remains unresolved, we cannot tell the
               extent to which the agencies are complying with the regulations.
               Furthermore, the lack of transparency surrounding much of the
               agencies' subcontracting data--missing information on plans when
               contracts appear to meet the criteria for having them--may lead to
               unwarranted perceptions about how the federal procurement system
               is working, particularly in terms of the government's stated
               preference for contracting with small businesses.

               For their Katrina-related relief contracts, until DHS, GSA, DOD,
               and the Corps improve documentation of (1) the status of whether
               subcontracting plan requirements are in place and (2) their
               decisions on whether subcontracting plans were required, the
               agencies will lack the ability to provide assurance they offered
               small businesses the maximum practical opportunity to do business
               with them. However, it is questionable whether the benefit from
               clearing up the agencies' incomplete subcontracting information
               would outweigh the costs of doing so for Katrina-related
               contracts. Consequently, the agencies' best course of action in
               response to what we found may be to improve documentation for all
               future contracts and reinforce to all of its contracting officers
               and others involved in the procurement process the importance of
               adhering to subcontracting plan requirements and ensuring that
               publicly available information--such as what the agencies report
               in FPDS-NG--accurately reflects the extent to which the agency
               made subcontracting opportunities available to small businesses.

    			  Recommendations for Executive Action

               To ensure compliance with federal contracting regulations and to
               more transparently disclose the extent to which subcontracting
               opportunities are available to small businesses, we recommend that
               the Secretaries of Homeland Security and Defense and the
               Administrator of General Services take the following two actions:

               o Issue guidance to the appropriate procurement offices and
               personnel reinforcing (1) the reasons for subcontracting plan
               requirements and the importance of complying with them; (2) the
               necessity for documenting in publicly available sources the
               agencies' decisions, particularly in instances when they determine
               not to require subcontracting plans; and (3) where subcontracting
               plans are in place, the need to adhere to the requirement for all
               prime contractors to report on their small business subcontracting
               accomplishments.
               o Consider asking their respective Inspectors General to conduct a
               review at an appropriate future date to ensure that this guidance
               and related requirements are being followed.

    			  Agency Comments and Our Evaluation

               We provided a draft of this report to DHS, GSA, DOD, DOT, and the
               SBA for their review and comment. Officials from DOT and SBA
               provided technical clarifications, which we incorporated as
               appropriate. Through written comments, DHS, GSA, and DOD--the
               agencies to which our recommendations are addressed--concurred
               with our recommendations. Their comments are reprinted in
               appendixes II, III, and IV.

               In written comments from the Director of DHS's Departmental
               GAO/OIG Liaison Office (app. II), DHS noted actions that it plans
               to take to implement the recommendations within the Federal
               Emergency Management Agency (which was responsible for the vast
               majority of the agency's Katrina-related contracting) and stated
               that it plans to apply them as best practices across all of the
               department. Specifically, the agency plans to:

               o issue guidance to all acquisition offices reinforcing previously
               issued guidance regarding the importance of awarding all
               appropriate contracts to small businesses and encouraging large
               businesses to subcontract all appropriate work to small
               businesses;
               o have an acquisition oversight team within the agency's Office of
               the Chief Procurement Officer review DHS acquisition offices'
               compliance with federal and DHS acquisition regulations, policies,
               and procedures; and,
               o pursue a review by the Defense Contract Management Agency (DCMA)
               to benchmark the agency's contract administration efforts,
               including its subcontracting plan administration, against DCMA
               practices and procedures.

               In commenting on our presentation of subcontracting
               accomplishments, DHS stated that many of the DHS contracts did not
               require contractors to enter subcontracting accomplishment data
               into the electronic subcontracting reporting system (eSRS), and
               that inputting subcontracting accomplishment information into eSRS
               was voluntary in fiscal year 2006. However, we note that according
               to a November 2005 memo to Chief Acquisition Officers from the
               Office of Management and Budget, all contractors for civilian
               agencies were required to use eSRS as of fiscal year 2005.

