oversight

Government Contracting: Federal Efforts to Assist Small Minority Owned Businesses

Published by the Government Accountability Office on 2012-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States Government Accountability Office

GAO              Report to Congressional Requesters




September 2012
                 GOVERNMENT
                 CONTRACTING
                 Federal Efforts to
                 Assist Small Minority
                 Owned Businesses




GAO-12-873
                                             September 2012

                                             GOVERNMENT CONTRACTING
                                             Federal Efforts to Assist Small Minority-Owned
                                             Businesses
Highlights of GAO-12-873, a report to
congressional requesters




Why GAO Did This Study                       What GAO Found
Each year, the government obligates          While their views varied to some degree, federal agency officials and advocacy
billions in contracts to businesses—         groups GAO contacted identified a number of challenges that small, minority-
nearly $537 billion in fiscal year 2011.     owned businesses may face in pursuing federal government contracts. For
About $104 billion (19.4 percent) was        example, officials and advocacy groups pointed to a lack of performance history
obligated to small businesses, and           and knowledge of the federal contracting process as significant barriers. Officials
over $36 billion of this amount was          from advocacy groups cited additional challenges, such as difficulty gaining
obligated to small businesses that           access to contracting officials and decreased contracting opportunities resulting
identified themselves as minority-           from contract bundling—the consolidation of two or more contracts previously
owned (see figure). In this report, GAO
                                             performed under smaller contracts, into a single contract. Officials from agencies
describes (1) what federal agency
                                             that accounted for 70 percent of federal contracting with small, minority-owned
officials and advocacy groups identified
as challenges small, minority-owned
                                             businesses—(the Departments of Defense, Health and Human Services, and
businesses may face in seeking               Homeland Security, and the General Services Administration) told GAO that they
federal government contracts—                conducted outreach to help small, minority-owned businesses with these
including any linguistic or cultural         challenges. Their outreach efforts include one-on-one interviews between
barriers—and agencies’ efforts to            contracting office staff and businesses seeking federal contracts. Linguistic and
address them, and (2) what information       cultural barriers were identified as a challenge on a limited basis.
is available on federal efforts to assist    Federal agencies GAO contacted collected and reported some information on the
small, minority-owned businesses in
                                             contracting assistance provided to small disadvantaged businesses—including
contracting with the federal
                                             those that are minority-owned. Two agencies GAO reviewed collected and
government. For selected agencies,
GAO analyzed data on obligations to          reported data by minority group. The Minority Business Development Agency in
minority-owned businesses, reviewed          the Department of Commerce—created to foster the growth of minority-owned
information on programs and                  businesses of all sizes—reported that its business centers helped these
resources that can assist minority-          businesses obtain 1,108 financings and contracts worth over $3.9 billion in fiscal
owned businesses, reviewed relevant          year 2011. For the same fiscal year, the Small Business Administration (SBA)
information from the Department of           reported that more than 90 percent of its primary business development program
Justice on agencies’ Limited English         participants were minority-owned businesses. Federal agencies that GAO
Proficiency plans, and interviewed           contacted said that the goals SBA negotiated with federal agencies for
officials from selected federal agencies     contracting with various socioeconomic categories, including small
and advocacy groups that provide             disadvantaged businesses, provided some information on efforts to assist
assistance to minority-owned                 minority-owned businesses. In fiscal year 2011, agencies GAO contacted met
businesses. In written comments,             their prime contracting goal and three out of four agencies met their
Commerce said that GAO had not               subcontracting goals. GAO generally found limited data on participants in agency
covered all federal efforts to support       outreach efforts because the agencies are not required to, and therefore
small, minority-owned business               generally do not, collect data on the minority group or socioeconomic category of
contracting. As GAO noted in the             businesses that participate in outreach events for federal contracting
report, this study focused on selected       opportunities.
agencies and contracting activities that
accounted for about 70 percent of total      Percentage of Obligated Funds for Contracts to Small, Minority-Owned Businesses,
federal obligations to small, minority-      Fiscal Year 2011
owned businesses in fiscal year 2010.


.


View GAO-12-873. For more information,
contact William Shear at (202) 512-8678 or
shearw@gao.gov.

                                                                                         United States Government Accountability Office
Contents


Letter                                                                                          1
               Background                                                                       5
               Agencies and Advocacy Groups Identified Various Contracting
                 Challenges That Minority-Owned Businesses May Face                             9
               Federal Agencies Collect Some Information on Contracting
                 Assistance Provided to Minority-Owned Businesses                             16
               Agency Comments and Our Evaluation                                             22

Appendix I     Objectives, Scope, and Methodology                                             25



Appendix II    Percentage of Obligated Funds for Contracts to Socioeconomic
               Categories by Minority Group, Fiscal Year 2011                                 29



Appendix III   Selected Federal Government Contracting Programs, Resources, and
               Outreach Activities                                                            34



Appendix IV    Potential Applicability of the Limited English Proficiency Executive
               Order to Federal Contracting                                                   38



Appendix V     Comments from the Department of Commerce                                       40



Appendix VI    GAO Contact and Staff Acknowledgments                                          42



Tables
               Table 1: MBDA Client Assistance by Minority Group, Fiscal Year
                        2011                                                                  20
               Table 2: Selected Federal Programs, Resources and Outreach
                        Activities                                                            34




               Page i                GAO-12-873 Federal Contracting with Minority-Owned Businesses
Figures
          Figure 1: Government-wide and Selected Agency Prime and
                   Subcontracting Goal Achievement, Small Disadvantaged
                   Businesses, Fiscal Year 2011                                          18
          Figure 2: 8(a) Program Participants, by Minority Group, Fiscal Year
                   2011                                                                  21
          Figure 3: Percentage of Obligated Funds for Contracts to Small
                   Businesses by Minority Group, Fiscal Year 2011                        29
          Figure 4: Percentage of Obligated Funds for Contracts to Small
                   Disadvantaged Businesses by Minority Group, Fiscal Year
                   2011                                                                  30
          Figure 5: Percentage of Obligated Funds for Contracts to Small
                   Women-Owned Businesses by Minority Group, Fiscal Year
                   2011                                                                  31
          Figure 6: Percentage of Obligated Funds for Contracts to Small
                   HUBZone Businesses by Minority Group, Fiscal Year 2011                32
          Figure 7: Percentage of Obligated Funds for Contracts to Small
                   Service-Disabled Veteran Businesses by Minority Group,
                   Fiscal Year 2011                                                      33




          Page ii               GAO-12-873 Federal Contracting with Minority-Owned Businesses
Abbreviations

CCR               Central Contractor Registration
CMR               Commercial Market Representative
DHS               Department of Homeland Security
DOD               Department of Defense
DOJ               Department of Justice
FAR               Federal Acquisition Regulation
FPC               Federal Procurement Center
FPDS-NG           Federal Procurement Data System-Next Generation
GSA               General Services Administration
HHS               Department of Health and Human Services
HUBZone           Historically Underutilized Business Zone
LEP               Limited English Proficiency
MBDA              Minority Business Development Agency
OSDBU             Office of Small and Disadvantaged Business Utilization
PCR               Procurement Center Representative
PTAC              Procurement Technical Assistance Center
PTAP              Procurement Technical Assistance Program
SAM               System for Award Management
SBA               Small Business Administration




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Page iii                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
United States Government Accountability Office
Washington, DC 20548




                                   September 28, 2012

                                   The Honorable Elijah Cummings
                                   Ranking Member
                                   Committee on Oversight and Government Reform
                                   House of Representatives

                                   The Honorable Judy Chu
                                   House of Representatives

                                   The Honorable Mike Honda
                                   House of Representatives

                                   The Honorable Gary Peters
                                   House of Representatives

                                   The federal government has a long-standing policy of maximizing
                                   procurement opportunities for small businesses owned and controlled by
                                   socially and economically disadvantaged individuals (small
                                   disadvantaged businesses). 1 In 1978, Congress amended the Small
                                   Business Act to require federal agencies to, among other things,
                                   negotiate annually in good faith with the Small Business Administration
                                   (SBA) to establish prime and subcontracting goals for these businesses,




                                   1
                                    Socially disadvantaged individuals are those who have been subjected to racial or ethnic
                                   prejudice or cultural bias because of their identity as a member of a group without regard
                                   to their individual qualities. Economically disadvantaged individuals are those socially
                                   disadvantaged individuals whose ability to compete in the free enterprise system has been
                                   impaired due to diminished capital and credit opportunities compared with others in the
                                   same business area who are not socially disadvantaged. 15 U.S.C.A. § 637(a)(5),(6).
                                   Federal agencies generally do not use the term minority-owned business or refer to the
                                   racial classification of the business owner. In Adarand Constructors, Inc. v. Pena, the
                                   Supreme Court held that all federal programs—including those concerning federal
                                   contracting—that use racial classifications are subject to strict judicial scrutiny. To meet
                                   this standard, a program must be shown to meet a compelling governmental interest and
                                   must be narrowly tailored to meet that interest. 515 U.S. 200, 227 (1995).




                                   Page 1                     GAO-12-873 Federal Contracting with Minority-Owned Businesses
which include businesses owned and controlled by various minority
groups. 2

U.S. Census data show that minority-owned businesses are among the
fastest growing businesses in the U.S. 3 According to the 2007 Survey of
Business Owners—the most recent survey data available—minority-
owned businesses numbered 5.8 million, an increase of 45.5 percent over
the 5 years prior to the survey and more than double the 17.9 percent
rate for all U.S. businesses over the same time period.

