Small businesses picked for financial backing from a U.S. Department of Energy "mentoring" program are often poor choices, the agency's inspector general found.

The Mentor-Protégé Program seeks to encourage small businesses to be prime contractors or subcontractors -- or "protégés." The small businesses are then groomed by larger contractors to produce better work for the Energy Department and eventually other federal agencies. Once the businesses were picked -- sans bidding against other businesses -- they were awarded subcontracts ranging between $100,000 and $4 million.

From 2010 to 2012, the IG found that the Energy Department struggled to effectively oversee the program, which led to businesses receiving help that shouldn't have received it.

Specifically, 13 protégés were found to already have received procurement transactions from the government worth between $7 and $11 million before joining the Energy Department program. For example, one protégé at the Y-12 National Security Complex in Tennessee had already received more than $61 million.

Six mentor-protégé agreements exceeded the terms of up to six years; some were as long as 10 years. Four "graduates" from the program were also then allowed to enter into a similar mentor-protégé agreement at other DOE sites.

"These findings, coupled with the practical limitations on the number of available Program slots, led us to conclude that small businesses most suitable for inclusion may not have had the opportunity to participate," the IG report revealed.

Contractors also had the incentive of possible additional pay based on their performance as mentors, leading them to often pick protégés known for producing successful projects.

The Energy Department said it plans to have policy revisions completed by fall 2014. The agency also plans to improve monitoring of the mentors, protégés and the program as a whole.