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an Air Force letter as follows: "The Department of the Air Force policy is to obtain the participation of small plants to the greatest possible extent in the defense production program, whether as prime or as subcontractors, for the purpose of broadening the base of supply and of maintaining a sound nationwide economic structure." Pursuant to that policy, the Air Force conducted meetings of its large contractors throughout the country which resulted in a formalized small business subcontracting program in 1953. That program has since become Department of Defense-wide and at this time the Air Force is responsible for insuring the adequate conduct of the defense subcontracting program with those large contractors assigned to the Air Force for this purpose by the Department of Defense. The conduct of this program on the part of the Air Force is the responsibility of the administrative contracting officers (ACO's) and the small business specialists in the contract management districts. Continuing surveil lance is maintained by the ACO's, and quarterly the ACO's are joined by the small business specialists in reviewing with the small business liaison officer of the contractor concerned, the effectiveness of the program in the contractor's purchasing department. This is done by means of a small business subcontracting checklist prescribed in ASPR 1–703.3(b) (4), a checklist which originated with the Air Force prior to the time the program was established on a DOD-wide basis. Additionally, personnel of the contract management districts who are responsible for contract administration perform annually a 2- or 3-day detailed inspection of the contractor's purchasing system, resulting in its approval or disapproval. The small business specialist in the contract management district is one of the team performing this review and his findings become part of the total report. This activity on the part of the small business specialist is conducted in a thorough manner and there have been instances in which the Air Force had held up approval of the contractor's purchasing system due to inadequacies uncovered by the small business specialist.

Twenty-eight full-time small business specialists located in 22 contract management districts or contract management offices perform the functions described above. The report directly to their respective chiefs of the contract management districts. The contract management districts are grouped into three contract management regions and at each contract management region headquarters there is a full-time assistant for small business who exercises staff supervision over the small business activities of the districts within the region.

Immediately following the revision of the ASPR to reflect the subcontract legislation commonly known as the Proxmire bill, the Air Force called the liaison officers of all its large contractors in to three regional meetings, together with all ACO's and small business specialists engaged in this program. They were addressed by the Air Force small business adviser from headquarters U.S. Air Force, who went over the expanded program with them, point by point.

This subcontracting program is carefully and continuously monitored by the Air Force small business adviser, who makes it a point to personally visit each of the major Air Force contractors at least once a year. In addition the Director of Procurement Policy and the Deputy Chief of Staff, Systems and Logistics, who are almost constantly in touch with our large contractors, never fail to discuss with them their conduct of the small business subcontracting program.

(The Air Force also supplied for the use of the committee the booklet "Small Business and the Air Force," August 1963, which is being retained in the subcommittee files.)

Mr. MULTER. Thank you very much, gentlemen.


Mr. MULTER. Now the last witness we have scheduled for today is the Defense Supply Agency, Mr. Vance M. Johnston. Mr. Johnston, we are pleased to have you with us. Will you proceed and introduce those with you?


Mr. JOHNSTON. I am Vance M. Johnston, Deputy Executive Director, Procurement and Production, Defense Supply Agency. I have with me, Mr. Julian F. Ross, Small Business Adviser, and Capt. James Harvey, Division Chief of Procurement Division.

I would like to voice Admiral Blick's regrets at not being able to be here this morning, because of an accident in his family.

Mr. MULTER. We are certainly sorry, and hope everything turns out well.

Mr. JOHNSTON. Thank you. I should like to read this prepared statement, Mr. Chairman, if it is agreeable to you. It is short.

Mr. MULTER. You may proceed along the lines of our invitation to your Agency. We will make everything that is attached to your statement a part of the record at the conclusion of your statement, with the exception of the pamphlets and the like which will be reviewed, and if they can be summarized they will, or if necessary they will be referenced.

Mr. JOHNSTON. Thank you.

(The following is the invitation to the Defense Supply Agency to testify.)

Director, Defense Supply Agency,
Washington, D.C.

ОСТОВЕВ 7, 1963.

DEAR GENERAL MCNAMARA: In connection with public hearings scheduled by Subcommittee No. 2 on Small Business and Government Procurement of the House Select Committee on Small Business to review small business procurement practices of Federal departments and agencies, your Agency is invited to testify before the subcommittee on November 12, 1963, at a place to be designated, regarding the following subjects:

1. The programs, practices, techniques, and devices your Agency is employing to effectuate small business participation in Government procurement.