Federal contracting can be an important revenue source for businesses of
any size. In fiscal year 2011, federal agencies obligated a total of around
$537 billion in government contracts to businesses. 4 About $104 billion
was obligated to small businesses (19 percent) and of this amount, just
over one-third ($36 billion) was obligated to small businesses that



2
 15 U.S.C. § 644(g). The Small Business Act defines various socioeconomic categories of
businesses. Small businesses are those that are independently owned and operated and
are not dominant in their field of operations. 15 U.S.C. § 632(a). Women-owned small
businesses must have at least 51 percent female ownership and the management and
daily operations of the concern must be controlled by women. 15 U.S.C. § 632(n).
Veteran-owned small businesses must be owned—also at least 51 percent—by one or
more veterans and veterans must control the management and daily business operations.
Service-disabled veteran-owned small businesses are veteran-owned small businesses
owned and controlled by service-disabled veterans. 15 U.S.C. § 632(q). 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—or by an economically
disadvantaged Indian tribe or Native Hawaiian organization. These owners must have at
least a 51 percent stake in the business. 15 U.S.C. § 637(a)(4)(A); 13 C.F.R. § 124.103.
Qualified Historically Underutilized Business Zone (HUBZone) small businesses must
have their principal offices physically located in these historically underutilized business
zones, which include 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. 15 U.S.C. § 632(p).The small business regulations
implementing the Small Business Act further define the size of these businesses. 13
C.F.R. §§ 121.401–121.413.
3
U.S. Census Bureau, 2007 Survey of Business Owners.
4
 In its annual report on small business procurement goals, SBA excludes certain contract
dollars when calculating percentages of dollars obligated to small businesses. The primary
justification for these exclusions is that these contracts are not subject to the Federal
Acquisition Regulation. According to SBA, the total amount of contract dollars less these
exclusions was $423 billion in fiscal year 2011. To view reports on these goals and
exclusions see https://www.fpds.gov/fpdsng_cms/index.php/reports/63-small-business-
goaling-report.




Page 2                     GAO-12-873 Federal Contracting with Minority-Owned Businesses
identified themselves as minority-owned according to data from the
Federal Procurement Data System-Next Generation (FPDS-NG). 5 To
foster participation by small disadvantaged and minority-owned small
businesses in federal contracting, federal agencies administer a number
of programs and conduct outreach activities for them. For example, SBA
administers programs that are designed to develop small businesses—
including minority-owned businesses—and help them navigate the federal
contracting process. Federal agencies also participate in outreach
activities such as matchmaking events—one-on-one meetings—that bring
together agency contracting officials and businesses seeking contracts.
Further, all federal agencies with procurement authority are required by
law to have an Office of Small and Disadvantaged Business Utilization
(OSDBU) that works specifically on contracting issues for these
businesses. 6 Finally, a number of online resources are available to all
businesses seeking federal contracting opportunities.

Given the growth in minority-owned business, you asked us to assess
procurement programs that assist minority-owned businesses. For this
report, we reviewed (1) what federal agency officials and advocacy
groups identified as challenges that small, minority-owned businesses
seeking federal government contracts may face—including linguistic or


5
 FPDS-NG is the only government-wide system for obtaining information on how federal
contract funds are being spent. Contracting obligation data are collected in FPDS-NG, a
comprehensive, web-based tool and database that functions as a clearinghouse of
information for all federal contract actions, including noncompetitive and competitive
actions exceeding $3,000. FPDS-NG captures data on minority-owned businesses for the
following groups: Asian-Pacific American, Subcontinent Asian (Asian-Indian) American,
Black American, Hispanic American, Native American, and has a category for other
groups. Businesses that self-identity as minority-owned do so when registering with the
Central Contractor Registration (CCR)—the primary registrant database for contracting
with the federal government. As part of the registration process, businesses have the
option of designating themselves as minority-owned to indicate that the firm is 51-percent
owned and the management and daily operations are controlled by one or more members
of the selected socioeconomic groups mentioned above. When contract funds are
obligated, the business information is transferred to FPDS-NG. CCR migrated to the
System for Award Management (SAM) on July 29, 2012. The General Services
Administration (GSA) is consolidating the government-wide acquisition and award system
into SAM, a free website which is being developed in phases. Phase 1, released in July
2012, includes the capabilities found in CCR, Online Representations and Certifications
Application, and the Extended Parties List System. Over the coming years, additional
system migrations will be completed.
6
 15 U.S.C. § 644(k). At DOD and many of its components, this office is referred to as the
Office of Small Business Programs. For simplicity, we use the term OSDBU throughout
the report.




Page 3                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
cultural barriers—and agencies’ efforts to address them, and (2) what
information is available on the extent of federal efforts to assist small,
minority-owned businesses in contracting with the federal government.

To determine what federal agency officials and advocacy groups
identified as challenges that minority-owned businesses may face in
contracting with the federal government, we interviewed agency officials
from a purposive, non-representative sample of eight contracting offices
at four agencies that accounted for about 70 percent of total federal
obligations to small, minority-owned businesses in fiscal year 2010. 7 The
officials included those from contracting offices (those responsible for
making acquisition decisions) and OSDBUs. The four agencies were the
Departments of Defense (DOD), Health and Human Services (HHS), and
Homeland Security (DHS), and the General Services Administration
(GSA). We also interviewed officials from SBA and the Minority Business
Development Agency (MBDA), a part of the Department of Commerce
that was set up specifically to assist minority-owned businesses of all
sizes. In addition, we interviewed officials from advocacy groups that
provide assistance to businesses owned by Asian-, Black-, Hispanic-, and
Native-Americans.

To describe the information available on the extent of federal agencies’
efforts to assist small, minority-owned businesses in contracting with the
federal government, we reviewed federal government prime contracting
and subcontracting goals, SBA procurement scorecards, and
documentation describing programs that can provide contracting
assistance to minority-owned businesses. We conducted interviews with
officials from the selected agencies and their contracting offices to identify
and obtain information available on their outreach efforts to contract with
minority-owned businesses. In addition, we conducted interviews with 12
advocacy groups that provided contracting assistance to the minority
groups in our scope. Appendix I provides additional details about our
objectives, scope, and methodology.

We conducted this performance audit from November 2011 through
September 2012 in accordance with generally accepted government


7
 The purpose of our sampling approach was to identify agency officials who may have
experience with the challenges that small, minority-owned businesses may face rather
than to develop a random sample that would be suitable for making estimates of how
often such challenges are encountered.




Page 4                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
                             auditing standards. Those standards require that we plan and perform the
                             audit to obtain sufficient, appropriate evidence to provide a reasonable
                             basis for our findings and conclusions based on our audit objectives. We
                             believe that the evidence obtained provides a reasonable basis for our
                             findings and conclusions based on our audit objectives.



Background
Federal Goals for            Under the Small Business Act, SBA plays an important role in ensuring
Contracting with Small       that small businesses gain access to federal contracting opportunities.
Businesses                   SBA negotiates specific agency-wide goals to ensure that the federal
                             government collectively meets the 23 percent statutory goal for contract
                             dollars awarded to small businesses. 8 In addition, SBA negotiates goals
                             for the socioeconomic categories of businesses. The current goals are:

                             •   5 percent of prime contracts and subcontract dollars are to be
                                 awarded to women-owned small businesses,
                             •   5 percent of prime contracts and subcontract dollars are to be
                                 awarded to small disadvantaged businesses,
                             •   3 percent of prime contracts and subcontract dollars are to be
                                 awarded to service-disabled veteran-owned small businesses, and
                             •   3 percent of prime and subcontract dollars are to be awarded to
                                 HUBZone small businesses.
                             Appendix II provides more information on the extent that federal agencies
                             obligated federal contract dollars to minority-owned businesses by
                             various socioeconomic categories.


Federal Agency               The federal government has established a number of programs that can
Contracting Assistance for   assist small and small disadvantaged businesses—including those that
Small Businesses             may be minority-owned—that seek to contract with federal agencies.
                             MBDA promotes the growth and competitiveness of minority-owned




                             8
                              15 U.S.C. § 644(g). Goals are not set for specific racial and ethnic groups. The 23
                             percent goal and various subgoals for socioeconomic categories are statutory minimums.




                             Page 5                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
businesses of any size. 9 MBDA’s network of business centers helps
clients identify federal procurement opportunities, analyze solicitations,
and prepare bids and proposals. It also facilitates relationships between
minority-owned businesses and federal agencies, and researches
contracting trends at federal agencies. MBDA’s Federal Procurement
Center (FPC) provides research on federal agency contracting trends,
identifies large federal contracts, and helps minority-owned businesses
identify possible contracting opportunities.