               DHS also stated that we could have emphasized the agency's
               administration of four key contracts with large businesses that
               had subcontracting plans, noting that these businesses provided
               subcontracting information weekly. While we were aware that DHS
               was obtaining weekly subcontracting accomplishment information
               from selected contractors, our methodology for DHS (and the other
               agencies) was to obtain and analyze the subcontracting
               accomplishment information that federal regulations required the
               agency to collect and report (semiannually, in this case, as of
               March 31, 2006).

               DHS also offered comments regarding the report's presentation of
               contracts awarded directly to small businesses. Specifically, DHS
               stated that work under two contracts that were awarded directly to
               large businesses was transferred to multiple small businesses. As
               we note in the report, DHS awarded $1.6 billion in Katrina-related
               contracting dollars directly to small businesses. To the extent
               that DHS accurately indicated in FPDS-NG that the contracting
               dollars were awarded directly to small and not large businesses,
               our report reflects this activity.

               GSA's Administrator generally concurred with our recommendations
               (see app. III). The agency's Office of the Chief Acquisition
               Officer will, among other things, take steps such as:

               o distribute an acquisition alert reminding the acquisition
               community of the importance of subcontracting plan requirements,
               and the need to document decisions, including those regarding
               subcontracting plan requirements;
               o remind contracting officers of their responsibility to ensure
               that contractors properly report their subcontracting
               accomplishments as required; and,
               o include compliance with the guidance about subcontracting plan
               requirements in its regularly scheduled Procurement Management
               Reviews as well as the special reviews it conducts during major
               catastrophes in order to ensure procurement statutes, regulations,
               and guidance are being met; when appropriate, GSA indicated it
               will seek the assistance of the agency's Inspector General to
               support these reviews.

               GSA emphasized--during the course of our review as well as in its
               comments on our draft report--that during catastrophic situations,
               time is of the essence in getting goods and services to a disaster
               area immediately. While its contracting officers and personnel
               worked to comply with all contracting requirements, including the
               subcontracting plan requirement, GSA stated that the latter proved
               to be impossible given the urgency of the needs resulting from the
               hurricane. GSA also noted that the subcontracting plan requirement
               is one it did not address when it waived certain procurement rules
               in early September 2005 during the emergency response. One reason
               GSA did not extend these waivers to the requirement for
               subcontracting plans is that, in the judgment of GSA procurement
               officials, there are no provisions or flexibility in the Federal
               Acquisition Regulation (FAR) that would have given them the
               authority, even in an emergency situation such as the response to
               Hurricane Katrina, to deviate from subcontracting plan
               requirements. We agree with GSA's conclusion that the FAR
               currently does not specifically permit agencies to waive the
               requirement for an approved subcontracting plan prior to contract
               award. This is because the FAR requirement is based on the Small
               Business Act, which does not provide for an agency to waive the
               subcontracting plan requirement or allow deferral of it until
               after the agency has awarded a contract. As a result of our
               findings and the lack of flexibility GSA determined the FAR has on
               subcontracting plan requirements, GSA plans to raise the issue of
               emergency processes with the FAR Council. ^50

               DOD's Director, Defense Procurement and Acquisition Policy, in the
               Office of the Under Secretary of Defense for Acquisition,
               Technology, and Logistics, concurred with our recommendations (see
               app. IV) and noted that the department plans to issue a policy
               memorandum in 2007 containing the guidance we recommend.
               Additionally, DOD indicated it would direct review officials for
               each of its military departments and other defense agencies to
               include subcontracting guidance and compliance as a special
               interest item in the periodic oversight reviews they conduct of
               the organizations within each department or agency. Moreover, DOD
               will ask the military departments' Offices of Inspectors General
               as well as the DOD Inspector General to review the adequacy of
               departmental and agency oversight and management review processes.

    ^49According to an Alabama DOT official, the Alabama DOT indirectly
    awarded 11 additional Katrina-related contracts totaling about $800,000
    through various counties in the state. The counties awarded the contracts
    and the Alabama DOT reimbursed them. DBE information was not readily
    available on these 11 contracts and we excluded them from our analysis.

