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tracts and to utilize that percentage plus the increase anticipated because of the mandatory requirement for goaling by prime contractors, in determining the percentage goal against the fiscal year 1980 dollars ($45,177,562,000) estimated in (6) above.

U.S. GOVERNMENT,
SMALL BUSINESS ADMINISTRATION,
Washington, D.C.

OFFICE OF THE ASSOCIATE ADMINISTRATOR FOR MINORITY SMALL BUSINESS AND CAPITAL OWNERSHIP DEVELOPMENT

ANALYSIS STATEMENT OF MINORITY SMALL BUSINESS PROCUREMENT GOALS-FISCAL YEAR 1980 DEPARTMENT OF DEFENSE

On January 13, 1980, the President signed an executive order which significantly increases the Federal government's commitment to small minority owned firms. Upon analysis and review of the preliminary goals, the Small Business Administration has determined that the goals as submitted are not in compliance with this order.

Our analysis of the Department of Defense's prior minority business activity leads us to determine that your 1980 minority business goal should be $4.1 billion. This goal includes prime contract, subcontract and 8(a) activity. Due to the Small Business Administration's limited resources and our desire to maximize opportunities under Section 211 of Public Law 95-507, we are establishing a ceiling of $839.6 million on the department's 1980 contracting through the 8(a) Program.

In establishing your goal, SBA disregarded all prior minority business goals as they were established before the President's mandate of January 13, 1980. Mr. LAFALCE. Mr. Trimboli, do you have any questions? Mr. TRIMBOLI. Thank you, Mr. Chairman.

I wonder if we could try and clarify some of the numbers because I am getting a little bit confused, and I think the record should be clarified.

SBA, in its statement indicates that there is an accumulative dollar total of $9.5 billion. Is that the face value of contracts-prime contracts-let without the plan that in fact should have a plan? That is $9.5 billion.

Mr. CLEMENT. Those are contracts and solicitations-that is the dollar amount of both combined.

Mr. TRIMBOLI. You took the anticipated dollar value of solicitations and added that to the actual face value of contracts awarded, and came up with $9.5 billion?

Mr. CLEMENT. There were approximately 1,713 contracts and about 825 solicitations that were termed "legally deficient."

Mr. TRIMBOLI. And the $8.8 billion in the OFPP statement is just face value of contracts; right?

Mr. CURRIE. Yes, sir.

Mr. TRIMBOLI. And this data is based upon the same reporting period? Can we conclude that the difference of $700 million represents the value of solicitations?

Mr. KULIK. Yes, sir.

Mr. CURRIE. That is included in my statement. The $782 million represent solicitations that were modified.

Mr. TRIMBOLI. All right. Is there any indication from the method. whereby you collected this data that contracts continue to be awarded without plans that should, in fact, have plans?

Mr. KULIK. Yes; Mr. Trimboli. At least for the period subsequent to the committee hearing in December there were contracts that were awarded that should have had the plan.

Let me, at the risk of confusing the issue a little more, use some additional figures. We, in preparation for this hearing, asked our procurement center representatives for a one-time report on the installations that they cover on a resident basis. There are approximately 50 installations.

They reported to us that 239 contracts totaling over $900 million were executed subsequent to December 4, 1979.

Mr. TRIMBOLI. Subsequent to the hearings the subcommittee held? Mr. KULIK. That is right.

Mr. TRIMBOLI. Could you tell us what agencies make up that $900 million?

Mr. KULIK. I can tell you only some of the agencies. I do not have a very detailed breakdown. One of them is GSA. Some of them are Air Force and Army.

Mr. TRIMBOLI. I see. Could you provide for the record a more detailed listing of where this $900 million comes from?

Mr. KULIK. We will provide that for the record. It will have to be collected from our field offices.

Mr. TRIMBOLI. I appreciate that.

Mr. LAFALCE. Without objection, the record will remain open at this point for the purpose of inserting the additional information. [Detailed listing requested above follows:]

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Mr. TRIMBOLI. I just have two more questions. Pursuant to Public Law 95-507, SBA did go out and solicit from the agencies proposed goals for this fiscal year with respect to contracting small and disadvantaged businesses. I believe the goal for fiscal year 1979 as set down by the executive branch was $3.3 billion for contracting with minority owned firms. That goal was not met. I believe there was a short fall-about $500 to $800 million in actual shortfall.

But the goals submitted to SBA for fiscal year 1980, did you sum them up? What was the sum of the goals that were submitted by the agencies for minority business?

Mr. CLEMENT. Those totals were approximately $3.4 or $3.5 billion which were less than the goal that was stated by the President on January 13. That was $3.8 billion.