SBA administers programs that are targeted to small businesses and that
provide assistance with federal contracting opportunities. SBA’s 8(a)
Business Development Program is one of the federal government’s
primary means of developing small businesses owned by socially and
economically disadvantaged individuals. 10 Participating businesses, which
are generally referred to as 8(a) firms, are eligible to participate in the
program for 9 years. Businesses receive technical assistance, mentoring,
counseling, and financial assistance so that they can become competitive
in the federal marketplace. Additionally, participating businesses may bid
on competitive federal contracts that are open only to 8(a) firms as well as
on noncompetitive federal contracts. 11

SBA’s Procurement Center Representatives (PCR) and Commercial
Market Representatives (CMR) play an important role in helping ensure


9
 MBDA serves enterprises that are owned or controlled by one or more socially or
economically disadvantaged persons from the following groups: African Americans;
Puerto Ricans; Spanish-speaking Americans; Asian Pacific Americans; Native Americans;
Eskimos; Aleuts; Asian Indians; and Hasidic Jewish Americans. See 15 C.F.R. §§ 1400.1.
Additional groups may apply to MBDA for a socially or economically disadvantaged
designation. 15 C.F.R. §§ 1400.3 to 1400.6. MBDA is considering a petition to designate
Arab-Americans as a socially or economically disadvantaged group. 77 Fed. Reg. 31,765
(May 30, 2012); 77 Fed. Reg. 46,346 (Aug. 3, 2012); 77 Fed. Reg. 53,780 (Sept. 4, 2012).
10
  The regulations governing participation in the SBA 8(a) Business Development Program
include a rebuttable presumption that Black Americans, Hispanic Americans, Native
Americans, Asian Pacific Americans, and Subcontinent Asian Americans are socially
disadvantaged. Other groups may petition SBA for designation as socially disadvantaged
under the 8(a) Program, and individuals who are not a member of a group presumed to be
socially disadvantaged may establish that they are socially disadvantaged by a
“preponderance of evidence.” 13 C.F.R. § 124.103.
11
  Under certain conditions, the Department of Defense, United States Coast Guard, and
National Aeronautics and Space Administration are authorized to contract without
providing for full and open competition. 10 U.S.C. § 2304(c). Other executive agencies are
provided similar authority under 41 U.S.C. § 3304.




Page 6                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
that small businesses gain access to contracting and subcontracting
opportunities. 12 PCRs and CMRs are the primary SBA staff who
implement SBA’s prime contracts and subcontracting assistance
programs, which are intended to increase contracting opportunities for
small businesses and help ensure that small businesses receive a fair
and equitable opportunity to participate in federal prime contracts and
subcontracts. PCRs also can make recommendations to agency
contracting officers that proposed contracts be set aside for eligible small
businesses. 13 In particular, a PCR’s key responsibilities include reviewing
potentially bundled or consolidated solicitations—those in which two or
more procurement requirements previously provided or performed under
separate smaller contracts are grouped into a solicitation for a single
contract 14—and making set-aside recommendations to agency
contracting officers.

The OSDBU within federal agencies advocate on behalf of small
businesses. Section 15(k) of the Small Business Act describes the
functions of OSDBU directors—which include implementing and
executing the agency’s functions and duties related to the award of
contracts and subcontracts to small and small disadvantaged
businesses. 15 Other responsibilities of the OSDBU include identifying
bundled contracts, potentially revising them to encourage small business
participation, and facilitating small business participation in the contracts.
OSDBU directors also help small businesses obtain payments from




12
 See 13 C.F.R. § 125.2(b)-(c); 13 C.F.R. § 125.3(e).
13
  The purpose of small business set-asides is to award certain acquisitions exclusively to
small business concerns. A “set-aside for small business” is the reserving of an acquisition
exclusively for participation by small business concerns. A small business set-aside may
be open to all small businesses. A small business set-aside of a single acquisition or a
class of acquisitions may be total or partial. 48 C.F.R. § 19.501(a).
14
  U.S.C. § 632(o).15 U.S.C. § 631(j).To foster the participation of small businesses in the
contract opportunities of the federal government, federal agencies, to the maximum extent
practical, are to avoid unnecessary and unjustified bundling of contract requirements that
preclude small business participation in procurements as prime contractors.
15
 15 U.S.C. §644(k).




Page 7                     GAO-12-873 Federal Contracting with Minority-Owned Businesses
agencies and subcontractors, recommend set-asides, coordinate with
SBA, and oversee OSDBU personnel. 16

Agencies also conduct outreach activities for small and small
disadvantaged businesses, including minority-owned firms that are
seeking federal contracts. Some agencies host monthly vendor outreach
sessions, a series of appointments with either agency officials (such as
small business or procurement officials) or prime contractors that have
subcontracting needs. These sessions give the businesses an opportunity
to discuss their capabilities and learn about potential contracting
opportunities. One of MBDA’s primary outreach efforts is the Minority
Enterprise Development Week Conference. During this conference,
participants from minority-owned businesses that have been vetted and
designated by MBDA are offered appointments with federal and corporate
partners to discuss contracting opportunities that will be made available
within the next 6 to 18 months.

Finally, a number of online resources are also available to businesses
seeking to contract with the federal government. For example, federal
agencies list their contract solicitations of $25,000 or more on the Federal
Business Opportunities website (www.FedBizOpps.gov)–managed by
GSA. The website provides online business tools, training videos, and
event announcements for small business owners. USA Spending,
established by the Office of Management and Budget, also contains
information on federal spending trends across the government, including
grants and contracts. In addition, federal agencies such as SBA provide
online contracting courses designed to help small businesses understand
the basics of contracting with government agencies. 17 Appendix III
provides a summary of selected programs, resources, and outreach
activities available to minority-owned businesses.




16
  Under section 15(k)(10), the OSDBU director is to make recommendations regarding
whether a particular contract should be awarded to a small business under certain
programs designed to promote contracting opportunities for small businesses.
17
 See http://www.sba.gov/gcclassroom.




Page 8                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
                              Agency and advocacy group officials we interviewed identified a number
Agencies and                  of challenges that small businesses—including minority-owned
Advocacy Groups               businesses—may face when seeking to contract with the federal
                              government. In particular, these officials generally agreed that the lack of
Identified Various            performance history and knowledge of the federal contracting process
Contracting                   were significant challenges minority-owned businesses may face in
Challenges That               contracting with the federal government. However, the officials offered
                              varying opinions on the extent to which minority-owned businesses faced
Minority-Owned                other challenges, such as a lack of access to contracting officials and a
Businesses May Face           lack of monitoring subcontracting plans, and difficulties accessing needed
                              resources such as capital. Some agency officials we contacted indicated
                              that outreach activities they conduct and practices they undertake in their
                              contract solicitation activities address some of these challenges.


Agency and Advocacy           Federal agency and advocacy group officials that we interviewed differed
Group Officials Differed in   in their opinions on challenges that small businesses—including those
Their Opinions on             that are minority-owned—may face when seeking to contract with the
                              federal government. The challenges identified included a lack of
Contracting Challenges        performance history and knowledge of the federal contracting process,
That Minority-Owned           contract bundling, a lack of access to contracting officials, lack of
Businesses May Face           monitoring of subcontracting plans, and difficulties assessing capital.

Performance History           Officials from federal agencies and advocacy groups we contacted cited
                              the lack of a performance history and a full understanding of the federal
                              contracting process as significant challenges that minority-owned
                              businesses may face. According to the statement of Guiding Principles of
                              the Federal Acquisition System, when selecting contactors to provide
                              products or perform services, the government will use contractors that
                              have a track record of successful past performance or that have
                              demonstrated a current superior ability to perform. 18 SBA officials told us
                              that historically and currently, small, minority-owned businesses that
                              lacked a performance history have had difficulty entering the federal
                              contracting market. MBDA officials also said that lack of a past
                              performance record with government contracts or private contracts of




                              18
                                48 C.F.R. § 1.102(b). Past performance means an offeror’s or contractor’s performance
                              on active and physically completed contracts.




                              Page 9                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
                           similar size, made obtaining federal contracts more difficult for minority-
                           owned businesses because of the weight given to performance history. 19

                           However, some agency officials, including those from two DHS
                           contracting offices, noted that because prior commercial experience—not
                           just government contracting experience—was considered, the lack of
                           prior government experience would not necessarily make a minority-
                           owned business noncompetitive. Officials from a GSA contracting office
                           said that most small businesses seeking to contract with its office had a
                           performance history with the private sector, not the federal government.
                           The officials said that they considered past performance with the private
                           sector when making contract award decisions, and thus would not
                           consider lack of past performance history with the federal government as
                           a challenge. Finally, officials from an HHS contracting office noted that
                           the Federal Acquisition Regulation (FAR) requires that businesses
                           receive a neutral rating if they do not have a performance history and that
                           some small businesses may not be aware of this requirement. 20 However,
                           some advocacy group officials indicated that certain prerequisites and
                           past performance requirements were difficult for minority-owned
                           businesses to meet. For example, officials from one group said that these
                           businesses might partner with other more established businesses to help
                           meet the performance requirements.

Knowledge of the Federal   Some federal agency and advocacy group officials we contacted
Contracting Process        indicated that lack of knowledge of the federal contracting process can be
                           a challenge for businesses seeking these contracts. For example, one
                           advocacy group official noted that small businesses have to understand
                           the work of the agencies, such as if there are any prerequisites,
                           certifications, or specialized skill sets that are required to obtain contracts.
                           In addition, an OSDBU official from DHS said that minority-owned
                           businesses could experience challenges in obtaining information about
                           various contracting opportunities, learning and understanding how the



                           19
                             Different rules apply based on the type of contracting involved. For example, when
                           engaged in a source selection for a contract by negotiation, past performance must be
                           evaluated when the contract is expected to exceed the simplified acquisition threshold
                           (unless a documented reason is provided). 48 C.F.R. § 15.304(c)(3).
                           20
                             See 48 C.F.R. § 15.305(a)(2)(iv). The FAR states that offerors without a record of
                           relevant past performance may not be evaluated favorably or unfavorably on past
                           performance—in other words, they must be given a neutral rating for the past performance
                           evaluation factor.




