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NATIONAL AERONAUTICS AND SPACE
(The following is the invitation to NASA to testify.)
SELECT COMMITTEE ON SMALL BUSINESS,
Hon. JAMES E. WEBB,
DEAR MR. WEBB: 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 13, 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 bsuiness participation in Government procurement. 2. A statistical report for fiscal years 1961, 1962, and 1963 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 of—
(a) Joint small business set-asides;
(b) Unilateral small business set-asides.
6. Criteria and guidelines which determine joint and unilateral small business set-asides.
7. 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.
8. Techniques or procedures by which procurement actions are screened and monitored to determine
(a) Feasibility of small business set-asides;
(d) Decisions not to invite small business to bid;
(e) Causes for failure to award procurements to small business;
(f) Adequacy of specifications to encourage small business bidding.
9. Proposed techniques and devices to generate and encourage small business procurement, including research and development.
10. Techniques and devices to screen and monitor prime contractors' make-orbuy decisions.
11. 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.
12. Such comments as the agency 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.
ABRAHAM J. MULTER, Chairman, Subcommittee No. 2.
Mr. MULTER. The last witness this morning will be the National Aeronautics and Space Administration, represented this morning by Mr. Ernest W. Brackett. Will you come forward, sir, with anyone else that you want to join you at the witness table, and introduce the gentlemen for the record?
TESTIMONY OF ERNEST W. BRACKETT, DIRECTOR OF PROCUREMENT; ACCOMPANIED BY JACOB M. ROEY, SMALL BUSINESS ADVISER, AND CARL SCHREIBER, ASSISTANT TO THE DIRECTOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Mr. BRACKETT. This is Mr. Jacob Roey, who is the Small Business Adviser at headquarters, and Carl Schreiber from our office. Mr. MULTER. We are happy to have you with us.
Mr. BRACKETT. I am very glad to be here this morning and tell the committee something about NASA's small business policy.
Mr. Chairman and members of the committee, one of the first actions taken in the procurement area by the National Aeronautics and Space Administration after it became an operating agency in 1958 was to establish small business policy. This policy has produced results for small business concerns.
Over 90 percent of the amount of the money appropriated for NASA is spent through contracts and NASA's appropriations have grown to the point where these expenditures are having a significant impact on the country's economy, including that of small business concerns.
NASA buys a limited amount of supplies for use in its inhouse laboratory work; it contracts for services of several types such as guards, janitorial and engineering services; it contracts for construction, although much of the construction contracting is done by the Corps of Engineers for NASA, but the largest amount of NASA funds is used in research and development contracting. The majority of the larger contracts for such things as the Apollo capsule or Saturn space vehicle or the million and a half pound thrust engine must necessarily be placed with companies which have large facilities, extensive experience in missile or engine development, and large technical staffs. However, there are subjects of research and development which smaller companies can perform and NASA is utilizing these capabilities. During the period of January through June 1963, which is the last period for which we have complete figures, 27 of the hundred contractors which received the largest dollar value of NASA contracts were small business concerns.
NASA's contractual provisions, including clauses relating to small business, are similar to those used in contracts issued by the Army, Navy, or Air Force. Also, we have a small business specialist at each of the NASA offices where contracting is done as well as a small business adviser at the headquarters staff level to counsel with small business people and to screen pending procurements to be sure small business companies are considered as contract sources. NASA has
received many letters and comments from small business companies that these small business specialists are effective and helpful in resolving problems of the small business concerns.
The majority of NASA contracts are administered for NASA in a contractor's plant by one of the military departments. This includes checking compliance with the contractual provisions requiring the contractor to maintain a small business program and to give considerations to small business concerns in the placement of subcontracts. NASA officials have also checked on some of its major contractors and have found companies are increasing the participation of small business concerns in subcontracting. NASA receives a subcontract report from its larger prime contractors where there is a substantial opportunity for subcontracting. This report, for the first half of fiscal year 1963 showed that 32 prime contractors placed $100 million or 40 percent of the total subcontract dollars with small business concerns. Since this was written we have the report for the full year, and out of 33 contractors, the total amount going to small business concerns was $232 million, also 40 percent. This is compared to 37 percent for the corresponding period the previous year.
Perhaps the best opportunities small business concerns have for participating in NASA's program is in subcontract work, and this is where NASA is placing its greatest emphasis. A year ago a simple postal card report was initiated by NASA which requires 12 large prime contractors to report on their subcontracts of over $10,000 and their first tier subcontractors to report on second tier subcontracts of $10,000 or over.
The 12 prime contractors are located in nine States. The report shows that up to August 31, 1963, there were 5,473 subcontract actions which went to 1,488 different subcontractors. The 12 prime contractors were located in nine States, but the subcontracts were placed in 42 States. Some States such as Minnesota and Iowa which have not received many large prime contracts are receiving substantial amounts of subcontracts. Of the total number of subcontractors, 1,086 or 73 percent were small business concerns with 16.7 percent of the dollars going to small business companies. Our last report, which was received since this was written, shows that the percentage has gone up to 22 percent. This report does not represent a complete picture of the participation of small business concerns in subcontracting. It does not cover all subcontracts but only the larger subcontracts in the first and second tiers. We believe that in the lower value subcontracts and in lower tier subcontracts small business participates to a much larger extent. For instance, second tier subcontract reports up through June 1963 showed that 53 percent of the dollars of second tier subcontracts went to small business. The first subcontract reports included many major large first tier subcontracts and later reports show an uptrend with small business subcontractors.