    ^50The FAR Council oversees the development and maintenance of the FAR.
    Its chair is the Administrator of OMB's Office of Federal Procurement
    Policy, who is responsible for providing overall direction for
    governmentwide procurement policies, regulations, and procedures. The
    Council's members also include the DOD Director of Defense Procurement and
    Acquisition Policy and the GSA Chief Acquisition Officer. The Office of
    Federal Procurement Policy chairs quarterly meetings to discuss and
    resolve significant or controversial FAR changes.

               We are sending copies of this report to appropriate congressional
               committees, the Secretary of Homeland Security, the Administrator
               of General Services, the Secretary of Defense, the Secretary of
               Transportation, and the Administrator of the Small Business
               Administration. We will also make copies available to others upon
               request. In addition, the report will be available at no charge on
               the GAO Web site at http://www.gao.gov .

               If you or your staff have any questions regarding this report,
               please call me at (202) 512-8678 or shearw@gao.gov . Contact
               points for our Offices of Congressional Relations and Public
               Affairs may be found on the last page of this report. GAO staff
               who made major contributions to this report are listed in appendix
               V.

               William B. Shear
    			  Director, Financial Markets and Community
               Investment

               List of Congressional Addressees

               The Honorable John F. Kerry
    			  Chairman
    			  The Honorable Olympia J. Snowe
    			  Ranking Member
    			  Committee on Small Business and Entrepreneurship
    			  United States Senate

               The Honorable Joseph I. Lieberman
    			  Chairman
    			  The Honorable Susan M. Collins
    			  Ranking Member
    			  Committee on Homeland Security and Governmental Affairs
    			  United States Senate

               The Honorable Richard J. Durbin
    			  The Honorable Sam Brownback
    			  Ranking Minority Member
    			  Subcommittee on Financial Services and General Government
    			  Committee on Appropriations
    			  United States Senate

               The Honorable Nydia M. Velazquez
    			  Chair
    			  The Honorable Steve Chabot
               Ranking Member
    			  Committee on Small Business
    			  House of Representatives

               The Honorable Henry A. Waxman
    			  Chairman
    			  The Honorable Tom Davis
               Ranking Member
    			  Committee on Oversight and Government Reform
    			  House of Representatives

               The Honorable Jose E. Serrano
    			  Chairman
    			  The Honorable Ralph Regula
               Ranking Minority Member
    			  Subcommittee on Financial Services
               Committee on Appropriations
    			  House of Representatives

               The Honorable Donald A. Manzullo
    			  House of Representatives

    			  Appendix I: Scope and Methodology

               To identify the amounts that small and local businesses received
               through direct contracts from the four federal agencies for relief
               and recovery efforts related to Hurricane Katrina, we identified
               the agencies that had received the largest supplemental
               appropriations for Katrina-related relief and recovery work, and
               then analyzed data from the Federal Procurement Data System-Next
               Generation (FPDS-NG), the governmentwide database of contracting
               activity, and DD-350, the Department of Defense (DOD) database
               that contains data on individual contracting actions, to identify
               federal agencies that had directly awarded the most contracting
               dollars as of May 2006. This analysis showed that the Department
               of Homeland Security (DHS), DOD, and the U.S. Army Corps of
               Engineers (Corps) had received the largest supplemental
               appropriations and that these three agencies plus the General
               Services Administration (GSA) had awarded 86 percent of all funds
               for Katrina-related contracts as of May 2006. Our analysis focused
               on these agencies.^1 For consistency, we decided to analyze all
               Katrina-related obligations from August 1, 2005, to June 30, 2006,
               in order to capture contracting actions that occurred in
               preparation for Hurricane Katrina, and because June 30th was the
               most current data available at the time we began data analysis.^2
               In addition, this time frame allowed for analysis of nearly 1
               year's worth of contracting activities.

