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result of GSA's recent review of procurement reporting requirements, we have developed a revised system which will provide, among other things, the number of procurement actions. This proposed revision has been sent to all civilian agencies, and we are awaiting their comments.

1. Total procurement actions:

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3. A breakdown of procurement actions on which small business was not invited to bid; or, on which small business was invited to bid but did not bid is not available.

4. Set-asides (including total and partial set-asides) for small business:

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Review of our procurement practices and procedures indicates compliance with both the spirit and the letter of the Federal procurement regulations (FPR) and the General Services procurement regulations (GSPR). In answer to specific questions posed in paragraphs 5 through 8 of your September 16 letter, the following is submitted:

5. (a) The basic responsibility and authority for determining which procurements shall be set aside from small business is jointly shared by the GSA contracting officer and the Small Business Administration representative. Review teams, buyers, and supervisory officials sometimes also enter into the decisions. (b) The types of supplies purchased by GSA do not ordinarily lend themselves to component breakout. SBA representatives concur in this view. 6. (a) Determination as to feasibility of small business set-asides is well defined in the regulations and requires review of all proposed procurements in excess of $2,500 by contracting officers and SBA representatives. Public buildings projects costing less than $500,000 are initiated to be set aside for small business. Similar projects which are estimated to cost less than the limits prescribed but requiring performance by a large firm, such as the rehabilitation of an elevator constructed by a large business firm, are not set aside. Occasionally,

public buildings projects estimated to cost in excess of $500,000 are set aside when it is known that adequate competition from small business can be obtained. (b) Availability of small business is determined by reviewing bidders mailing lists, prior experience of the buyer and contracting officer, reviews of previous procurements, augmented with names furnished by business service centers and SBA representatives.

(c) The only known instances where small business has been excluded from bidding are in those cases where they may have been on the list of debarred bidders.

Participation by small business concerns is assured by utilization of bidders lists on formal proposals in excess of an estimated $2,500 value, plus the employment of lists of all prior SBA recommended sources of supply where past history indicates their availability or interest.

Publication of all formal invitations in the U.S. Department of Commerce synopsis gives further assurance of expanded coverage to additional potential, but unknown, small business firms.

(d) Failure to award procurement to small business would only occur where the business concerns were not the lowest bidders, or did not meet all of the essential requirements of the invitation (to include specifications).

In the event that the question arises as to capacity or credit, the matter (for awards in excess of $2,500) is referred to the SBA for resolution.

(e) The timeliness of invitations to bid is to a large extent predicated upon the program needs of the Government. However, the need for providing adequate bidding time is given careful attention. Regulations require that procurements of standard commercial-type supplies or services be advertised not less than 15 days nor more than 40 days, and that a minimum time of 30 days and not more than 60 days be allowed for supplies other than standard commercial. This time range has assured us of adequate competition and sufficient leadtime for both small business and otherwise.

(f) The regulations covering "General Policies" prescribe that the use of Federal specifications is mandatory except in certain specific areas, such as items of a proprietary nature, purchases under $2,500, where the purchase is needed under a public exigency, purchases in foreign markets, or purchases involving new items or research and development. Technical assistance is given to contractors, particularly small business contractors, in meeting any problems they may encounter in complying with specifications.

7. Techniques and devices employed to further small business participation in bidding on Government requirements include publicizing of proposed procureIments in the Commerce Business Daily, publication in other suitable trade journals, close liaison with SBA representatives, public posting of invitations in such places as post offices and chambers of commerce, breakdown of quantities into lots which would be suitable to small business, and participating in meeting, forums, and seminars held by SBA and chambers of commerce.

In fiscal year 1963 our regional business service centers conducted 74 business opportunity meetings with businessmen in an effort to acquaint them with opportunities of doing business with GSA. Over 46,000 businessmen attended these meetings. GSA contracting officers and business service centers have, on a direct contact basis, gone out and secured participation in GSA procurements by small concerns which had not previously participated in Government work.

8. Regulations require the use of a clause entitled "Small Business Subcontracting Program" in all contracts exceeding $500,000 where substantial subcontracting opportunities exist. This clause explains the responsibilities of the contractor to attempt to secure as much subcontracting as possible for small business concerns.

