Background We previously reported that DOL is one of more than a dozen federal agencies—known as National Drug Control Program agencies—that have responsibilities for drug prevention, treatment, and law enforcement activities. The Office of National Drug Control Policy (ONDCP) was established in 1988 to, among other things, enhance national drug control planning and coordination. As federal agencies engage in drug control efforts, ONDCP is responsible for, among other things, overseeing and coordinating the implementation of national drug control policy across the federal government. These responsibilities include promulgating a National Drug Control Strategy. In 2017 and 2018, ONDCP lacked a statutorily-required National Drug Control Strategy, and we recently reported that the 2019 National Drug Control Strategy did not fully comply with the law. In December 2019, we recommended that ONDCP develop and document key planning elements to help ONDCP structure its ongoing efforts and to better position the agency to meet these requirements for future iterations of the National Drug Control Strategy. We also found that the 2019 strategy did not contain several pieces of required information, such as quantifiable and measurable objectives, and specific targets for long-term goals, or a description of a performance measurement system. ONDCP subsequently issued the 2020 National Drug Control Strategy on February 3, 2020. We reviewed this Strategy and found that it made progress in addressing several statutory requirements but fell short in meeting others. Furthermore, in our March 2019 High-Risk report, we named drug misuse as an emerging issue requiring close attention. Based on our findings from a body of work related to drug misuse—including 25 new GAO products issued since our 2019 High-Risk report—we have determined that this issue should be on our High-Risk List. DOL’s Phase 1 and Phase 2 grants, targeted to support efforts for addressing the opioid crisis, are authorized by WIOA, which was enacted in 2014 and emphasizes the alignment and integration of workforce programs. ETA is responsible for some WIOA programs, which provide education and other services to help job seekers obtain employment and advance in the labor market, including job search assistance, career counseling, and a variety of occupational skills such as classroom and on-the-job training. In addition, WIOA emphasizes that employers are also customers of the workforce system, and includes provisions that involve them in helping the system provide the skilled workers they need. WIOA requires states to submit plans to DOL every 4 years, and updates to these plans every 2 years, that outline the state’s workforce strategies for core WIOA programs. The next state plans are due in 2020. WIOA gives state and local officials the flexibility to develop and fund services that meet the specific needs of their local communities and meet WIOA goals of increasing employment, retention, and earnings to promote economic self-sufficiency. To that end, WIOA core program performance measures and targets include those related to job attainment and retention; median earnings; and skill and credential attainment. DOL officials told us that states generally use the same WIOA performance measures for the Phase 1 and 2 grants as well. The WIOA-funded workforce development system provides services through a national network of approximately 2,400 American Job Centers (AJCs). State and local entities deliver WIOA-funded employment and training activities and coordinate with partner programs via the AJCs. ETA’s Phase 1 and 2 grants are intended, in part, to serve dislocated workers—adults whose jobs have been terminated, who have been laid- off, or who were self-employed. These grant funds are awarded to states, tribal governments, or outlying areas that, in turn, may work with local workforce boards to administer the grants. Grant recipients generally have 2 years to expend their funds. See table 2 for more information about these grants. Both grants require that recipients partner with community organizations, such as those in health care and justice systems, and with at least one local workforce development board or AJC. While grants cannot be used to pay the costs of in-patient drug treatment and in-patient rehabilitation programs, grantees may use some funding to provide supportive services to participants, such as assistance with child care. States may be using other federal funds to address the workforce impacts of the opioid crisis, including other WIOA-related funding. For example: Ohio received $8 million in September 2018 from DOL’s Trade and Economic Transition National Dislocated Worker Grant, which provides training and career services to dislocated workers affected by layoffs at one or more companies and are seeking reentry into the workforce. The state targeted 16 counties in the state that officials said had been hardest hit by the opioid crisis. State officials said they plan to use this grant to provide services to anyone who meets the criteria of a dislocated worker, and they felt the opioid crisis had a strong enough economic effect for the state to use the grant for those whose employment has been affected by the crisis. DOL’s Women’s Bureau granted Maryland $650,000 in September 2018 to fund two projects providing job-seeking supports to women affected by opioid use disorder. Pennsylvania plans to use HHS funding to expand treatment capacity for underserved populations through targeted workforce development, according to its grant application. Additionally, ETA has recently provided more funding opportunities to support state and local workforce efforts to address the opioid epidemic. In September 2019, ETA, in partnership with the Appalachian Regional Commission and the Delta Regional Authority, announced the 23 grantees on the first round of funding under the Workforce Opportunity for Rural Communities Initiative, which included a focus on serving individuals impacted by the opioid epidemic. Five of the ten awards in the Appalachian region committed to addressing opioid and other SUD impacts as part of their projects. Also, in October 2019, ETA announced another funding opportunity for $20 million in grants under the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act. The SUPPORT Act directs DOL to conduct a pilot grant program to address the economic and workforce effects associated with SUDs. Beyond those recently funded, workforce efforts to address the opioid crisis may need to continue for many years given the nature of SUD. Research suggests that incentives for avoiding drug misuse, such as obtaining and maintaining employment, can be highly effective in promoting recovery from SUD. However, an estimated 40 to 60 percent of people with SUD experience relapse, according to the National Institute on Drug Abuse. As a result, people with SUD often need ongoing support to reduce this risk. States Used Targeted Grants to Tailor Assistance to Job Seekers in Recovery, but Results Are Not Yet Known Workforce Agencies Relied on Partnerships to Enhance Services to Job Seekers in Recovery Officials in the four selected states that received Phase 1 and Phase 2 DOL grants told us that the required partnerships with community organizations were essential in their efforts to serve those affected by SUD. These relationships fostered both knowledge sharing and coordination, elements especially important to state officials with limited experience serving this population. For example, in Ohio, state officials said that input from community partners, such as substance use disorder and mental health boards, helped them identify who could best provide supportive services for job seekers in recovery. We found workforce agencies in all four states receiving targeted DOL grants worked to serve job seekers with the following partners: Health care organizations. Workforce officials said they partner with health care organizations to identify people in recovery from SUD who are ready to look for employment. For example, New Hampshire state officials described the state’s “hub-and-spoke” services system, where health care entities such as hospitals refer people affected by SUD to various services. The health care staff coordinate with local workforce agency staff and notify them when an individual in recovery is ready for employment and training services. Other states described similar coordination of services. For example, a local workforce agency in Washington is partnering with a nonprofit health care organization to coordinate workforce development efforts with health and social services. Justice organizations. Workforce agencies partnered with drug courts, detention centers, and other facilities to address the employment readiness and support needs of those in the juvenile and adult justice systems who may have SUD. For example, in Washington, local workforce agency officials told us that they provide training and education services—including reentry workshops and work readiness services—for their area’s juvenile justice facilities, where over 70 percent of the population has a substance use disorder. In New Hampshire, state workforce officials described a partner organization whose officials have relationships with all of the drug courts in the state, and also sit on the board of the drug court in one of the state’s largest counties. They said that drug courts provide people an option to seek recovery services instead of criminal charges, and the local workforce agency provides employment services for people participating in drug courts. Educational institutions. Partnerships with community colleges and universities helped workforce agencies to provide employment training for job seekers interested in participating in recovery services. In two of our selected states, officials reported using funds to support the development of peer recovery specialists. Such peer recovery specialists, according to HHS, can bring the lived experience of recovery to assist others in initiating and maintaining recovery. For example, in Ohio, the state workforce agency partnered with a community college to help people to become peer recovery specialists and licensed chemical dependency counselors. Maryland provided Phase 1 Grant funds to a research-based organization, housed on the campus of state university, which is preparing peer recovery specialists. Furthermore, local workforce agency officials in Ohio also told us that they worked with a university to put together a master’s degree in social work for those with Licensed Social Worker credentials or a bachelor’s degree. Other organizations. Partnerships with community organizations and housing commissions helped states address transportation and housing needs through referrals and coordinated services. For example, local workforce officials in Washington told us they work with partners through subcontracts or memoranda of understanding to help job seekers with childcare and housing so they can attain and retain employment. Also, officials in New Hampshire told us that one state partner works with sober living houses, which are group homes in which people in recovery can live during and after treatment. Several state workforce officials we interviewed noted that a key benefit to the WIOA targeted-assistance grants was forging partnerships which will have lasting impacts on how they conduct services in the workforce system. For example, officials in New Hampshire noted that the state plans to continue to leverage relationships with their partners after the grant expires. Also, officials in Ohio said these partnerships put new processes in place, including referral systems that will facilitate getting people in recovery into the