               To identify and obtain information on the Katrina-related
               contracting dollars awarded by DHS and GSA between August 1, 2005,
               and June 30, 2006, we analyzed data in FPDS-NG on new contracts,
               contract modifications, and task orders against existing
               contracts. We excluded contract modifications that were
               administrative or that did not change the dollar value of the
               contract. We analyzed data that were reported into FPDS-NG as of
               October 23, 2006. Although we could not independently verify the
               reliability of all of these data, we conducted electronic data
               testing for inconsistency errors and completeness, and interviewed
               agency officials. For DHS, we also assessed the reliability of
               contract information in FPDS-NG by comparing these data to
               information that the agency maintained on Katrina-related
               contracts in an ad hoc spreadsheet that it developed in the early
               days after the hurricane; DHS used this spreadsheet to collect and
               maintain Katrina-related contract information from late September
               2005 through the present in order to be able to provide timely
               information to the White House. Subsequently DHS used this
               spreadsheet to check the Katrina-related contract information in
               FPDS-NG, and investigate any anomalies. We determined the data to
               be sufficiently reliable for the purposes of this report.

               To identify and obtain information on the Katrina-related
               contracting dollars awarded by DOD and the Corps between August 1,
               2005, and June 30, 2006, we analyzed data in DD-350 on new
               contracts, contract modifications, and task orders against
               existing contracts. We excluded contract modifications that were
               administrative or that did not change the dollar value of the
               contract. We analyzed data for DOD and the Corps that were
               reported into DD-350 as of October 26, 2006, and FPDS-NG as of
               November 13, 2006. Although we could not independently verify the
               reliability of all of these data, we conducted electronic data
               testing for inconsistency errors and completeness, and interviewed
               agency officials. For the Corps, we also assessed the reliability
               of contract information in DD-350 by comparing these data to
               information that the Corps maintained on Katrina-related contracts
               in an ad hoc spreadsheet that it developed following the
               hurricane; the Corps used this spreadsheet to collect and maintain
               current Katrina-related contract information from late in
               September 2005 through the present in order to be able to report
               timely information to the White House. Subsequently the Corps used
               this spreadsheet as a check on the accuracy and completeness of
               Katrina-related contract information in DD-350. Based on these
               efforts, we determined the data to be sufficiently reliable for
               the purposes of this report.

               To describe the extent to which prime contractors subcontracted
               with small businesses, we used different approaches for military
               and civilian agencies. For DOD and the Corps, we obtained
               information on the top 10 contractors because data on the extent
               to which military contractors awarded subcontracts to various
               types of small businesses are not electronically aggregated.^3 To
               identify the 10 contractors that cumulatively had received the
               most funds for Katrina-related contracts from DOD and the Corps
               between August 1, 2005, and June 30, 2006, we analyzed information
               from DD-350 and FPDS-NG. Of these 10 contractors, 4 received
               contracts for strictly Katrina-related projects from the Corps,
               and were required to submit subcontracting plans for these
               contracts. These 4 contractors were all large, and received a
               total of eight contracts. For each of the eight contracts, we
               obtained and reviewed the subcontracting plans and the individual
               subcontracting reports as of March 31, 2006. We also interviewed
               contractors about their subcontracting activities. We compared the
               amounts each of the 4 contractors awarded to small businesses to
               the total amounts obligated as of March 31, 2006.

               To identify the extent to which contractors for DHS and GSA
               subcontracted with small businesses to do Katrina-related relief
               and recovery work, we used FPDS-NG to identify those contractors
               that received prime contracting dollars between August 1, 2005,
               and June 30, 2006, for activities that were coded as being related
               to Hurricane Katrina, and were required to submit a subcontracting
               plan. For those contracts that required a subcontracting plan, we
               searched for documentation of subcontracting awards in the
               electronic subcontracting reporting system (eSRS) as of March 31,
               2006.

               In addition, for all four agencies, we assessed the extent to
               which the agencies required subcontracting plans for
               Katrina-related contracting actions to large businesses for over
               $500,000.^4 According to federal acquisition regulations,
               contracts or contract modifications to large business valued at
               over $500,000 ($1 million for construction) and which have
               subcontracting possibilities, are required to submit
               subcontracting plans. For each of the four agencies, we identified
               Katrina-related contracting actions that occurred between August
               1, 2005, and June 30, 2006, that met this criteria. We asked each
               agency to explain why subcontracting plans were not required for
               those contracting activities that met these criteria, but for
               which the data showed they had not been required to submit
               subcontracting plans. We also contacted, where appropriate, the
               procurement and legal officials at each agency to determine any
               basis upon which agencies may have determined not to require
               subcontracting plans for any contracts that otherwise appeared to
               have met the criteria for them.

