Small Business: Information on Eight Small and Disadvantaged Business
Utilization Offices (Letter Report, 04/14/95, GAO/RCED-95-137).

Pursuant to a congressional request, GAO reviewed the Office of Small
and Disadvantaged Business Utilization (OSDBU) at eight federal
agencies, focusing on: (1) whether OSDBU directors report to the
required agency official and, if not, the rationale for the deviation;
and (2) OSDBU activities to assist small and disadvantaged businesses
(SDB) in obtaining federal contracts.

GAO found that: (1) except for at the Defense Logistics Agency (DLA) and
the Department of Energy (DOE), OSDBU directors report to the
appropriate agency official as required; (2) DLA OSDBU director reports
to the Deputy Director for Acquisition, since that official is
responsible for all contracting matters; (3) DLA plans to have its OSDBU
director report either to the DLA head or the DLA principal deputy under
its reorganization plan; (4) DOE maintains that its authorizing
legislation enables the Secretary of Energy to use discretion in
determining the OSDBU director's reporting level; (5) DOE plans to
comply with federal OSDBU reporting requirements; (6) OSDBU activities
are consistent with legal requirements for assisting SDB in obtaining
federal contracts; (7) these activities include developing contracting
goals, sponsoring or participating in outreach efforts, being an
interagency liaison for small business procurement activities, and
supervising and training agency staff who work with small businesses;
and (8) several agency OSDBU have undertaken additional initiatives to
promote SDB participation in federal contracting.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-137
     TITLE:  Small Business: Information on Eight Small and 
             Disadvantaged Business Utilization Offices
      DATE:  04/14/95
   SUBJECT:  Small business contracts
             Disadvantaged persons
             Federal procurement
             Defense procurement
             Compliance
             Federal agency reorganization
             Reporting requirements
             Small business assistance
             Military procurement
             Procurement regulation
IDENTIFIER:  GSA Procurement Preference Goaling Program
             GSA Courthouse/Federal Buildings Pilot Program
             Air Force East St. Louis Initiative
             NASA High-Tech Small Disadvantaged Business Forum
             
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Cover
================================================================ COVER


Report to the Honorable
Kweisi Mfume, House of Representatives

April 1995

SMALL BUSINESS - INFORMATION ON
EIGHT SMALL AND DISADVANTAGED
BUSINESS UTILIZATION OFFICES

GAO/RCED-95-137

Small Business


Abbreviations
=============================================================== ABBREV

  OSDBU -
  DOD -
  NASA -
  GSA -
  DLA -
  DOE -
  OFPP -
  OMB -

Letter
=============================================================== LETTER


B-258025

April 14, 1995

The Honorable Kweisi Mfume
House of Representatives

Dear Mr.  Mfume: 

To increase the opportunities for small and disadvantaged businesses
to obtain federal contracts, in 1978 the Congress enacted Public Law
95-507, amending the Small Business Act, to establish an Office of
Small and Disadvantaged Business Utilization (OSDBU) in each federal
agency with procurement powers.  Under the act, the OSDBU is
responsible for overseeing the agency's functions and duties related
to the awarding of contracts and subcontracts to small and
disadvantaged businesses.  The act requires the OSDBU director to
report directly to the agency head or the agency's deputy (the
second-ranking official in the agency); an exception enacted in 1988
allows the Department of Defense OSDBU director to report to an
official designated by the Secretary of Defense.\1

You requested that we review the OSDBUs at eight federal
agencies--the Departments of Defense (DOD) and Energy (DOE); the
General Services Administration (GSA); the National Aeronautics and
Space Administration (NASA); and, within DOD, the Defense Logistics
Agency (DLA) and the Departments of the Air Force, Army, and Navy. 
Specifically, we agreed to (1) determine whether OSDBU directors
report to the appropriate agency official as required by the Small
Business Act, as amended, and, if not, provide you with information
on the rationale for the deviation and (2) describe the activities
that OSDBUs perform to assist small and disadvantaged businesses in
obtaining federal contracts. 