workforce system over the long term. States not receiving targeted grants. Workforce officials in Alabama and Arizona, the states we selected that did not receive targeted DOL grants but are still experiencing high levels of opioid misuse in their communities, stated that they were engaged in some newly formed partnerships to address the workforce aspects of SUD. Alabama workforce officials said they recently began participating in a statewide opioid task force, including serving on the workforce subcommittee with other state departments, such as the state Department of Commerce. Arizona officials said that the state workforce agency partners with the state Department of Corrections and has implemented second chance centers, which offer services such as job training and onsite job fairs, within three prisons. They noted that in one of these prisons, the majority of women are incarcerated for drug-related offenses. Workforce Agencies Used Funding to Provide Employment Services to Job Seekers in Recovery Officials in the four selected states that received targeted DOL grants said they used this funding to assist those in recovery from SUD to obtain employment. While many of the services are also offered to other job seekers, officials said grant-funded efforts involved intensive work with SUD-recovering individuals, who may have inconsistent work histories or long periods of unemployment. New Hampshire state workforce officials reported providing individuals in recovery with services, including job training, direct placement in a job, or on-the-job training. As of January 2020, officials said the state had enrolled 177 individuals into its program, including some who are participating in on-the-job training (employment that is partially subsidized by grant funds). Similarly, officials at a local workforce agency in Washington told us that the agency aims to place 125 people affected by SUD into transitional jobs as part of its grant-funded activities. These subsidized jobs allow individuals to add experience to their resumes, as well as gain an employment reference. In Maryland, the state distributed part of its Phase 1 grant funds to local workforce agencies in eight counties directly or indirectly affected by the opioid crisis. These funds provide job seekers with employment, training, and support services that help them prepare for, secure, and retain employment, and advance along career pathways in high-demand industries and occupations—including those related to SUD recovery, such as counseling. Similarly, Ohio workforce officials told us they were reintegrating individuals who are affected by opioid use into the workforce by using some of their Trade and Economic Transition National Dislocated Worker Grant funds to provide career services, guidance, and counseling, along with support services. Several officials noted that, while their agencies may use the same process for those with SUD as those without to get individuals ready for jobs, it is often a longer process when someone is in recovery or otherwise affected by SUD. For example, officials from a local workforce agency in Ohio told us that those in recovery from SUD often need more services and support to work through barriers prior to job placement than other clients without the disorder. Agency workforce staff are to follow up with people in recovery to make sure they are still supported, even after they have found employment or have enrolled in training—sometimes on a weekly basis. Officials said that those in recovery may not have previously had a job or attended post-secondary school before, and must balance their recovery with these new responsibilities. Similarly, state workforce officials in New Hampshire said that many in recovery have not had the opportunity to build skills and confidence. The New Hampshire Work Ready program is a 60-hour program offered through the state’s community colleges that provides help in areas such as how to dress for an interview and the workplace. This program, which is available to all job seekers, also helps people decide what to disclose regarding their personal history and helps them emphasize their strengths. Officials characterized this program as especially helpful for people with criminal backgrounds. In response to the needs of those in recovery, they said the state has created a new “bridge” program to prepare individuals to participate in the Work Ready program, which will be implemented in recovery centers using targeted grant funds. States not receiving targeted grants. Workforce officials in Alabama and Arizona, states that did not receive targeted grants, said that state efforts to address SUD, and more specifically opioid use disorder, were largely focused on the health aspects of the issue. Alabama officials told us that the state workforce agency was not originally part of the Governor’s task force on opioid use disorder. The task force’s recommendations were mostly health care related and addressed issues such as provider practices. However, the task force has recently added a workforce subcommittee with the goal of identifying strategies and resources to provide in-demand career pathways for those affected by SUD, and officials reported that they plan to apply for Phase 2 funding in the future. Arizona state officials said that its workforce development system provided support in communities, but noted that there is not a coordinated strategy statewide. Arizona officials also emphasized that they consider SUD primarily a public health issue, not a workforce issue; they said that while employment is part of a spectrum of services, SUD is an issue that is best addressed on the health side. Agencies Also Funded Specialists and Are Piloting Workplace Programs To assist those affected by SUD in finding employment, local workforce agencies used their targeted grant funding to secure specialists. For example, officials at two local workforce agencies in Ohio told us they had hired or planned to hire new staff to work with the population affected by SUD. One agency plans to hire case managers specializing in mental health, who will team with AJC staff to help ensure clients in recovery get the support they need to be successful. The other agency plans to hire peer recovery specialists and job coaches to help those in recovery develop soft skills. One local workforce agency in Washington also hired peer recovery specialists, and is using them as case managers at an AJC. Another agency in Washington is using Phase 1 grant funds to employ four “navigators” to coordinate services to address the needs of those in recovery. In addition, officials said they are in the process of hiring a job developer to liaise between job seekers, navigators, and employers, and help recruit employers who are willing to hire those in recovery from SUD. Additionally, communities are exploring different workplace programs to support those in recovery. Officials in New Hampshire and Ohio reported using their Phase 1 and Trade and Economic Transition National Dislocated Worker Grant funds, respectively, to pilot recovery-friendly workplace initiatives, which provide training and supports to employers to help them better understand and work with individuals with SUD. Ohio state officials told us that, in three pilot counties, the state will train supervisors and managers and provide second-chance policies and employee assistance programs. According to these officials, recovery- friendly workplaces encourage an environment where employers, employees, and communities can collaborate to create positive change and eliminate barriers for those affected by SUD. In New Hampshire, employers may request that the state designate them as a recovery- friendly workplace. The New Hampshire workplace program will provide an advisor who conducts an orientation with management and staff and helps the employer publicize their participation in this effort so that their employees will know of their commitment, and will know their workplace is a safe place to disclose SUD. Employers in the program also agree to complete certain activities, such as conducting training and making connections with local recovery organizations. New Hampshire officials said they had 220 employers participating in the program as of January 2020. Workforce Efforts to Address Substance Use Disorder Are in Early Stages and Results Are Not Yet Known State and local workforce officials said that their efforts to meet the needs of job seekers and employers in communities affected by SUD are relatively new. For example, officials in Ohio said that state efforts are still very much in the preliminary planning stages of their broader implementation goals. They said that, at this point, they are looking at how to educate workforce agencies and staff about how to best address the needs of this population. State and local officials in our four selected states receiving targeted Phase 1 and Phase 2 grants were not yet able to report outcomes. Officials told us that it took time to organize and implement plans, causing delays in beginning activities. Specifically, workforce officials stated that: In Washington, officials said they received the notification for Phase 2 grant funding in March 2019. The state workforce agency finalized the contract with the local workforce agency at the end of May 2019, and began enrolling eligible job seekers in the late summer and early fall of 2019. In New Hampshire, it took the state six months to begin implementing grant activities after receiving funding in July 2018, and officials confirmed in January 2020 that they were still too early in addressing the opioid crisis to have any outcomes. In Maryland, officials originally planned to use funding to train peer recovery specialists to work in the state’s AJCs. However, the state Department of Health secured funding to train peer recovery specialists, and they did not want to duplicate efforts. As a result, they revised their plan to instead create an Opioid Workforce Innovation Fund, which delayed grant activities by six months or more. As of August 2019, Ohio officials said they were just starting to get the local workforce areas on board and acclimated. They reported that they had just completed training for the local workforce agencies on the grant rules and activities, and launched a toolkit to help agencies serve individuals with SUD. Workforce Agencies Face Challenges Helping Individuals Affected by Substance Use Disorder Gain and Maintain Employment Workforce Agencies Struggle to Support Job Seekers with a Range of Barriers to Employment Workforce agency officials in all six of our selected states told us they face challenges addressing the needs of job seekers affected by SUD, in part due to their limited experience in serving this population. For example, Health issues. Officials in all six states said they continue to struggle with ensuring job seekers receive necessary services due to lack of medical treatment, mental health services, and recovery services and personnel, especially in rural areas. For example, officials at a local workforce agency in a rural area of Maryland said their area has no addiction specialists, and many people in the area have to travel nearly 2 hours to receive recovery treatment and counseling. Involvement with the justice system. Individuals in recovery may be more likely to have criminal records that complicate obtaining and maintaining employment. Officials in New Hampshire told us that employers might not hire people with a criminal history, and that employers are allowed to ask about criminal history on a job application, even if the individual is in long-term recovery. Appalachian Regional Commission officials said that job seekers with a criminal record also