Mr. TRIMBOLI. How much of an increase is there with the fiscal year 1980 procurement budget as opposed to the fiscal year 1979 pro

Mr. CLEMENT. You mean in absolute dollars for the total ?

Mr. TRIMBOLI. Yes, absolute.

Mr. CLEMENT. I don't know.

Mr. TRIMBOLI. Mr. Currie, do you have any idea?

Mr. CURRIE. I would not be confident in giving you a figure on that. Mr. CLEMENT. The actual figure reported in fiscal year 1979 for minority procurement was approximately $2.5 billion. So, that particular goal of $3.8 is an absolute increase of $1.3 billion.

Mr. TRIMBOLI. What I am trying to determine is how much the overall procurement budget increased from fiscal year 1979 to fiscal year 1980.

Do we know how much we bought in fiscal year 1979?

Mr. CURRIE. I am not sure that our figures are complete yet for the total fiscal year 1979. We are not able to project the budget to my knowledge. It does not give you a basis for projecting the procurement expenditures in the way we collect those data. I can furnish you data from 1979. I will not be able to give you data projected for 1980.

Mr. TRIMBOLI. So, we have to come up with goals for fiscal year 1980 and not know overall what we are spending?

Mr. CURRIE. I think that is somewhat the problem.

Mr. KULIK. Mr. Trimboli, one of the problems I mentioned in response to the chairman's question before was the problem of the base figure against which a goal is being sought. That is one of the places where we are having difficulty with some of the procuring agencies. Our position is anything that is not legally barred from going to a small business should, in fact, be included in the base available for small business.

Mr. TRIMBOLI. But the fact still remains that we don't know how much we spent in fiscal year 1979, and we don't know how much we may spend in fiscal year 1980.

Mr. KULIK. We are asking the agencies to tell us how much they are going to spend in fiscal year 1980.

Mr. TRIMBOLI. I have just two more questions.

You indicated that in SBA's opinion there are few agencies that have not yet established a full-time director of small and disadvantaged business utilization and that has been communicated to officials in OMB.

Could you state for the record now those agencies that, in your opinion, do not meet the requirement of the statute or the OFPP policy letter that establishes that office?

Mr. CLEMENT. Some of those agencies are here today. This would be information that we had as of last week. It would be DOD, EPA, VA, the National Science Foundation, ACTION, CSA, and HUD. Mr. TRIMBOLI. They are all in noncompliance, in your opinion? Mr. CLEMENT. That is our understanding. Some of those agencies. are here today, and I would suggest that we direct that question to them, but we have transmitted this to

Mr. TRIMBOLI. We might take that up.

I have one further question for OFPP.

With respect to commercial products, you are, of course, you say, working with the committee staff to resolve that and working with the SBA to try and resolve that. Are there any indications coming in from the field yet to indicate that certain large prime contractors are

refusing to do business with the Government as a result of Public Law 95-507?

Mr. WILLIAMSON. We have had a few, Mr. Trimboli, particularly with utility contractors and energy contractors. I think those are the primary ones, so far.

Mr. TRIMBOLI. So it is correct to state that there are certain large businesses that do not want to do business with the Government solely because of Public Law 95-507?

Mr. WILLIAMSON. That is right.

Mr. TRIMBOLI. I have no further questions, Mr. Chairman.

Mr. LAFALCE. Thank you.

With that, we want to thank OFPP and SBA for their testimony. [Mr. Clement's prepared statement follows:]

PREPARED STATEMENT OF WILLIAM A. CLEMENT, JR., ASSOCIATE ADMINISTRATOR, MINORITY SMALL BUSINESS AND CAPITAL OWNERSHIP DEVELOPMENT

I appreciate the opportunity to appear before you today to discuss SBA's progress in the implementation of Public Law 95-507. Mr. Bernard Kulik, Associate Administrator for Procurement Assistance, has accompanied me to the Hearing. Specifically, we wish to highlight those initiatives taken by SBA subsequent to the Committee Hearings on December 4, 1979, to correct certain contracts and solicitations let by several Federal agencies without regard to the Section 211 Clause of Public Law 95-507. I shall also review with you SBA's progress on Federal Agency establishment of the Office of Small and Disadvantaged Business Utilization. Finally, there are other areas of progress which SBA has initiated but were not fully addressed at the last Hearing. These areas include progress summary statements on; the 8(a) Program; the 7(j) Program; the Army Pilot Program; the Discretionary Surety Bond Waiver Program and the Presidential Advisory Committee.

