necessary data, or the agency reviewing the application wants additional information in support of certain parts of the application. When this occurs, the appropriate Small Business Administration field office obtains the necessary information from the applicant and if requested, the agency will check the status of a small firm's application.

As of December 31, 1956, only 16 expansion goals were open. Few of the unfilled goals are in categories normally suitable for small firms. The SBA field offices have complete current lists of open goals and assist applicants interested in expansion under the stipulated goals. Applications for tax amortization assistance have been declining over the past few months.

Tax amortization program as of Dec. 31, 1956

Certificates of necessity issued to small business concerns.

Certificates of necessity issued by ODM to small business concerns from Aug. 1, 1953, through Dec. 31, 1956.

Certificates of necessity issued to small business firms in which SBA participated from Aug. 1, 1953, through Dec. 31, 1956.

C. Production pools

Under section 217 of the Small Business Act of 1953, as amended, the Small Business Administration is responsible for providing small manufacturers with information about pooling and to help them in forming and operating pools.

The SBA pooling program is especially effective for two types of small firms: those having different manufacturing facilities and those having similar manufacturing facilities, and wishing to associate in order to enable the groupsthrough improved ranges of facilities and through enlarged capacities-to compete effectively for business from which the members would otherwise be excluded.

While the formation of production pools declined during July to December 1956, evidenced by the fact that no new pools were approved during this period and no formal requests for approval are pending, interest in production pools continues to a moderate degree. Regular reports from the SBA field offices continue to reflect the receipt of inquiries regarding the formation of pools, in addition to those received directly in the Washington office. Should mobilization activities increase, in the light of past experience, a revision upward in figures for pooling functions would be expected.

As of December 31, 1956, there were six approved small-business production pools of the Small Business Administration. These pools are composed of 51 companies, employing approximately 3,000 persons. Two of the presently active pools have reported 245 prime contract awards, valued at $963,232, in addition to 4 subcontract awards valued at $85,967.

D. Products assistance program

The Small Business Administration's products assistance program is designed to help small concerns gain access to product development information available from Government and industry. Since start of the service in July 1954, requests for this type of assistance have increased steadily.

As part of this service the agency

1. Helps small concerns gain access to data on research and on product, process, and market development needed in solving day-to-day operating problems and in planning production and marketing programs.

2. Provides small firms a clearinghouse for information on available products and processes which can be used to maintain, diversify, or expand their operation.

Expenditures by Government and industry on research and development have increased steadily over the years. As a result, a wealth of information on product and process development has been accumulated. Much of this data is nonconfidential in nature and is available to any potential user. However, it is not always readily accessible, particularly to small-business owners who either do not have the time or do not know where to obtain the information needed in solving a specific problem. One of the objectives of the Products Assistance Service is to help bridge this gap, to assist small concerns in gaining access to needed information.

The Small Business Administration does not maintain laboratory or staff facilities for research on product and process development. It does, however, provide technical counsel and assistance to individual small business concerns on new product research and development. In this connection, the agency enlists the cooperation of industry, other Government agencies, public and private research organizations, and trade associations in solving the small business problems submitted to it.

During the last 6 months, the number of requests for this aid increased 56 percent; 4,881 firms requested and were furnished information on product, process and market development (exhibit A). Since the service was established in July 1954, the number of small firms that have been provided this type of technical assistance totaled 13,381.

As another part of this service, the agency issues a monthly Products List Circular, a publication which provides information on patented inventions (privately owned and Government-owned) available for production and distribution. Over 12,000 small concerns have now asked to receive this publication on a continuing basis. During the past year, 3,262 small firms requested further information on the 1,027 new and improved products and processes listed in the Products List Circular. In the 6 months ending December 1956 a total of 459 products were listed and 1,371 requests were received for information and data on these items.

E. Managerial assistance program

Managerial assistance is inherent in the various SBA activities relating to procurement, production, and products assistance; problems in these areas naturally involve the aplication of appropriate managerial techniques.