have especially limited employment options in their region because the federal government and its contractors are large employers there, but may not be able to hire someone with a felony conviction, which is an issue for many individuals with SUD. Transportation difficulties. Lack of reliable, affordable transportation presents difficulties for many in recovery. For example, New Hampshire officials told us many people with SUD have lost their license or have no car, and few public transportation options are available in the state outside of urban areas. Local workforce officials in a rural area of Ohio said no reliable public transportation exists near them, and the limited taxi service that exists is very expensive. Housing difficulties. Individuals in recovery may not have access to stable housing, making it difficult to focus on job training or employment. Specifically, officials in Maryland, Ohio, and Washington cited homelessness as an issue among those in recovery. Further, New Hampshire officials said individuals who have a drug conviction may not be eligible for government-subsidized housing. While homelessness can be a result of a substance use-related history, local officials in New Hampshire, Ohio, and Washington told us that there is also a lack of affordable housing in their respective areas. Workforce Agencies Face Difficulties Recruiting Employers Workforce officials in all six selected states told us that they have had difficulty finding employers who are willing to hire those in recovery. As a result, workforce agencies risk not meeting WIOA performance targets related to (1) job seekers’ obtaining and maintaining employment and (2) effectiveness in serving employers. Workforce officials in all six states cited employer concerns around relapses, safety and reliability, suitability, and stigma. Relapses. Officials from the Appalachian Regional Commission said this was the most challenging aspect of SUD with respect to the workplace. Officials from another organization that works with employees with SUD also told us that employers may be reluctant to hire SUD-affected individuals because state laws or claims related to lack of reasonable accommodations under the Americans with Disabilities Act of 1990 can make it difficult to terminate individuals with a known substance disorder when they relapse. To address this, some employers put in place a zero- tolerance policy, automatically terminating an employee who tests positive for drugs. Safety/reliability. Workforce officials in Maryland said employers are concerned that SUD-affected employees may bring drugs into their workplaces or quit unexpectedly. New Hampshire officials told us that employer liability is an issue as employers are worried about accidents. They also told us employers are concerned about productivity loss due to SUD and, in particular, an employee’s inability to work a regular schedule because they or a family member is dealing with SUD. Ohio officials in one local area told us that employers in white-collar jobs are less willing to hire individuals in recovery because they are concerned about possible theft, and that workforce officials have been working with businesses to secure liability insurance. Suitability. Some employers will not hire a person who is unable to pass a drug test. This may present issues for individuals who take medication as part of their recovery treatments. For example, Alabama officials told us that a major reason that employers in their state did not hire job applicants for vacant positions was because they could not pass initial drug screenings. In addition, under U.S. Department of Transportation regulations on workplace drug and alcohol testing, when an employee performing safety-sensitive functions tests positive for drug use, they must be removed from performing such functions and evaluated for treatment options before returning to work. This includes those in aviation, trucking and locomotive transit. Certain entities regulated by the Nuclear Regulatory Commission are also required to administer drug and alcohol testing. Workforce officials in Washington said that it is also difficult for people with SUD to obtain the available jobs in their state in the health care field and with federal agencies because these jobs required drug testing. Stigma. Employers may also be reluctant to hire those affected by SUD because of its associated stigma. New Hampshire officials said that employers are concerned about people’s perceptions and believe it would hurt business if they declare themselves a recovery-friendly workplace. For example, they told us about an employer who runs a high-end restaurant in the state who expressed concern that customers may not want an individual with SUD preparing their food. Washington officials expressed similar concerns, saying that while some employers embrace being a recovery-friendly employer, others do not publicize this because they are unsure how it will be received by the public. Officials in Alabama also noted the need for honesty and transparency about the stigma of SUD and for employers who are willing to invest in their workers. DOL Is in the Early Stages of Supporting State and Local Efforts through Information Sharing and Technical Assistance; Workforce Agencies Identified Additional Needs Federal Partnerships Help DOL Identify Ways to Support State and Local Agencies Serving SUD- Affected Individuals According to DOL officials, they have begun working with ONDCP and other federal agencies to address the drug crisis. DOL officials noted that, although the National Drug Control Strategy does not include explicit goals and performance targets for DOL or employment and training- related efforts, DOL is using the strategy to guide its efforts in addressing the opioid crisis. DOL officials said they have regular conversations with ONDCP about how ETA can support the ONDCP strategy within its current authority. For example, one DOL official told us she communicates with ONDCP nearly every week. DOL officials also said they attend meetings hosted by ONDCP which occur roughly every 6 weeks and include representatives from all of the agencies involved in the National Drug Control Strategy. According to DOL officials, through these meetings, they have learned about government-wide efforts to support those affected by SUD, and have shared information about DOL’s own efforts to address the opioid crisis. DOL officials told us they communicate with other federal agencies regarding the opioid crisis. For example, DOL officials said that HHS provided a list of available grant funding to address the opioid crisis, and DOL has sent this list to its regional offices to distribute to states. In addition, ETA officials told us that two out of the six regional offices have staff serving on regional opioid task forces, for example, with HHS. DOL has also conducted several webinars with HHS on addressing training and employment needs of individuals and communities affected by SUD. Specifically, DOL officials described: a webinar in October 2018 discussing topics such as the rise in opioid use and a screening and intervention technique; a webinar in May 2019 for program staff working directly with participants in the workforce development programs located in states in the mid-Atlantic region, which are among those with the highest opioid-related deaths; and, a webinar with HHS, ONDCP, and other organizations in August 2019 on peer support recovery, including discussing how DOL grant funds have been used to train SUD-affected individuals to become peer recovery specialists. Internally, DOL officials told us they began a DOL-wide opioid workgroup in April 2019 to improve communication among units and strengthen connections across the agency. According to DOL officials and meeting agendas we reviewed, the workgroup meets about once a month, and discusses what DOL is doing to address the opioid crisis and identify any potential gaps in their efforts. They also invite speakers from external organizations, such as ONDCP, the Centers for Disease Control and Prevention, and the National Institute for Occupational Safety and Health. DOL Provides Some Support for Targeted Opioid Grants Recipients, and Has Plans in Place for Oversight and Evaluation ETA officials have provided technical assistance to states during the Phase 1 and 2 grant application processes, such as by clarifying allowable grant-funded activities and defining grant eligibility, and during grant implementation. According to officials, ETA assigned Federal Project Officers from one of its six DOL regional offices to work with each state. Officials have also encouraged information sharing among grantees. For example, officials said they hosted quarterly calls among grantee states, where they discussed performance reporting, evaluation, and use of the Federal Bonding Program, and have allowed time for peer- to-peer sharing of grant accomplishments and challenges. To encourage peer-to-peer sharing and engagement, ETA also provided grantees with a list of grantee contacts in all states that received Phase 1 or 2 grants. However, this technical assistance has been limited to those receiving the targeted grants, and is not offered to all states, tribes, and outlying areas that may be interested in conducting related work. DOL officials are working to improve available information on addressing the employment and training needs of those affected by SUD. According to DOL officials, interested entities can access a DOL website called WorkforceGPS with resources and materials on substance abuse, including its effect on the workforce system, and case management resources. DOL also contracted with a research organization to review literature that examines what is known about workforce programs for individuals with SUD. The research is meant to identify key themes and findings related to successfully implementing the Phase 1 grants, such as the role of mental health services in the lives of grant participants and different employment-related interventions. DOL officials said that, as a complementary piece to the literature review, the contractor was tasked with developing a resource guide that identifies promising practices across the public and private sectors, with a goal of providing up to date information on tools, programs, websites from across the country to serve as a resource for grantees who are planning and implementing their own initiatives. Officials said that the contractor shared preliminary results from its research activities with targeted grantees in October 2019. Based on these results, DOL officials reported that there was a lack of evidence about the relationship between opioid use disorder and employment. Therefore, they said, the literature review covers a broader range of information related to SUD in an effort to provide useful information. DOL released the full results of the literature review and resource guide on its website in March 2020. Regarding oversight of grant activities, DOL plans to review grantee performance through required state quarterly reports, which have only recently begun to be submitted. DOL requires that these reports include financial data and program performance information (such as characteristics of, and services received by, participants, as well as participant outcomes). These quarterly reports also contain a narrative section where grantees can share information on project success stories, upcoming grant activities, and promising approaches. The final quarterly report for the grant must summarize the successes and/or challenges in delivering services, as well as address the topics of sustainability, replicability, and lessons learned. DOL officials said they do not have plans to share information