--------------------
\1 Public Law 100-656. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

In all of the agencies except the Defense Logistics Agency and the
Department of Energy, the Office of Small and Disadvantaged Business
Utilization directors report to the appropriate agency official as
required by Public Law 95-507.  We found that two directors report to
the agency head, and three report to the agency's deputy.  At
Defense, the director reports to the Secretary's designee, as
permitted by the exception enacted in 1988. 

At the Defense Logistics Agency, its Small Business Office director
reports to the Deputy Director for Acquisition.  However, the Deputy
Director for Acquisition is not the second-ranking official for the
agency.  In March 1995, agency officials said that they will take
steps to reorganize so that the Small Business Office director
reports to either the agency head or the agency's second-ranking
official.  At Energy, the Small Business Office director reports to
the Director of the Office of Economic Impact and Diversity.  In the
past, Energy has maintained that the Department of Energy
Organization Act provides the Secretary of Energy with discretion to
determine the Small Business Office director's reporting level and
that Public Law 95-507 was not intended to supersede or amend the
Organization Act.  Nevertheless, according to Energy's Deputy General
Counsel for General Law, the agency now plans to comply with a recent
executive order mandating that, unless prohibited by law, the Small
Business Office director should report to the agency head or the
agency's deputy.  However, the agency has not developed a detailed
plan or timetable. 

All eight Small Business Offices we examined conduct activities
consistent with the requirements of Public Law 95-507 for assisting
small and disadvantaged businesses in obtaining federal contracts. 
These activities include developing contracting goals, sponsoring
and/or participating in outreach efforts, and providing guidance and
training to agency staff who work with small businesses. 


   BACKGROUND
------------------------------------------------------------ Letter :2

In 1979, the Office of Management and Budget's (OMB) Office of
Federal Procurement Policy (OFPP) issued Policy Letter No.  79-1 to
guide federal agencies in implementing Public Law 95-507.  The letter
provides uniform policy guidance to federal agencies regarding the
organization and functions of OSDBUs. 

In September 1994, the President signed Executive Order No.  12928,
entitled "Promoting Procurement With Small Businesses Owned and
Controlled by Socially and Economically Disadvantaged Individuals,
Historically Black Colleges and Universities, and Minority
Institutions." The order mandates that, unless prohibited by law, the
OSDBU director should be responsible to and report directly to the
agency head or the agency's deputy as required by the Small Business
Act.  The order also mandates that federal agencies comply with the
requirements of OFPP's policy letter, unless prohibited by law. 


   MOST OSDBU DIRECTORS REPORT TO
   APPROPRIATE AGENCY OFFICIALS
------------------------------------------------------------ Letter :3

Of the eight federal agencies we reviewed, only DLA's and DOE's OSDBU
heads do not report to the appropriate agency official. 


      MOST DIRECTORS REPORT TO THE
      AGENCY HEAD OR DEPUTY
---------------------------------------------------------- Letter :3.1

The conference report accompanying Public Law 95-507 states that each
federal agency having procurement powers must establish an Office of
Small Business Utilization\2 to be directed by an employee of that
agency, who would report directly to the head of the agency or the
agency's second-ranking official.  Also, OFPP's policy letter defines
the agency's deputy as the second-ranking official within the agency. 
Furthermore, in a June 1994 memorandum to federal agencies, the OMB
Director defines the agency's deputy as the second-in-command. 

The OSDBU directors in the Departments of the Army, the Navy, and the
Air Force; NASA; and GSA report to either the agency head or the
agency's deputy.  The Army OSDBU director reports to the Secretary of
the Army (the agency head), while the Navy and Air Force OSDBU
directors report to the Under Secretary of the Air Force and the
Under Secretary of the Navy, respectively (the agencies'
second-ranking officials).  The NASA OSDBU director reports to the
NASA Administrator (the agency head).  At GSA, the OSDBU director
reports directly to the GSA Deputy Administrator (the agency's
second-in-command). 

