During its approval of the defense budget back in 1989, Congress added a new test program intended to simplify the subcontracting process for large defense contractors. In theory, proponents said, the tweak would lead large prime contractors to pass more work along to small businesses.
A quarter century later, some of the world’s largest defense contractors are still taking advantage of the program — which, oddly enough, remains in “test” mode. Odder still, the test has yet to be evaluated.
Called the Comprehensive Subcontracting Plan Test Program, the initiative allows large defense contractors to establish company-wide or division-wide subcontracting plans that outline how the company or each of its units generally intends to partner on any work awarded by the federal government. Any time one of the participating companies competes for work, it can present the general subcontracting strategy.
Normally, prime contractors are required as part of the bidding process to submit a specific subcontracting plan for each individual project, which details how much of the work they plan to outsource and to what type of companies.
Originally approved for a two-year test, the test program has since been extended by Congress several times, with its latest authorization set to expire at the end of the year. Its current test participants include a dozen of the nation’s largest defense contractors, including Lockheed Martin, Boeing, Northrop Grumman and General Dynamics.
Now 25 years after its inception, the Defense Department’s Web site still refers to the program as a “test,” stating that its purpose is “to determine whether comprehensive subcontracting plans will result in increased subcontracting opportunities for small business while reducing the administrative burden on contractors.”
The idea is that, by alleviating some of the hassle of partnering with small businesses and by allowing those subcontractors to perhaps become part of a larger firm’s overarching, routinely-used subcontracting network (rather than competing for one-off projects), more work — and more contracting dollars — would trickle down to small firms.
However, there’s no telling whether that has panned out.
In 2004, the Government Accountability Office released the government’s first report on the initiative, stating that, “although the test program was started more than 12 years ago, DOD has yet to establish metrics to evaluate the program’s results and effectiveness.”
Six years later, still without any metrics in place, several lawmakers sent a letter to the GAO formally requesting a follow-up investigation, noting that the program still had “never been evaluated.” A second GAO report was never filed. DOD, meanwhile, still has never put forth a report on the results of the program.
Not surprisingly, that hasn’t sat well with small business organizations. The National Small Business Association, Small Business and Entrepreneurship Council, U.S. Hispanic Chambers of Commerce and a half dozen other advocacy groups in April sent a letter to the House Small Business Committee and House Armed Service Committee urging them not to keep extending an initiative that has no data demonstrating its value and effectiveness.
“Despite the program’s longevity, we cannot find any data that suggests this is good for subcontractors and small businesses,” they wrote.
Now, even the Defense Department thinks it’s time to scrap the program.
Citing discussions with large and small businesses, Maureen Schumann, a spokeswoman for the agency, said the Pentagon’s current position is “to not have Congress extend the CSP,” referring to the company-wide comprehensive subcontracting plans. The Defense Department’s internal analysis, she added, suggests that the program has resulted in savings for the large prime participants, but that those participants have shown no evidence that the savings have translated into more opportunities for small subcontractors.
Going a step further, due to its lack of transparency and accountability, she said the department believes the program “has led to an erosion of our small business industrial base.” She pointed out, however, that the decision to extend or nix the program lies with Congress, not the agency.
In a recent opinion piece published online, Charles Tiefer, a professor of contracting law at the Baltimore School of Law and previously a deputy general counsel for the House of Representatives, expressed even sharper criticism of the program. He called the initiative a sham that gives massive defense firms a loophole to circumvent important contracting rules at the expense of small businesses. Contractors, he explained, can normally be held accountable (including being forced to pay damages) for not following through on their subcontracting plans; thus the test program shields its participants from potential penalties.
He later pointed to research showing that the share of subcontracting dollars awarded by primes to small businesses has fallen since the mid ‘90s.
“There is no doubt in my mind the CSPTP has significantly reduced subcontracting opportunities for small businesses,” Tiefer wrote.
Not everyone on Capitol Hill is so certain.
A member of the senior counsel to the House Small Business Committee said that while the program may limit the amount of subcontracting dollars flowing to small businesses on government work, it could still benefit some small companies. The official, who was not authorized to speak publicly, explained that by becoming part of a company-wide subcontracting plan at, say, Lockheed or Boeing, a small business may be able to secure routine subcontracting work on those firms’ lucrative commercial projects, too.
In other words, while some small firms’ share of government work may decrease because of the program, others may come out ahead due to more private-sector work. But again, in the absence of any testing from the Defense Department or others, there’s no way to know whether that’s actually happening, either — leaving lawmakers flying blind as they mull whether to extend the program.
“The real flaw here is that there’s no data,” the House official said.