from the summaries in the quarterly reports with other states. In addition, DOL officials told us that states generally are to use the same performance measures for these grants as they do for WIOA core programs. However, officials said they realize the SUD population could have different challenges than the rest of the WIOA population and, as a result, they are looking into developing new performance measures to address these differences. Regarding evaluation of grant activities, DOL has contracted with a research organization to conduct a 3-year evaluation of Phase 1 activities. The evaluation is expected to end in September 2021, with a final report to follow. DOL officials confirmed that there will be no interim reports. State and Local Workforce Agencies and Our Review Identified Areas for Further Assistance Although some state and local workforce officials we interviewed were aware of available technical assistance from DOL, they identified a need for more information to help them address challenges in serving communities affected by SUD, as discussed below. Furthermore, our review of DOL documents and guidance such as the ETA announcements to states of the targeted grants and the WIOA state plan guidance, found that these documents did not fully address the questions and concerns of state and local workforce officials. Federal internal control standards regarding risk assessment state that management should identify, analyze, and respond to risks related to achieving its objectives such as WIOA’s goals of increasing employment and retention. These standards also state that management should communicate with its partners to help achieve its objectives. Better communicating information could enhance DOL’s ability to respond to these risks. Specifically, state and local workforce officials and our review identified three areas in which additional DOL actions could help officials address the needs of job seekers in recovery and potential employers: Clarity about expectations and use of funds. Officials in Arizona, Ohio, and Washington said they would like clarification from DOL about its expectations regarding the role of state and local workforce systems in preparing individuals in SUD recovery for employment, or in determining the appropriate use of WIOA grant funds. Clarity around DOL’s expectations for state workforce agencies could be helpful, as Arizona officials emphasized that they consider SUD a public health issue, not a workforce issue, and have viewed SUD as an issue that is best addressed on the health side. Also, information on expectations and the use of non-targeted WIOA grant funds is especially important as states draft their 2020 WIOA state plans, which will set priorities for state workforce agencies for the next 4 years. For example, officials from one local area in Washington told us that they hoped to continue the grant activities and partnerships past the end of the current targeted grant, but they were unsure whether they could do this with non-targeted, WIOA formula grant funding. Our review of the targeted grant announcements found they did not contain information on whether this was an allowable use of funds. ETA issued guidance regarding the 2020 WIOA state plans in February 2020. However, our review of this guidance found that it does not provide specific information about states’ roles in meeting the needs of job seekers in recovery from SUD or their potential employers, or how non- targeted WIOA funding can be used to address those needs. DOL officials acknowledged that the guidance does not include such information, stating that the purpose of the guidance was to focus on the procedures and instructions for states in submitting their state plans, and not to provide specific suggestions on uses of WIOA funds or what particular strategies states should pursue. Clarity on the role of states and the use of WIOA funding would better position state workforce systems to meet the training and employment needs of those affected by SUD and their potential employers. Better information sharing with all states. Officials from four of the six selected states identified areas in which it would be useful for DOL to enhance its information sharing. Specifically, officials in these states told us that it would be useful for DOL to share information about lessons learned and successful strategies in addressing the needs of job seekers in recovery and potential employers with all states—whether or not they received targeted grants. They said such information would be particularly helpful given that many states are in the early stages of developing their programs. Officials stated that information based on the experiences of their peers would assist states in ensuring those in recovery are job ready and in hiring and retaining these workers. For example, officials from Arizona—a state without a targeted DOL grant—told us their communities could benefit from learning about experiences of states or local areas that are addressing the crisis within the workforce system, especially those using an approach that offers wraparound services such as transportation assistance. Additionally, officials from Ohio—a state with a targeted DOL grant—said they would like to learn from more experienced state officials who have been working for 6 months or a year within the workforce system to address the opioid crisis. Workforce officials stated that even if job seekers in recovery are trained and job ready, workforce agencies face challenges in addressing employers’ concerns about hiring these individuals. Workforce officials in five of the six selected states said that information about incentives for employers to hire individuals affected by SUD, and/or education for employers about this population, would be helpful given that perceived risks have led to difficulties with finding employers who are willing to hire this population. In particular, given limitations of federally supported incentive programs and the stigma associated with SUD, a dual approach—education and incentives—may be needed. However, at this point, most information on strategies to address employer concerns, including leveraging pre-existing federal programs, is not widely disseminated. DOL officials stated that they recognize the challenges state and local workforce agencies face in engaging employers in this area and are exploring use of existing programs to incentivize the hiring of job seekers with SUD. However, they acknowledged that to date, limited information has been shared with the large network of state and local workforce agencies. Thus far, DOL has been piloting and promoting one available incentive, the Federal Bonding Program, which is designed to help reduce employers’ risk by offering reimbursement for loss from illegal acts, such as theft or embezzlement, for individuals with criminal records. DOL officials have recognized that other existing incentive programs—targeted to employers of other populations, such as low-income, and other disadvantaged job seekers—may be helpful. They said that because the populations eligible for these programs share similar characteristics as those in recovery, they are exploring how to connect them to employers who are willing to hire those in recovery. For example, the Work Opportunity Tax Credit encourages employers to hire individuals from certain targeted groups who have consistently high unemployment rates, such as individuals with a felony record, by providing employers with a tax credit as an incentive to hire and retain these workers. However, state officials said, and our review confirmed, that these current federal programs may not fully address employer concerns. Specifically, bonds might not protect against other liabilities which may be of concern to employers, such as accidents caused by an employee under the influence of opioids. Furthermore, despite promoting awareness of these programs, DOL officials recognized that these efforts alone may not increase employer participation, particularly given the need to move beyond the stigma associated with that condition. Officials in two states told us that education is an important response in addressing employers’ concerns about the potential stigma associated with hiring individuals with SUD. For example, New Hampshire has a pilot program on recovery- friendly workplaces to educate employers about reducing stigma associated with SUD, as well as related human resource policies and employee assistance programs. Also, Arizona officials stated that workforce agencies need to understand the employer perspective and engage, educate, and involve employers. To date, DOL has been primarily communicating information about emerging, workforce system-based strategies to serve job seekers and employers affected by SUD with Phase 1 and 2 grantee states. As previously noted, DOL has an existing mechanism—its WorkforceGPS website—that could be used to share information more widely. Access to information on promising practices and lessons learned can help workforce agencies in all states learn about possible ways to address the needs of job seekers affected by SUD and their potential employers. More time to use grant funds. Officials in New Hampshire, Ohio, and Washington said that a longer time window in which to use the DOL grant funding would be helpful. For example, New Hampshire officials said the length of time needed for intake and enrollment for clients with SUD is longer than usual for a typical WIOA job seeker; therefore, more time to use the Phase 1 grant funds could help them with the more intense interventions. In addition, state workforce officials in Ohio told us it is complicated and takes time to develop new partnerships and trust at the local level, and to determine what the state and other partners can provide. Similarly, Washington state officials said the limit on the time allowed to use the Phase 1 and 2 grant funds has limited their ability to enroll job seekers in recovery and implement their partnerships. Specifically, state officials said that the delay in receiving funds means they will not have the full 2 years for grant activities. To meet DOL’s reporting deadlines, they will need to complete their activities earlier than anticipated. ETA officials told us that they are considering extending the Phase 1 and 2 grant periods for some states. In commenting on a draft of this report, they also said that If these limitations prevent a state from continuing its grant beyond a certain period of years, states can apply for a new grant should it still meet the conditions for eligibility, such as if the public health emergency declaration for the opioid crisis remains active. Conclusions In light of the persistent nature of the drug crisis and the complex set of issues facing individuals on the path to recovery, workforce agencies are likely to continue facing challenges in meeting the needs of this population and their potential employers. As the agency responsible for the nation’s workforce system, DOL can play an important role in serving communities and individuals affected by SUD who are seeking employment. However, state officials we interviewed expressed uncertainty about what is expected of them or the specific allowable uses of their non-targeted WIOA funds to address a crisis that has long been considered primarily a health and law enforcement issue. Our work raises concerns about how the workforce system continues to seek clearer direction on the role of states and the use of non-targeted WIOA grant funding in helping ensure the economic well-being of communities affected by this public health emergency. DOL’s current efforts are still in the early stages, and it will take time for the agency to fully identify and