In 1988, Public Law 100-656 amended the Small Business Act, allowing
the Secretary of Defense to designate the official to whom the OSDBU
director should report.  Currently, DOD's OSDBU director reports to
the Under Secretary of Defense for Acquisition and Technology, who is
the Secretary's designee. 


--------------------
\2 The conferees changed the office's name to the current Office of
Small and Disadvantaged Business Utilization. 


      TWO OSDBU DIRECTORS DO NOT
      REPORT TO THE AGENCY HEAD OR
      DEPUTY
---------------------------------------------------------- Letter :3.2

The OSDBU directors at DLA and DOE report to officials other than the
agency head or agency's deputy.  While each agency explained its
rationale, we do not believe that in either agency the OSDBU director
reports to the appropriate official, as defined by Public Law 95-507. 


         DEFENSE LOGISTICS AGENCY
-------------------------------------------------------- Letter :3.2.1

DLA's OSDBU director reports to the agency's Deputy Director for
Acquisition.  As shown in figure 1, the Deputy Director for
Acquisition is neither the agency head nor the agency's deputy. 

   Figure 1:  DLA's Organizational
   Chart

   (See figure in printed
   edition.)

Note:  DLA's organizational chart abbreviated by GAO. 

According to DLA's Deputy General Counsel (Acquisition), the agency's
rationale for the above reporting arrangement is that the Deputy
Director for Acquisition is considered to be the agency's deputy for
all matters relating to acquisition.  We do not agree with DLA's
rationale.  In our view and as shown by the agency's organizational
chart, the Principal Deputy Director is the agency's
second-in-command. 

In addition, the existing reporting arrangement at DLA could
potentially impair the achievement of the act's objectives.  As the
House Committee on Small Business observed in a 1987 report, having
the OSDBU director report to an individual who has responsibility for
the functions that the director is intended to monitor (procurement)
could lessen the director's effectiveness.\3

DLA officials neither agreed nor disagreed with our position that the
OSDBU's reporting level was not in compliance with Public Law 95-507. 
However, in March 1995, on the basis of questions raised during our
review, DLA's Deputy General Counsel (Acquisition) said that DLA will
take steps to reorganize so that the OSDBU director reports to either
the agency head or the agency's deputy. 


--------------------
\3 H.R.  Rep.  No.  460, 100th Congress, 1st Sess.  40-41 (1987). 


         DEPARTMENT OF ENERGY
-------------------------------------------------------- Letter :3.2.2

As shown in figure 2, the head of Energy's OSDBU, whose title is
Deputy Director, reports to the Director of the Office of Economic
Impact and Diversity.  The Director reports directly to the Secretary
of Energy but is neither the agency head nor the agency's
second-in-command. 

   Figure 2:  DOE's Organizational
   Chart

   (See figure in printed
   edition.)

Note:  DOE's organizational chart abbreviated by GAO. 

Figure 2 reflects DOE's January 1995 reorganization.  Prior to the
reorganization, the title of the head of the OSDBU was Director, and
that official reported to the Director of Economic Impact and
Diversity.  In response to our inquiry concerning the rationale for
that arrangement, DOE said that the Department of Energy Organization
Act (42 U.S.C.  7253) gives the Secretary broad authority to organize
the Department and that Public Law 95-507 was not intended to
supersede or amend the Organization Act. 

In response to a congressional request, in 1993 OMB surveyed federal
agencies to determine the organizational reporting levels of their
OSDBU directors.  The OMB survey included four of the agencies we
reviewed:  DOD, DOE, GSA, and NASA.  According to the OFPP Deputy
Administrator for Procurement Law and Legislation, DOE was not in
compliance with the statute because the OSDBU director did not report
to the agency head or the agency's deputy.  In a June 9, 1994,
memorandum, OMB's Director emphasized that federal agencies must
comply with the law and policy regarding the OSDBU's organizational
reporting level. 

Furthermore, in a 1987 report, we stated that DOE's rationale based
on the Organization Act does not give the Secretary the authority to
alter or abridge the requirements of the Small Business Act.\4 We
recommended that the Secretary of Energy require the head of the
OSDBU to be responsible only to, and report directly to, the
Secretary or Deputy Secretary of Energy. 

