Report | March 20, 2015

Small Business Contracting at Regional Contracting Office-National Capital Region Needs Improvement

DODIG-2015-095

Objective

We performed the audit in response to a Defense Hotline allegation. Our objective was to determine whether the Marine Corps Regional Contracting Office-National Capital Region (RCO-NCR) in Quantico, Virginia, provided small businesses adequate opportunity to be awarded prime contracts. To determine adequate opportunity we reviewed 45 contracts, valued at $344.5 million, and 1 indefinite-delivery, indefinite-quantity contract, valued at $123,706. In addition, we determined whether RCO-NCR officials held prime contractors accountable for meeting small business subcontracting goals.

Findings

We substantiated the Hotline allegation that RCO-NCR contracting officials did not hold large prime contractors accountable for meeting small business subcontracting goals. However, we did not substantiate the allegation that RCO-NCR senior leadership did not ensure that small businesses were awarded a sufficient number of contracts.

RCO-NCR contracting officials generally provided small businesses an adequate opportunity to compete for prime contracts. However, we determined that the contracting officials delayed competition by awarding seven bridge contracts, valued at $91.1 million, awarded to large business incumbents to provide continuation of services until competitive contracts could be awarded.

The contracting officials did not ensure that prime contractors provided small businesses adequate subcontracting opportunities. Specifically, we reviewed seven prime contracts (valued at $871 million) that should have required subcontracting plans awarded by RCO-NCR contracting officials. For six of these seven contracts, the contracting officials did not ensure that prime contractors provided small businesses with adequate subcontracting opportunities.

Among other reasons, this occurred because RCO-NCR did not have policies and procedures for evaluating and approving subcontracting plans or for monitoring contractor compliance with subcontracting plans. As a result, small businesses may not have received subcontract work which large businesses were required to provide them, and RCO-NCR personnel may have missed an opportunity to recoup potential liquidated damages of up to $153.5 million, which they may have been entitled to.

Recommendations

We recommend that the Director, RCO-NCR:

  • establish policy requiring contracting officials to obtain adequate subcontracting plans from contractors when the Federal Acquisition Regulation requires subcontracting plans and verify that contractors submit the required subcontracting reports to the Electronic Subcontracting Reporting System;
  • implement training to ensure that contracting officials understand their responsibilities; and
  • determine whether the contractors for the two specified contracts made a good faith effort to meet the small business subcontracting goals in their subcontracting plans and, if not, determine whether liquidated damages may be imposed against the contractor.

Management Comments and Our Response

The Head, Audit Coordination, Office of the Director, Marine Corps Staff, fully addressed all specifics of the recommendations, and no further comments are required.