concerns owned and controlled by socially disadvantaged individuals, shall have the maximum practicable opportunity to participate in the performance of contracts let by any Federal agency." In order to effectuate this policy, Congress made crystal clear the requirements, obligations, and responsibilities relating to the subcontracting program.

The law spells out in considerable detail the circumstances under which a contractor must provide for small and minority business subcontracting opportunities, the contents of subcontracting plans, the obligations imposed upon contractors to carry out this policy in awarding subcontracts, the obligations imposed on the Federal agencies to carry out this policy, and finally, the various means for enforcing this program.

Congress provided that a best efforts subcontracting clause be included in most contracts in excess of $10,000 which essentially requires a contractor to provide the maximum practicable opportunity for small business to participate in subcontracting. Furthermore, all solicitations for contracts in excess of $500,000, or $1 million if for construction, must contain a clause notifying prospective offerors or bidders that the apparent successful offeror or bidder, if other than a small business, must submit a subcontracting plan. The subcontracting plan must include, among other items, the percentage goals for the utilization of small and disadvantaged business as subcontractors and assurances that the offeror or bidder will include a "best efforts” clause in all subcontracts he may make which provide further subcontracting opportunities.

To insure compliance with the law by prime contractors, Congress provided that: One, an apparent successful offeror who fails to negotiate a subcontracting plan becomes ineligible to be awarded the contract; two, an apparent low bidder selected to receive a contract who fails to submit a subcontracting plan shall be ineligible to be awarded the contract; three, any plan negotiated by an offeror must provide the maximum practicable opportunity for small and small disadvantaged business to participate in the performance of the contract; four, a subcontracting plan is a material part of the contract; and five, the failure of any contractor or subcontractor to comply in good faith with either the best efforts clause or a subcontracting plan constitutes a material breach of the contract or subcontract. By providing that the plan is a material part of the contract, and that the failure to adhere to it is a material breach, Congress has put the prime contractors on notice that ignoring the concerns of small and disadvantaged business will not be treated lightly as they had been in the past.

To insure proper implementation of, and subsequent compliance with, the subcontracting program by the Federal Government, Congress provided the various agencies and departments with specific functions and duties. The Office of Federal Procurement Policy was authorized and directed, "To promulgate a single, simplified, uniform Federal procurement regulation and to establish procedures for insuring compliance with such provisions by all Federal agencies." The SBA was given ample authority to review, to assist and consult with the Federal buying agencies and prime contractors to facilitate their compliance, and to report to Congress on plans it

finds unsatisfactory. Each Federal agency with procurement authority was required to establish an Office of Small and Disadvantaged Business Utilization to implement and execute the subcontracting functions and duties of the agency. Furthermore, each Federal agency was required to: One, cooperate and consult with SBA on a regular basis with respect to compliance; two, report to the SBA on the extent of participation by small business in procurement contracts; three, establish goals with SBA for participation by small business to perform subcontracts; four, conduct studies or surveys as may be necessary to determine the extent of a prime contractor's compliance with the best efforts clause; and five, provide incentives to encourage subcontracting opportunities for small business in noncompetitive or sole source contracts, which comprise the bulk of the Federal procurement dollar.

Nevertheless, despite our efforts to provide small and minority business with the maximum practicable opportunity to participate in the performance of contracts let by the Federal Government, it has come to the subcommittee's attention that the Federal agencies and departments have been derelict in their implementation of the subcontracting program. The result is that the law's goal, to increase the small and disadvantaged business share of the Federal procurement dollar, has been frustrated. To the extent that we are aware, 14 Government agencies have issued almost 1,000 solicitations without required subcontracting notices, and over 1,200 contracts valued at approximately $4.6 billion have been awarded without requisite subcontracting plans.

The actual performance by the agencies has been less than stellar. As of October 24, 1979, which is precisely 12 months after enactment of this law, merely 441 contract solicitations from 18 agencies contained the requisite subcontracting notice; 10 agencies reported no contracts awarded with subcontracting plans; and 4 agencies reported a total of 80 contracts awarded with plans, of which 68 came from a single agency (DOE). Although OFPP issued regulations implementing the subcontracting program in April 1979, some agencies have yet to commence their implementation. While we recognize that it might take a reasonable time for regulations to filter down from the head of an agency to the individual contracting officers in the field, over 13 months have passed since the law was enacted, and over 5 months have elapsed since OFPP issued its uniform guidelines.

