DOE audit: Small businesses getting help when it's not needed

By Annette Cary, Tri-City HeraldNovember 25, 2013 

Small businesses picked for Department of Energy mentor-protege programs are too often not the ones that need the extra help, according to an audit report by the DOE Office of Inspector General.

The audit looked at mentor-protege programs at Hanford and two other DOE sites in Tennessee and South Carolina.

Small businesses picked by DOE or its contractors in the program often are given subcontracts outright without having to bid for the work in competition with other small businesses, according to the audit report. Many contractors guaranteed the companies they pick as protege are given subcontracts ranging from $100,000 to $4 million.

The mentors benefit by counting the awards toward their small-business subcontracting requirements.

The mentor-protege program is intended to grow small businesses by helping them develop business and technical capabilities to make them better able to perform work for DOE and other federal agencies. The goals of the program are laudable and have been recognized as valuable by the small business community, the audit report said.

But the audit found that several small business picked for the extra help had already received significant federal awards before becoming a protege. In other cases, they were allowed to continue as protege for too long or graduated from the program at one DOE site and then became a protege, with similar development help offered, at another DOE site.

One protege company at Hanford had received more than $102 million worth of federal work before becoming a protege, according to the audit report. It did not name the Hanford contractor and subcontractor in that mentor-protege arrangement.

In two other examples in Oak Ridge, Tenn., protege had received previous awards of more than $61 million and $47 million. An additional nine protege at Hanford and the Oak Ridge and Savannah River, S.C., DOE sites had received subcontracts for federal work totaling $7 million to $28 million.

"The fact that these protege all received significant federal awards prior to entering the program tends to indicate that they should have already had the capabilities that are typically developed by participation in the program," the audit report said.

The audit also found three small businesses that had been protege for more than a decade and eight that had been protege for more than seven years. DOE recommends an initial two-year agreement with up to four one-year extensions, but has no written formal policy.

Issues occurred because DOE and its prime contractors did not have an adequate control structure for effective oversight of the mentor-protege program, the audit report said.

DOE did not have adequate polices to guide its contractors in picking protege, did not monitor the progress of protege and did not have an adequate tracking system for protege, the audit report said. And mentors did not always give enough consideration to protege' existing capabilities when selecting protege.

In some cases, contractors earned pay based for their performance as mentors, giving an incentive to pick protege that already had a record of successful federal projects, the audit report said.

The Office of Inspector General recommended that DOE develop detailed policies and procedures to make sure that the most suitable small businesses were selected for the extra help the program offers. DOE said it would make policy revisions and expects to have them completed in fall 2014. It also has plans to improve monitoring of protege and to track mentor-protege across the DOE complex.

-- Annette Cary: 582-1533; acary@tricityherald.com; Twitter: @HanfordNews

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