2. A statistical report for fiscal years 1961, 1962, and 1963, or for the period of time that the Agency has been operational, showing small business participation in prime procurements, by supplies, services, and construction, indicating number of actions, dollar amounts, and percentages of total procurement,

3. A statistical report for the same period showing small business participation in research and development procurement by number of actions, dollar amounts, and percentages of total procurement.

4. A statistical report for the same period showing small business participation in subcontracting procurement by number of actions, dollar amounts, and percentages of total procurement.

5. A statistical report for the same period showing the number of actions, dollar amounts, and percentages of total procurement—

(a) Joint small business set-asides.

(b) Unilateral small business set-asides.

6. Multiyear procurement policy, indicating total number of multiyear procurement contracts in force, number with small business firms, and the nature and type of services or supplies thus procured.

7. Weighted guidelines policy, indicating the extent to which it is being implemented and its effect, known or anticipated, on the small business subcontracting program.

8. Criteria and guidelines which determine joint and unilateral small business set-asides.

9. The respective roles of the contracting officer, small business specialist, if any, and Small Business Administration representative in small business setaside determinations and prime and subcontract awards.

10. Techniques or procedures by which procurement actions are screened and monitored to determine

(a) Feasibility of small business set-asides;

(b) Feasibility of small business subcontracting;
(c) Availability of small business for bidding;

(d) Decisions not to invite small business to bid;

(e) Causes for failure to award procurement to small business; and
(f) Adequacy of specifications to encourage small business bidding.

11. Proposed techniques and devices to generate and encourage small business procurement, including research and development.

12. Techniques and devices to screen and monitor prime contractors' make-or-buy decisions.

13. Manner in which the Agency is coordinating its procurement activities with the Small Business Administration in furtherance of the Government's small business procurement policies, including such activities as set-asides, subcontracting, and make-or-buy decisions.

14. Such comments as you may wish to make relating to the subject matter of the hearings.

It would be appreciated if you would furnish the committee with the name of the witness who is to testify on behalf of your Agency, together with 10 copies of his statement, on or before November 4, 1963.

Sincerely yours,

ABRAHAM J. MULTER, Chairman, Subcommittee No. 2.


You asked that we supply answers to 14 separate questions. In the interest of presenting a coordinated response to questions 1, 11, and 14, I am including the information therein required in this opening statement.

Inasmuch as the answers to the other questions are largely statistical, I will not burden the committee with reading them, but have submitted them as an attachment.

It is the policy of the Defense Supply Agency, in keeping with the intent and desire of the Congress and with the Department of Defense small business policy, that small business concerns shall receive a fair proportion of the total contract awards for supplies and services. In consonance with this policy, the small business program is conducted as an integral element in the DSA mission to achieve effective and efficient military supply.

Our small business program is dedicated to the achievement of two objectives: the maximum utilization of the set-aside technique, and the increased encouragement of qualified small firms to compete for our contracts. The set-aside tech

nique is, of course, after years of its application, a well-established tool for seeking to comply with the congressional mandate to award a fair share of procurement dollars to small business firms. However, we firmly believe that the continued successful use of this tool depends upon the continued influx of additional qualified small business firms to the ranks of those competing for the procurement thus set aside.

Accordingly, and to this end, the DSA small business program has been making, and will continue to make in fiscal year 1964, major efforts to interest, stimulate, and encourage additional small business competition.

Significant among these efforts is our extensive participation in industrial assistance events. During fiscal year 1963, our procurement counseling teams participated in 25 such occasions (including three DSA business opportunity events) where, among the businessmen in attendance, DSA could expect to find new sources of supply and for whom DSA could represent a new market for their products. One of the DSA-conducted events was a 3-day "fair" attended by approximately 700 prospective bidders from as far west as California. In the current fiscal year to date, we have already conducted a 3-day fair, and have just concluded a "business opportunity day" in Charleston, W. Va., in which manufacturers from all over the State came to learn how DSA can be a market for their products. We have also participated in 10 other industrial assistance events.

At all of these events, we are making a determined and deliberate effort to inform potential bidders of the opportunities available to them in DSA's procurement program, and to encourage them to participate in it. We consider these industrial assistance events as major opportunities for bringing buyers and sellers together to the mutual advantage of DSA and the businessman with whom we meet.