                           Page 10                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
                    bidding process works, and learning how to secure a government
                    contract. Further, MBDA officials noted that the federal contracting
                    process was very different from contracting with private sector
                    companies. They added that although federal agencies spend time and
                    money holding sessions on doing business with the federal government,
                    these sessions offered general information that could not be transferred
                    to bidding on specific projects. Similarly, agency officials also cited the
                    lack of understanding of agencies’ contracting needs. For example, an
                    OSDBU official from HHS emphasized that businesses that did not
                    understand the mission of the agency with which they were seeking a
                    contract or did not know what the agency bought and acquired might not
                    know how to market their product or service appropriately to win the
                    contract.



Contract Bundling   Advocacy group officials cited contract bundling as a significant
                    challenge, although a majority of agency officials disagreed. Advocacy
                    group officials whom we interviewed said that contract bundling could
                    reduce the number of contracting opportunities available for small and
                    minority-owned businesses. MBDA officials said that they believe that
                    many contracts are bundled unnecessarily and agreed that this practice
                    limited minority-owned businesses’ ability to compete for these contracts.

                    However, other federal agency officials we interviewed said that they did
                    not believe that contract bundling was a significant challenge for minority-
                    owned businesses at their agencies. In addition, some agency officials
                    told us that they had specific policies regarding contract bundling. For
                    example, HHS and DOD contracting officials noted that their offices had
                    policies that prohibited contract bundling and added that small businesses
                    could protest a contract that they believed was unjustifiably bundled. 21
                    Further, officials from one HHS contracting office indicated that they
                    worked with small business specialists to determine if contracts should be
                    separated.



                    21
                      A bid protest is a challenge to the award or proposed award of a contract for the
                    procurement of goods and services or a challenge to the terms of a solicitation for such a
                    contract. Bid protests may be filed at GAO against procurement actions by federal
                    government agencies and can also be filed with the agency responsible for the
                    procurement, and with the U.S. Court of Federal Claims. In addition, size and status
                    protests based on business determinations can be filed with SBA.




                    Page 11                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Lack of Access to Contracting   Advocacy group officials cited a lack of access to contracting officials as a
Officials                       significant challenge. Officials from six advocacy groups that we
                                interviewed stated that the agency officials present at outreach events,
                                such as matchmaking events, often did not have the authority to make
                                decisions about awarding a contract. However, with the exception of
                                MBDA, none of the federal agency officials we contacted said that access
                                to contracting officers was a challenge at their agencies. The officials
                                emphasized efforts that their agencies were making to assist businesses.
                                For example, officials participate in industry days, where businesses can
                                meet prime contractors as well as interact with agency procurement staff,
                                and also conduct one-on-one appointments with businesses that seek to
                                contract with their agencies. Some federal contracting officials did note
                                that limited resources might pose a challenge in accessing the contracting
                                officers. For example, contracting officials from DHS and GSA indicated
                                that any perceived access issues would be due to limited resources in
                                contracting offices. GSA contracting officials said that when the office had
                                a large number of contracts to complete, they could not meet with each
                                business owner seeking contract opportunities.

Lack of Monitoring of           Advocacy group officials also cited a lack of monitoring of subcontracting
Subcontracting Plans            plans by federal agencies as a significant challenge for minority-owned
                                businesses, although SBA officials noted that this issue was a challenge
                                for all small businesses, not just those owned by minorities. Officials from
                                five advocacy groups described instances in which prime contractors did
                                not use the small, minority-owned business subcontractors that they
                                initially said they would use. Further, one advocacy group official said that
                                because federal contracting officials generally had relationships with
                                prime contractors and not subcontractors, small, minority-owned
                                subcontractors often had no recourse when a problem arose. An official
                                from another advocacy group stated that contracting officers have no
                                accountability to federal agencies to justify any subcontractor changes.
                                SBA officials noted that prime contractors’ “dropping” of subcontractors
                                from their plans after the contracts were obligated was not an issue




                                Page 12               GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                exclusive to minority-owned businesses but was a challenge for small
                                subcontractors in general. 22

                                In addition, we previously reported that CMRs cited a lack of authority to
                                influence subcontracting opportunities. 23 PCRs and CMRs also said that it
                                was difficult to enforce prime contractors’ performance under
                                subcontracting plans because determining that a contractor was not
                                acting in good faith was difficult. Officials from one DOD contracting office
                                said that they did not communicate with subcontractors directly and that
                                prime contractors did have the right to pick a subcontractor of their choice
                                throughout the duration of a contract. An OSDBU official from DOD added
                                that the contracting officer would review and approve a replacement
                                subcontractor under certain circumstances. If a prime contractor’s
                                subcontracting plan included a certain percentage of work that was
                                designated for a small disadvantaged business, the contracting officer
                                might not approve the proposed replacement subcontractor if the change
                                did not adhere to the original percentage.

Lack of Access to Capital and   Some federal agency and advocacy group officials we interviewed said
Other Resources                 that a lack of access to capital, financing, and bonding were challenges.
                                Officials from three federal agencies, including contracting officials and
                                one OSDBU official, cited lack of access to capital as a key barrier for
                                minority-owned businesses. SBA officials also said that historically and
                                currently small, minority-owned businesses have had difficulty entering
                                the federal contracting market due to lack of access to capital. In addition,
                                according to a 2010 MBDA report, capital access is the most important
                                factor limiting the establishment, expansion, and growth of minority-
                                owned businesses. Moreover, MBDA reported that minority-owned
                                businesses paid higher interest rates on loans than other businesses,
                                received smaller loans, were more likely to be denied credit, and were




                                22
                                  The Small Business Jobs Act of 2010 requires prime contractors on covered contracts to
                                notify the contracting officer in writing if the prime contractor fails to use a small business
                                concern as described in the prime contractor’s bid or proposal or when a payment to a
                                subcontractor is reduced or 90 days or more past due. Pub. L. No. 111-240, §§ 1322,
                                1334, 124 Stat. 2504, 2540–2544 (2010). SBA has issued a proposed rule regarding
                                these requirements. 76 Fed. Reg. 61,626 (Oct. 5, 2011).
                                23
                                  GAO, Improvements Needed to Help Ensure Reliability of SBA’s Performance Data on
                                Procurement Center Representatives, GAO-11-549R (Washington, D.C.: June 15, 2011).




                                Page 13                     GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                   less likely to apply for loans because they feared their applications would
                                   be denied. 24

                                   Further, officials from two advocacy groups noted that bonding
                                   requirements could prevent small, minority-owned businesses from
                                   competing for large contracts. Bonding is required to compete for certain
                                   contracts to ensure that businesses have the financial capacity to perform
                                   the work and pay for labor and supplies. 25 For example, an official at one
                                   advocacy group indicated that to be considered for large contracts,
                                   businesses may be required to obtain $25 million to $50 million in
                                   bonding capacity. Since few small businesses can obtain this bonding
                                   capacity, this official said that these businesses rely on “teaming”
                                   arrangements—two or more businesses that collectively pursue larger
                                   procurement contracts—to expand their opportunities.

Linguistic and Cultural Barriers   In general, advocacy groups identified linguistic and cultural barriers as a
                                   challenge for minority-owned businesses on a limited basis. One
                                   advocacy group official said that linguistic barriers may be a challenge
                                   because business owners with strong accents could have difficulty
                                   communicating. Officials from a few Asian-American advocacy groups
                                   noted that business owners with limited English proficiency (LEP) 26 may
                                   experience challenges. For example, one official said that business
                                   owners in the construction industry may have difficulty obtaining a
                                   required design certification if English was not the business owner’s first
                                   language. Another advocacy group official cited challenges such as
                                   discrimination against subcontractors by prime contractors because of
                                   accents or LEP. Officials from advocacy groups also cited examples of
                                   cultural barriers. For example, one noted that some first generation
                                   Americans might have an aversion to working with the federal
                                   government and therefore would not be willing to seek government
                                   contracts. Some officials from Hispanic advocacy groups said Hispanic
                                   contracting officials were underrepresented in the federal government.



                                   24
                                     U.S. Department of Commerce, Minority Business Development Agency, Disparities in
                                   Capital Access between Minority and Non-Minority-Owned Businesses: The Troubling
                                   Reality of Capital Limitations Faced by MBEs (Washington, D.C.: 2010).
                                   25
                                    A surety bond is form of insurance that guarantees contract completion.
                                   26
                                     See appendix IV for a discussion of the potential applicability of Executive Order 13,166,
                                   Improving Access to Services for Persons with Limited English Proficiency, to federal
                                   contracting and outreach activities.




                                   Page 14                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
                          Officials from another group also said that some minority groups,
                          including those in nonmetropolitan areas, could lack the infrastructure
                          needed (e.g., Internet service and transportation) to conduct business in
                          these areas.

                          Officials from all but one federal agency—SBA—that we contacted said
                          that they did not know of any linguistic or cultural issues that posed a
                          barrier for minority-owned businesses seeking to contract with the
                          government. SBA officials told us that cultural barriers may be a
                          challenge for minority-owned businesses seeking federal government
                          contracts and emphasized that minority-owned businesses would be
                          hesitant to reveal any linguistic barriers. The officials noted that some
                          cultural barriers existed for Asian-Americans, Alaskan Natives, Native-
                          Americans, and Native Hawaiians, because their traditional ways of
                          conducting business involved intangibles that did not translate well into a
                          “faceless” electronic contracting community. These officials also said that
                          some minority-owned businesses may have informal business
                          practices—for example, they may obtain financing from a friend or family
                          member instead of through a bank—and therefore a business owner
                          might not have the documentation required by some federal programs.