               To obtain information on the extent to which Disadvantaged
               Business Enterprises (DBEs) received federal funds for
               transportation projects that relate to reconstruction or recovery
               from Hurricane Katrina, we analyzed data on contracts awarded
               between August 1, 2005, and June 30, 2006, with Department of
               Transportation funds in the states of Alabama, Louisiana, and
               Mississippi. Specifically, we obtained data on contracts awarded
               through funds from two of the three operating administrations of
               the DBE program--the Federal Highway Administration (FHWA) and the
               Federal Aviation Administration (FAA). The third operating
               administration, the Federal Transit Administration (FTA), did not
               provide us with any data since FTA funds were not used to award
               contracts related to Katrina reconstruction or recovery projects
               during the time frame that we examined. For contracts awarded with
               FHWA funds, we obtained contract data from each state department
               of transportation. For contracts awarded with FAA funds, we
               obtained contract data from FAA's Southern and Southwestern
               regional offices, which compiled data from the various airports in
               the three states. The contract data we obtained for contracts
               funded with FHWA and FAA funds included information on DBE
               participation as either prime contractors or subcontractors, and
               the amounts awarded to DBEs, among other data fields. Overall, we
               obtained data on 120 contracts awarded with FHWA and FAA funds. To
               assess the reliability of the data we collected, we contacted a
               simple random sample of 29 contractors and verified specific
               fields used in this report. We verified specific fields for each
               of the contracts in the sample--contract award date, contract
               amount, DBE participation, and amount awarded to DBEs. We
               determined the data for contract award date and DBE participation
               to be sufficiently reliable for the purposes of this report. We
               identified 3 contracts award amounts in the sample that contained
               minor discrepancies. We estimated, at the 95 percent confidence
               level, that these discrepancies would not exceed $50,000 in total
               error in the population of 120 contracts. Based on this estimate
               we determined the data to be sufficiently reliable to report
               aggregated information rounded to the nearest $100,000. We chose
               to not report any figure below $50,000. To obtain background
               information on the DBE program, we interviewed DOT headquarters
               officials from each of the three operating administrations. We
               also obtained documentation on the DBE program goals, DBE
               certification procedures, and information on the overall
               administration of the program.

    ^1We are reporting DOD and the Corps separately because three of the four
    supplemental appropriations specifically directed certain funds to the
    Corps for its disaster relief activities.

    ^2A Katrina-related action is one that had the National Interest Action
    code of "H05K" or for DOD the System Code of "ZHK" or had some variation
    of the name "Katrina" in the Description of Requirement field or the Major
    Program field.

    ^3Identifying the top 10 contractors is a nonprobability sample because we
    did not consider including contractors other than the top 10.

    ^4During the period of our analysis, each solicitation of offers to
    perform a contract or contract modification over $500,000 ($1 million for
    construction) and that had subcontracting possibilities required the
    contractor to submit a subcontracting plan. The dollar threshold was
    changed to $550,000 on September 28, 2006. 71 Fed. Reg. 57363 (Sept. 28,
    2006).

    			  Appendix II: Comments from the Department of Homeland Security

    			  Appendix III: Comments from the General Services Administration

    			  Appendix IV: Comments from the Department of Defense

    			  Appendix V: GAO Contact and Staff Acknowledgments

    			  GAO Contact

               William B. Shear, (202) 512-8678, shearw@gao.gov

    			  Staff Acknowledgments

               In addition to the individual named above, Bill MacBlane,
               Assistant Director; Jim Ashley; Emily Chalmers; Julia Kennon;
               Tarek Mahmassani; Alison Martin; Marc Molino; Lisa Moore; Rhonda
               Rose; Paul Thompson; and Myra Watts-Butler made key contributions
               to this report.