disseminate effective, evidence-based strategies. In the meantime, states are seeking the best information currently available to help their workforce systems support job seekers affected by SUD and their potential employers. DOL’s targeted grants provide an opportunity for grantees and non-grantees alike to learn states’ experiences in addressing the effects of the opioid crisis through the workforce system, but information on the current approaches states receiving targeted grants are using is not being shared beyond the targeted grantee community. Sharing this information with all states could better position workforce agencies to address the needs of job seekers affected by SUD and help employers understand and address the perceived risks of hiring job seekers in recovery. While the workforce system may take time to fully build its capacity to work with these job seekers and employers, opportunities exist to learn and make interim progress towards this end. Recommendations for Executive Action We are making the following two recommendations to DOL: The Assistant Secretary for Employment and Training should clarify DOL’s expectations of the role of state workforce agencies in addressing the employment and training needs of those affected by SUD and how non-targeted WIOA funding can be used to assist job seekers and employers. (Recommendation 1) The Assistant Secretary for Employment and Training should share information from targeted grantees with all state workforce agencies, tribal governments, and outlying areas regarding lessons learned and promising practices in addressing the needs of job seekers affected by SUD and potential employers. (Recommendation 2) We provided a draft of this report to DOL and HHS for review and comment. In its formal comments, which are reproduced in appendix I, DOL agreed with our recommendations. DOL also provided technical comments, which we incorporated as appropriate. HHS did not have comments. In its response, DOL noted that throughout our report, we refer to SUD, but that its targeted grants are limited to addressing SUD caused by opioids. While our report focuses on SUD more broadly, many of the efforts states and federal agencies are involved in focus on opioid use disorder, as a result of HHS’s emergency declaration. DOL also stated that it was in the process of announcing another round of grants in partnership with the Delta Regional Authority and the Appalachian Regional Commission, part of which will be available to address opioid or other SUD. DOL also noted that grant-funding limitations, including the availability of appropriated funds, make it difficult to address states’ concerns about not having enough time to spend their grant funds, and suggested that states may consider applying for a new grant. We have reflected this point of view in the final report. In response to our first recommendation, DOL officials said they anticipate providing information and technical assistance to help workforce system grantees understand how they can address the impacts of SUD on the workforce. ETA plans to issue guidance by the end of 2020 to share promising practices and describe how WIOA funds can be used to support job seekers in recovery and employers. In response to our second recommendation, DOL officials said ETA has created resources that are available to all states based on its experience administering some of the targeted grants. ETA officials cited the recently published literature review and companion resource guide, and said they also plan to share the evaluation of the Phase 1 grants widely when it is available, including any resources or tools developed by states that were awarded Phase 1 grants. In addition, ETA plans to host at least one webinar to share additional promising practices from the targeted grants that could be useful to local workforce boards around the country. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Labor, the Secretary of Health and Human Services, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Appendix I: Comments from the Department of Labor Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Danielle Giese (Assistant Director), Amy Sweet (Analyst-in-Charge), Linda Lootens Siegel, and Anna Kallschmidt made key contributions to this report. Also contributing to this report were Deborah Bland, Alex Galuten, Natalie Herzog, Tom James, Bill Keller, Sheila R. McCoy, Corinna Nicolaou, Monica Savoy, Almeta Spencer, Tonnye Connor-White, and Greg Whitney.


Background We previously reported that the Army began its modernization efforts— defined as efforts to enhance its capabilities and upgrade its weapon systems—in the fall of 2017. As a part of this effort, the Army identified six modernization priorities. 1. Long-Range Precision Fires— focused on improving the targeting, range, and lethality of, among other things, artillery and rockets. 2. Next Generation Combat Vehicle—focused on developing manned and unmanned combat vehicles with updated firepower, protection, mobility, and power generation. 3. Future Vertical Lift— focused on developing manned and unmanned aircraft capable of attack, lift, and reconnaissance missions. 4. Army Network— focused on developing a mobile system of hardware, software, and infrastructure for reliable and secure communications. 5. Air and Missile Defense—focused on improving capabilities for protection against modern and advanced air and missile threats. 6. Soldier Lethality—focused on improving capabilities, equipment, and training for all fundamentals of combat including shooting, moving, communicating, protecting, and sustaining combat operations. We also reported that, to fund these priorities, in 2017 the Army realigned over $1 billion in science and technology funding away from efforts that it determined did not align with these priorities. The Army subsequently announced plans to spend an additional $7.5 billion on these priorities over the next 5 years. Army Futures Command Army Futures Command was formed less than a year ago and has not finalized its structure. The Army established the Army Futures Command in June 2018 to consolidate its modernization efforts under one entity and it began initial operations in July 2018. Army Futures Command selected Austin, Texas, as its headquarters location and began to integrate and align resources and personnel. The new command headquarters includes a number of administrative and functional offices that report directly to it, not all of which are co-located with the command in Austin. Specifically: Administrative offices are responsible for providing contracting support, legal support, and small business engagement support to headquarters. These offices are located in Austin, Texas. Army Applications Laboratory is responsible for coordinating outreach to businesses, including small businesses, for headquarters. The Army Applications Laboratory is located in Austin, Texas. Cross-functional teams are the eight teams responsible for identifying capability needs and developing requirements associated with the Army’s six priorities. The teams are located in different parts of the country in areas relevant to their capability focus. Medical Research and Development Command is responsible for seeking and developing new medical technologies for use by the Army. This command is in the process of transferring from Army Medical Research and Materiel Command and is located at Fort Detrick, Maryland. In addition to these organizations, the command has three major subordinate components, comprised of several existing requirements and technology development organizations. Specifically: Futures and Concepts Center is responsible for identifying and prioritizing capability and development needs and opportunities. This organization subsumed the Army Capabilities Integration Center— formerly part of Army Training and Doctrine Command—on December 7, 2018 and is located at Fort Eustis, Virginia. Combat Capabilities Development Command is responsible for conceptualizing and developing solutions for identified needs and opportunities. This organization subsumed the Research, Development, and Engineering Command—formerly a part of Army Materiel Command—on February 3, 2019 and is located at Aberdeen, Maryland. Combat Systems Directorate is responsible for refining, engineering, and producing new capabilities. The directorate is to communicate with the program executive offices and program management offices reporting to the Assistant Secretary of the Army for Acquisition, Logistics, and Technology. The command is in the process of establishing Combat Systems Directorate in Austin, Texas. Army Futures Command is expected to become fully operational in July 2019, when its headquarters and its subordinate components are fully staffed. Locations for components of the new command are shown in figure 1. According to Army Futures Command officials, as part of their modernization efforts, they plan to coordinate with other existing Army organizations. These include the Office of the Assistant Secretary of the Army for Acquisition, Logistics, and Technology—the civilian authority responsible for the overall supervision of acquisition and contracting for the Army. They also plan to coordinate with Army Contracting Command, which is the principle buying agent and provider of contracting support for the Army and operates within Army Materiel Command. Small Business Engagement As we previously stated, others have reported that small businesses are a vital part of the defense industrial base and engaging with them can produce innovative capabilities and emerging technologies to support the warfighter. For the purposes of this report, engagement with small business is defined as a range of activities including: initial outreach to small businesses to identify companies that may have useful information or ideas, information sharing on the Army’s capability needs, and formal engagement including processes to enter into business relationships, including contracts and other arrangements. The Small Business Act requires federal agencies to establish annual goals that provide small businesses with contracting opportunities to the maximum extent practicable. Pursuant to the Act, the Small Business Administration negotiates annual small business goals with federal agencies, including the Department of Defense. A portion of the overall goals for the Department of Defense is assigned to the various military components— including the Army—that have contracting authority. The Army Office of Small Business Programs, responsible for enhancing Army contracting opportunities for small businesses, then assigns portions of the Army’s goal to its four major commands with contracting authority: Army Materiel Command, Army Medical Command, Army Corps of Engineers, and the National Guard Bureau. Army Materiel Command is the primary command responsible for the execution and oversight of contracts for Army Futures Command. Historically, the Army has engaged with small businesses in a variety of ways, including awarding contracts for various goods and services that support the warfighter. Federal contracts, including those awarded by the Army, are tracked in the Federal Procurement Data System-Next Generation database. Using data provided by the Army from this database, we identified over 4,500 contracts awarded to small businesses for research and development efforts in the 5 years prior to the establishment of Army Futures Command—fiscal years 2013 through 2017. The number of contracts awarded during this time period is summarized in table 1. We identified almost $2.3 billion in obligations to small businesses for research and development from fiscal years 2013 through 2017, or about half of the total amount the Army obligated