Military not giving small business subcontractors a fair shake, DoD IG says

The military services are not giving small businesses a fair shake when it comes to awarding contracts.

The Defense Department Inspector General Office unearthed some disturbing trends over the past few years for small business owners trying to do business with the military.

“We’ve done five different audits,” said Michael J. Roark, assistant inspector general for readiness and global operations at DoD IG, while testifying before the House Small Business Subcommittee on Contracting and Workforce on May 17. “The consistent challenges contracting officials face is monitoring prime contractors’ compliance with individual subcontracting plans and determining why individual contractors with subcontracting plans did not meet their small business subcontracting goals.”

Two of the DoD IG audits were performed on the Marine Corps, two others were on the Air Force and the final on the Army.

The requirements overlooked are mandated by the Small Business Act to help small companies work with the government and give them a chance to inject their ideas into the government’s procurement.

Tiffany Scroggs, president of the Association of Procurement Technical Assistance (PTAC) said the trends the DoD IG found are consistent with PTAC’s experience not only in military procurement, but across all agencies and buying activities.

“In the broader context of government acquisitions, expanding access to small business subcontracting opportunities is often not treated as a priority at any level, not by buying offices, not by agency leadership, and not by policy. As a consequence, it is not a priority for prime contractors either. But it should be,” Scroggs said.

The most recent audit by DoD IG found two Army Contracting Commands (ACCs) did not comply with rules requiring them to administer subcontracting plans, which ultimately denied small businesses about $915 million in subcontracting opportunities.

“The Inspector General investigated 50 contracts for this report. Extrapolate this across the entire Army procurement system and the damage to small businesses could be devastating. Make no mistake, these are disturbing and egregious errors made by the Army that should not have occurred,” Subcommittee Chairman Rep. Steve Knight said during the hearing. “Perhaps most alarming is the IG’s finding that administering subcontracting plans is not a high priority at the ACC. This is a short-sighted view, failing to take into account the enormous cost the loss of qualified, high-performing small business contractors would have on our industrial base.”

Director of the Army Office of Small Business Programs Tommy L. Marks admitted the service is not doing what it needs to do to include small businesses. Despite DoD awarding nearly $60 billion in prime contract dollars to small business firms in Fiscal 2017, Marks stated the Army has deficiencies in its administration of subcontracting plans.

“Going forward it is definitely going to be a priority,” Marks said. “On the prime contracts side of the house we do very well. We do subcontracts. We put in our acquisition strategies language, as we build in those requirements, about subcontracting. It’s a matter of enforcement and compliance.

In response to the report, the Army found inconsistencies in its regulations on small business contracting and will issue new guidance on June 1.