Agency Outreach Efforts   As we have previously noted, federal agencies conduct outreach to help
Help Address Some         minority-owned businesses seeking federal government contracts. For
Challenges Facing Small   example, federal contracting officials with whom we spoke cited “industry
                          days,” conferences, and meetings with businesses as efforts to help
and Minority-Owned        businesses address challenges they could face in seeking federal
Businesses                contracts. During industry days small businesses are invited to meet
                          prime contractors in their industries and potentially obtain subcontracts.
                          Businesses can also interact directly with contracting office staff. For
                          example, contracting officers said that they participated in panel
                          discussions to provide business owners with information on the
                          acquisition process and forecasts of contract opportunities. Contracting
                          officers also accept requests from business owners that schedule
                          meetings to discuss their business capabilities. Many agency officials,
                          including an OSDBU official and contracting officials, told us they also
                          work with and refer businesses to Procurement Technical Assistance
                          Centers (PTAC) so that the businesses may receive one-on-one
                          assistance.

                          Agency outreach to businesses is generally directed by agency OSDBUs,
                          the agencies’ advocates for small businesses. OSDBU directors use a
                          variety of methods—including internal and external collaboration,


                          Page 15               GAO-12-873 Federal Contracting with Minority-Owned Businesses
                      outreach to small businesses, and oversight of agency small business
                      contracting—to help small businesses overcome challenges they may
                      face such as understanding the federal contracting process. OSDBU
                      officials from three federal agencies we contacted indicated that they
                      collaborate with several agency offices, such as acquisition and small
                      business specialists, and with organizations such as MBDA. We
                      previously reported that nearly all of the OSDBU directors saw outreach
                      activities as a function of their office. 27 For example, 23 of the 25 OSDBU
                      directors we surveyed between November and December 2010 viewed
                      hosting conferences for small businesses as one of their responsibilities,
                      and 23 had hosted such conferences. More specifically, these 23
                      agencies had hosted an average of 20 conferences within the previous 2
                      years. In addition, 20 of the 25 OSDBU directors surveyed saw
                      sponsoring training programs for small businesses as one of their
                      responsibilities, and 18 had hosted such events in the last 2 years.


                      Federal agencies we contacted generally collect and report information
Federal Agencies      on contracting assistance they provide to small and small disadvantaged
Collect Some          businesses. Federal agencies are required to report annually to SBA on
                      participation in the agency’s contracting activities by small disadvantaged
Information on        businesses, veteran-owned small businesses (including service-disabled
Contracting           veterans), qualified HUBZone small businesses, and women-owned small
Assistance Provided   businesses. SBA compiles and analyzes the information and reports the
                      results to the President and Congress. 28 Agencies are also required to
to Minority-Owned     report to SBA plans to achieve their contracting goals, which can include
Businesses            outreach activities. In addition, Executive Order 11,625 requires the
                      Secretary of Commerce—the umbrella agency of MBDA—and other
                      agencies to report annually on activities related to minority business
                      development and to provide other information as requested. Finally,
                      federal agencies are also required to develop and implement systematic




                      27
                        GAO, Small Business Contracting: Action Needed by Those Agencies Whose
                      Advocates Do Not Report to Agency Heads as Required, GAO-11-418 (Washington, D.C.:
                      June 3, 2011).
                      28
                       15 U.S.C. § 644(h).




                      Page 16                 GAO-12-873 Federal Contracting with Minority-Owned Businesses
data collection processes and provide MBDA with current data that will
help in evaluating and promoting minority business development efforts. 29

A majority of the federal agencies we contacted told us that the extent to
which they met SBA prime and subcontracting goals for the various
socioeconomic categories of businesses (including the small
disadvantaged business goal) provided a measure of their efforts to assist
minority-owned businesses in contracting with the federal government. As
figure 1 shows, in fiscal year 2011 the federal government met its 5
percent goal for prime contracting and subcontracting with small
disadvantaged businesses. In addition, all four agencies we reviewed met
their prime contracting goals of 5 percent, and three met their 5 percent
subcontracting goals for this category. Contracting officials at these
agencies generally attributed their success in contracting with small
businesses—including small disadvantaged businesses—to a variety of
factors, including support from the agency OSDBU and upper
management, staff commitment, and the use of set-asides. They also
noted several other factors that contributed to their contracting
performance, including market research, a strategy for small businesses,
and outreach efforts. Federal agency officials also said that some
outreach activities might be targeted to certain socioeconomic categories
to assist in meeting agency SBA goals. For example, DHS contracting
office officials said that as a result of monitoring their progress in meeting
SBA goals, they conducted outreach to women-owned and HUBZone
businesses with contract set-asides.




29
  Exec. Order No. 11,625, Prescribing Additional Arrangements for Developing and
Coordinating a National Program for Minority Business Enterprise, 36 Fed. Reg. 19,967
(Oct. 13, 1971).




Page 17                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
Figure 1: Government-wide and Selected Agency Prime and Subcontracting Goal
Achievement, Small Disadvantaged Businesses, Fiscal Year 2011




SBA also issues an annual scorecard as an assessment tool to measure
how well federal agencies reach their small business and socioeconomic
prime contracting and subcontracting goals, to provide accurate and
transparent contracting data, and to report agency-specific progress. An
overall grade assesses an agency’s entire small business procurement
performance, and three quantitative measures show achievements in
prime contracting, subcontracting, and plan progress, or an agency’s




Page 18                GAO-12-873 Federal Contracting with Minority-Owned Businesses
efforts and practices to meet its contracting goals. 30 An overall grade is
given for government-wide performance, and individual agencies receive
their own grades. For fiscal year 2011, SBA gave a grade of “B” for
overall government-wide performance. For the federal agencies that we
included in our analysis, GSA scored an overall grade of A+, DHS and
HHS scored an overall grade of A, and DOD scored an overall grade of B.

Two agencies we reviewed collected and reported data by minority group.
For example, MBDA reports data categorized by minority group, on
contracting assistance that its business centers provide as required by
executive order. For fiscal year 2011, MBDA reported that its business
centers helped minority-owned businesses obtain 1,108 transactions (the
sum of contracts and financings) totaling over $3.9 billion (see table 1). 31




30
  The three quantitative measures are weighted and assigned different percentages.
Prime contracting achievement equals 80 percent, subcontracting achievement 10
percent, and the agency’s progress plan for meeting its goals 10 percent, for a total of 100
percent. SBA changed the scorecard methodology in fiscal year 2009, moving from a
color-based methodology that used three potential grade ranges (green, yellow, red) to
letter grades, with six potential grade ranges (A+, A, B, C, D, F). According to SBA,
expanding the number of grade ranges allows for a clearer distinction among different
agencies’ performance. In addition, SBA incorporated two measurements—subcontracting
and plan performance—that help explain the totality of an agency’s small business efforts.
There are nine plan progress elements, including demonstrating top-level agency
commitment to small business contracting and implementing a strategy to increase the
number of competitively awarded contracts to small businesses. Previous scorecards only
addressed prime contracting achievement and did not offer an overall grade to assess
agencies’ comprehensive procurement practices.
31
  MBDA defines the dollar value of transactions as the total principal value of approved
loans, equity financings, bonds, leases (property and equipment), assets under
management, or other binding financial agreements secured by clients of the project.
Further, eligible financial transactions are those that have a specific dollar value that
expands a client’s capital base and operations or produces some other direct commercial
benefit.




Page 19                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Table 1: MBDA Client Assistance by Minority Group, Fiscal Year 2011

Minority        Number of     Number of                 Total        Dollar value of         Dollar value of     Total dollar value
groups           contracts    financings         transactions             contracts              financings             of awards
African               217            102                    319      $1,264,362,499            $826,639,729         $2,091,002,228
American
Asian                  23             28                     51         114,456,719              24,444,285            138,901,004
American
Asian Indian           16             18                     34          58,707,052              19,956,625              78,663,677
Asian Pacific          27             10                     37          12,817,685              16,606,632              29,424,317
American
Hasidic Jew            63              3                     66          17,025,583              74,210,000              91,235,583
Hispanic              155             76                    231         539,874,743             438,981,088            978,855,831
American
Native                217             51                    268         126,392,998             409,191,757            535,584,755
American
Other                  59             43                    102              980,134             12,569,948              13,550,082
minority
Total                 777            331                   1,108     $2,134,617,413          $1,822,600,064         $3,957,217,477
                                           Source: MBDA.



                                           SBA also collects some information for its various programs, including
                                           information by minority group for the 8(a) Business Development
                                           Program, as required by statute. 32 For example, SBA reported that of the
                                           7,814 8(a) program participants in fiscal year 2011—the most recent data
                                           available—more than 90 percent of the participants were minority-owned
                                           businesses (see fig. 2). SBA also reported that 8(a) program participants
                                           reported total year-end revenues exceeding $21.7 billion in fiscal year
                                           2010, with 43.4 percent of these revenues coming from 8(a) contracts.
                                           During that same year, SBA provided technical assistance to 2,000 8(a)
                                           businesses. SBA officials we interviewed said that SBA generally did not
                                           collect information by minority group for any of its other programs.




                                           32
                                             The Business Opportunity Development Reform Act of 1988 requires that SBA report the
                                           race or ethnicity, and gender, of business owners that participate in the 8(a) program. 15
                                           U.S.C. 636(j)(16)(B)(iv).




                                           Page 20                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
Figure 2: 8(a) Program Participants, by Minority Group, Fiscal Year 2011




a
 According to SBA, the category of “other American” includes individuals who select this category,
who select “no ethnicity”, who select categories that are not considered an ethnicity or race, and who
make no selection at all. In SBA’s fiscal year 2011 survey of 8(a) participants, “other American”
included 221 Alaskan Native corporations, 80 tribally owned organizations, 17 Native Hawaiian
organizations, and 2 community development organizations.