for all research and development contracts. The obligations for these Army contracts awarded to small businesses for research and development are summarized in table 2. These contract obligations for research and development went to 1,815 small businesses throughout the United States from fiscal years 2013 through 2017. Figure 2 shows this information for each state as well as the District of Columbia and Puerto Rico. About half of the Army contract awards and obligations to small businesses for research and development from fiscal years 2013 through 2017 supported two organizations—Research, Development, and Engineering Command and Medical Research and Materiel Command— which have transitioned, or are in the process of transitioning, to Army Futures Command. To support research and development efforts for these two organizations, the Army awarded 2,948 out of a total 4,514 small business contracts, and obligated about $1.3 billion out of $2.3 billion from fiscal years 2013 through 2017. In addition to the contracts discussed above, the Army can use other arrangements to engage with small businesses. These other arrangements include: agreements using other transaction authority for research and development activities and developing prototypes; financial assistance mechanisms including grants—which are used when the principal purpose of the relationship is to transfer a thing of value to the recipient to carry out a public purpose authorized by law, and substantial involvement by the agency is not expected—and cooperative agreements—which are also used to transfer a thing of value to carry out a public purpose, but where substantial involvement by the agency is expected; and cooperative research and development agreements under which the government and nonfederal partners may share resources and increase the commercialization of federally developed technology. Unlike contracts, the Federal Procurement Data System-Next Generation database cannot be used to quantify engagement with small businesses using these other arrangements. For example, the financial assistance mechanisms, as well as cooperative research and development agreements, are not generally tracked in the Federal Procurement Data System-Next Generation database. In addition, while it is the Department of Defense’s policy to report the use of other transaction authority for prototype projects in the Federal Procurement Data System- Next Generation, the data for this reporting does not distinguish business size. As a result, it cannot be used to quantify the Army’s engagement with small businesses under this arrangement. Army Did Not Conduct Analyses Specific to Small Business, but Army Futures Command Stated It Considers Small Business Engagement Important The Army conducted several analyses related to its modernization efforts, including those directly focused on the creation of Army Futures Command. We identified the following key analyses the Army used to support its modernization efforts: In October 2017, Army reviewed its science and technology portfolio and determined which investments contributed to the Army’s modernization priorities and which might be curtailed or eliminated to realign funding. According to Army officials, this review was focused on identifying solutions to known capability needs, not on how small businesses would be affected by the realignment of funds. In early 2018, Army analyzed several options for the roles, responsibilities, staffing, and organizational structure for the proposed Army Futures Command. This analysis did not include an assessment of how small business would be affected by its establishment. In April 2018, Army completed a report on its modernization strategy as mandated by the Congress. The report focused on warfighting challenges, risks, costs, and acquisition timelines for fielding future capabilities. It also included analyses of near-peer competitors, operational requirements, strategic portfolio analyses, and capability gaps. It did not include information on what role, if any, small businesses would have in developing or supplying the means to close capability gaps. Multiple Army officials explained that they did not specifically analyze the effect of modernization on small business as they anticipated continuing their current level of engagement with these entities and perhaps increasing it. Further, senior Army Futures Command officials stated that they consider engagement with small businesses to be critical to their modernization efforts as well as a key aspect of their mission. They also noted that the command’s headquarters location in Austin, Texas was chosen, in part, because of its close proximity to science, technology, and engineering talent and small business start-ups that can provide innovative solutions. Army Futures Command Is Taking Steps to Engage with Small Businesses, but Is Not Fully Leveraging Existing Relevant Army Expertise Army Futures Command Stated It Is Continuing Small Business Engagement Efforts of Subordinate Commands and Taking Initial Steps to Enhance Engagement Senior Army Futures Command officials told us they intend to continue the small business engagement efforts undertaken by components being integrated into the new command. Command officials stated that organizations transitioning to Army Futures Command will continue engaging with small businesses as they have in the past. For example, organizations transitioning to Army Futures Command awarded about $1.3 billion to hundreds of small businesses from fiscal years 2013 through 2017. In addition, prior to transitioning to the new command, the Combat Capabilities Development Command Army Research Laboratory and the Medical Research and Materiel Command participated in outreach events, such as industry days and conferences focused on small businesses, to network with and identify small businesses for potential future awards. According to officials from these commands, these efforts have historically led to business relationships using a variety of arrangements, including contracts, agreements using other transaction authority, grants, cooperative agreements, and cooperative research and development agreements. Officials from Army Futures Command stated that the past efforts of its components aimed at small business engagement would continue. The command also plans to continue utilizing the Small Business Innovation Research and Small Business Technology Transfer programs to award contracts, grants, and cooperative agreements to small businesses. Army Futures Command also intends to use their cross-functional teams to enhance small business engagement. These teams identify capability needs and requirements derived from the Army’s six modernization priorities. Officials told us that these cross-functional team efforts can serve as a way to focus small business engagement. For example, the cross-functional teams develop problem statements that describe the capabilities currently needed by the warfighter for a specific activity, such as a need for better communications and networking equipment. These problem statements can then be shared with small businesses as part of outreach efforts—such as challenge competitions or industry days—and lead to discussions about potential solutions. In addition, Army Futures Command officials told us the command intends to enhance its small business engagement through several initiatives—some of which are underway and some of which are in development. Officials told us they were not certain how many of these initiatives have led to specific contracts or awards, but noted that they had in some cases. Command officials told us that they have undertaken four initiatives to engage with small businesses for research and development: Army Research Laboratory Open Campus 2.0 is based on an existing Army Research Laboratory program to transition scientific research from universities to Army technology concepts. It will work with the research communities within universities to develop these concepts and potentially commercialize them. This program is currently directed by the office of the Deputy Commanding General, which is located at the command’s headquarters in Austin, Texas. Army Capability Accelerator is a new initiative that engages small businesses in developing and maturing concepts into prototypes and validating early-stage technologies. The accelerator is managed by the Army Applications Laboratory, which is located with the command’s headquarters in Austin, Texas. It also provides the support and infrastructure needed to accelerate small businesses’ concepts into solutions for warfighter capability gaps. Army Capability Accelerator has offices in Austin, Texas, and New York City, New York, and Army Futures Command intends to establish additional offices across the country. Army Capability Accelerator has hosted or co-hosted events allowing small businesses to demonstrate their capabilities and engage with the command. For example, the Austin office hosted a challenge competition in September 2018 to develop a solution for countering a drone threat. Similarly, according to officials, the New York City office hosted a challenge competition in December 2018 where the command funded awards to small businesses for positioning, navigation, and timing capabilities. Army Strategic Capital is a proposed restructuring of a prior initiative intended to leverage venture capital to offset Army development costs through co-investment with existing Army Small Business Innovation Research and Small Business Technology Transfer programs. According to Army Futures Command officials, this initiative will be managed by the office of the Deputy Commanding General in Austin, Texas, but is in the planning stages and could involve legislative or policy changes to clarify or augment the authorities of the command. Halo is a new initiative intended to accelerate the adaptation and transition of commercial and startup-derived products to Army applications and programs. This initiative involves more mature technologies and focuses on the acceleration and integration of prototypes. Army officials stated that Army Applications Laboratory will manage this initiative and that it is under development. These four initiatives are described further in Figure 3 below: Army officials noted that many of their new initiatives address concerns raised by small businesses in working with the government, including the Army, on research and development activities. According to a representative involved with the capability accelerator office in Austin— which involves a private company that works with small businesses to facilitate opportunities both across the private sector and, now, with the Army—small businesses have expressed concerns about working with the government. Specifically, these representatives identified concerns related to barriers to entry, length of time to reach an award, and the complexity of the government contracting process, among others. Similarly, representatives from the capability accelerator office in New York City stated that the Army needs a way to increase its visibility to small businesses in order to attract the interest of these companies. Army Futures Command officials acknowledged these concerns and said that they are developing efforts to alleviate or overcome them. For example, as part of its Halo initiative, the Army created a program intended to guide small businesses through the government contracting processes. In addition, Halo also plans to use business arrangements designed to decrease the time between initial contact with small businesses and the award of contracts or other agreements. Army Futures Command Has Not Fully Leveraged Army’s Small Business Expertise but Is Working to