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TARP Oversight Report

TARP Oversight Report

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Published by Milton Recht
Congressional Oversight Panel October 2010 TARP Report Examining Use of Private Contractors
Congressional Oversight Panel October 2010 TARP Report Examining Use of Private Contractors

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Published by: Milton Recht on Oct 14, 2010
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Under the FAR, any acquisition between $3,000 and $100,000 must be set aside
exclusively for small business concerns, unless the contracting officer determines that
competitive offers from small businesses cannot be obtained.205

For all other contracts, the FAR

expresses a preference for contracting with small businesses, but does not require it. No
requirements at all exist for small business financial agency agreements.206

From the beginning of the TARP, however, OFS has encouraged small businesses,
including minority-, veteran-, and women-owned small businesses, to pursue procurement
opportunities under both its contracting authority and for financial agency agreements.207

Where

subcontracting opportunities exist for a given work requirement, OFS requires contractors to
submit small business subcontracting plans.208

OFS considers a potential contractor‟s efforts to

use small businesses as part of its selection criteria for all contracts.209

Each contract is reviewed

internally by a small business specialist to examine opportunities for small business
participation.210

In addition, the financial agency agreements for both Fannie Mae and Freddie
Mac provide a floor for the government-sponsored enterprises‟ (GSEs‟) use of small business
contractors, including minority- or women-owned contractors. In entering into their financial
agency agreements with Treasury, Fannie Mae and Freddie Mac agreed to “engage one or more

204

This lack of direct oversight and its associated dangers are not unique to Treasury. Treasury‟s procedure

for managing subcontractors is typical of most government agencies. Steven Schooner, Professor of Law, George
Washington University Law School, conversations with Panel staff (Oct. 5, 2010); Project on Government Oversight

conversations with Panel staff (Oct. 6, 2010). Over the past twenty years, the government‟s contract management

staff has been cut while the total value of its acquisitions has increased. This has left the government with
insufficient resources for contract management and has eviscerated the resources available for overseeing
subcontractors. Steven Schooner, Professor of Law, George Washington University Law School, conversations with
Panel staff (Oct. 5, 2010).

205

Federal Acquisition Regulation, supra note 11, at Subpart 9.5.

206

December 2008 GAO Report, supra note 149, at 39.

207

U.S. Government Accountability Office, Troubled Asset Relief Program: One Year Later, Actions Are
Needed to Address Remaining Transparency and Accountability Challenges
, at 28 (Oct. 2009) (GAO-10-16) (online

at www.gao.gov/new.items/d1016.pdf) (hereinafter “October 2009 GAO Report on Transparency and
Accountability”). One of Treasury‟s objectives is to provide contracting opportunities for small businesses. See
Treasury Procurement Contracts and Agreements, supra note 10 (“Treasury actively encourages the participation of
small, minority, veteran, and women-owned businesses in fulfilling its needs. … Where subcontracting opportunities
exist for a given work requirement Treasury requires contractors to submit small business subcontracting plans with
specific goals for small, minority, veteran, and women-owned business subcontracts.”).

208

Treasury Procurement Contracts and Agreements, supra note 10.

209

Treasury conversations with Panel staff (Sept. 16, 2010).

210

Treasury conversations with Panel staff (Sept. 16, 2010).

52

small businesses as contractors, including minority- or women-owned businesses,” in fulfilling
their responsibilities.211

OFS has also reached out to small businesses, including minority-,
veteran-, and women-owned small businesses. For example, on May 27, 2009, Treasury held an
Industry Day and Small Business Networking event where 11 small businesses presented their
capabilities to an audience of approximately 40 interested firms.212

In some cases, OFS has
called small business trade associations to notify them of a new solicitation available to small
businesses.213

These efforts notwithstanding, Treasury has received considerable criticism of its

efforts to promote small business contracting. A recurring critique is that Treasury‟s solicitations

are too large, covering too much work or too large a geographic area. Instead of awarding one
large contract that small businesses cannot feasibly perform, these organizations argue, Treasury
should break down the work into multiple smaller contracts.214

Other criticisms include that
Treasury‟s outreach efforts have not included small professional services firms such as law
firms,215

and that Treasury has not provided sufficient, conveniently located training sessions on

how to win contracts.216

OFS has not established any specific targets for how many contracts, agreements, and
subcontracts to award to small businesses. Treasury in general, however, establishes, in
negotiation with the Small Business Administration, internal goals for small business contracts.
Their goals for disadvantaged, women-owned, and veteran-owned small businesses are subsets
of their broader small business goals. Figure 7 below displays the goals for fiscal years 2010 and
2011.

211

Financial Agency Agreement Between Treasury and Freddie Mac, supra note 122. For a more complete
discussion of Fannie Mae and Freddie Mac, see Annex I, infra.

212

Treasury conversations with Panel staff (Sept. 16, 2010).

