(b) authority for the Small Business Administration (SBA) to waive

terms of the Miller Act for "start up" 8(a) concerns;

(c) definitions of "socially disadvantaged" and "economically disadvantaged" individuals;

(d)

(e)

(f)

(g)

a subcontracting clause for small and small disadvantaged concerns for all contracts over $10,000;

a requirement for subcontracting plans for small and small disadvantaged concerns in all contracts $500,000 and over ($1 million for construction);

authorization for payments of incentives for contractor performance in subcontracting to small and small disadvantaged firms;

a requirement that contracts under $10,000 be reserved for small business;

(h) the establishment of annual goals by Federal agencies for

ક

procurement from small and small disadvantaged concerns;

(i) establishment in Federal agencies of an Office of Small and

(j)

Disadvantaged Business Utilization; and

the requirement for assignment of small business technical advisors in agencies with SBA procurement center

representatives.

Some of these elements of the law are being implemented directly by OFPP, others are being implemented by the Small Business Administration (SBA). In both cases, we have coordinated closely with SBA.

I would like, Mr. Chairman, to discuss in turn the status of each of the elements over which OFPP has some implementing responsibility, with primary emphasis of the Section 211 subcontracting provisions. I would also like to mention some problems we have faced and still face.

SECTION 211, SUBCONTRACTING PROGRAM

General Progress

The major P.L. 95-507 responsibility of OFPP was the preparation of implementing regulations for Section 211, regarding subcontracting obligations of prime contractors. In this implementation we worked closely with SBA, particularly with respect to their primary role in interpreting the statutory term "other minorities," and with respect to their roles in goal-setting and evaluating subcontracting plans.

On January 16, 1979, the OFPP published in the Federal Register its proposed regulations for the implementation of Section 211. In response to that publication, we received 104 separate comments. Most of the comments from industry, government, and interest groups were constructive and helpful. On April 10, 1979, final OFPP implementing regulations were signed and were published in the Federal Register on

April 20, 1979. Thereafter, GSA and DOD issued formal amendments to the Federal Procurement Regulations and Defense Acquisition Regulation on July 2, and July 27, 1979, respectively.

Although the final regulations had been issued by the end of July, as you know Mr. Chairman, the progress in fully implementing the law has not been as smooth as we would have liked, for a number of reasons that I will discuss. For this reason, in early September we decided to develop further regulatory guidance for procuring agencies to assist in their implementation efforts. After gaining some experience with P.L. 95-507, we believed that the complexities of this law needed further explanation for the procuring officials.

Throughout September and most of October, an interagency working group chaired by OFPP met to identify problem areas and draft additional regulatory guidance to overcome those problems. On October 29, 1979, the results of this effort were published for comment in the Federal Register. Several areas were addressed in more detail, including guidance on how to negotiate a subcontracting plan and set contract goals, what sort of records should be required to be kept, what to do in case of a contractor's failure to comply with a plan, and the use of incentive clauses.

Also published in that Federal Register for comment are proposed data collection formats to provide essential information required to monitor and evaluate both contractor and agency performance under the P.L. 95-507 subcontracting program and other socio-economic programs affecting subcontracting. When these forms are issued in their final

version, we expect that they will provide us with information necessary to properly carry out these programs, with a minimum of burden on both contractors and the procuring agencies.

I have attached to my statement a copy of the October 29 Federal Register submission, which contains the major OFPP implementing guidance issued or proposed for comment to date, together with the proposed data reporting formats.

Subcontracting Problem Areas

Mr. Chairman, I would like at this time to describe to you three problem areas we have encountered in the implementation of Section 211. Two of these areas we will eventually resolve, the other may need legislative change to overcome.

Commercial Products

As you know, P.L. 95-507 requires subcontracting plans for all contracts $500,000 and over ($1 million for construction). The law does not distinguish between contracts for items made specifically for the

government and contracts for commercial type products that the government buys off the shelf.

The problem with requiring subcontracting plans on contracts for commercial-type products is two-fold: First, the contractor generally does not know who its subcontractors were for items delivered under a particular contract; and second, generally the subcontracts were awarded and performed prior to the time the government places its order. These problems are compounded by the fact that in many commercial product situations the government has little or no buying leverage over the contractor since the government business is usually a fairly small portion of the contractor's total business.

These problems have led, and potentially will continue to lead to resistance on the part of the makers of commercial-type products to furnishing subcontracting plans. In our implementing guidance, we have modified the type of plan required for commercial-type products to allow for a single annual plan for a company's commercial product line. This annual plan would be submitted with each government order of the requisite size throughout the year. However, even this liberalization of plan requirements has been troublesome to implement and we expect more difficulties in the future.