Most federal agencies that we contacted indicated that they collected
some general information on outreach events and activities and some
demographic data, although collecting such data was not required. For
example, for outreach events such as the Minority Enterprise
Development week conference, MBDA officials told us that they collect
general demographic information from participants on their businesses
and experience, but not by minority group. The officials told us that they
also collect aggregated data on its outreach activities for minority-owned
businesses, such as number of meetings and participants. For example,
MBDA officials told us that they conducted 119 of the 129 one-on-one
meetings scheduled between minority-owned and small businesses and
corporations and prime contractors during this event.




Page 21                       GAO-12-873 Federal Contracting with Minority-Owned Businesses
                     Officials from DOD, DHS, GSA, and HHS said that they asked
                     participants in their outreach events questions (sometimes by survey or
                     evaluation) about the value or helpfulness of the events. Officials from
                     three agencies noted that they used the survey results to determine the
                     effectiveness of, or how to improve, the event. In addition, agencies may
                     ask questions to obtain general information about a business and
                     potentially its socioeconomic status. Officials also said that they collected
                     some information by socioeconomic group, but none by minority group.

                     Finally, the OSDBU Council—which comprises OSDBU officials from
                     various federal agencies—hosts an annual procurement conference that
                     provides assistance to businesses seeking federal government contracts,
                     and some information is collected for this event. 33 According to the
                     council’s website, more than 3,500 people registered for the 2012
                     conference, and more than 130 matchmaking sessions were conducted.
                     According to the council’s president, 2012 is the first year that such
                     information was collected.


                     We provided a draft of this report to Commerce, DHS, DOD, GSA, HHS,
Agency Comments      and SBA for review and comment and received comments only from
and Our Evaluation   Commerce. Commerce provided written comments which are reprinted in
                     appendix V.

                     Commerce made two observations on our draft report. First, the
                     department stated that the report was a good start at capturing the federal
                     government’s effort to support small, minority-owned businesses, but did
                     not include all federal programs that supported federal contracting with
                     minority-owned businesses. The department added that GAO had missed
                     an opportunity to provide a more comprehensive picture of the federal
                     government’s efforts in this area, noting, for example, that the
                     Departments of Agriculture, Housing and Urban Development, and
                     Transportation had programs (other than OSDBUs) geared toward
                     increasing federal contracts with minority-owned firms. In addition, the
                     department stated that an Office of Minority and Women Inclusion was
                     recently established at each of the financial regulatory agencies. While


                     33
                       The OSDBU Council is an informal organization led by the OSDBU directors, who work
                     with SBA and other stakeholders on federal small business contracting programs. The
                     OSDBU Council also discusses and exchanges information on outreach events with small
                     businesses to assist agencies in their small business contracting efforts.




                     Page 22                  GAO-12-873 Federal Contracting with Minority-Owned Businesses
providing support to minority-owned businesses, these agencies and
offices were outside of the scope of our review, which as we stated in our
report, focused on the four agencies—DHS, DOD, GSA, and HHS—that
accounted for about 70 percent of total federal obligations to small,
minority-owned businesses in fiscal year 2010. We also included SBA
and Commerce’s MBDA in our review because of their roles in assisting
minority-owned businesses. We are reviewing the efforts of the Office of
Minority and Women Inclusion in an ongoing study that will be issued in
2013.

Second, Commerce noted that although the dollar amount of federal
contracts obligated to small, minority-owned businesses was
encouraging, the report did not analyze the number of minority-owned
firms that actually secured federal contracts. The department said that it
was possible that a handful of minority-owned firms had secured sizable
federal contracts but that the majority of minority-owned firms continued
to fail in obtaining them. However, data are not available on the total
universe of small, minority-owned businesses that entered bids in
response to federal contract solicitations. Just as with our reporting of
funds obligated for contracts, data on the number of minority-owned
businesses that secured federal contracts would not provide information
on the number of such businesses that did not obtain them. Likewise,
while we do report MBDA’s statistics on contracting assistance provided
to minority-owned businesses, again such data do not provide information
on how many businesses sought but did not obtain federal contracts. We
conducted interviews with officials from MBDA, SBA, contracting offices
at the federal agencies in our scope, and advocacy groups to obtain their
perspectives on the challenges minority-owned businesses may face in
seeking to contract with the federal government.


We are sending copies of this report to appropriate congressional
committees; the Attorney General; the Secretaries of Defense, Homeland
Security, and Health and Human Services; the Acting Secretary of
Commerce; and the Administrators of the General Services
Administration and Small Business Administration. In addition, this report
will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions on the matters discussed in this
report, please contact me at (202) 512-8678 or by email at
shearw@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.



Page 23               GAO-12-873 Federal Contracting with Minority-Owned Businesses
GAO staff who made major contributions to this report are listed in
appendix VI.




William B. Shear
Director, Financial Markets and
 Community Investment




Page 24               GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix I: Objectives, Scope, and
              Appendix I: Objectives, Scope, and
              Methodology



Methodology

              Our objectives were to describe: (1) what federal agency officials and
              advocacy groups identified as challenges that small, minority-owned
              businesses may face in seeking to contract with the federal government—
              including any linguistic or cultural barriers—and agencies’ efforts to
              address them, and (2) what information is available on federal efforts to
              assist small, minority-owned businesses in contracting with the federal
              government.

              To determine which programs and resources to include in our scope, we
              conducted a web-based search for initial information on programs and
              resources available from federal government agencies using terms such
              as contracting assistance for minorities. We analyzed information on
              programs that provide federal contracting assistance and resources on
              contracting opportunities, and are available to minority-owned
              businesses. We describe programs and resources provided by the
              Minority Business Development Agency (MBDA) as they are tasked with
              the growth and promotion of minority-owned businesses. We also
              describe programs and resources available from the Small Business
              Administration (SBA), as this agency is responsible for providing
              assistance to small businesses—which can be minority owned—and
              programs and resources available from other selected federal agencies
              based on the criteria described below. 1 Finally, we interviewed officials
              from these selected agencies and advocacy groups that provide
              assistance to businesses owned by Asian-, Black-, Hispanic-, and Native-
              Americans. We selected these minority groups because they received the
              largest share of federal obligations to small, minority-owned businesses
              based on business owners self-identifying as a member of these groups.

              To select agencies to include in our scope, we reviewed data from
              Federal Procurement Data System-Next Generation (FPDS-NG) on
              contract awards to small businesses owned by the minority groups in our
              scope by federal agency. Although we could not independently verify the
              reliability of these data, we reviewed system documentation and
              conducted electronic data testing for obvious errors in accuracy and
              completeness. On the basis of these efforts, we determined that the
              FPDS-NG data on federal contract dollars to socioeconomic groups by
              self-reported minority group were sufficiently reliable for purposes of our



              1
               We did not include all programs and resources that provide government contracting
              assistance and information to minority-owned businesses.




              Page 25                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix I: Objectives, Scope, and
Methodology




review. We selected the top four agencies that accounted for about 70
percent of total federal obligations to small, minority-owned businesses in
fiscal year 2010—the most recent data available at the time of our
selections. These agencies were the Departments of Defense (DOD),
Health and Human Services (HHS), and Homeland Security (DHS), and,
the General Services Administration (GSA).

To select a purposive, non-representative sample of contracting offices
for purposes of conducting interviews, we first selected the top two
divisions within DOD, DHS, and HHS in terms of the percentage of their
agency’s obligations to small, minority-owned businesses. 2 Those
divisions included the Departments of the Army and Navy for DOD; the
Bureau of Customs and Border Protection and the United States Coast
Guard for DHS, and the National Institute of Health and the Centers for
Medicaid and Medicare for HHS. We selected only one division for
GSA—the Public Buildings Service—as this division represented over 76
percent of GSA’s funds obligated for contracts to small, minority-owned
businesses. Using this approach, we selected a total of seven divisions
within the four agencies in our scope. Within each division, we selected
one of the top contracting offices based on the office’s percentage of their
division’s obligations to businesses owned by the minority groups in our
scope. We selected two contracting offices from the Department of the
Army because the percentage of obligations to small, minority-owned
businesses by any of its top contracting offices was small. Our final
sample consisted of eight contracting offices.

To describe the challenges that small, minority-owned businesses may
face in contracting with the federal government, we interviewed agency
officials—including those from contracting offices and the Office of Small
Disadvantaged Business Utilization—from the purposive, non-
representative sample of eight contracting offices. We also interviewed
officials from MBDA and SBA. Further, we conducted interviews with
officials from 12 advocacy groups. We selected groups that provided
assistance to businesses owned by the minority groups in our scope
based on a web-based search on national organizations that represent
and provide assistance to minority-owned businesses in obtaining federal


2
 The purpose of our sampling approach was to identify agency officials who may have
experience with the challenges faced by small, minority owned businesses. Because we
did not use a random sample, findings cannot be generalized and may not represent the
entire population of small, minority owned businesses.




Page 26                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix I: Objectives, Scope, and
Methodology




contracts. To describe information on improving access to services for
persons with limited English proficiency, we reviewed Executive Order
13,166—Improving Access to Services for Persons with Limited English
Proficiency (LEP)—to understand its applicability to outreach activities
associated with federal contracting. We reviewed guidance from the
Department of Justice (DOJ), as well as existing LEP plans for each
agency in our scope. We could not review the LEP plans for DOD and for
SBA, as the plan for each agency had not yet been completed. We also
obtained and reviewed written responses from DOJ.