Four series of management publications are currently issued covering problems perplexing the owners of small firms. Three are distributed free upon individual request and the fourth is sold at nominal prices by the Government Printing Office. An increasing number of the publications is issued in the SBA administrative management courses offered by educational institutions to proprietors of small businesses.

Management aids for small manufacturers.-To date 78 of these 4-page, free leaflets have been issued. More recent aids include "Protecting Your Records Against Disaster," "Surveying and Controlling Executive Time," and "How the Post Office Helps Small Business." Total distribution of the management aids is now 1,865,775 copies.

Technical aids for small manufacturers.-Today technological changes affect many production aspects of the smallest manufacturing plant or shop. These changes involve production processes, materials, machinery and equipment, and maintenance. To date 46 technical aids have been published. More recent aids include "Modern Welding Methods," and "Cash Values in Industrial Scrap." The number of copies of technical aids distributed now totals 587,975.

Small marketers aids.-The newest series of free aids is prepared for the use of the small retailer, wholesaler, and service operator. Their management problems are analyzed and proven solutions to actual problems are briefly presented. Typical of these leaflets are "Sizing Up Small Business Locations," "Appraising the Market for the Services You Offer," and "Improving Personal Selling in Small Business." Over 366,000 copies of the 17 issued to date have been distributed.

Small business management series.-When a management subject cannot be adequately covered in a short leaflet, the SBA has a leading authority in the field prepare a manuscript on the subject. These booklets are sold at nominal prices by the Superintendent of Documents. Widespread acceptance of them is indicated by the sale of more than 427,200 copies of the 19 booklets issued thus far. Among the best sellers are Cost Accounting for Small Manufacturers, Cutting Office Costs in Small Plants, Human Relations in Small Industry, and A Handbook of Small Business Finance.

All of these publications are prepared with the greatest care to cover the more important management problems in a practical manner. Subjects are selected with the aid of advisory committees of businessmen, written by experts in their respective fields, and all manuscripts are reviewed by equally outstanding experts. The wide acceptance of the management publications justifies the care taken in their preparation. A table showing the distribution and sale of SBA publications and a list of publications described above is appended. (Exhibit K.)

Another aspect of managerial assistance is the administrative management courses. In cooperation with universities and other educational groups throughout the Nation, the SBA is cosponsoring short courses in administrative management for small business owners and managers. The courses are designed to help the small business operator improve his knowledge of business administration. They are concerned with management policy having to do with organizing, staffing, planning, directing, and controlling. During fiscal year 1957 (up to December 25, 1956), 36 courses have been completed, 3 are in progress, 20 more are contemplated. These 59 courses are being conducted by 52 educational institutions. Approximately 5,600 businessmen have attended these courses up to the present time.

The educational institutions assume educational and financial responsibility for all of the courses, and the SBA lends assistance in the role of cosponsor. Most of the classes meet 1 evening per week for a period of 8 to 10 weeks. Typically, each session runs from 2 to 3 hours. Costs are defrayed by tuition fees paid by the businessmen who take the courses. Speakers are selected from among businessmen, educators, bankers, and Government officials.

Evaluations from more than 1,300 businessmen who have attended these courses have been analyzed. These evaluations were unsigned and made by the businessmen after they had completed a course. Nearly all made favorable comments. Of those who rated the courses as a whole, 86 percent rated them good to excellent, while 14 percent considered them fair. Only 3 persons rated them as poor. More than 95 percent of the students asked said that the problems discussed were important or vital to the operation of their businesses.

V. SMALL BUSINESS ADMINISTRATION PRIME CONTRACT PROGRAM

The Small Business Administration is empowered to enter into contracts with any Department or agency of the United States Government to furnish supplies and services, and to arrange for the performance of such contracts through subcontracting to small business concerns or others, as may be necessary.

The Small Business Administration believes that its authority to take prime contracts in order to extend subcontracting should be continued as a standby basis, for use in emergencies.