For contracts over $5,000 the regulations require the inclusion of a shortform clause entitled "Utilization of Small Business Concerns." In essence, this clause states the contractor agrees to accomplish the maximum amount of subcontracting to small business concerns that the contractor finds consistent with the efficient performance of the contract.

Sincerely yours,

BERNARD L. BOUTIN, Administrator.

Mr. GRIFFIN. May I ask, Mr. Chairman, how long the record will be kept open for the submission of our answers to these questions?

Mr. MULTER. Would 10 days after receipt of the questions be ample?

Mr. GRIFFIN. That is plenty of time, Mr. Chairman. However, should we defer on the questions which we already have?

Mr. MULTER. NO. How soon can you supply that information to us?

Mr. GRIFFIN. I would say a week.

Mr. MULTER. We will have additional questions for you to answer which we will send to you. You will have 10 days in which to answer them.

Mr. GRIFFIN. Very good, sir.

Mr. MULTER. Thank you very much, gentlemen. You have been very helpful.

Mr. GRIFFIN. Thank you, sir.

(The additional information follows.)

Question. How many certificates of competency have been issued by SBA for GSA contracts since this program was established?

Answer. In fiscal years 1961, 1962, and 1963 a total of 51 certificates of competency were issued.

Question. How many, if any, of the contractors who received such awards after the COC was issued by SBA have defaulted in the performance of the contract?

Answer. Two of the fifty-one contractors have defaulted.

Question. A specific breakdown of the mix of procurements that cause changes in the percent of purchases that go to small business from year to year. Answer. Decline in the proportion of Federal Supply Service awards to small business in the fiscal year 1962 to 1963 was due mainly to changes in the mix of procurement by the central office. For example, in fiscal 1963 there were significant declines in those commodity areas which in 1962 accounted for a substantial part of the small business volume, such as radiological instruments, household and quarters furniture, handtools, and office supplies and paper products. Conversely, sizable increases occurred in commodity groups typically procured from other than small business such as motor vehicles and DDT. The following table compares fiscal year 1962 and 1963 procurements of key commodity items by FSS, central office.

Procurement of key commodity items by FSS, central office, fiscal years 1962

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In the Public Buildings Service area, the drop in awards to small business was caused by the increase in the number of large Federal buildings that were contracted for in fiscal year 1963.

Question. The total number of full-time and part-time employees in GSA who are small business specialists or advisers.

Answer. GSA has more than 300 contract officers throughout the United States. Each one of whom has the inherent responsibility for providing advice and assistance to small businessmen to the extent required and does this upon request. However, in order to provide businessmen with maximum convenience in seeking procurement assistance and advice, GSA's business service centers, which are located in 11 key cities throughout the country, including all regional headquarters cities, provide one-stop counseling service to businessmen. The

63 full-time employees devoted to this program are trained to assist businessmen in all facets of GSA's procurement, in order that they not be required to be shunted between the various GSA procurement offices for their required assistance. Although this service is provided to all businessmen, experience has indicated that by far the greatest portion of recipients are small businessmen. In additional, there is a staff of 14 employees in GSA's Regulations and General Law Division who have responsibility for the development of Federal procurement and other regulations, which have Government-wide applicability. Such regulations particularly further the interests of small business concerns in Government procurement programs.

Question. A report on the Veterans' Administration's compliance with the Federal procurement regulations in purchasing pharmaceuticals and supplying them to other agencies of Government.

Answer. Based upon our observation of the procurement practices of the Veterans' Administration in purchasing pharmaceuticals and supplying them to other agencies of the Government, we feel they are following the Federal procurement regulations. However, in order to obtain more current information than we now have, we have initiated an onsite inspection of this operation which will be completed within 2 weeks. At this time, a report of our findings and actions taken will be forwarded to the committee.

(The report referred to follows.)


Approximately 500 items of pharmaceuticals and chemicals are included in the Veterans' Administration stores stock system. Inventories are maintained at the three VA depots located at Wilmington, Calif.; Hines, Ill.; and Somerville, N.J. Each depot ships to ordering offices within their assigned distribution areas. The Somerville Depot is the central purchasing point for each depot.

Shown below are statistics relating to stock on hand and depot sales for drugs and chemicals for the period ending October 31, 1963.