NASA headquarters receives a report on each prime contract placed by its contracting offices of over $25,000. A part of this report requires the contracting officer to state whether the contract was placed with a small business concern or why it was not. Such reasons, among others, are that there were no known small business sources or a small business company was not the low bidder or small business concerns did not respond to an invitation to bid or to quote. Records show, for
fiscal year 1963 that small business concerns submitted bids on 52 percent of the dollar value of procurements where they were invited and were successful in obtaining 52 percent of the dollar contract awards when they bid or submitted a proposal.
During fiscal year 1963 NASA had a total of 176,632 contractual actions of all types with business firms. An action may be the purchase of a gross of machine screws or a contract for a space capsule or an amendment to a contract. Of these total actions small business companies received 117,266 or 63 percent which is an increase in numbers of actions of 51 percent over the preceding year. In dollars small business concerns received $191,346,955 or 55 percent more dollars than the preceding year.
However, the percentage of the total NASA dollars going to small business companies decreased to 8.5 percent during fiscal year 1963. This is largely attributable to the dollars which were added to existing large contracts for additions, modifications, or periodic incremental funding. Of the new contracts placed with business of over $25,000, small business concerns received 12 percent by dollars. There were 1,947 small business set-asides during this period which is 162 percent more than in fiscal year 1962.
It is NASA's opinion that one of the most constructive things which can be done for small business companies is to advise them as to what they can do to get contracts and subcontracts and what is entailed in their performance. Many smaller companies have never had a Government contract and do not know how to go about competing for them. In addition to counseling with any company which asks for information and distributing of several thousand copies of a booklet called "Selling to NASA" which tells how and where NASA contracts are made, we have, jointly with representatives of the Small Business Administration, provided the program for several meetings on this subject in various cities, and more are planned. We have also participated in many industry assistance and procurement conferences throughout the country where a NASA small business representative was available to give advice to companies. We continue to synopsize in the Department of Commerce Business Daily all research and development contracts of an estimated amount of $100,000 or over with the names and addresses of companies to be solicited for prime contracts so that companies interested in subcontract work will know where to go to solicit subcontract business before companies make up their proposals.
NASA is aware of its responsibility to small business and is carrying this responsibility out in spirit as well as in theory. Our relationship with the Small Business Administration is excellent and we have worked together to increase the utilization of adding small business sources for pending procurements at our centers. NASA will continue to put emphasis on its small business programs.
We are under the same procurement statute as the military departments, the Armed Services Procurement Act. Our set-aside procedures, our make-or-buy procedures, and small business clauses generally are practically the same as employed by the military depart
Mr. MULTER. Thank you. You have made a very good statement, Mr. Brackett. I wonder why you would take the figure of $25,000 as the cutoff figure for the information reports you get.
Mr. BRACKETT. That is the figure, Mr. Chairman, on which we get a complete report. It was a cutoff, an arbitrarily decided figure, to cut down the number of reports which would have to be made. We do get a total figure, but the complete picture on each individual contract is only $25,000 and over.
Mr. MULTER. In those instances where the report shows that they had no known small business source or they have had no small business company willing to make a bid, do you pass that information on to the Small Business Administration?
Mr. BRACKETT. They get a copy of our report.
Mr. MULTER. They do?
Mr. BRACKETT. I don't know as they get an individual copy of each report. I am sure they don't.
Mr. MULTER. Mr. Robison.
Mr. ROBISON. Mr. Brackett, I think it is an understatement when you say that NASA's contracts for procurement are having a significant impact on the country's economy. It surely is, and it is going to have even greater impact. That is why it is tremendously important that your agency, particularly, does all it can to encourage small business participation in the type of work you do.
On page 2 of your statement, you say that you have a small business specialist at each of NASA's offices where contracting is done. Can you tell me how many offices of this sort there are?
Mr. BRACKETT. We have 11 offices where contracts are actually made. We also have a Northeast Office located in Boston and a Western Operation Office in Santa Monica, both of which have full-time small business specialists available to counsel with companies.
We have this booklet entitled "Selling to NASA," and it lists each of the places where procurement is done, and a résumé of what we purchase, with the name of the small business specialist and his address. Mr. ROBISON. At those smaller contracting offices, then, there is only a part-time small business specialist?
Mr. BRACKETT. I believe, sir, with one possible exception, sir, it is a full-time job at all of our centers, and furthermore they report to the director of the center.
Mr. ROBISON. I can fully understand that, by the nature of the work in which NASA is engaged, you are much like the AEC, in that a lot of it has to be done by large prime contractors.
Mr. Scammahorn of the AEC did say that recently his agency has begun to encourage partial set-asides by prime contractors on a voluntary basis. Is your agency doing this, too?
Mr. BRACKETT. We have even gone so far, at least in one instance, as to write it in the contract. The contractor will not make a subcontract for certain items or services unless it is approved by NASA, and there will be total set-asides for small business.
Our type of supplies that we buy, and services, are limited in quantity, and in order to have a partial set-aside, it is necessary to break down the quantity. So with very few exceptions, all of our set-asides have been total set-asides.
Mr. ROBISON. I understand. Thank you.
Mr. MULTER. Will you leave a copy of the pamphlet you referred to a moment ago for our committee files?
Mr. BRACKETT. Yes, sir.