VI. RESEARCH AND DEVELOPMENT

The Department of Defense has reported that small business concerns were awarded 5.9 percent of its research and development prime contracts during fiscal year 1956. Small firms were awarded 9.7 percent of total Army contracts, 9.4 percent of Navy contracts, and 3.7 percent of Air Force contracts. However, since awards to educational and nonprofit institutions are included in these "small business" percentages, they do not adequately reflect the volume of research and development contracts going to small firms.

In their procurement counseling, Small Business Administration staff members stress to qualified small business concerns the importance of their trying for research and development work and guide them to the proper offices. This is important, because a firm which performs a research and development contract has an advantage over competitors when the production contract for the item is awarded.

During the last half of calendar year 1956, one-fourth of the value of all procurements screened by the agency's representatives at the Quartermaster Research and Development Command, Natick, Mass., was jointly set aside for small business. Good progress also is being made in other Army and Navy installations.

VII. PROGRESS PAYMENTS

The first progress report of the Cabinet Committee on Small Business recommended that the President direct departments and agencies engaged in extensive procurement to adopt procedures designed to (1) insure that a need by a bidder for progress payments or advance payments will not be treated as a handicap in awarding a contract, and (2) accelerate the making of progress payments to small suppliers when requested.

. On November 16, 1956, the Secretary of Defense issued Department of Defense Directive No. 7800.4, which deals with the subject of defense contract financing policy-small business concerns. The stated purposes of the directive are to insure that a need for progress or advance payments by contractors will not be treated as a handicap in awarding contracts, and to facilitate and speed up the

making of progress payments requested by small suppliers under Government contracts. The directive also emphasizes the desirability of providing proper contract financing assistance to small business concerns.

Similarly, the Administrator of the General Services Administration issued Personal Property Management Regulation No. 33 on December 31, 1956. This regulation, directed to heads of all Federal agencies, prescribes basic policies and procedures governing executive agencies in providing contract financing in the form of progress payments. The regulation applies only to fixed-price contracts for supplies and nonpersonal services other than contracts for construction or the engineering and architectural contracts pertinent to construction. The regulation states further that to the maximum practical extent the need for progress payments will not be treated as a handicap in awarding contracts to concerns qualified as responsible suppliers. Prospective contractors deemed reliable, competent and otherwise responsible will not be regarded as any less responsible because of the need for progress payments. The regulation requires executive agencies to takes whatever action is necessary to facilitate and speed up payments on contracts when due.

VIII. SMALL BUSINESS SIZE STANDARDS

Congress, in the Small Business Act of 1953, stated that to be considered small and therefore eligible for assistance from the Small Business Administration, a business concern must be "independently owned and operated and * * * not dominant in its field of operation." The act also authorized the Small Business Administration, in making a more detailed definition of "small business," to use such criteria as number of employees and dollar volume of business. The agency uses two different yardsticks in determining whether a firm is small-one is employed in determining whether a firm is eligible for assistance in selling to the Government, the other in determining whether it qualifies for financial and other nonprocurement assistance.

A new small business size standard became effective January 1, 1957. It was formulated by an interagency task force for procurement purposes and represents the unanimous judgment of the 14 Government agencies chiefly concerned with procurement procedures and the Small Business Administration.

Under the new ruling, for purposes of Government, a "manufacturing concern” is a small business if (a) it is not dominant in its field of operation and, with its affiliates, employs fewer than 500 employees, or (b) it is certified as a small business by the Small Business Administration.

To be classified as a “small business concern,” a nonmanufacturing firm bidding on Government purchases must meet the same criteria as a manufacturer, plus two additional requirements: (1) It must be defined as a "regular dealer" under the Walsh-Healey Public Contracts Act, and (2) in the case of a Government purchase reserved for award to small business or in appropriate cases involving equal bids, it must furnish the product of a small manufacturer or producer in the performance of the contract.

