By Calvin Biesecker
The Department of Homeland Security (DHS) is meeting federal goals for awarding contracts to small businesses but a majority of the business is going to the top 10 firms in each of five reporting categories, according to a new report by the Democratic staff of the House Homeland Security Committee.
“While the Department has met its small, minority, and disadvantaged business goals for every fiscal year, serious concerns remain about the distribution of these funds within the small, minority, and disadvantaged business community,” says the report, Small, Minority, and Disadvantaged Business in the Department of Homeland Security–Selected Aspects, FY 2007. “This review has shown that the top 10 contractors in each category account for the lion’s share of contract awards. Surely, such a concentration of awards among a relatively few firms is not in accord with the spirit of the Small Business Act’s objective of facilitating federal contracting opportunities as a means to develop a robust small, minority, and disadvantaged business community.”
The Committee is chaired by Rep. Bennie Thompson (D-Miss.).
The report, which was released yesterday, also says that DHS double-counts small businesses when tallying the value of contract awards against mandated performance targets. For example, when DHS awards a contract to a women-owned small business that operates in a HUBZone, the department counts that award against the women-owned small business and HUBZone categories, the House report says.
“This multiple counting not only makes it more likely that an agency will do business with a firm that meets multiple criteria because multiple counting allows an agency to reach its goals in the several small business categories more quickly, but this method of multiple counting may serve to obfuscate an accurate accounting of the number of small, minority, and disadvantaged businesses that are actually doing business with the government, creating an artificially robust picture of the federal procurement participation by these businesses,” the report says.
“DHS follows the same rules as the rest of the federal government for defining what a small business is and how we establish our goals for doing business with small businesses,” a DHS spokesman told Defense Daily.
The report acknowledges that DHS easily exceeds federal mandates for awarding contracts to various types of small businesses. For example, through July 1 of FY ’07, DHS awarded nearly 32 percent of its contract dollars to small businesses against a federal requirement of 23 percent. For small and disadvantaged businesses, where the mandate is for 5 percent of contract awards by dollar amount, DHS more than doubled the goal amount.
The report also points out that in FY ’07 39 percent of the total obligated procurement spending, or $4.7 billion, went out in the fourth quarter. That spending rate is about double the previous quarters. This is an invitation to mistakes, the majority staff warns.
The “increased processing in procurement requests could serve as an indicator of other phenomena, including increased pressure to complete projects or make purchases that have undergone long-term planning but have not been executed or a rush to execute projects that have not been adequately planned before the commencement of a new funding cycle,” the report says. “Under either scenario, a drastically increased volume of transactions decreases the likelihood of adequate internal review and audit oversight of the nature, purpose, cost, and utility of the item to be purchased or the service to be procured. In an atmosphere of decreased internal review and audit oversight, the potential for fraud, waste, and abuse increases exponentially.