DOE officials neither agreed nor disagreed with our position that the
OSDBU's reporting level was not in compliance with Public Law 95-507. 
However, in March 1995, DOE officials--including the Director, Office
of Economic Impact and Diversity, and the Assistant General Counsel
for General Law--told us that the agency recognizes that it must
comply with Executive Order 12928 (which mandates that, unless
prohibited by law, the OSDBU director should be responsible to and
report directly to the agency head or the agency's deputy).  DOE
officials told us that they are currently developing a reorganization
plan.  DOE's Assistant General Counsel for General Law said that it
is uncertain when or how the reorganization will be accomplished
because of a need to reconcile the responsibilities of the OSDBU with
DOE's statutorily mandated Office of Minority Economic Impact.\5


--------------------
\4 Small Business Act:  Energy's Disadvantaged Business Advocate Not
Reporting to Proper Management Level (GAO/GGD-87-69, May 26, 1987). 

\5 This office advises the Secretary on the effects of energy
policies, regulations, and other actions by DOE on minority
businesses. 


   OSDBUS PERFORM A VARIETY OF
   ACTIVITIES TO ASSIST SMALL
   BUSINESSES
------------------------------------------------------------ Letter :4

All eight OSDBUs we examined conduct activities consistent with the
requirements of Public Law 95-507 and OFPP's Policy Letter 79-1 for
assisting small and disadvantaged businesses in obtaining federal
contracts.  These activities include (1) developing the agency's
small business contracting and subcontracting goals, (2) sponsoring
and/or participating in small business outreach efforts, (3) serving
as an interagency liaison for procurement activities relating to
small businesses and small disadvantaged businesses, and (4)
supervising and training employees involved with the agency's small
business activities.  Officials at several OSDBUs also cited examples
of special initiatives undertaken to help meet their agency's
contracting goals. 

As noted above, the Energy OSDBU head reports to the Director of the
Office of Economic Impact and Diversity.  Because the Diversity
Office has broad responsibility for formulating and monitoring the
implementation of policies for the agency's small business,
disadvantaged business, and women-owned business programs, many
activities are conducted jointly with the OSDBU.  For simplicity, in
the following sections, we characterize these as the OSDBU's
activities. 


      ESTABLISHING GOALS FOR SMALL
      AND DISADVANTAGED BUSINESSES
---------------------------------------------------------- Letter :4.1

The Small Business Act and OFPP's Policy Letter require OSDBU
directors to consult with the Small Business Administration (SBA) on
establishing contracting goals for small and small disadvantaged
businesses.  At GSA and NASA, the OSDBU directors and SBA establish
goals setting out the percentage of prime contracts and subcontracts
that will be awarded to small businesses, small disadvantaged
businesses, and women-owned businesses.  For DOD, the OSDBU director
negotiates DOD-wide prime contracting and subcontracting goals, which
incorporate the goals for the component agencies such as DLA and the
Departments of the Army, Navy, and Air Force.  For DOE, the Office of
Economic Impact and Diversity has assumed the responsibility for
negotiating the agency's contracting and subcontracting goals. 

The process of setting goals begins with OSDBU representatives
providing SBA officials with estimates of the total dollar amounts of
(1) all prime contracts the agencies anticipate awarding during the
forthcoming fiscal year and (2) subcontracts to be awarded by the
agencies' prime contractors.  The agencies express the goals in terms
of the percentages of the total contract and subcontract dollars to
be awarded to small and small disadvantaged businesses.  In
formulating goals and tracking the agencies' progress or achievement
toward the goals, the OSDBUs also look at the number of contracts
awarded and their dollar values. 