To compound this situation, a recent legal opinion given by the General Accounting Office has cast doubt over the legality of many of these solicitations and contracts. According to that opinion, which was issued on October 19, 1979, at the request of my distinguished colleague Congressman Joseph Addabbo, former chairman of this subcommittee, contracts awarded after the issuance of GSA's and DOD's implementing regulations-which GAO found to be on July 2, 1979, and July 27, 1979 respectively-which fail to contain subcontracting plans required by the law, are "legally deficient," and, depending on the particular circumstances, contract modification or termination may be required.

Under the circumstances, the subcommittee believes that it is imperative to establish precisely what each Federal agency has done to date regarding the implementation of the subcontracting

provisions of Public Law 95-507. To this end, we have invited the Office of Federal Procurement Policy, SBA, GAO, the Office of the Secretary of Defense, GSA, and several military and civilian agencies with the largest procurement budgets. Today's hearing will provide them with an opportunity to explain how they have, or more likely have not, fully complied with the law. To the extent that the agencies have in fact been remiss, we would want to know what each intends to do to correct the situation and when we can expect full compliance.

At this time I would like to call upon the distinguished ranking minority member, Congressman Tim Lee Carter, for any remarks he may have.

Mr. CARTER. Thank you, Mr. Chairman. I have no remarks. Mr. LAFALCE. Thank you.

Mr. Corman?

OPENING STATEMENT OF HON. JAMES C. CORMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. CORMAN. Mr. Chairman, I appreciate your calling these hearings. I think sometime the people in the executive branch feel we are in adversary positions; that is not the case at all. We listen carefully to lots of testimony, we pass laws, the other body finally acts, we go to conference, the process is slow and painstaking. Once a decision is made it must be complied with. It is made for sound and valid reasons. We do not provide special laws for small business out of any kind of charity, it is a selfish reason. We find that in this big and complex country of ours, unless there is a thriving, competitive, small business, that we get into trouble. The Federal Government is the biggest single consumer of goods and services in the world. We must have a large, diverse market to which we can go to buy our goods and services. We worked a long time, we looked for almost 10 years as to whether we ought to put some requirements below the prime contracting level. I am disappointed there has been so much time lapse, and I am eager to hear the witnesses as to why.

I thank you for calling these hearings.

Mr. LAFALCE. And now I would like to call upon the Honorable Joseph Addabbo, who as chairman of this subcommittee through his efforts undertook the passage of Public Law 95-507, and has been zealous in his efforts, for which we are grateful.

OPENING STATEMENT OF HON. JOSEPH P. ADDABBO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. ADDABBO. Thank you, Mr. Chairman, I appreciate your kind words and appreciate your calling these hearings at this very important time. I am sure that under your capable leadership this subcommittee will be able to compel agencies to rectify the apparent widespread violation of law which I have recently uncovered and made known to the public over the last few weeks.

I would like to take this opportunity to report to you and the other members of the subcommittee the results of my investigation regarding implementation of section 211 of Public Law 95-507. Section 211 requires that most solicitations for large Federal contracts contain notice that the successful offeror or bidder must,

if a large business, negotiate or submit a plan which contains, among other things, percentage goals for the utilization of small and small minority-owned businesses as subcontractors. The plan, when approved by the Government buying activity, must be included in the contract as a material term.

On April 20, 1979, the Office of Federal Procurement Policy (OFPP) published in the Federal Register final rules and regulations implementing section 211 and directing the DOD and the GSA to conform the defense acquisition regulations and the Federal procurement regulations respectively, to the OFPP regulations. On May 22, 1979-over 1 month later-the GSA sent a telegram to civilian agencies authorizing use of the OFPP regulations and stating that compliance with certain other provisions of the Federal procurement regulations (FPR) were no longer required. These other regulations of the FPR contain the boilerplate small/minority business subcontracting clauses which Public Law 95-507 was intended to replace.

