Mr. LAFALCE. I see. What is the timeframe in which these deficiencies occurred? How far back are you going? Mr. CLEMENT. We went back to approximately July 2 for the civilian agencies and to September 1 for the defense agencies. Mr. LAFALCE. Have you formed any judgments which you would be able to make public today regarding the good faith efforts of particular agencies? Are there any agencies you think are not complying with the law in the manner in which they should be and remedying the defects that took place? Mr. CLEMENT. Mr. Chairman, I think that in good faith we have seen momentum in the right direction. Our Deputy Administrator, for example, has just completed a review of approximately eight or nine regions. It was his observation this morning that there has been heightened activity as well as tightened communication between the procurement activities and the SBA, indicating that there is more cognizance of section 211 of Public Law 95–507. As I indicated earlier, everything is not right, but I think the momentum is moving in the right direction. Mr. LAFALCE. Mr. Kulik? Mr. KULIK. If I may, Mr. Chairman, there is another example of that. For the first quarter of this fiscal year, our procurement center representatives_had reviewed approximately 109 proposed subcontracting plans. In the month of January alone, they were asked to and completed their reviews of 306 such plans. So, the momentum has definitely picked up since last year. Mr. NEIDICH. Were any of those plans found unsatisfactory? Mr. NEIDICH. Could you give us some flavor of your findings in such cases? Mr. KULIK. The 415 plans were submitted for review and the review actually completed by SBA this fiscal year. In 196 of those cases, the contracting officer was notified that the plan, as submitted, did not provide maximum practicable opportunity so far as we were concerned. Now this does not mean that this was the plan as finally accepted. I cannot tell you that final figure. Mr. NEIDICH. Could you provide the subcommittee some indication of how that decision process is made? In other words, it is fine to say that it is a conclusion that you are stating to the contracting officer. It does not contain the maximum practicable opportunitythat is, how is that decision made? Mr. KULIK. By the SBA? Mr. NEIDICH. Yes. Mr. KULIK. The procurement center representative at the procuring installation reviews the plan. He seeks advice from the subcontracting specialist within SBA on the site-that is, at the location where the prime contractor is located-and the advice of the minority small business specialist at that site. Those inputs are then taken by the procurement center representative and put into his comments through the contracting officer as to whether this plan is acceptable Mr. NEIDICH. Does that involve the identification of potential small businesses and disadvantaged business sources for subcontracting which have apparently been overlooked? Mr. KULIK. Yes; it does. Mr. NEIDICH. Is that information communicated back to the contracting officer? Mr. KULIK. Yes, sir, it is. Mr. NEIDICH. Is there any followthrough to see if the ultimate plan reflects these recommendations? Mr. KULIK. Yes; there is. As I said, of the 196 instances, these represent advice that we have given to the procuring contracting officer, not necessarily the final decision. Mr. NEIDICH. I mean in terms of where are we going to pick up those numbers on a final decision. In other words Mr. KULIK. Those numbers will be picked up by our procurement center representatives in the course of their operation. The contracting officer makes the decision as to whether the plan is ultimately acceptable or not. We, SBA, make the decision as to whether he was proper in that decision. Mr. NEIDICH. But, again, the information provided us is all tentative. Mr. KULIK. It is preliminary-that is right. The first round, if you will. Mr. LAFALCE. Mr. Clement, what criteria do you use for determining whether a goal that has been set is adequate? In particular, what difficulties did you have with the goals established by DOD and GSA? Mr. CLEMENT. Mr. Chairman, there were three major categories prime contract opportunities, subcontracting opportunities, and, third, contracts for minority business enterprises. Our general goal at SBA is to approach a certain percentage for prime contracts, another percentage for subcontractors of the total Federal procurement dollar. This is approximately $107 billion. And for a minority business enterprise at a minimum to get to the $3.8 billion which was set by the President as a goal for that sector. So, using those percentages, we have a dollar amount that we would like to get at and the dollar amounts that were submitted by the procuring activities were not sufficient for us to meet our internal goals for 1980. Mr. LAFALCE. Would you comment specifically? Do you have data on you now, or do you recollect the data pertaining to the goals initially submitted by DOD and GSA and the difficulties you have had with their goals? Mr. KULIK. Mr. Chairman, we do not have that information with us here. However, the response to each of the agencies included memoranda of analysis of the goals by SBA staff. On the prime and subcontracting side these memoranda included such things as the history of the agency in procurements, the small and disadvantaged businesses, the types of contracts that were involved, the sources that the agency or department had taken into account-sources of small business and disadvantaged small business-and the base that the agency was using as its bottom line number available for small business. Mr. CLEMENT. Mr. Chairman, I do have a copy in my book here of a letter that was sent to two agencies which, as Mr. Kulik indicates, state the reasons in the first two pages why we turn them down. There is a complete analysis of their procurement activity for fiscal year 1978-79. Then there