When submitting a bid or proposal on a Government procurement, a concern which meets the above criteria, and which has not previously been denied small business status by the Small Business Administration, may represent in the appropriate place on the bidding form that it is a small firm. The concern will then be deemed to be a small firm for the purpose of the specific Government purchase, unless another bidder protests to the contracting officer and the Small Business Administration about the firm's size status, or the contracting officer himself questions its representation. If the firm's representation that it is a small business is challenged, it may then apply to the nearest Small Business Administration office for a certificate that it qualifies as a small firm. If granted, this small business certificate is conclusive.

If a firm is in doubt as to whether it meets the small business criteria, it may apply to the nearest Small Business Administration office for a small business certificate.

This definition differs from the old less-than-500-employees standard in the following respects:

1. The factor of dominance in an industry is added. Under the new definition firms having more than 500 employees in some industries may be determined to be small business if they are nondominant in the industry. Conversely, a firm and its affiliates having fewer than 500 employees may be considered large if they are dominant in the field.

2. A nonmanufacturing firm must itself be classsed as a "small business concern," and also must furnish the product of a small business manufacturer or producer in the performance of the Government contract.

3. The number of employees formerly was the total number of the firm and its affiliates at the time of submission of the bid. Under the new definition, “number of employees" means the quarterly employment of the concern in question and its affiliates based (1) on the average number of employees reported for the preceding four quarters to the United States Treasury Department under the old age and survivors insurance program; or (2) the number of employees as of the most recent quarterly report, whichever more correctly reflects the size of the concern in question.

It is believed that the new definition will be more equitable to small business firms and will provide the flexibility necessary to handle inequities on an individual basis.

Insofar as the definition for "business loans and purposes other than Government procurement" are concerned, the Small Business Administration will continue to use the definition of "small business" adopted by it on June 10, 1954. This definition provides:

Manufacturing concerns.—Any manufacturing concern is classified as "small" if it has 250 or fewer employees, including employees of affiliates; as "large" if it employs more than 1,000 persons. A manufacturing firm which has more than 250 but not more than 1,000 employees may be classified as either "small" or "large" depending upon the size standard which the Small Business Administration has developed for its particular industry.

Nonmanufacturing concerns.-Any wholesale concern is considered small if its annual dollar volume of sales is $5 million or less; any retail or service trades concern as small if its annual sales or receipts are $1 million or less. (The regulation also provides certain exceptions.) The dividing line between large and small for other industries for purposes other than Government procurement: Construction: Average annual receipts of $5 million or less for the preceding 3 years. Trucking and warehousing: Annual receipts of $2 million or less with exceptions based on economic data in individual instances. Taxicabs: Annual receipts of $1 million or less.

IX. SMALL BUSINESS ADMINISTRATION LIAISON OFFICER WITH DEPARTMENT OF DEFENSE

A Small Business Administration liaison officer is assigned to the Department of Defense to help achieve greater coordination of the two agencies' small-business programs. The SBA representative participates in conferences and in the preparation of directives relating to small-business policies of the Defense Department and the three military services. Defense officials have given this liaison officer excellent cooperation and his participation at the Defense Department's policy level has resulted in a number of changes beneficial to small business. This SBA representative participates with the policy level officials of the Department of Defense by reviewing proposed policies, instructions, procedures, and implimentations that affect small business and makes recommendations with respect to such proposals.

X. THE CABINET COMMITTEE ON SMALL BUSINESS

During the past year, in addition to the activities of SBA program operations, there has been a coordinated effort among all Government agencies and departments to render specific assistance to small business. A direct result of the Administration's small-business programs has been the establishment by the President of a Cabinet Committee on Small Business. SBA activities and programs have pinpointed small business problems and have served as a corollary to efforts of small-business men who have in this connection, as expressed by the annual report of the Select Committee on Small Business of the United States Senate, "* * succeeded in placing their problems on the steps of the White House itself."

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The purpose of the Cabinet Committee on Small Business is that of directing the development and strenthening of Government programs and policies to provide such enterprise with additional constructive assistance.

The Administrator of the Small Business Administration was named a member of the Cabinet Committee on Small Business, and the Committee actions reflect the problems and requirements of small business as experienced by the SBA in administering the Small Business Act of 1953.