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Small Business Contracting at Marine Corps Systems Command Needs Improvement

DODIG-2016-019

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Objective

We performed this audit in response to a Defense Hotline allegation. Our objective was to determine whether the Marine Corps Systems Command (MCSC), Quantico, Virginia, provided small businesses with an opportunity to be awarded prime contracts. In addition, we determined whether MCSC held prime contractors accountable for meeting small business subcontracting goals. We reviewed a nonstatistical sample of 40 contracts, valued at $1.3 billion, out of 208 contracts, valued at $2.8 billion.

Findings

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

MCSC contracting officials generally provided small businesses an adequate opportunity to compete for 40 prime contracts, valued at $1.3 billion. However, MCSC contracting officials could not find the contract file for 5 of the 40 contracts we initially requested for review. This occurred because MCSC contracting office management did not have procedures for transferring files for ongoing contracts from one contracting officer to another and did not designate a centralized storage location. As a result, MCSC cannot provide assurance that the Government’s interests when conducting reviews and investigations or in the event of litigation or contractor proprietary data were protected.

MCSC contracting officials did not ensure prime contractors provided small businesses with adequate subcontracting opportunities for 12 prime contracts (valued at $222.1 million). Specifically, MCSC contracting officials did not track compliance with small business subcontracting goals for four contracts; did not determine why large businesses were not meeting their small business subcontracting goals on two ongoing contracts; and awarded six contracts without subcontracting plans or the required determination and approval. This occurred because MCSC contracting office management did not provide adequate internal guidance for awarding and administering subcontracting plans or implement effective internal review procedures for approving and administering subcontracting plans. As a result, small businesses may have been denied subcontracting opportunities that large businesses were required to make a good faith effort to provide. In addition, MCSC contracting officials did not determine whether the prime contractors are making good faith efforts to comply with negotiated subcontracting goals and whether liquidated damages should be assessed.

Recommendations

We recommend that the Assistant Commander for Contracts, Marine Corps Systems Command: establish procedures for transferring files for ongoing contracts; establish a local centralized storage location for completed contracts; determine whether the contractors for the six specified contracts made a good-faith effort to meet their subcontracting goals, and if not, whether liquidated damages may be imposed against the contractor; establish guidance for contracting officers for reviewing, approving, and administering subcontracting plans; and train contracting officials on their responsibilities for evaluating and administering subcontracting plans.

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.  

This report is a result of Project No. D2015-D000CF-0118.000.