      OUTREACH AND LIAISON EFFORTS
      TO SMALL AND DISADVANTAGED
      BUSINESSES
---------------------------------------------------------- Letter :4.2

OFPP's policy letter requires OSDBUs to conduct outreach efforts to
provide information to small and disadvantaged businesses.  For
example, OSDBU's outreach may consist of sponsoring or participating
in seminars or conferences on contracting opportunities and providing
materials describing how to do business with the agencies.  OSDBU
officials at each of the eight agencies told us that they had
sponsored or cosponsored conferences or seminars for small businesses
during fiscal years 1993 and 1994.  In addition, all eight agencies
told us that their staffs had attended numerous conferences or
seminars sponsored by other government agencies or private
organizations. 

OFPP's policy letter also requires the OSDBU directors to serve as
interagency liaisons for all small business matters.  Officials of
each of the OSDBUs we reviewed serve in this capacity.  For example,
in response to the Federal Acquisition Streamlining Act of 1994,
OSDBU officials at five of the eight agencies are participating in an
interagency group that is drafting revisions to the Federal
Acquisition Regulations pertaining to small businesses. 

Generally, the OSDBUs also serve as their agency's point of contact
for small businesses.  All eight of the agencies provide information
to individual small businesses in response to inquiries about doing
business with them.  For example, the information provided includes
forecasts of agencies' acquisitions, contracting procedures, and
required forms. 


   OSDBU'S TRAINING FOR AGENCY
   STAFF ON SMALL AND
   DISADVANTAGED BUSINESSES
------------------------------------------------------------ Letter :5

Under Public Law 95-507 and/or OFPP's policy letter, OSDBUs are
responsible for supervising and training agency employees in
contracting and subcontracting with small businesses.  The OSDBUs we
reviewed had activities designed to accomplish this requirement. 
These activities include conducting annual or semiannual training
sessions for small business specialists and issuing agency
regulations concerning small business procurement matters. 


      INITIATIVES TO HELP MEET
      AGENCIES' CONTRACTING GOALS
---------------------------------------------------------- Letter :5.1

Officials of each of the eight OSDBUs said that they have initiated
efforts to help meet their agency's contracting goals.  In
particular, the GSA and Air Force OSDBUs cited examples that
illustrate these efforts.  Furthermore, officials of small and
minority business associations cited the NASA OSDBU as a model for
other federal OSDBUs because of its initiatives to help meet the
agency's goals. 


         GENERAL SERVICES
         ADMINISTRATION
-------------------------------------------------------- Letter :5.1.1

GSA's OSDBU, in conjunction with the agency's Office of Training and
Compliance, has established the Procurement Preference Goaling
Program.  The program is designed to assist small disadvantaged
businesses and women-owned businesses in four industries--travel,
manufacturing, automobile sales, and construction--where these
businesses have done less well in obtaining federal contracts.  For
example, the program includes the following: 

  Developing a list of minority- and women-owned automobile
     dealerships in various geographic areas that can supply a
     portion of GSA's automobile fleet purchases.  For about 80
     percent of the agency's automobile purchases, the volume of cars
     required can only be obtained directly from one of the big three
     automakers.  The remaining 20 percent--about $217 million in
     fiscal year 1993--is small enough that the agency can procure
     the automobiles from individual dealerships, according to GSA's
     OSDBU director. 

  Working with SBA on a pilot project to identify zones where
     contracts for travel services could be set aside for SBA's 8(a)
     program participants.  The OSDBU and SBA are currently planning
     to sponsor a large conference in New Orleans, Louisiana, to
     solicit applications from 8(a) firms in the travel services
     field. 

  Compiling lists of small businesses, small disadvantaged
     businesses, and women-owned businesses that manufacture various
     goods that the Federal Emergency Management Agency may need
     during disasters. 

  Attempting to increase construction subcontracting opportunities
     for small disadvantaged businesses and small women-owned
     businesses by implementing the Courthouse/Federal Buildings
     Pilot Program.  Under this program, GSA identifies new federal
     construction projects with an estimated cost of over $50 million
     and makes special efforts to include small businesses, small
     disadvantaged businesses, and small women-owned businesses as
     subcontractors.  (GSA has identified one such project in 10 of
     its 11 regions; no project qualified in one region.)