is a third page which has to do with the minority small business procurement goals for 1979. So, we do have a copy of a letter to one agency. Mr. LAFALCE. For any agency you have turned down and asked them to resubmit-would you provide me with a copy of the analysis? Mr. CLEMENT. Certainly. Mr. LAFALCE. Without objection, the record will remain open for the purpose of inserting this additional information. [Letters on the analysis of the goals by SBA follow:] Hon. HAROLD BROWN, FEBRUARY 7, 1980. DEAR MR. SECRETARY: The Department of Defense goals for 1980 were submitted to me under dates of January 17, 1980, for prime and subcontracting goals and January 22, 1980, for small disadvantaged business goals. The Small Business Administration cannot concur with the goals submitted. The goals are too low considering your past performance. In several subgoals the format and response required by Office of Federal Procurement Policy Letter 79-3 were not followed. All goals were to be projected in terms of the total value of contracts exceeding $10,000 in amount. The goals for subcontracting are not stated in terms of the total value of prime contracts requiring the inclusion of subcontracting plans in the contract. Unless specifically prohibited by law the total dollar value of all procurement contracts is the data base against which the percentage goals for small and disadvantaged business awards are to be established. Your exclusions from the procurement data base appear to arbitrarily eliminate large amounts of procurement dollars from consideration of possible awards to small and disadvantaged business. This and other specific issues are raised in our evaluations of your proposed goals for awards to small and disadvantaged concerns. These evaluations are enclosed herewith. As you will recall, the President's letter of January 13, 1980, called upon the heads of departments and establishments to give personal and immediate attention to the setting of FY 1980 goals for procurement in support of socio-economic programs. Accordingly, I would appreciate your calling me to arrange for a meeting during the week of February 18, 1980, in order to finalize our FY 1980 goal negotiations. In the meantime, our respective staff level personnel should be working together to narrow the issues evident in the above and in the individual program papers enclosed. My staff level contact is Edward N. Odell, telephone 653-6332. SBA is committed to complete its mandate relative to Section 15(a) of the Small Business Act as amended by March 1, 1980. Your cooperation in complying with our mutual mandate to optimize procurement opportunities for small and disadvantaged business is appreciated. Sincerely, A. VERNON WEAVER, COMMENTS ON PROPOSED FISCAL YEAR 1980 GOAL BY THE DEPARTMENT OF DEFENSE (DOD) FOR TOTAL PRIME CONTRACT AWARDS TO SMALL BUSINESS DOD proposes a fiscal year 1980 small business prime contracting goal of 20.2 percent. This figure, however, according to information and data provided in the agency's letter of January 17, 1980, was not, in areas of major significance, developed in accordance with the instructions/guidelines set forth in OFPP with certain very specific provisions of Public Law 95-507, Subsection 221 (15) (g). For example, the 20.2 percent goal figure: (1) is based upon inclusion of small purchases valued at less than $10,000, whereas OFPP Policy Letter 79-3 provides, as does Public Law 95-507, in unequivocal terms, that small business award goals established pursuant to the requirements of Public Law 95-507 are to be based upon (all) procurement contracts valued at $10,000 or more (only). Subsection 221 (15) (g) of Public Law 95-507 also is quite clear on this point, viz: ". . . each Federal agency shall . . . establish goals. . . in procurement contracts ... having values of $10,000 or more" (emphasis added); and the emphasized language in that statutory provision is viewed as being fully consistent with Subsection 221(15)(j) which, if strictly complied with by contracting officers, effectively negates any necessity to establish small business award "goals" for less-than-$10,000 small purchases. (2) is based upon a projected total prime contract awards dollar amount, $62.4 billion (which improperly includes approximately $5.1 billion for small purchases under $10,000), that quite obviously does not reflect the value of DOD prime contract awards in the many acquisition categories (those involving, for example, foreign military sales; intragovernmental (FSS, etc.); work performed outside the United States; educational and nonprofit institutions; civil functions ; nonappropriated funds; and, apparently, certain transportation services acquired outside the framework of the Defense Acquisition Regulation-re: DAR 1-102, which the agency traditionally has excluded from its annual report of Small Business Program performance measurement figures/statistics in the years prior to fiscal year 1980; whereas OFPP Policy Letter 79-3 (and Public Law 93-507, as well) clearly dictates that Federal agency goals are to be based upon ". . . all prime contracts having a value of $10,000 or more . . .". (3) does not reflect consideration of any fiscal year 1980 acquisition requirements of several DOD agencies (e.g., National Security Agency; Defense Communications Agency; Defense Nuclear Agency; Defense Mapping Agency), whose combined prime contract awards volume in fiscal year 1980 quite possibly will, based upon DOD's published report of procurement contract awards totalling $1.05 billion by such agencies in fiscal year 1978 (fiscal year 1979 data not yet received by SBA), amount to substantially more than one billion dollars. Therefore, until the DOD (re) submits its proposed fiscal year 1980 total prime contracting awards goal in full accordance with the provisions of OFPP Policy Letter 79-3, the SBA obviously will be unable to conduct a proper review and evaluation