213

Treasury conversations with Panel staff (Sept. 16, 2010).

214

National Association of Minority and Women Owned Law Firms conversations with Panel staff (Sept.
30, 2010); National Association of Real Estate Brokers conversations with Panel staff (Oct. 5, 2010).

215

National Association of Minority and Women Owned Law Firms conversations with Panel staff (Sept.

30, 2010).

216

National Association of Real Estate Brokers conversations with Panel staff (Oct. 5, 2010).

53

Figure 7: Treasury’s Small Business Contracting Goals, Fiscal Years 2010 and 2011217

Category

Goal218

Prime Contracts

Small Business

28.5%

Small Disadvantaged Business

5.0%

Women-Owned Small Business

5.0%

Service-Disabled Veteran-Owned Small Business

3.0%

Subcontracts

Small Business

44.7%

Small Disadvantaged Business

5.0%

Women-Owned Small Business

5.0%

Service-Disabled Veteran-Owned Small Business

3.0%

OFS initially did not contract with many small businesses, but has substantially increased
its share of small business contracts over time.219

As of September 30, 2010, a majority of
financial agency agreements (eight of 15) and 13 contracts have been awarded to small
businesses. Small businesses have won 55 subcontracts, although it is possible that Treasury‟s
lack of transparency regarding subcontractors has concealed even greater opportunities for small
businesses.220

These contracts, subcontracts, and agreements have already expended $42.3
million to small businesses and have an obligated value of $54.3 million.

217

Office of Small and Disadvantaged Business Utilization, Fiscal Year 2010 & 2011 Small Business
Program Goals
(online at www.treas.gov/offices/management/dcfo/osdbu/accomplishments.shtml) (accessed Oct.
12, 2010).

218

The goal is a percentage of contract dollars obligated, not the number of contracts.

219

October 2009 GAO Report on Transparency and Accountability, supra note 207, at 28-29.

220

The Panel compiled this number from data provided from Treasury (Sept. 30, 2010).

54

Figure 8: Total Number of Contracts, Subcontracts, and Financial Agency Agreements, as
of August 13, 2010
221

Prime
Contracts

Financial
Agency
Agreements Subcontracts

Large Business

60

7

43

Service Disabled Veteran Owned Small Business

2

0

2

Small Business

6

2

20

Small Disadvantaged Business222

1

0

2

Women and Minority Owned Small Business

1

0

5

Woman Owned Small Disadvantaged Business

1

0

1

Women Owned Small Business

2

1

15

Minority Owned Small Business

0

5

10

Other

0

0

1

Figure 9: Value of Contracts, Financial Agency Agreements, and Subcontracts, as of
August 13, 2010
223

Prime
Contracts

Financial
Agency
Agreements Subcontracts

Large Business

$74,551,966 $180,380,453 $62,095,468

Service Disabled Veteran Owned Small Business

89,032

0

$187,843

Small Business

224

1,931,694

4,229,167

14,621,028

Small Disadvantaged Business

0

0

191,368

Women and Minority Owned Small Business

0

0

3,466,979

Woman Owned Small Disadvantaged Business

0

0

422,499

Women Owned Small Business

1,307,071

575,000

7,892,877

Minority Owned Small Business

0

9,180,000

3,999,121

Other

0

0

87,360

Despite OFS‟s efforts to promote small business contracting opportunities, large
businesses still receive the overwhelming majority of prime contracts,225

both in terms of value

221

Data from Treasury (Sept. 30, 2010). Data for contractors to financial agents is as of August 31, 2010.

222

Despite the potential overlap, Treasury used both the Minority Owned Small Business and Small
Disadvantaged Business categories in the data provided to the Panel.

223

Data from Treasury (Sept. 30, 2010). All values are expended values. For prime contracts and financial
agency agreements, the subcontract values were deducted from the prime contract or financial agency agreement
expended value to avoid double counting. Data for contractors to financial agents is as of August 31, 2010.

224

One small business contract had a listed expended value that was less than the value of its subcontract.
This resulted in an expended value that was negative. As a result, this prime contract has been given an expended
value of zero for purposes of this Figure.

55

and number. OFS has not met Treasury‟s goals for small business prime contracts. Indeed, less
than 5 percent of prime contract dollars go to small businesses, far short of the 28.5 percent goal.

Though not so far below the goal as for prime contracts, OFS has also failed to meet Treasury‟s

goals for subcontracting dollars. Although Treasury has made efforts to include small
businesses, there remains room to improve.

Also of note is the limited involvement of women- and minority-owned small

businesses.226

Despite increases over time in small business contracting, the situation has not
substantially improved with regard to minority- and women-owned businesses. Only one prime
contract has been awarded to a minority-owned business. Trade associations representing
minority- and women-owned businesses, moreover, state that Treasury has not reached out to
them as it has done for small businesses more generally.227

The Panel notes with concern the

lack of outreach to minority- and women-owned small businesses.

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