Improve Coordination In its initial efforts to enhance engagement with small businesses, Army Futures Command did not fully leverage the expertise of other Army organizations that previously facilitated small business engagement. Various Army officials have identified several early instances in which the command took steps to engage with small businesses without consulting other Army offices with relevant expertise. For example: Army Office of Small Business Programs—According to Army Office of Small Business Programs officials, the command did not consult with them (1) before engaging with small businesses in Texas for research and development efforts; (2) when establishing its small business office, which is still ongoing; and (3) before announcing hiring positions for that office. Army Office of Small Business Programs is positioned to provide direct support to various commands on small business activities. In particular, we previously reported that small business offices are responsible for assisting agencies in increasing small business participation and provide advice on acquisition strategies and market research. Subordinate Commands—According to Army officials, Army Futures Command has not fully engaged the organizations that transitioned, or are transitioning to, the command in terms of small business research and development efforts. Combat Capabilities Development Command and its subordinate command Army Research Laboratory, these organizations have years of experience working with small businesses on research and development efforts. Army Research Laboratory is the Army lead for the Small Business Technology Transfer program, and participates in the Small Business Innovation Research program along with other Combat Capabilities Development Command organizations; both of which are designed to stimulate technological innovation. Combat Capabilities Development Command officials stated they have had limited involvement with Army Futures Command headquarters on small business research and development issues. In addition, Medical Research and Development Command officials stated that Army Futures Command headquarters has not interacted with them on small business engagement beyond planning for the organization’s transfer to Army Futures Command. Historically, Medical Research and Materiel Command participated in the Small Business Technology Transfer and the Small Business Innovation Research programs and conducted outreach to small businesses through various events, such as industry days and conferences focused on small businesses. Office of the Assistant Secretary of the Army for Acquisition, Logistics, and Technology—We reported in January 2019 that it was not yet clear how Army Futures Command will coordinate its responsibilities with the Office of the Assistant Secretary of the Army for Acquisition, Logistics, and Technology. The office conducts outreach to small businesses, sponsors challenge competitions, and promotes small business participation in Army acquisitions. More recently, according to Army officials, the command is seeking to improve and formalize coordination roles and responsibilities related to research and development within and outside the command. For example, Although a formalized agreement between the command and Army Office of Small Business Programs does not yet exist, the command is now actively consulting with this office. According to Army small business officials, the command has been familiarizing small business staff with their office and its small business research and development efforts. The command has also been establishing its small business office with support from Army Office of Small Business Programs. In addition, Army small business officials stated that the office is assessing the command’s small business needs to determine how to allocate workforce resources. However, the effort has not been finalized. The command is also working to formalize small business relationships within and among its components. As part of this, the command established a Directorate of Operations at headquarters to facilitate integration of command activities across components, which would include those related to small business research and development. However, the command has not yet assigned a permanent director for the new directorate. According to Army Futures Command officials, as well as Army documents, the command will continue to develop coordination procedures related to research and development with the Assistant Secretary of the Army for Acquisition, Logistics, and Technology. The command is also working with the Assistant Secretary’s office on a challenge competition that aims to facilitate small business engagement with the Army and spur innovative technology. Army Futures Command does not have its own procurement authority, so the Army Contracting Command will provide it with contracting support. This support includes making awards to small businesses on behalf of Army Futures Command. Army Contracting Command officials told us they are also supporting the establishment of an Army Futures Command contracting office that would advise on contracting needs. For example, they sent temporary support staff to the headquarters of the new command and are helping with recruitment efforts for permanent personnel. Army Futures Command officials told us they had not prioritized coordinating with other Army organizations that have small business expertise because the command and its officials had other, more pressing priorities, such as establishing the command and engaging directly with small businesses as quickly as possible. Federal internal control standards state that during the establishment of an organizational structure management should consider how organizations across and outside of it interact in order to fulfill their overall responsibilities. This includes establishing reporting lines and roles and responsibilities within and outside the organization as they relate to small business engagement. With those coordination roles and responsibilities established, organizations are better able to communicate the quality information necessary to fulfill their overall small business engagement responsibilities. By taking actions to formally coordinate with and leverage other Army organizations’ expertise, such as coordinating outreach events, Army Futures Command could improve its opportunities to engage with small businesses and obtain access to the innovative research and development they could provide. Further, if the command does not formalize coordination roles and responsibilities, it risks potentially duplicating small business-related work and creating overlap and fragmentation. Army Futures Command Has Not Yet Developed Tracking or Performance Measures for Small Business Engagement Army Futures Command Does Not Fully Track Small Business Engagement As previously noted, Army Futures Command stated it is continuing the efforts of its subordinate commands to engage with small businesses and is taking additional steps to enhance engagement. However, command officials told us they do not systematically track the number and timing of outreach events, the number of participants at these events, and the extent to which these outreach efforts result in business arrangements such as contracts. As a result, Army Futures Command officials were uncertain of how often the command—across all of its components—was engaging with small businesses for research and development efforts. For example, Army Applications Laboratory officials were not able to identify the number and timing of challenge competitions the command has hosted or is planning to host in the future. Some organizations that have transitioned to Army Futures Command, such as Combat Capabilities Development Command, continue to track small business engagement activities for their component. However, Combat Capabilities Development Command officials told us that they were unsure if this data will be tracked at Army Futures Command headquarters. According to Army Futures Command officials, the command has not prioritized tracking small business activities because it focused instead on establishing the command and engaging with small businesses as quickly as possible to identify innovative solutions. Officials did not provide a specific plan for tracking such engagement. According to Federal Internal Control Standards, management should establish monitoring activities for its internal control system and evaluate the results to remediate any identified challenge on a timely basis. Further, management should use quality information from reliable sources in a timely manner to achieve the objectives of the command. By tracking its small business engagement activities, Army Futures Command would have a more comprehensive understanding of the various efforts underway across the command. This would provide opportunities to examine its overall small business engagement efforts. Tracking such information would also allow the command to make adjustments to those efforts to ensure it obtains the innovative input from small businesses the command has stated it needs to achieve its modernization goals. Tracking small business engagement across the command components could also help reduce inefficiencies including overlap, fragmentation, and duplication of its small business engagement efforts. Army Futures Command Has Not Yet Established Performance Measures to Assess Small Business Engagement While Army Futures Command officials told us they consider small businesses to be critical to their success and they have taken steps to engage with small businesses, the command has not yet established measures for evaluating the effectiveness of that engagement across the command nor has it developed a plan to systematically assess these efforts. Command officials told us that they are in the process of considering various measures to do so, but they have not yet determined which specific measures, if any, they will use. There is also no time frame to establish these measures. According to Army Futures Command officials, they would consider small business engagement successful if, for example, a Small Business Innovation Research award resulted in an innovation or a technology that was later transitioned to a weapon systems program or a product that would further support an Army weapon systems program. Command officials told us they have not formalized and implemented these measures because the command and its officials have prioritized focusing on establishing the new command. Components subsumed by Army Futures Command have historically used performance measures to assess their small business engagement. For example, officials from Combat Capabilities Development Command told us that they previously used several outcome-based measures, including the number of Small Business Innovation Research products incorporated into fielded Army acquisition programs, contracts awarded to small businesses, and total dollars obligated to small businesses for research and development. This previously collected information was then provided to management in various small business offices in semiannual reports. Officials told us they have continued to monitor this information since the transition to Army Futures Command. Officials from Medical Research and Development Command also reported that they have performance measures and that they use these measures to assess the success of their small business engagement. For example, they said that they develop summary reports after outreach events with small businesses. These reports describe the event, outcomes, and how participation at the event enhanced utilization of small businesses for research and development