Included in our efforts to stimulate new small business competition for our contracts is our booklet, "How To Do Business With the Defense Supply Agency." In less than 5 minutes of reading time, it describes what we buy, where we buy it, and what steps the businessman must take in order to participate in our procurements. Copies of this booklet are submitted with this statement.

We have just published a handy, pocket-sized listing of the Federal supply classes for which DSA has procurement responsibility. These classes, each coded to the Defense Supply Center charged with its purchase, are arranged for ready reference both alphabetically and numerically. This listing, of great interest to businessmen in general, is expected to find its most significant use by all those individuals within the Government who may be called upon to answer the question, "Who buys my products?" Accordingly, the listing will be distributed to all Department of Defense small business specialists, Small Business Administration regional and branch offices, General Services Administration Business Service Centers, Department of Commerce field offices, and any other interested individuals or activities. Copies are submitted with this statement.

The DSA small business program is exploring other new methods and new techniques for increasing small business competition for our awards. Among them is a short, 16-millimeter, color-sound film entitled "DSA-A Market for You," which is being shown across the country to groups of potential bidders. In 12 minutes, it seeks to convey the idea that we are eager to attract new qualified competitors for our contracts and that small firms can do business with us.

Indicative of the approach we are taking in DSA and of the reception that our efforts are receiving is the lead article in the January 21, 1963, issue of the "Government Contractor" which, commenting on our new counseling program regulation, stated:

"DSA Regs Detail Small Business Rules-Attempt To End Info. Merry-GoRound.' A completely new appendix S, entitled "The Small Business Program,' has been added to DSA's procurement regs (DSPR) * * *. As regards counseling activities, the regs make what history may judge to be one of the greatest contributions to the business of the Republic. They attempt, by the following key phrases, to end (in this area) the merry-go-round referrals of businessmen from one Government office to another:

"*** Each DSA small business specialist is a counselor for all DSA centers. Under no circumstances is an inquiry to be handled casually in an endeavor to dispose of the problem with the least amount of effort, nor should an inquirer be told to get in touch with another DSA center. When a ✶✶✶ specialist

determines that an inquirer's problem can best be handled in another DSA center, he (the specialist) should make the necessary contact, introduction, and appointment * *

The appendix S, as well as other appropriate portions of the Defense Supply Procurement Regulation, is attached.

Throughout DSA, in the pursuit of our small business objectives, we are continuing to explore new ideas and new avenues of approach so that we may, indeed, implement, both in letter and in spirit, the congressional mandate to award a fair share of our procurement dollars to small business.

(The following attachment contains statistical information in response to the remaining questions.)

2. A statistical report for fiscal years 1961, 1962, and 1963, or for the period of time that the Agency has been operational, showing small business participation in prime procurements, by supplies, services, and construction, indicating number of actions, dollar amounts, and percentages of total procurement

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1 Services and construction represent an insignificant portion of DSA procurement. In fiscal year 1963, they totaled less than 1 of 1 percent of all dollars awarded to U.S. firms.

2 DSA was activated on Jan. 1, 1962.

3. A statistical report for the same period showing small business participation in research and development procurement by number of actions, dollar amounts, and percentages of total procurement

Not applicable to DSA.

DSA has no assigned research and development responsibilities.

4. A statistical report for the same period showing small business participation in subcontracting procurement by number of actions, dollar amounts, and percentages of total procurement

Department of Defense figures for fiscal year 1963 indicate that small firms received $4.34 billion in subcontract payments from large defense contractors. This represents 15.6 percent of the total defense awards to U.S. business firms during this period.

The DOD reporting system on subcontract payments does not permit a breakdown of this figure by individual military departments or Defense Supply Agency. Rather, the instructions on the reporting form provide that, "each reporting company, division, or plant will report the required information for the reporting unit as a whole on the basis of the total mix of defense business (e.g., expenditures for subcontracting work will not be segregated as between subcontracts under prime or under subcontracts, nor as between subcontracts arising from work for the Army, Navy, or Air Force, nor as between contracts with relatively high or relatively low expenditures to receipts ratio.)"

Under this reporting system each major DOD contractor having contracts in excess of $500,000 is assigned to one of the military services or DSA for subcontracting surveillance. Each such contractor reports all subcontract payments in a lump sum, even though it may have contracts with more than one service. Accordingly, it is not possible to provide separate DSA figures.

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