lution for a subcontracting plan for the utilization of a small and/or disadvantaged business. Is that correct,

Mr. KULIK. If I may add to that, sir, the remedies that were specified, as you will recall, in the GAO letter were either to terminate and resolicit, to modify, or do nothing. The modification remedy is the one that, in fact, this covers including a subcontracting plan in the contract through modification.

There was one contract that was terminated. However, that was for other reasons. It was terminated for nonperformance. There were other contracts where the decision was made to do nothing basically for one of the three reasons that Mr. Clement specified.

Mr. NEIDICH. I see. I direct this to both of you, Mr. Currie and Mr. Clement.

Could you clarify for me all the reports that are being received. I know that SBA is receiving reports. OFPP is receiving reports. I think DOD is also receiving reports. I am just wondering if somebody could outline all of these reports and explain to me the differences, if any, and just what data is being collected by the two of you.

Mr. CURRIE. We asked for one report. In our memo of November 21, the agencies were to report the actions they had taken to review their contracts and solicitations. They were to advise us by January 15 of the solicitations and contracts that were modified. We only have one report and that data, I think, still might be considered tentative because the agencies are still reviewing the contracts. The Department of Defense particularly had a large workload.

The SBA in the interest of following up on the reports, has requested that the agencies submit to them monthly until all the reviews have been completed

Mr. NEIDICH. In effect, their first report is then your first report. That was a one-shot deal for OFPP and SBA then is collecting similar data in a similar reporting manner, monthly until completed.

Mr. CURRIE. Yes; the data that has been testified to this morning, I think, is basically the same data. The difference in the figures that have been used is, I think, because Mr. Clement combined solicitations and contracts and we dealt with them separately. I believe they will total approximately the same.

Mr. NEIDICH. Mr. Clement, in the report recently furnished the Congress pursuant to section 8 (d) (11), with respect to your evaluation of the report required by Public Law 95-507, you indicated that SBA took exceptions to numerous provisions in the DAC-76-19. Most of these, you indicated, were not heeded by the Department of Defense. I was wondering whether you would be able to briefly explain all the more significant of those to the subcommittee since DAC-76-19 was the subject of extended discussion at our December 4 hearing.

Mr. KULIK. Mr. Neidich, there were, if I remember correctly, some 52 exceptions that we took to DAC-76-19. A good many of them, however, were on other parts of the circular than implementation of 95507. For example, I recall there were some changes that the circular made in the certificate of competency procedure that we disagreed with.

Some of them were adopted. Most of them were not. We have made our position known to OFPP. Mr. Currie has met with the appropria

tion people in the Defense Department and those comments are being reviewed once again by the Defense Acquisition Regulation Council. Mr. NEIDICH. Will you be able to provide the subcommittee with copies of all those exceptions?

Mr. KULIK. Yes, sir, we can.

[Exceptions to DAC-76-19 and comments and suggested changes:]

Mr. THOMAS G. CASSIDY,

Acting Director, DAR Council OUSDESE,

The Pentagon,

Washington, D.C.

JUNE 4, 1979.

DEAR MR. CASSIDY: We are pleased to submit herewith our comments and suggested changes relative to the proposed rewrite of Part 7-Small Business Concerns of the Defense Acquisition Regulation (DAR).

In preparing the appended comments, a studied effort was made to limit our consideration of the draft to substantive issues only. It is felt that adoption of the recommended changes will not only bring the language of the proposed revision into conformity with the new statutory requirements dictated by Public Law 95-507, but will also have the attendant effect of improving the Department of Defense's (DOD) programs for small business and for disadvantaged

concerns.

We recognize the enormity of the task which the DAR Council and officials associated with both affected programs have undertaken in working towards a revision of Part 7 of the DAR. All concerned are to be commended for their work on this project.

Two aspects of the proposed revision are, we feel, particularly noteworthy. Implementation of the automatic repetitive set-aside technique and use of the more positive language to be observed in applying the "two or more small business concerns" criterion for establishing setasides reflect genuine interest in making the department's programs more responsive to current needs.

This Agency is very much interested in how DOD's programs on behalf of small business and disadvantaged concerns are to be structured and implemented. DOD has traditionally served as the bellwether for all Federal departments in this regard, and the approach it adopts in implementation of Public Law 95-507 will undoubtedly be closely observed and followed by many, if not most, of the other executive departments.