At the outset, let me reaffirm this Agency's belief in the value of Public Law 95-507 as a much needed vehicle to increase prime and subcontracting opportunities for both small and small and disadvantaged business concerns. We welcome the additional authority and the challenges provided to us by the statute. Based on the authority of the law and our efforts to vigorously monitor implementation, SBA has accomplished the following actions since December 4, 1979, in regard to the legal sufficiency of contracts let during fiscal year 1979:

On December 7, 1979, Administrator Weaver addressed a memo to all the Regional Administrators of this Agency, reminding them of SBA's obligation to forcefully implement Public Law 95-507 and that they and their staffs are expected to carry out the Agency's obligation to the fullest extent.

On December 11, 1979, Administrator Weaver sent a memo to the heads of all Federal departments and agencies, asking that the implementation of Public Law 95-507 in their organizations be given their personal attention. It stressed the need for remedying those legally deficient solicitations and contracts which did not contain the subcontracting provisions as required by Public Law 95-507. The memo also reminded them of a deadline date of December 31, 1979, for submission to SBA of fiscal year 1980 procurement goals for small and small disadvantaged business concerns.

AA/PA memo was sent on December 18, 1979, to all Directors of Small and Disadvantaged Business Utilization, emphasizing the need to remedy those solicitations and contracts which were legally deficient under Public Law 95–507. Specific listings by number, activity, and dollar value of such actions were requested.

Additionally, our Administrator has personally called the agency heads of the Departments of the Navy, the Army, and NASA. Appointments and/ or calls have been arranged with the Air Force and GSA. This process will be followed with other departments and agencies whenever appropriate. As a result of the above activities, reports submitted by the Federal agencies as requested by SBA and SBA field staff memos with respect to compliance with Section 211, the following data was compiled. Twenty-nine

contracts and/or solicitations. The cumulative dollar total was $9.5 billion; corrective actions have been taken on 358 contracts totalling 1 billion dollars; an additional 640 contracts or solicitations are being amended to comply with Public Law 95-507, Section 211. SBA anticipates the continued cooperation and timely reporting by all Federal agencies on these matters until all contracts and solicitations meet the requirements of the law. Updated reports on such data are due in SBA by the 15th of each month. During this same interim period, the following White House actions took place; clearly demonstrating President Carter's deep interest in assuring that the new statute will be fully observed and implemented throughout the Executive Branch. A Presidential statement at the Cabinet meeting of January 7, 1980, expressed concern at the inadequate performance of agencies in carrying out Public Law 95-507's subcontracting requirements.

A Presidential memo of January 13, 1980, to the Heads of Departments and Agencies, strongly endorsing the new law, exhorting total compliance with it by all agencies, and stating that small and minority procurement goal achievements should be critical elements in evaluating the performance of procurement officials under the SES and Merit Pay System.

On January 24, 1980, OFPP issued Policy Letter 80-1 effective February 25, 1980 which reinforces the SBA evaluation role regarding the provisions of Section 211, Subcontracting and provides for the timely notification of SBA field offices of specific contract actions.

I would like to turn our attention to Section 221 of Public Law 95-507 and OFPP Policy Letter 79-3, Federal Agency Goal Setting and report to you on the progress to establish Federal Agency procuremnt goals to small and small and disadvantaged business concerns for fiscal year 1980.

Twenty-six agencies have responded to our requests for goals pursuant to OFPP Policy Letter 79-3.

The eight agencies having the largest procurement budgets (DOD is counted as one) account for 77 percent of the Federal procurement dollars expended annually. These eight agencies were notified that their recommended goals were not acceptable to SBA as submitted. Meetings at the Agency Head level were requested during the week of February 18th. Meanwhile the respective staff level personnel of SBA and the agency are working together to narrow the issues. The eight agencies are:

Department of Agriculture.

Department of Defense.

Department of Energy.

Department of the Interior.

National Aeronautics and Space Administration.

Tennessee Valley Authority.

Veterans Administration.

General Services Administration (resubmitted).

Letters to nine additional agencies have been signed and forwarded by Mr. Weaver in regard to having the necessary negotiation sessions at the staff level. The nine agencies are:

Department of Justice.

Department of Transportation.

Environmental Protection Agency.

Federal Communications Commission.

Commission on Civil Rights.

Department of Health, Education, and Welfare.

Department of Housing and Urban Development.

National Endowment for the Humanities.

National Labor Relations Board.

Goals have been received and are in the process of evaluation from the following six agencies:

Department of the Treasury.

International Communications Agency.

U.S. Arms Control and Disarmament Agency.

Federal Emergency Management Agency.

Agency for International Development (Department of State).

Department of Commerce.

Section 15 (k) of the Small Business Act requires that each Federal Agency establish an Office of Small and Disadvantaged Business Utilization. This Section of the law has been supplemented by OFPP Policy Letter 79-1.

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