As part of this pilot program, one of the Deputy Directors will be
directly involved in the projects and will meet with potential
contractors and agency field staff before contracts are issued to
ensure that specific language concerning subcontracting is included
in solicitations and bid offerings.  Also, the prime contractor will
be required to report to GSA--on a monthly basis during the
procurement phase and quarterly thereafter--on the utilization of the
targeted small businesses.  According to the Deputy Director, as of
February 1995, although the pilot had not yet been formally approved
by GSA, two projects--the Tampa Courthouse and the Kansas City
Courthouse--were in the initial process stage. 


         AIR FORCE
-------------------------------------------------------- Letter :5.1.2

The Air Force OSDBU initiated the Small Business and Historically
Black Colleges and Universities/Minority Institutions Strategic
Planning Workshop in fiscal year 1992.  The purpose of the workshop
is to increase the participation in the Air Force's procurement by
establishing contracting goals for small business, small
disadvantaged business, and minority educational institutions. 

The workshop is unique for three reasons:  (1) The process of goal
setting begins 6 months earlier than in other agencies, (2) the OSDBU
and field officials meet for a week to develop the goals, and (3) the
Air Force develops a set of goals explicitly based on an increased
level of effort by agency contracting officials to provide
opportunities to small and disadvantaged businesses. 

The OSDBU also has a project called the East St.  Louis Initiative,
under which the Air Force OSDBU is working with the city of East St. 
Louis, Illinois, to help bring contracts to small disadvantaged
businesses and jobs to the mostly minority residents.  Under this
initiative, the Air Force is in a partnership with a national
organization called Access America and identifies Air Force contracts
that it can obtain to bring manufacturing jobs to this economically
depressed area.  Access America has obtained a grant to train between
1,100 and 1,500 residents of East St.  Louis in aircraft maintenance
and aerospace technology. 

With support from the Air Force Secretary and Chief of Staff, the
OSDBU director has assembled a Business Education Team from field and
headquarters contracting activities.  The team conducts seminars that
provide small businesses and small disadvantaged businesses with
information on doing business with the Air Force. 


         NATIONAL AERONAUTICS AND
         SPACE ADMINISTRATION
-------------------------------------------------------- Letter :5.1.3

NASA is required by law to award, to the fullest extent possible, at
least 8 percent of the annual total value of its contracts and
subcontracts to small businesses or other organizations owned or
controlled by socially and economically disadvantaged individuals,\6
including (1) women-owned businesses, (2) historically black colleges
and universities, and (3) minority educational associations.  NASA
targeted fiscal year 1994 to meet the goal.  The agency awarded 8.5
percent of its fiscal year 1993 contracting budget to small
disadvantaged businesses, and in fiscal year 1994 it awarded 9.9
percent. 

NASA OSDBU officials attributed the agency's success to the office's
six-point plan--a strategy for achieving and maintaining compliance
with the law's requirements.  The six points include

  requiring NASA's top officials--Center Directors and Associate
     Administrators--to develop a plan for meeting their portion of
     the agency's 8-percent goal;

  requiring the concurrence of the NASA Chief of Staff when
     consolidating prime contracts that would reduce awards to small
     disadvantaged businesses;

  requiring Associate Administrators to take steps to increase
     subcontracting to small disadvantaged businesses by NASA's top
     100 prime contractors and report these steps to the OSDBU;

  requiring each NASA center to identify two non-8(a) procurement
     requirements, of significant dollar value, that could be awarded
     to small disadvantaged businesses in fiscal year 1993;

  developing an awards program for technical small business and
     contracting personnel for their efforts in helping to achieve
     NASA's 8-percent goal; and

  challenging NASA's Jet Propulsion Laboratory to double its
     subcontracting in fiscal year 1993. 

Also, at the urging of its OSDBU, NASA requires that the OSDBU
director review all procurement proposals with an estimated value
over $25 million for large contracting activities and $10 million for
smaller contracting activities, in order to establish a goal for the
portion to be subcontracted to small businesses. 

NASA also established criteria for assessing top-level managers'
assistance to small and disadvantaged businesses.  Fiscal year 1993
was the first year the OSDBU provided input for top-level managers'
performance assessment. 