In realization of DOD's example-setting role, much time and consideration was spent in reviewing the draft of Part 7 and in the preparation of the attached comments. We would welcome the opportunity to discuss them more fully with you and your colleagues on the DAR Council.

Sincerely,

R. F. McDermott, Acting Associate Administrator for Procurement Assistance.

Enclosure.

DAR section/paragraph

701 -702(d).

2

4(b)..

(1) In final sentence, substitute "shall" for "may".
(1) Public Law 95-507, sec. 221 (15(k)) requires that the appointing
authority for the small business technical adviser be the
Federal Agency Director of Small and Disadvantaged Business
Utilization.

(1) Public Law 95-507, sec. 221 (15(k)) does not provide for assist-
ance, as the principal duty, to the activity SADBUS (small and
disadvantaged business utilization specialists).

(1) Of current DAR. At the end of the penultimate sentence, substitute "either set-aside or 'reserved exclusively for' small business" for "a small business set-aside".

(1) Director of Small and Disadvantaged Utilization, apparent organizational anomalies, contrary to the organizational structure required by Public Law 95-507 and its legislative history, are outlined in this paragraph. However, inasmuch as this subject is the focus of continuing congressional review, other than to

COMMENTS AND SUGGESTED CHANGES-Continued

(1) We nonconcur with the last sentence of the final paragraph. In every instance at low volume procurement activities, at least a part-time SADBUS appointment is necessary.

1-704.3(b)..

1-704.3(b)(iii)...----

(1) We object to the discretionary authority given the appointing officer regarding performance of the duties enumerated for the SADBUS under this DAR subparagraph.

12.. -------- (1) In the first sentence, following the words "in excess of $2,500," insert the following phrase: "or prior to an award in excess of $2,500 for requirements which were estimated to cost $2,500 or less."

(2) We nonconcur with the removal from this DAR section of the SADBUS duty for initiating action to require small business set-asides. It is intended that the SBA's review of proposed procurements follow only after the buying activity's determination (i.e., contracting officer and SADBUS) not to make a small business set-aside.

(1) This paragraph should also require SADBUS review of subcontracting plans prior to contract award.

(1) In fifth sentence, insert "but are not limited to" between words "include" and "review."

(2) Duties imposed by Public Law 95-507 should be included viz.,
SBA representatives are authorized to review solicitations and
report advisory findings to the contracting activity pursuant to
statutory requirement that small business and disadvantaged
concerns will be afforded maximum practicable subcontracting
opportunities (see 1-707.1(i)).

(3) We do not concur with deletion of requirement for SADBUS review
of proposed non-set-aside procurements prior to review by
SBA representatives.
(1) We cannot concur with the phrase "unless there is valid reason
for not so doing." (Re: Public Law 95-507, sec. 223(a)(1).)
(1) Of current DAR. Presume this subparagraph "(c)" is deleted
in its entirety, which is made necessary by Public Law 95-507,
sec. 223(a)(1).
(1) To preclude any misinterpretation, insert "but not necessarily
limited to" between the words "including" and "technical
data.'

(1) Eliminate third sentence in entirety. Eliminate words "on a
proposed award of more than $10,000" from fourth sentence.
Denying COC consideration to many small firms by arbitrarily
establishing a $10,000 threshold cannot be justified.
(2) Substitute words "reserved or both portions" for words "maxi-
mum quantity" in penultimate sentence of this subsection.
(1) Eliminate words "that warrant reversal of the pre-award survey
activity's negative finding" from final sentence of this sub-
section.

(1) This eligibility paragraph refers to sec. XII. Par. 12-604(a)(5)(A),
which permits an urgency determination in Walsh Healey cases,
must be deleted.

(1) This paragraph must be deleted, as it sanctions withdrawal of a referral after a meeting with SBA representatives. Provision for such action no longer exists.

(1) This paragraph should be rewritten. It suggests the possibility of a COC being withdrawn following an appeal. There is no provision whatever for withdrawal of a COC, once issued.