On July 2, 1979-about 21⁄2 months after the OFPP regulations were published and over 1 month after the telegram was sentGSA published a temporary regulation in the Federal Register. This temporary regulation referred to the May 22 telegram and, once again, reiterated that civilian agencies comply with the April 20 OFPP regulations.

Strangely enough, this temporary regulation which was published on July 2, had an effective date of April 10, 1979, which predates not only the May 22 telegram but also the publication date of the OFPP regulations.

At the very least, this confusing and contradictory set of events indicates to me that no one had given the implementation of this program any serious consideration.

However, I am of the opinion that the May 22 telegram triggered the responsibility of civilian agencies to start implementing the law. Surely, the July 2 publication did nothing more than reiterate the contents of the telegram, and the April 10 effective date is meaningless since there were no regulations until April 20. The question, then, is what have the civilian agencies done to implement section 211 since May 22? On October 25, 1979, I sent a letter to all agencies requesting that information. What I found is shocking.

Since May 22, 1979:

First, the Department of Agriculture has issued 24 solicitations that should have had a section 211 notice but, in fact, did not. This department also awarded 10 contracts for $21,596,820 that should have had plans but did not.

Second, the Department of Labor had issued 19 faulty solicitations and awarded 22 contracts for $31,342,302 that should have had plans but did not.

Third, HEW issued 85 deficient solicitations and awarded 99 contracts totaling $133,968,780 without plans even though the law and regulations clearly required plans in those situations.

Fourth, HUD represents that three solicitations failed to contain the requisite notice and two contracts for $7,551,562 were awarded without plans.

Fifth, DOT has identified 19 solicitations originally published without the notice and $155 million representing 18 contracts awarded without plans.

Sixth, the Agency for International Development reports 32 solicitations without the required notice and 29 contracts awarded for $46,401,513 that should have plans, but, in fact, do not.

Seventh, the Department of Commerce presents a rather strange story. Even though all of its solicitations contained the requisite section 211 notice, it awarded six contracts for $4,392,000 without plans because of an "unintended oversight of our contracting officers," to quote the Acting Secretary of Commerce.

Eighth, the Department of Interior advertised four solicitations without the legally required notice and awarded four contracts for $7.6 million without the requisite plans.

Ninth, finally, we come to the last civilian agency-GSA-the same GSA that has control over the Federal procurement regulations-the same GSA that sent out the May 22 telegram instructing other agencies to implement the law. This agency advertised 437 solicitations without the requisite section 211 notice and awarded 246 contracts for $306,351,761 that legally should have had plans but, in fact, did not.

And now the military departments

On July 27, 1979, DOD published Defense Acquisition Circular (DAC) 76–19. This DAC contains the regulations to implement, among other things, the section 211 subcontracting provisions. The DAC became effective upon receipt by the military buying activities.

Since receipt of the DAC:

First, the Army has advertised 26 solicitations without the requisite notice and awarded 154 contracts for $818,800,000 without plans even though such contracts must, by law, contain those plans.

Second, the Navy issued 104 solicitations without the requisite notice and awarded $1 billion representing 206 contracts without the mandated plans.

Third, the Air Force identified 89 solicitations issued in violation of the law, and 248 contracts for $633,900,000 awarded without the required plans.

Fourth, finally, the Defense Logistics Agency reported 131 solicitations without the required notice, and 165 contracts valued at $1.4 billion awarded without plans.

I am still in the process of gathering more data from some agencies that have either not yet responded to my inquiry, or have only provided partial information, or are now in the process of amending their original reports to me. However, at this point in time, I can identify a total of 975 solicitations issued without the notice mandated by law, and 1,209 contracts for $4,566,804,738 that have been awarded without plans even though the law and regulations clearly required plans in those circumstances.

On October 19, 1979, the General Accounting Office, at my request, issued a legal opinion as to the validity of contracts awarded without the requisite plans (B-114835). The General Accounting Office held, That contracts which fail to contain plans required under section 211 and the implementing regulations are legally