efforts. The reports are also used internally as market research for future opportunities. Internal control standards call for management to use quality information to make informed decisions and to define objectives in specific and measurable terms so that performance toward achieving those objectives can be assessed. Management should also determine whether performance measures for the objectives are appropriate for evaluating performance. Once performance measures are defined, management should then establish and operate monitoring activities that allow them to evaluate the effectiveness of the internal control system. Establishing performance measures and developing a plan to capture and monitor information on its small business engagement would help ensure Army Futures Command is not missing opportunities to make informed management and investment decisions for its research and development efforts. Establishing these measures and a plan to monitor how the command assesses small business engagement would also help it to evaluate the overall effectiveness of its small business engagement in providing support to the warfighter and identifying which small business efforts have been most effective. Conclusions The establishment of Army Futures Command represents a considerable change to how the Army develops new weapon systems and prepares for the future. While Army Futures Command is still finalizing how it will operate, it is already engaging with small businesses in various ways. However, the command could better manage these efforts. In particular, formalizing coordination roles and responsibilities with Army organizations that already have small business experience, such as the Army Office of Small Business Programs, would allow the command to leverage additional expertise as it pertains to small business engagement for research and development. In addition, Army Futures Command does not systematically track engagement across the command. By tracking this activity, the command could more effectively oversee and manage overall small business engagement. Finally, while Army Futures Command officials consider engaging with small businesses critical to the success of modernization, it has not yet developed performance measures to assess the effectiveness of its small business engagement nor has it developed a plan for systematically assessing its efforts. Establishing performance measures, and using them to assess small business engagement, would provide the command with information to evaluate, and potentially enhance, its engagement with small businesses to help accomplish its research and development efforts. Recommendations for Executive Action We are making three recommendations to the Secretary of the Army. The Secretary of the Army should direct the Commanding General of Army Futures Command to formalize coordination roles and responsibilities for small business engagement in support of research and development with relevant Army entities. (Recommendation 1) The Secretary of the Army should direct the Commanding General of Army Futures Command to systematically track its small business engagement in support of research and development across its subordinate organizations. (Recommendation 2) The Secretary of the Army should direct the Commanding General of Army Futures Command, in coordination with relevant Army entities, to establish command-wide performance measures and develop a plan to use these measures to systematically assess the effectiveness of small business engagement in support of research and development. (Recommendation 3) Agency Comments We provided a draft of this report to the Army for review and comment. In its written comments, reproduced in appendix II, the Army concurred with all three of our recommendations. The Army also provided technical comments which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Acting Secretary of Defense; and the Acting Secretary of the Army. In addition, the report is available at no charge on the GAO Website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or LudwigsonJ@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology You asked us to examine how small businesses that support research and development efforts could be affected by the establishment of Army Futures Command. This report (1) describes what analyses, if any, the Army conducted to determine the effect of its modernization initiatives on small businesses; (2) describes how Army Futures Command is engaging with small businesses to support research and development efforts and assesses how it is coordinating with other relevant Army organizations; and (3) assesses how Army Futures Command plans to track and measure the performance of its engagement with small businesses to support research and development efforts. We analyzed research and development contract awards and obligations made during fiscal years 2013 through 2017 for the Army. The data are presented in the background as it is prior to the establishment of Army Futures Command in 2018. For the number of contracts, we used the number of new base contract awards for research and development. For the obligations, we analyzed both newly awarded base contracts and associated orders under indefinite-delivery contracts since funds would be obligated at the order level. The obligations in this analysis include only those made during the fiscal year the contract was awarded. To identify and analyze contracts awarded during that time period, we requested data in the Federal Procurement Data System-Next Generation database from the Army. The Army used the product and service codes for research and development to extract the relevant data for fiscal years 2013 through 2017. The data also included contracts awarded through the Small Business Innovation Research and Small Business Technology Transfer programs for that time period and business size and registered location. We excluded foreign military sales obligations. We did not include subcontractor data. We obtained the funding codes for organizations that are transitioning to Army Futures Command, which includes the former Army Research, Development, and Engineering Command and the Army Medical Research and Materiel Command, portions of which are transitioning to the new command. To determine the proportion of contracts and associated obligations that supported these organizations, we used their funding codes to identify the number of contracts and associated obligations during our selected time period. To assess the reliability of the Federal Procurement Data System-Next Generation data, we electronically tested for missing data, outliers, and inconsistent coding. Based on these steps, we determined the data were sufficiently reliable for identifying and analyzing Army contracts awarded from fiscal years 2013 through 2017 for research and development efforts and their obligations. We obtained data on grants, cooperative agreements, and other types of agreements using the Defense Assistance Awards Data System. We conducted initial analysis on the data and discussed reliability and validity of the data with agency officials. As a result, we determined that the data were not sufficiently reliable for the purpose of this engagement and we excluded them from our review. To describe analyses the Army conducted on the potential effect modernization efforts could have on small businesses, we collected and reviewed available studies and analyses the Army conducted. We reviewed the Army’s science and technology portfolio analysis, studies related to the establishment and future organizational structure of Army Futures Command, and the Army’s modernization strategy to determine if the Army analyzed how small businesses could be affected. To describe how Army Futures Command is engaging with small businesses to support research and development efforts, we reviewed policies, procedures, and guidance from the Department of Defense, Department of the Army, Army Futures Command, and other relevant Army organizations on small business engagement. We also reviewed relevant sections of the Federal Acquisition Regulation, as well as Defense and Army supplements to the Federal Acquisition Regulation, to understand the framework for small business participation in support of research and development efforts. We also reviewed relevant statutes, regulations, and policies regarding research and development and small business programs. We collected and analyzed documentation on how Army Futures Command engages with small businesses, including its roles and responsibilities, outreach efforts, and award documentation as well as those of its subordinate components. To assess how Army Futures Command coordinates with other Army organizations, we reviewed policy documentation, such as a memorandum of understanding on coordinating contract support and for small business engagement, in addition to operational orders outlining roles and responsibilities. We assessed the information we collected against Federal Standards for Internal Control related to organizational structure, reporting lines, roles and responsibilities, and using quality information. To assess how Army Futures Command plans to track and measure its engagement with small businesses, we reviewed policies from the Department of Defense and Army on engagement with small businesses. To understand how Army Futures Command plans to track its small business engagement, we reviewed policy documentation from the command, operational orders, briefs and memoranda. We also reviewed documentation on how organizations tracked this data prior to transitioning to Army Futures Command. In order to assess any performance measures Army Futures Command plans to use to evaluate its small business engagement, we reviewed available documentation on the establishment of the command. We also reviewed documentation from organizations transitioning to Army Futures Command to determine how these organizations previously monitored and evaluated their small business engagement. In addition, we assessed the information we collected against Federal Standards for Internal Control related to establishing monitoring activities, using quality information, defining objectives, and evaluating results. To more completely understand the small business engagement efforts of the new command, we interviewed officials from various Army offices, including the Office of the Under Secretary of the Army, Army Futures Command, organizations transitioning to the new command, Army Office of Small Business Programs, members of the Office of the Assistant Secretary of the Army for Acquisition, Logistics, and Technology, and Army Contracting Command. We also met with two private sector entities the Army has coordinated with for outreach to small businesses. These entities have experience in engaging small businesses both in the private sector and for government programs and discussed with us the concerns and challenges small businesses have in working with the government. These views are not generalizable but provide perspective on matters relevant to the Army’s efforts to engage with small businesses. We conducted this performance audit from September 2018 to July 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the Department of Army Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Jon Ludwigson at (202) 512-4841 or LudwigsonJ@gao.gov. Staff Acknowledgments In addition to the contact named above, J. Kristopher Keener (Assistant Director), Andrea C. Evans (Analyst-in-Charge), Hilary Benedict, Emily Bond, Frederick K. Childers, Matthew T. Crosby, Lori A. Fields, Julia Kennon, Jean McSween, Monique Nasrallah, Anh Nguyen, Kevin O’Neill, William Shear, and Anne Stevens made contributions to this report.