(1) DAR provisions involving goals should include identification of specific goal categories; time-frames for interagency coordinations; and procedures for monitoring, evaluating and reporting performance against assigned goals.

(1) The responsibility assignment for goal coordination conflicts with Public Law 95-507, sec. 221.

(2) The phrase "as may be required" must be deleted, as Public Law 95-507 permits no discretionary authority.

(1) Following "concurred in by the contracting officer," insert "or
higher authority pursuant to 1-706.3."

(1) In the first sentence, recommend that, following the words "all
future requirements", the intended span of application (i.e.,
"of the installation", or "of the department/agency", or "of
the Department of Defense') should be inserted.
(2) Last sentence should be expanded to include reference to pro-
ceedings (DAR 1-706.3) to be followed in the event of non-
concurrence by either the SADBUS or the SBA representative.
(1) Concerning procurements under $2,500, this paragraph (e.g.,
seventh sentence) must be modified to reflect the statutory
requirements of Public Law 95-507, sec. 221(15(j)).
(2) Delete the word "Joint" at the beginning of the sixth sentence.
(1) We must nonconcur with the provision permitting large business
concerns to offer on small business set-aside procurements.
(2) This paragraph must be modified to eliminate the small business
set-aside exception as it applies to procurements under $10,000
(re: Public Law 95-507, sec. 221 (15(j)).

COMMENTS AND SUGGESTED CHANGES-Continued

DAR section/paragraph

Revision page No.

Comments

(1) This paragraph must be modified to eliminate the small business set-aside exception as it applies to procurements under $10,000 (re: Public Law 95-507, sec. 221 (15(j)).

(1) To be consistent with the intent of Public Law 95-507, the following subjects also should be separately delineated under this paragraph: repurchases against default_terminations; utilization of "best technical approach" in R. & D. procurements; first time buy/no previous procurement history; testing the market; follow-on procurement; not previously produced/tested by small business.

(1)

Of current DAR. In the first sentence, delete the words "and available' in the parenthetical phrase.

(1) Delete last 2 sentences from this paragraph (e.g., refer the HQ
USAF Message 031900Z April 1979).

(1) In the first sentence, substitute "shall" for "may."
(1) Delete the (new) phrase, "except where... a reasonable price,"
and substitute therefor "except where the contracting officer
formally determines, prior to solicitation issuance, that there is
not reasonable expectation of receiving 2 or more offers from
small business concerns so that award can be made at a reasona-
ble price."'

(2) Delete the sentence "Total set-asides shall not be made unless
such a reasonable expectation exists."

(1) Delete the (proposed new) paragraph in its entirety, as it is in direct conflict with SBA Rules and Regulations, pt. 121 (par. 121.3-8(c)); appropriately revise numbering of succeeding subparagraphs.

(1) Delete the words "in excess of $2,500 and" to reflect the requirement of Public Law 95-507, sec. 221 (15(j)).

(1) We are unable to associate the (new) phrase "except as noted in 1-706.1(h)" with the contents of this paragraph; require explanation.

(1) The opening policy statement is outdated and does not reflect the
Government's current official policy as spelled out in the new
Public Law 95-507, sec. 211. It is suggested that it be replaced
as follows: "It is the policy of the Government to encourage
prime and subcontractors working under Government procure-
ment contracts to provide subcontracting opportunities to small
and disadvantaged business concerns and to assure that prime
contractors and subcontractors having related subcontracting
programs consult and cooperate with the SBA to help achieve
these objectives."