To describe the information available on the extent of federal efforts to
assist small, minority-owned businesses in contracting with the federal
government, we reviewed federal government prime contracting and
subcontracting goals and SBA procurement scorecards for fiscal year
2011 for DOD, HHS, DHS and GSA. We also reviewed documentation for
programs that assist small businesses owned and controlled by socially
and economically disadvantaged individuals—which can include
businesses that are minority-owned—to determine the types of
contracting assistance available. We conducted interviews with officials
from the selected agencies and contracting offices to identify and obtain
available information on their outreach efforts to assist minority-owned
businesses. In addition, we conducted interviews with officials from 12
advocacy groups that provide contracting assistance to the minority
groups in our scope.

For information on the percentage of funds obligated for contracts in fiscal
year 2011 to each socioeconomic category of small businesses by
minority group—including small disadvantaged, women-owned, service-
disabled veteran-owned, and Historically Underutilized Business Zone
(HUBZone)—we analyzed data from FPDS-NG, which receives data from
the Central Contractor Registration System (CCR)—the system in which
all businesses seeking federal government contracts must register. In
CCR, registrants (i.e., business owners) can self identify as minority-
owned and can specify a minority group(s). Registrants can select from
the following six categories: Asian Pacific, Subcontinent Asian, Black-
American, Hispanic-American, Native-American, and Other. We
conducted electronic testing for obvious errors in accuracy and
completeness. As a part of this assessment, we analyzed the FPDS-NG
data to determine cases in which contracting firms were identified as
belonging to a particular minority group, such as Subcontinent Asian, but
did not designate the firm as being minority-owned. This occurred in less
than 3 percent of the cases. We conducted the same assessment within
different socioeconomic categories, such as small disadvantaged


Page 27                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix I: Objectives, Scope, and
Methodology




business, and found a potential undercount of the minority-owned
designation in less than 4 percent of the cases. In addition, businesses
that selected “other minority” and those that self-identified as more than
one minority group were categorized as other minority. We determined
the minority-owned designations data were sufficiently reliable for the
purposes of our report. However, because we cannot verify the minority
group that contractors self-report, we characterize these data as self-
reported.

We conducted this performance audit from November 2011 through
September 2012 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.




Page 28                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix II: Percentage of Obligated Funds
                                        Appendix II: Percentage of Obligated Funds for
                                        Contracts to Socioeconomic Categories by
                                        Minority Group, Fiscal Year 2011


for Contracts to Socioeconomic Categories
by Minority Group, Fiscal Year 2011
                                        We analyzed data from the Federal Procurement Data System – Next
                                        Generation to determine the amount of obligated funds for contracts that
                                        federal agencies made to small businesses by minority group for fiscal
                                        year 2011. As figure 3 shows, the federal government obligated over $36
                                        billion (35.1 percent) to small, minority-owned businesses in fiscal year
                                        2011.

Figure 3: Percentage of Obligated Funds for Contracts to Small Businesses by Minority Group, Fiscal Year 2011




                                        Note: Data are as of February 2012. The dollars reported are in obligations and minority designations
                                        are self-reported. Businesses that self identified as “other minority” and those that selected more than
                                        one minority category were designated as other minority. Nonminority includes those that did not
                                        select any minority category.
                                        .




                                        Page 29                       GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                        Appendix II: Percentage of Obligated Funds for
                                        Contracts to Socioeconomic Categories by
                                        Minority Group, Fiscal Year 2011




                                        Figure 4 shows the amount of federal obligated funds for contracts to
                                        small disadvantaged businesses. For example, about $28.8 billion (85.6
                                        percent) was obligated to small disadvantaged businesses that were
                                        minority-owned.

Figure 4: Percentage of Obligated Funds for Contracts to Small Disadvantaged Businesses by Minority Group, Fiscal Year
2011




                                        Note: Data are as of February 2012. The dollars reported are in obligations and minority designations
                                        are self-reported. Businesses that self identified as “other minority” and those that selected more than
                                        one minority category were designated as other minority. Nonminority includes those that did not
                                        select any minority category.
                                        .




                                        Page 30                       GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                       Appendix II: Percentage of Obligated Funds for
                                       Contracts to Socioeconomic Categories by
                                       Minority Group, Fiscal Year 2011




                                       Figures 5 shows the amount of federal obligated funds for contracts to
                                       small women-owned businesses. For example, $8.2 billion (45.7) percent
                                       were obligated to small women-owned businesses that were minority-
                                       owned.

Figure 5: Percentage of Obligated Funds for Contracts to Small Women-Owned Businesses by Minority Group, Fiscal Year
2011




                                       Note: Data are as of February 2012. The dollars reported are in obligations and minority designations
                                       are self-reported. Businesses that self identified as “other minority” and those that selected more than
                                       one minority category were designated as other minority. Nonminority includes those that did not
                                       select any minority category.
                                       .




                                       Page 31                       GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                        Appendix II: Percentage of Obligated Funds for
                                        Contracts to Socioeconomic Categories by
                                        Minority Group, Fiscal Year 2011




                                        Figure 6 shows the amount of federal obligated funds for contracts to
                                        small HUBZone businesses. For example, nearly $5.5 billion (54.3
                                        percent) were obligated to small HUBZone businesses that were minority-
                                        owned.

Figure 6: Percentage of Obligated Funds for Contracts to Small HUBZone Businesses by Minority Group, Fiscal Year 2011




                                        Note: Data are as of February 2012. The dollars reported are in obligations and minority designations
                                        are self-reported. Businesses that self identified as “other minority” and those that selected more than
                                        one minority category were designated as other minority. Nonminority includes those that did not
                                        select any minority category.
                                        .




                                        Page 32                       GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                        Appendix II: Percentage of Obligated Funds for
                                        Contracts to Socioeconomic Categories by
                                        Minority Group, Fiscal Year 2011




                                        Figure 7 shows the amount of federal obligated funds for contracts to
                                        small service-disabled veteran-owned businesses. For example, nearly
                                        $3.9 billion (33 percent) were obligated to small service-disabled veteran-
                                        owned businesses that were minority-owned.

Figure 7: Percentage of Obligated Funds for Contracts to Small Service-Disabled Veteran-Owned Businesses by Minority
Group, Fiscal Year 2011




                                        Note: Data are as of February 2012. The dollars reported are in obligations and minority designations
                                        are self-reported. Businesses that self identified as “other minority” and those that selected more than
                                        one minority category were designated as other minority. Nonminority includes those that did not
                                        select any minority category.
                                        .




                                        Page 33                       GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix III: Selected Federal Government
                                           Appendix III: Selected Federal Government
                                           Contracting Programs, Resources, and
                                           Outreach Activities


Contracting Programs, Resources, and
Outreach Activities
                                           This table shows programs, resources, outreach activities, and examples
                                           of contracting assistance that agencies provide to assist minority-owned
                                           businesses in contracting with the federal government.

Table 2: Selected Federal Programs, Resources and Outreach Activities

Program or resource
(agency)                     Description                                     Examples of contracting assistance provided
Programs
Business Centers             MBDA funds a nationwide network of          •     Identification of procurement opportunities based on
(MBDA)                       business centers which operate as                 client needs and sourcing deals
                             public/private partnerships that provide    •     Solicitation analysis
                             direct client assistance and educate
                                                                         •     Bid and proposal preparation
                             businesses on how to do business with
                             the federal government and private          •     Research contract award histories
                             sector.                                     •     Post-award contract administration
                                                                         •     Central contractor registration
                                                                         •     Certification assistance
Federal Procurement Center   Supported by MBDA’s new                     •     Identification of federal procurement opportunities
(FPC)                        Governmental Procurement Unit, the          •     Facilitation of relationships between minority-owned
(MBDA)                       FPC is the first business center in the           businesses and federal program managers
                             U.S. that assists minority-owned
                                                                         •     Research on federal agency contracting trends
                             businesses in competing for and
                             winning federal government contracts.       •     Information on federal regulations and contracting
                                                                               requirements
                                                                         •     Linking minority-owned businesses with other companies
                                                                               to develop strategic partnerships
8(a) Business Development    The 8(a) program is a 9-year                •     8(a) businesses may be eligible for set-asides, awards
Program                      developmental program that provides               exclusively for program participants
(SBA)                        technical and management assistance
                             to businesses so that they can become
                             competitive in the federal marketplace.
Procurement Assistance to    This program assists small businesses       •     Application of small business set-asides to increase
Small Businesses Program     in obtaining a fair share of contracts            procurement to small businesses
                             and subcontracts for federal                •     Consultation with procuring activities on structuring of
                             government supplies and services and              procurement and sales planning to optimize small
                             a fair share of property sold by the              business participation
                             government.
                                                                         •     Review and analysis of small businesses’ capacity
                                                                         •     Review of subcontracting plans and programs of large
                                                                               prime contractors to determine the extent that they are
                                                                               providing subcontracting opportunities to the SBA
                                                                               socioeconomic categories.