NASA also has several efforts aimed specifically at high-tech small
or minority-owned businesses.  In cooperation with SBA and the
UNISPHERE Institute, the OSDBU assists firms that have participated
in SBA's 8(a) program to find international venture partners.\7 The
UNISPHERE program helps these firms expand their technical and
financial capabilities, thus increasing their ability to compete for
NASA contracts.  In addition, the OSDBU's New England Outreach Office
identifies high-tech minority businesses that are capable of working
on NASA contracts and subcontracts.  Furthermore, the OSDBU has
initiated the High-Tech Small Disadvantaged Business Forum, which
permits small disadvantaged businesses to make presentations on their
technical capabilities to NASA headquarters and field officials.  In
fiscal year 1994, 70 percent of the NASA contracts awarded to small
disadvantaged businesses were awarded to high-tech firms. 


--------------------
\6 Public Law 101-144, as amended by Public Law 101-507. 

\7 The UNISPHERE Institute is a nonprofit organization that provides
financial and technical support to small high-tech businesses seeking
to expand their markets overseas. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

The organizational reporting levels of the OSDBU directors at the
Defense Logistics Agency and the Department of Energy do not comply
with the requirements of Public Law 95-507.  By reporting to
officials other than the agency head or the agency's deputy, the
OSDBU directors at these agencies may not have access to officials at
a high enough level to maximize their effectiveness in assisting
small and disadvantaged businesses.  Following our review, DLA's
Deputy General Counsel for Acquisition said that the agency will take
steps to reorganize so that the OSDBU director reports to either the
agency head or the agency's second-ranking official.  DOE's Director,
Office of Economic Impact and Diversity, and the Assistant General
Counsel for General Law told us that their agency would comply with
Executive Order 12928.  However the Deputy General Counsel said that
it is uncertain when or how the reorganization will be accomplished
because of a need to reconcile the responsibilities of the OSDBU with
another statutorily mandated office. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We discussed a draft of this report with the OSDBU directors or their
designees and staff at each of the eight agencies we reviewed.  In
addition, we discussed matters related to the OSDBUs' reporting
levels with DLA's Deputy General Counsel for Acquisition and with
DOE's Assistant General Counsel for General Law.  All of the
officials generally agreed with the facts presented.  We have
incorporated the officials' comments where appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To attain our objectives, we reviewed the Small Business Act, Public
Law 95-507, OFPP's Policy Letter 79-1, and Executive Order No. 
12928.  We interviewed the directors and other officials of the OSDBU
at each of the eight agencies.  To obtain the views of small
businesses and small disadvantaged businesses concerning OSDBUs'
activities, we also interviewed representatives from two small
business associations:  the National Minority Suppliers Development
Council, Inc., and the National Association of Small Businesses.  To
determine the reporting levels of the OSDBU directors, we reviewed
organizational charts and identified the officials providing
performance ratings.  In those cases in which the OSDBU varied from
the statutory requirement, we obtained the rationale from the
agency's OSDBU and Office of General Counsel officials.  To determine
what activities the OSDBUs conducted to assist small businesses and
small disadvantaged businesses, we reviewed the OSDBUs' function
statements and obtained documentation related to specific activities. 
We conducted our review from April 1994 through March 1995 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :8.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter.  At that time, we will send copies of
this report to the appropriate congressional committees and to other
interested parties.  We will also make copies available to others on
request.  Should you or your staff have any questions, you may reach
me at (202) 512-7631.  Major contributors to this report are listed
in appendix I. 

Sincerely yours,

Judy A.  England-Joseph
Director, Housing and Community
 Development Issues


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

James E.  Wells, Jr., Associate Director
Karen S.  Zuckerstein, Assistant Director
Charles E.  Wilson, Jr., Senior Evaluator
Stanley P.  Ritchick, Jr., Senior Evaluator
Donald J.  Sangirardi, Staff Evaluator

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

John T.  McGrail, Attorney Advisor

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