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The above ratio represents an average overall 31⁄2 months stock on hand. Orders are submitted monthly by ordering offices and shipped within less than 30 days. Back orders to ordering offices average about 1 to 12 percent of total orders received.

An agreement exists between the Veterans' Administration and the Defense Medical Supply Agency for filling requirements for certain pharmaceuticals that are not included in VA depot stock, or in existing open end type contracts. Purchase orders covering each item are submitted to DMSA where arrangements are made to ship the merchandise from a military depot located in the same area as the VA depot having the requirement. An example would be a requirement for Chloremphenical (Chloromycetin) to be shipped into the VA depot in Wilmington, Calif. DMSA, New York, arranges to have the merchandise shipped from Sharpe General Depot, Calif., rather than a depot located outside the distribution area of Wilmington.

For stores stock, supplier distribution on consolidated orders issued by Somerville are generally made from a contractor distributing source nearest the depot to which deliveries are made.

Under the Federal supply schedule program, deliveries are made directly to the requesting agencies from the contractor. The Federal supply schedule provides that ordering agencies should place their orders with the nearest distributing point. Prices in both instances are for delivery to destination. There was no evidence of merchandise being shipped from one coast to another and then reshipped to destination.

Plant facility inspections are conducted by technicians at Somerville for contractors and prospective contractors within the New York-New Jersey areas. For other areas, the Chief, Supply Division and Chief Pharmacist of the VA station located nearest the plant are requested to make the inspections. The resulting inspection reports are returned to Somerville for evaluation. If a contractor's plant fails to meet required standards, he is advised of the reasons and given an opportunity to take corrective action.

Purchases for depot stock are made based upon requirements determined monthly by the requirements officer. These requirements are stated in a form identified as a purchase authorization, which is a means used to instruct the Procurement Section to purchase the quantities listed for delivery by a determined date. Upon receipt of this document, the Purchasing Section determines method of purchase, whether formal or informal, negotiated or advertised. Contracting and purchasing techniques are conducted according to Federal procurement regulations. Implementing instructions are contained in VA Manual MP-2, part II.

Invitations are issued and opened on a timely basis. Strict appraisal is given to all bids received and all elements necessary in the proper evaluation of an award are present.

Bidders' mailing files are maintained satisfactorily. Purchase orders are prepared efficiently and effectively. Purchase order format depends upon the form of advertising utilized.

All shipments received at the depots are subject to one or more of the following tests depending upon the nature of the item:

(a) Receiving test (conducted by depot personnel).

(b) Technical test (conducted by pharmacist).

(c) Technical test (conducted by pharmacist and FDA). (d) Analytical test (conducted by FDA).

Manufacturers' laboratory tests reports are required on each chemical and drug lot purchased for depot stocks. These reports, as applicable, are compared with FDA findings, specifications, and national standards for compliance.

The two Federal supply schedules assigned the Veterans' Administration in accordance with the GSA-VA agreement dated January 3, 1961, are being prepared and administered according to that agreement. Federal supply schedule FSC group 65, part I, section A covers advertised annual contracts for items described generically; and section B covers negotiated contracts with approved suppliers for their entire line of items falling into the pharmaceutical and laboratory or reagent chemical groups. The use of these schedules are mandatory upon the Veterans' Administration and the Department of Health, Education, and Welfare for deliveries within the 50 States.

Mailing lists supplied by GSA for distribution of contractors' price lists and catalogs are not considered current. Many catalogs distributed by contractors are being returned because addressee is unknown. This has caused some contractor complaints.

There are no small business set-asides in either the stores or Federal supply schedule programs. Generally, the high dollar volume items are sole source. The dollar volume of items remaining is considered to be insufficient to warrant small business set-aside. Nevertheless, small business participated in 262 of 676 transactions in the stores program during fiscal year 1963 for a total dollar volume of $853.248. Under the Federal supply schedule program of 223 contracts awarded under FSC group 65, part I, section B, 132 contracts were awarded to small business; and a total of 15 out of 26 were awarded under section A representing a total estimated value of $5,013,989.

The following are additional statistics relating to the procurement of drugs and chemicals for fiscal year 1963:

Number of items responsible for in depots---

Number of items responsible for on decentralized contracts and Fed


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