(1) This subsection as written neglects to give cognizance to SBA's
statutory role in determining contractor compliance (Public
Law 95-507, sec. 211). This can be remedied by inserting the
following as a second sentence: "The SBA is also authorized
to conduct such studies or surveys as it deems necessary to
determine the extent of contractor compliance."
(1) The proposed coverage suggests that SBA's evaluating role is
limited to that of subcontracting plans. The new legislation
authorizes SBA to also determine the extent of subcontracting
program compliance. The following addition should therefore
be made: "and (iv) conduct such studies or surveys as may be
necessary to determine the extent of contractor or subcontractor
compliance with subcontracting program requirements."
(1) This paragraph indicates that prime contractors are required "to
assume an affirmative obligation. . . ." It does not reflect the
serious consequences of noncompliance. To clarify this, it is
recommended that terminology taken from Public Law 95-507,
sec. 211 be used as a second sentence: "Failure of any con-
tractor or subcontractor to comply in good faith shall be a
material breach of such contract or subcontract."
(1) A reading of the proposed DAR coverage would suggest that SBA
has little or no role relative to the evaluation of subcontracting
plans. This is contrary to the new law (Public Law 95-507). To
remedy this, the following language should be inserted as the
penultimate sentence: "The SBA is authorized to assist in the
formulation and evaluation of subcontracting plans.
(1) The word "sole" in the first sentence should be replaced by the
word "primary." A second sentence should be inserted to
read as follows: "The SBA, which is authorized by Public Law
95-507 to conduct independent studies and surveys to deter-
mine the extent of contractor compliance, shall also be invited
to participate in subcontracting program reviews." The final
sentence should be eliminated.
(1) The word "participant" should be eliminated, as SBA is interested
in how contractors are complying and would therefore want a
copy of the review report whether or not it participated in the

40.

1-707.1(b)..

1-707.1(i).

COMMENTS AND SUGGESTED CHANGES-Continued

DAR section/paragraph

Revision page No.

Comments

(1) Substitute the words "small business firms" for "firms which
identify themselves as small businesses," as there is no pro-
vision in Public Law 95-507, sec. 223(a)(1) requiring "'identifi-
cation."
(2) Following the phrase "and shall contain," the specific words used
in Public Law 95-507 should be inserted, i.e., "adequate
citations to each major Federal law or agency rule with which
such business concern must comply in performing such con-
tract."

(3) In the penultimate sentence (of the current DAR), the term
"reasonable number'' in quotations is rendered obsolete as the
result of revised verbiage at the beginning of this paragraph.
(1) *Of current DAR. This paragraph requires revision to reflect the
provisions of Public Law 95-507, sec. 223(a)(1).

(1) Of current DAR. It appears that a change may be in order here
such as, following the term "set-asides," insert the phrase
"including small purchases under $10,000 which are 'reserved
exclusively for small business by the contracting officer."
(1) *Of current DAR. Same comment as made on 3–201.2(b)(ii)(A)
above applies.

(1) In the first sentence, we cannot concur with 2 phrases, i.e.,
"which is to be accomplished under" and "unless the contract-
ing officer determines there is no reasonable expectation that
offers will be obtained from," as each is materially different
from the statutory language of Public Law 95-507, sec. 221
(15(j)), viz: "which is subject to" and "unless the contracting
officer is unable to obtain offers from," respectively, and either
conceivably could introduce an interpretation conflict of far-
reaching impact.

(2) In the second sentence, the word "potential" should be inserted after "all known."

(3) At the beginning of the third sentence, insert the word "potential" after the words "If no.'

(4) At the end of the third sentence, delete the phrase "operating in the local area," as such a restriction is not contemplated by Public Law 95-507.

Mr. NEIDICH. Mr. Clement, I would like some clarification of a parenthetical phrase in your prepared statement. You have indicated that all the agency goals have been unacceptable. Next to GSA, there is a parenthetical phrase which says, "in addition to being unacceptable, it's resubmitted." I was wondering if, in fact, this was the second time you had found GSA's goals unacceptable. Perhaps you could expand upon that, if that is the case.

Mr. CLEMENT. My understanding, Mr. Neidich, is that GSA had previously submitted certain goals to their regional offices. It is my understanding of the procedures that we have to agree on those goals before they are submitted to any field offices. That reference was made to that particular process that I just described earlier.

Mr. NEIDICH. Do you agree with that, Mr. Kulik?

Mr. KULIK. Yes.

Mr. LAFALCE. Mr. Clement, I am concerned about this. You indicated there are 2,536 deficient contracts or solicitations; 358 have been corrected; an additional 640 are being amended. What is the status of the remaining 1,500-plus contracts or solicitations?

Mr. CLEMENT. They are still under review, Mr. Chairman. As I indicated before, Mr. Chairman, there are approximately 360 that have been corrected. There are some 640 that have been amended. The balance are under review at the present time and, as Mr. Currie indicated, our reports will be coming on the 15th of each and every month until we get a final accounting of that last column.