TESTIMONY OF WILBERT E. CANTEY, DIRECTOR, OFFICE OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION, DEPARTMENT OF TRANSPORTATION, ACCOMPANIED BY ROGER MARTINO, OFFICE OF INSTALLATION AND LOGISTICS Mr. CANTEY. I am Wilbert Cantey, Office of Small and Disadvantaged Business Utilization. I have with me Mr. Roger Martino, Chief, Office of Installation and Logistics. The Department of Transportation appreciates the opportunity to appear before you today to discuss our implementation of the procurement provisions of Public Law 95-507. I hope that this testimony will help to clarify the efforts my office, and the Department generally, are making to comply with this statute, and to improve the participation of small and disadvantaged businesses in direct Department of Transportation contracting. The Department of Transportation is committed to an effective program for the participation of small and disadvantaged businesses in its procurement activities. Our record is one of awarding a substantial portion of our total direct procurement dollars to small and disadvantaged businesses. On May 17, 1979, the DOT issued a Notice of Proposed Rulemaking-NPRM-to strengthen our program for small and disadvantaged businesses. We recognize that the NPRM differed from Public Law 95-507 in some areas. We have since worked with the committee, its staff, the Office of Federal procurement policy, the Small Business Administration, and others to effect changes in the final rule. The final regulation should be published in early 1980. The Department has actively implemented section 211 of the Public Law 95-507. Following its enactment, the Department looked for guidance to the OFPP, the key procurement policy and regulation agency of the Government, for direction. OFPP published proposed policy guidance on January 16, 1979, and the Department commented on the proposed regulations. OFPP issued a final rule on April 20, 1979, that requested GSA to make appropriate changes in the Federal procurement regulations, calling for agencies to place subcontracting provisions derived from Public Law 95-507 in all solicitations for contracts exceeding $500,000-$1 million for construction contracts. A GSA telegram dated May 22 directed the agencies to begin using the subcontracting provisions immediately. On June 7, 1979, the Director of Installations and Logistics of DOT sent a procurement bulletin to all affected procurement offices advising that the appropriate clauses were required in all future solicitations and including a copy of the GSA telegram. Our compliance with the procurement provisions of section 211 has not been as automatic as expected in view of our June 7 directive to all our procurement offices. The table attached to this statement shows the best figures on solicitations and contracts and the utilization of the required clauses which we were able to obtain from our operating administrations since we received the questions you sent on November 26, 1979. We are moving to correct this situation, as I will describe in a moment. To implement section 221 of Public Law 95-507 we are currently working to establish goals for contract awards to small and disadvantaged business for fiscal year 1980 in accordance with guidance issued by OFPP. We have been regularly consulting with the Small Business Administration concerning all aspects of our small business program. Our first report which meets the requirements of section 221 of Public Law 95-507 will be submitted in December. My office, the Office of Small and Disadvantaged Business Utilization, was established in July of this year. It is making formal and informal initiatives to achieve full compliance with this law. The Secretary established this office as an office reporting directly to him and the Deputy Secretary. An organization chart showing this relationship is attached. We are developing, in consultation with the Deputy Secretary, a supervisory network reaching to the Department's procurement officers which will ensure compliance with requirements and goals and yet not be unduly burdensome or redundant. My office's budget for fiscal year 1980 is approximately $300,000. Mr. LAFALCE. I want to thank you for your testimony. I have read the entirety of it and believe we can begin the questioning. Mr. CANTEY. It is less than 10 minutes. Mr. LAFALCE. Yes, a little over the desired 5. Mr. Neidich. Mr. NEIDICH. Why is it that GSA, which is responsible for procurement, has issued 437 deficient contracts without evaluating? Is this the sort of example to be setting? Mr. MCBRIDE. Until Mr. Addabbo asked the question, I had no idea what was going on in that area. It was disappointing as I began to examine the results and statistics coming in. I am taking some actions to correct them. As to how many of those solicitations are on the street right now and how many are in-house that can be amended, I just do not have those statistics available to me now. I have absolutely no excuse to offer at this stage in the game. We will do better in the future. Mr. NEIDICH. Does GSA promulgate regulations? Mr. MCBRIDE. Yes, through FPR. Mr. NEIDICH. Have there been any legal opinions issued? Mr. MCBRIDE. I asked the other day, last week, to be exact, for an opinion on the force and effect of the GAO opinion as it relates both to GSA's contracting posture and also as it relates to the temporary regulation still in existence. Mr. NEIDICH. Have you sent any communications to other civilian agencies at this point? Mr. MCBRIDE. We have not. Mr. NEIDICH. I think your testimony indicated you sent instructions down to your field personnel. Mr. MCBRIDE. Yes, by a wire dated November 30. Mr. NEIDICH. Did that give them any indication as to how to modify or terminate existing contracts? Mr. MCBRIDE. No, it did not. Until I can evaluate the impact of that, I have held in abeyance those decisions until the counsel advises us of the legal ramifications. Obviously if it is illegal, all contracts will have to be reviewed. Mr. NEIDICH. When do you expect an opinion from counsel? Mr. MCBRIDE. In about 10 days from today. Mr. NEIDICH. Will you please provide the subcommittee with a copy? Mr. MCBRIDE. Yes. [Counsel opinion follows:] During the hearings before your Subcommittee on General Oversight and Minority Enterprise on December 4, 1979, you requested that I get and provide to you, for your record, a copy of the legal opinion of the General Services Administration (GSA) Counsel of what the Comptroller General meant when he responded to Congressman Joseph P. Addabbo by letter of October 19, 1979 (B-114835) that "contracts which fail to contain plans required under Section 211 and the implementing regulations are legally deficient". Attached hereto is the legal opinion as requested. wold mi Bride GERALD MC BRIDE Assistant Administrator for Enclosure On December 5, 1979, you requested an opinion as to the meaning of The text of the question and answer is as follows: "What is the legal status of all Federal contracts "It is our view, for the reasons already indicated, that the legality of the contracts awarded after October 24, 1978, and before the issuance of implementing regulations is not impaired by the absence of the plans. To conclude otherwise would mean that Congress intended the wheels of Government-wide procurement to come to a halt pending issuance of the necessary regulatory implementation of section 211. We do not believe that Congress intended such a result. "Contracts awarded after issuance of the regulations should 2 where it is not feasible to remedy the situation. For The question that needs clarification is what the Comptroller General meant when he stated that "contracts which fail to contain plans required under section 211 and the implementing regulations are legally deficient." Did he mean (1) that such contracts are illegal, or (2) that they are improper because they are technically deficient? The remainder of the Comptroller General's response (quoted above) seems to suggest the answer. Had he intended to say that such contracts were illegal and should be cancelled without any liability to the Government, he would not have said "the remedy must depend on the particular circumstances' and "Contract modifications might be appropriate under certain conditions", (Emphasis added.) etc. I believe he used the words "legally deficient" because Mr. Addabbo had employed the words "legal deficiency" in the question. I believe that the Comptroller General was saying that contracts awarded after the effective date of the regulations implementing section 211 which did not contain the subcontracting plans were improper but not illegal. (Informal contact with GAO's Office of General Counsel confirmed the fact that GAO regards the contracts in question to be improper, not illegal.) A number of Court of Claims cases and Comptroller General decisions have addressed the differences between improperly awarded contracts and illegal contracts. In 52 Comp. Gen. 215 (1972) at 218, the Comptroller General states: "We are in agreement with the position of the Court of |