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    www.gao.gov/cgi-bin/getrpt?GAO-07-205.

    To view the full product, including the scope
    and methodology, click on the link above.

    For more information, contact William B. Shear at (202) 512-8678 or
    shearw@gao.gov.

    Highlights of GAO-07-205, a report to congressional addressees

    March2007

    HURRICANE KATRINA

    Agency Contracting Data Should Be More Complete Regarding Subcontracting
    Opportunities for Small Businesses

    In response to Hurricane Katrina, the Departments of Homeland Security
    (DHS) and Defense (DOD), the General Services Administration (GSA), and
    the U.S. Army Corps of Engineers (Corps) were responsible for 94 percent
    of the federal funds awarded for relief efforts via contracting as of May
    2006. This report, which GAO conducted under the Comptroller General's
    Authority, describes (1) the amounts that small businesses received from
    prime contracts with these agencies, (2) the extent of subcontracting, (3)
    and the extent to which Disadvantaged Business Enterprises (DBEs) received
    Department of Transportation funds for Katrina-related projects.

    In conducting this study, GAO analyzed agency contract data, reviewed
    federal acquisition regulations, and interviewed agency procurement
    officials.

    [38]What GAO Recommends

    GAO recommends that DOD, DHS, and GSA (1) issue guidance to key personnel
    reinforcing the importance of subcontracting plan requirements and (2)
    consider requesting that their Inspectors General review their compliance
    with this guidance.

    The agencies generally agreed with GAO's recommendations and are taking
    steps to implement them.

    Small businesses received a total of 28 percent of the $11 billion in
    contracting dollars that DHS, GSA, DOD, and the Corps directly awarded in
    response to Hurricane Katrina (see fig.). Local businesses of all sizes in
    Alabama, Louisiana, and Mississippi received 18 percent, or $1.9 billion
    of these funds. Small businesses received 66 percent of the $1.9 billion
    awarded in these states.

    Required information on small business subcontracting is not consistently
    available in official procurement data systems for the four agencies. The
    systems had no information on whether DHS or GSA required subcontracting
    plans for 70 percent or more of their contracting funds. In addition, when
    data showed agencies determined that the plans were not required, the four
    agencies often did not document a reason for their determinations, even
    though federal rules require such documentation when prime contracts meet
    criteria for having these plans. Incomplete information about
    subcontracting limits determining the extent to which agencies complied
    with contracting rules and gave small businesses maximum opportunities to
    win subcontracts.

    DBEs were awarded about 4 percent, or about $53 million, of the almost
    $1.3 billion the Department of Transportation's Federal Highway
    Administration funded for Katrina-related contracts in Alabama, Louisiana,
    and Mississippi between August 1, 2005, and June 30, 2006. These contracts
    were awarded by the three state departments of transportation. DBEs also
    received about 10 percent of $24 million that airports in the three states
    awarded using Federal Aviation Administration funds for Katrina-related
    contracts.

    Percentage of Katrina-Related Contracts Awarded to Small Businesses, by
    DHS, GSA, DOD, and the U.S. Army Corps of Engineers

    References

    Visible links
      26. http://www.gao.gov/cgi-bin/getrpt?GAO-06-834
      27. http://www.gao.gov/cgi-bin/getrpt?GAO-05-459
      28. http://www.gao.gov/
      29. file:///home/webmaster/infomgt/d07205.htm#mailto:shearw@gao.gov
      30. file:///home/webmaster/infomgt/d07205.htm#mailto:shearw@gao.gov
      31. http://www.gao.gov/
      32. http://www.gao.gov/
      33. http://www.gao.gov/fraudnet/fraudnet.htm
      34. file:///home/webmaster/infomgt/d07205.htm#mailto:fraudnet@gao.gov
      35. file:///home/webmaster/infomgt/d07205.htm#mailto:JarmonG@gao.gov
      36. file:///home/webmaster/infomgt/d07205.htm#mailto:AndersonP1@gao.gov
    *** End of document. ***