of the agency's initially proposed fiscal year 1980 goal figure of 20.2 percent. In its resubmission, DOD also should include a full explanation for the projected, substantial decline of 0.7 percent, from 20.9 percent in fiscal year 1979 to 20.2 percent, in fiscal year 1980 prime contract awards to small business (for just those acquisitioning entities and categories/commodities addressed by the agency in its January 17, 1980 correspondence). Procurement Claimant Program (PCP) data included with the agency's submission indicate that all three military departments and the Defense Logistics Agency (DLA) are forecasting a decline in fiscal year 1980 and, in the case of DLA, the forecast is very alarming, i.e., a decline of more than 5 percent from that agency's achievement rate in both fiscal year 1978 and fiscal year 1979. (The PCP data sheet provided for DLA is incomplete, also.) In this regard, examination of the PCP data sheets provided reveals, for example, that each military department projects a lower small business awards ratio in the vast majority of commodity areas identified: furthermore, in many instances the fiscal year 1980 projections represent the lowest small business ratio since at least fiscal year 1977 (comparable data for periods prior to fiscal year 1978 not currently available within SBA). The DOD submission includes no rationale or explanation for these most unfavorable projections. In addition, on the surface there appears to be considerable inconsistency between the projections by the three military departments and DLA, in individual commodity areas; e.g.: (i) for "Petroleum" and "Other Fuels and Lubricants," Air Force and DLA forecast significant decline in small business awards, whereas Navy, particularly, and Army forecasts are just the opposite: (ii) for "Subsistence," Army forecasts a major decline in the small business share of total awards, whereas Air Force, Navy and DLA each project a slight increase; and (iii) for "All Actions of Less Than $10,000" (although this awards category is not applicable to fiscal year 1980 goals development), Army and DLA project increased awards to small business, whereas Air Force and Navy-even in the face of Subsection 221(15)(j) of Public Law 95-507— actually forecast a decline in this area. It is essential that information and data adequate for meaningful, independent evaluation by the SBA, in all areas mentioned above (as a minimum), be included with the DOD's resubmission of its proposed fiscal year 1980 goal in subject awards category. COMMENTS CONCERNING SUBCONTRACTING ESTIMATES AND GOALS SUBMITTED BY THE DEPARTMENT OF DEFENSE (DOD)—JANUARY 17, 1980 The DOD recognized one of the requirements of the OFPP Policy Letter 79-3 guidelines concerning subcontracting estimates and goals in an oblique reference to the impossibility of estimating with any degree of preciseness just what amount of its estimated dollar amount of prime contracts to be awarded will result in contracts requiring subcontract plans and goals. However, DOD then stated that its size distribution report for fiscal year 1979 shows how many contracts and their dollar values were awarded at various thresholds, indicating that the estimate required can be developed. Beyond the oblique reference noted above, the requirements of OFPP Policy Letter 79-3 guidelines were ignored by DOD. DOD did not establish the goals required under items 7 and 8 of the OFPP guidelines under the belief that small business subcontracting goals should be established on the total subcontracting awards estimated to be made by its prime contractors. In the absence of DOD estimates and goals in the format required by the OFPP guidelines, we consider the DOD submission concerning subcontracting to be nonresponsive to OFPP Policy Letter 79-3. DOD ESTIMATES AND GOALS CALCULATED IN THE FORMAT REQUIRED BY OFPP POLICY LETTER 79-3 GUIDELINES Guideline items (1) DOD estimated $62.4 billion for fiscal year 1980 total prime contract awards. That figure included purchases less than $10,000 but did not include purchases by "other Defense agencies." Calculating the fiscal year 1978-79 rate of increase for "other Defense agency purchases" (24.8 percent) and applying that rate to the fiscal year 1979 total, we obtain a fiscal year 1980 estimate of $1,635,400 for "other Defense agencies." That estimate includes an estimated $37.56 million in purchases less than $10,000. According to the DOD organizational "objectives" projections for fiscal year 1980, (enclosures 1 of the DOD submission), actions less than $10,000 amount to a total of $5,326.1 million. Adding to that the $37.56 million in "purchases less than $10,000" projected in fiscal year 1980 for "other Defense agencies," we arrive at a total estimate of $5,363.7 million for "purchases less than $10,000". The estimate of the total dollar amount of all prime contracts having a value of $10,000 or more to be awarded by the close of the fiscal year is therefore $58,672,159,000. ($62.4 billion plus $1,635,859,400 ("other Defense agencies") minus $5,363.7 million (“purchases less than $10,000").) It is not known whether the $62.4 billion and the $5.363.7 million cited herein include procurement from non-profit organizations. (6) Utilizing the total amount of price contract dollars calculated in item (1) above and applying the fiscal year 1979 experience data contained in DOD's fiscal year 1979 "Prime Contract Awards by Size and by Military Department," we see that there is an estimated total of $45,177,562,000 in prime contract dollars which will require prime contractors to submit subcontracting plans. (7) In order to establish ". . . a goal for subcontracts to be awarded by prime contractors to small business in order to meet contractually established goals expressed as a percentage of (6) above. ..." it will be necessary for DOD to determine the percentage of fiscal year 1979 prime contract dollars |