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REPORTING OF ENERGY DEPARTMENT SMALL BUSINESS CONTRACTS

Statement of Robert Thompson Chairman Energy Communities Alliance
Committee on Senate Energy and Natural Resources
May 18, 2004
Mr. Chairman and Members of the Committee, I thank you for inviting me to testify on the subject of Small Business Contracting by the United States Department of Energy (“DOE“ or “Department“). Energy Communities Alliance Supports Small Business Contracting As a small business owner and a leader in my community, I fully support the general idea of increasing small business opportunities in DOE contracts. However, in practice, the change in the Department`s reporting of small business contracting with the idea of breaking up the Department`s Management and Operating contracts and Management and Integration contracts (“Prime Contracts“) into several small business contracts creates several unintended consequences that may adversely impact local communities and workers at DOE sites and impede the ability to complete the DOE mission in a safe and effective manner. DOE`s system of awarding large Prime Contracts to contractors (“Prime Contractors“) at sites and including small business contracting goals within such contracts is the best method of ensuring small business involvement in DOE contracts.
As the organization of local governments that are most affected by the Department`s weapons complex activities, Energy Communities Alliance (“ECA“) has an interest in ensuring the effective and efficient implementation of DOE contracts. ECA is committed to making sure that the DOE contracting system works. ECA is the organization of local governments that are adjacent to or impacted by DOE activities. Our mission is to bring together local government officials in DOE impacted communities to share information, establish policy positions, and advocate community interests in order to effectively address an increasingly complex set of constituent, environmental, regulatory, and economic development needs.
Changing the Method of Counting Small Business Involvement Does Not Make Sense ECA has seen an evolution in the way the Department contracts for services. Many of the changes have made sense because they have as their goal focusing on the missions at the sites and ensuring that the U.S. taxpayer benefits. The Department has for the past several years evaluated small business contracts by measuring the amount of small business contracts the Department`s Prime Contractors utilize to meet its statutory small business contracting goals. A recent change by which the number of small business contracts issued directly by the Department increases while the number of Prime Contracts issued decreases is being met with skepticism among the local governments around the DOE facilities.
The best explanation the Department has provided to local governments is that the change is required by the Office of Management and Budget (“OMB“) to ensure that more contracts go directly to small businesses–a change that alters the method by which small business involvement is counted. In the past, the Department has informed local governments that changes in contracting have been made in order to make contractors more accountable, assist DOE in obtaining better pricing, improve contract effectiveness, and provide better incentives to ensure that contractors focus on DOE`s mission. This latest explanation as to why the system should change – to meet OMB contracting goals – will have unintended negative consequences on a complex system and does not further DOE`s mission.
Is the Department gaining a more efficient contract? A more effective contractor? The reality is that the Department is meeting an OMB goal of small business contracting – a goal ECA believes the Department achieved by setting small business contracting goals and small business contract reporting requirements in its Prime Contracts. If the Department wants to ensure more small business contracting, add the incentive to new contracts. The Department should not change a system based upon an internal administrative technicality – DOE contracts impact jobs, safety and the ability to complete a difficult job at the DOE facilities. DOE`s contracts that it is looking to directly offer to small businesses are not simple. In fact, they are complicated and require highly specialized work that is not necessarily within the area of expertise of most large or small contractors.
Some of the Department`s missions are as follows.
- Take environmentally contaminated sites that are not clearly characterized and remove and remediate hazardous and radioactive waste within a specific budget that relies upon regulatory review and approval to accomplish the cleanup.
- Provide security for Nuclear Weapons Facilities.
- Disassemble nuclear reactors.
- Demolish and remove buildings that contain radioactive and hazardous substance contamination.
Unintended Consequences Prior to my testifying before this Committee, I contacted several local government officials around the country to discuss the impact of small business contracting changes at DOE facilities. The following are some of the unintended consequences that local governments have highlighted:
1. DOE Oversight. The Department plans to divide the functions of some of the Prime Contracts into several different contracts at specific sites. DOE would become the contract integrator for the site. DOE`s record on overseeing one contractor at a site has rarely been identified as exemplary, as is clear from reading GAO reports and reviewing Congressional hearings. The Department must address how it expects to manage multiple contracts at a site utilizing a decreasing number of DOE employees to oversee the contracts.
2. Putting Regional Small Businesses Out of Work. Another consequence of dividing up the Prime Contracts is to put regional small businesses that currently work for the Prime Contractors out of business. The current system allows the Prime Contractors to solicit small businesses from a regional area. DOE`s new contracting scheme advertises small business contracting nationally. Hence, DOE`s change in policy removes the focus on regional small business hiring.