                                           Page 34                      GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                         Appendix III: Selected Federal Government
                                         Contracting Programs, Resources, and
                                         Outreach Activities




Program or resource
(agency)                   Description                                Examples of contracting assistance provided
Procurement Technical      PTAP was created to generate             PTAP established Procurement Technical Assistance
Assistance Cooperative     employment and to improve the            Centers (PTAC) that assist small businesses seeking to
Agreement Program (PTAP)   general economy of a locality by         contract with DOD and with other agencies by providing the
(DOD)                      assisting business firms in obtaining    following:
                           and performing under federal, state,     •    counseling,
                           and local government contracts.
                                                                    •    matchmaking, and
                                                                    •    assistance with online database registration
Mentor-Protégé Program     The mentor-protégé program includes      Mentor-protégé agreements authorize a broad array of
(Various)                  an arrangement in which mentors—         developmental assistance such as
                           typically businesses that are            •   assistance in obtaining certifications needed to work on
                           experienced prime contractors—               large federal government contracts
                           provide technical, managerial, and
                           other business development               •   contract administration
                           assistance to eligible small             •   loans and award of subcontracts on a noncompetitive
                           businesses.                                  basisa
Other Resources
Office of Small and        OSDBUs are advocates for contracting OSDBUs functions include
Disadvantaged Business     opportunities for small and          •  identifying proposed solicitations that involve significant
Utilization (Various)      disadvantaged businesses.               bundling of contract requirements
                                                                •  working with agency procurement officials to revise such
                                                                   proposed solicitations to increase the probability of
                                                                   participation by a small business
                                                                •  advising agency leadership on small business matters
                                                                •  providing direction for developing and implementing
                                                                   policies and initiatives to help ensure that small
                                                                   businesses have the opportunity to compete for and
                                                                   receive a fair share of agency procurements
Procurement Center         PCRs help ensure that small              PCR’s key responsibilities include
Representatives            businesses gain access to contracting    •  reviewing proposed agency solicitations—such as
(SBA)                      opportunities.                              potentially bundled and consolidated solicitations
                                                                    •  making set-aside recommendations to agency
                                                                       contracting officers
                                                                    •  reviewing agency small business programs
                                                                    •  counseling small businessesb
Commercial Market          CMRs help ensure that small              CMRs’ key responsibilities include
Representatives (CMR)      businesses gain access to                •  counseling small businesses on marketing themselves to
(SBA)                      subcontracting opportunities.               prime contractors
                                                                    •  counseling large prime contractors on maximizing
                                                                       subcontracting opportunities for small businesses
                                                                    •  facilitating the matching of prime contractors with small
                                                                       businesses




                                         Page 35                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
                                         Appendix III: Selected Federal Government
                                         Contracting Programs, Resources, and
                                         Outreach Activities




Program or resource
(agency)                   Description                                               Examples of contracting assistance provided
Minority Enterprise        MED Week Conference, one of                           During MED Week, businesses are provided the following
Development (MED) Week     MBDA’s primary outreach efforts,                      assistance
Conference                 offers thousands of minority-owned                    •   15-minute appointments with federal and corporate
(MBDA)                     businesses across a variety of                            partners to discuss upcoming contracting opportunities
                           industries the opportunity to connect
                           with buyers, and access information,                  •   educational sessions on topics such as capital access
                           tools, and resources to grow their                    •   discussions about federal contracting opportunities with
                           businesses.                                               representatives from agencies’ Offices of Small and
                                                                                     Disadvantaged Business Utilization (OSDBU)
Federal Business           FedBizOpps is the single point                        Businesses can conduct ad hoc searches or set up automatic
Opportunities              of entry for federal buyers to publish                queries to notify them when opportunities meeting their
(www.FedBizOpps.gov)       and for businesses to find federal                    criteria are posted
                           business opportunities over $25,000
                           across departments and agencies.
BusinessUSA                BusinessUSA is a centralized, one-                    The site allows small businesses and exporters to use
(www.businessusa.gov)      stop platform for businesses to access                technology to quickly connect to the services and information
                           services to help them grow and hire.                  relevant to them, regardless of where the information is
                                                                                 located or which agency’s website, call center, or office they
                                                                                 go to for help
USA Spending               USAspending.gov is a free, publicly                   For each award, the site includes
(www.usaspending.gov)      accessible website containing data on                 •   the name of the entity receiving the award
                           federal awards (e.g., contracts, loans,
                           grants) across the government.                        •   the amount of the award
                                                                                 •   information on the award such as transaction type and
                                                                                     funding agency
                                                                                 •   the location of the entity receiving the award
                                                                                 •   a unique identifier of the entity receiving the award
Federal Procurement Data   FPDS-NG is a comprehensive web-        FPDS-NG allows businesses to obtain information on how
System- Next Generation    based tool and database that functions federal contract funds are being spent government-wide
(FPDS-NG)                  as a clearinghouse for all federal
                           contract actions exceeding $3,000.
Outreach activities
Matchmaking Events         Matchmaking events are held around                    During matchmaking events businesses are provided the
(Various)                  the country to give business owners                   following assistance
                           the opportunity to meet prime                         •    insights into doing business with agencies
                           contractors and agency contracting
                           officers.                                             •    cultivating effective relationships with prime contractors

Vendor Outreach Sessions   Monthly sessions consisting of 10-to                  Vendor outreach sessions include
                           15-minute appointments with either                    •  discussions on business’ capabilities
                           agency officials (such as small
                           business or procurement officials) or                 •  information on potential contracting opportunities
                           prime contractors that have                           •  meetings with individuals who have decision-making
                           subcontracting needs. The sessions                       responsibilities
                           may be geared to SBA socioeconomic
                           categories.
                                         Source: GAO analysis of agency programs, resources and outreach activities.




                                         Page 36                               GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix III: Selected Federal Government
Contracting Programs, Resources, and
Outreach Activities




a
 We identified 13 federal agencies that have mentor-protégé programs: the Department of Homeland
Security, Department of Defense, Department of Energy, Department of State, Environmental
Protection Agency, Federal Aviation Administration, General Services Administration, Department of
Health and Human Services, National Aeronautics and Space Administration, Small Business
Administration, Department of the Treasury, United States Agency for International Development, and
Department of Veterans Affairs. See GAO, Mentor-Protégé Programs Have Polices That Aim to
Benefit Participants but Do Not Require Postagreement Tracking, GAO-11-548R (Washington, D.C.:
June 15, 2011).
b
 Bundling of contract requirements means the consolidation of two or more procurement
requirements for goods or services previously provided or performed under separate smaller
contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a
small business concern for various reasons. 15 U.S.C. § 632(o).




Page 37                         GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix IV: Potential Applicability of the
              Appendix IV: Potential Applicability of the
              Limited English Proficiency Executive Order to
              Federal Contracting


Limited English Proficiency Executive Order
to Federal Contracting
              Executive Order 13,166, Improving Access to Services for Persons with
              Limited English Proficiency, issued on August 11, 2000, requires federal
              agencies to prepare a plan to improve access to federally conducted
              programs and activities for those with limited English proficiency (LEP). 1
              Under the order, federal agencies must take reasonable steps to provide
              meaningful access to persons with LEP for federally conducted programs
              and activities. In addition, the Department of Justice (DOJ) serves as a
              central repository for agency plans to address LEP and provides
              guidance to agencies for developing such plans.

              According to DOJ guidance issued on August 16, 2000 and available at
              LEP.GOV, the four factors to be considered in determining what
              constitutes “reasonable steps to ensure meaningful access” include
              (1) the number or proportion of such individuals in the eligible population,
              (2) the frequency with which they come into contact with the program,
              (3) the importance of the service provided by the program, and (4) the
              resources available to the recipients. In May 2011, DOJ also issued a
              Language Access Assessment and Planning Tool for Federally
              Conducted and Federally Assisted Programs to provide guidance to
              recipients of federal financial assistance and federal agencies. The first
              step in the assessment tool is a self-assessment that determines what
              type of contact an agency has with the LEP population and describes the
              elements that are part of effective language access policy directives and
              implementation plans.

              DOJ officials told us that Executive Order 13,166 regarding LEP generally
              applied to outreach activities associated with federal contracting. The
              officials added that DOJ had not issued specific guidance related to the
              order on outreach to minority-owned businesses seeking to contract with
              the federal government. In addition, the planning tool does not provide
              guidance on outreach activities associated with federal contracting.
              According to DOJ officials,

              “Generally, current practice with regard to announcing federal government contracts and
              grants would not be altered under the Executive Order. In determining what is required,
              the focus of the analysis in this situation is on the first factor—the number or proportion of
              eligible LEP persons. Except, perhaps, in territories, it is reasonable to expect that the
              number or proportion of eligible contract or grant recipients who are LEP and are




              1
               65 Fed. Reg. 50,121 (Aug. 11, 2000).




              Page 38                     GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix IV: Potential Applicability of the
Limited English Proficiency Executive Order to
Federal Contracting




themselves attempting to find and respond to announcements of grants and contracts is
negligible.”

Federal agency officials and advocacy groups we spoke with cited
linguistic barriers as a challenge on a limited basis. In addition, few
agencies had taken action to address possible linguistic barriers, and
most told us that they had not taken such action because they had not
encountered this challenge. For example, based on its efforts as of July
2012, GSA found that only one region reported significant contact with
persons with LEP.




Page 39                    GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix V: Comments from the Department
             Appendix V: Comments from the Department
             of Commerce



of Commerce




             Page 40                 GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix V: Comments from the Department
of Commerce




Page 41                 GAO-12-873 Federal Contracting with Minority-Owned Businesses
Appendix VI: GAO Contact and Staff
                  Appendix VI: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  William B. Shear, (202) 512-8678 or shearw@gao.gov
GAO Contact
                  In addition to the contact named above, Marshall Hamlett (Assistant
Staff             Director), Emily Chalmers, Pamela Davidson, Meredith Graves, Julia
Acknowledgments   Kennon, Shamiah T. Kerney, Katherine Leigey, and Andrew J. Stephens
                  made key contributions to this report.




(250645)
                  Page 42                   GAO-12-873 Federal Contracting with Minority-Owned Businesses
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