and agencies whose representatives are scheduled to testify today and tomorrow regarding their small business policies and programs. The overriding concern of our committee is to see that these departments and agencies carry out the congressional mandate that a fair proportion of their purchases, contracts, or subcontracts "be placed with small business enterprises ** Congress enacted legislation to establish a joint set-aside program and a small business subcontracting program. The purpose of this legislation is to enable small business to secure and maintain an effective competitive position in our economy and preclude an undesirable concentration of Government contracts and subcontracts in the hands of large companies. While congressional intent is clearly expressed in our statutes and in regulations of the military and civilian agencies, their implementation, in some instances, tends to defeat that intent. I am pleased to state that our Procurement Subcommittee, after extensive hearings, investigations, urging, and prodding, has finally succeeded in getting the Small Business Administration and the procurement agencies to agree to restore the joint set-aside program and to once again place Small Business Administration representatives, known as PCR's, in the various military and civilian procurement agencies. These hearings will review the progress being made in that direction and the manner in which the statutory joint set-aside program will be implemented. Today and tomorrow we will hear representatives of the Department of Defense, Departments of the Army, Navy, and Air Force, Defense Supply Agency, National Aeronautics and Space Administration, and General Services Administration. At subsequent sessions of these hearings at a date to be later announced, testimony will be obtained by the subcommittee from small firms and their associations. Those wishing to testify should submit their request promptly. The concluding witnesses, following representatives of additional civilian agencies, will be representatives of the Small Business Administration. It is hoped that these hearings will pave the way for a strengthening of the position of small business in Government procurement. Since the testimony in these hearings will be viewed against the background of congressional intent and legislative enactments, I believe it is appropriate to read into the record at this point the provisions of section 2(a) of the Small Business Act entitled "Policy of Congress." [Reading:] SEC. 2. (a) The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed. It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises,*** and to maintain and strengthen the overall economy of the Nation. That concludes the statement of the chairman. I am pleased to call on Mr. Broyhill of North Carolina, who I believe has an opening statement. Mr. BROYHILL. Thank you. As the ranking minority member of this subcommittee, I want to congratulate you and Chairman Multer for initiating hearings on this vital subject of Government small business procurements. The policies and practices of military and civilian agencies are critical to the implementation of congressional directives in the area of Government procurement. The Congress, in its mandate contained in the Small Business Act, directs that all Government agencies must aid, assist, counsel, and protect small business and see to it that a fair proportion of purchases, including subcontracts, shall be placed-and I emphasize placedwith small businesses. Through such efforts our Government can best assure that small businesses can and will remain vigorous. Through such efforts, we can assure the maintenance and the growth of this segment of our economy so vital to our economic health and military defense. Simultaneously, we can best assure that the Government in its procurement gets the most for its dollar, for it's been proven conclusively that small business generally provides the greatest efficiency, the flexibility, and the creativity required. Therefore, it is to see that Government does obtain the most of the beneficial contribution of small business, and that small business provides the full measure of its capability that commands our attention and our efforts today. Mr. Chairman, I am happy to join with you, Mr. Multer, and colleagues on the subcommittee in these hearings. I am certain that the results of these hearings and our deliberations will provide effective solutions to the many problems existing in this field of Government procurement. Mr. CORMAN. Thank you very much, Mr. Broyhill. I would like to announce that we will go from now until noon, and we anticipate getting permission to meet this afternoon from 1:30 until 3 o'clock. We will then meet tomorrow morning at 10 a.m., in the hope that we can conclude these hearings on this subject as quickly as possible. DEPARTMENT OF DEFENSE (The following are the subcommittee's letters of invitation to the Secretary of Defense to testify and his response:) SELECT COMMITTEE ON SMALL BUSINESS, HOUSE OF REPRESENTATIVES OF THE UNITED STATES, Hon. ROBERT S. MCNAMARA, Washington, D.C., September 19, 1967. Secretary of Defense, Department of Defense, DEAR MR. SECRETARY: Subcommittee No. 2 on Government Procurement and Economic Concentration of the House Select Committee on Small Business has scheduled hearings to review small business procurement practices and programs of military and major civilian procurement agencies. In connection with these hearings, we invite you and such officials as you may designate to testify on October 17 at 10:00 a.m. in Room 2359, Rayburn House Office Building. Please include in the prepared statements specific responses and information regarding the following: 1. Total defense contract awards in fiscal years 1964-1967 to all business firms for work in the United States, to small business firms in dollars and percentages. 2. Small business set-asides in fiscal years 1959-1967 in dollar amounts and percentages of total awards to all business firms. 3. Total defense awards by claimant program in fiscal years 1964-1967 to all business firms and to small frms in dollars and percentages. 4. Research and development awards in the same period to all business firms and to small business in dollar amounts and percentages. 5. Total awards for military construction and civil functions in fiscal years 1964-1967 to all business firms and to small business in dollars and percentages, and small business set-asides in dollars and percentages. 6. Small business subcontracting program in fiscal years 1964-1967, showing number of reporting contractors, subcontract payments in dollar amounts to small and other business concerns, and percentage of total to small business concerns. 7. Progress and advance payments in the same period to all defense contractors and to small business. 8. Value of Government-owned machine tools, dies and equipment furnished in fiscal years 1964-1967 to all defense contractors and to small firms in dollar value and percentage. 9. Revisions made or contemplated in Armed Services Procurement Regulations to implement the joint determination program for awarding contracts pursuant to provisions of Title 15 United States Code 644. Any other ASPR revisions since July 1965 especially designed to benefit small business. 10. Defense prime contract awards in fiscal years 1964-1967 to the top 100 companies and their subsidiary corporations listed according to value of awards received. 11. Records requested in the Subcommittee letter of November 15, 1966, to your Assistant Secretary for Installations and Logistics, regarding actions in which weighted guidelines were applied to reward with extra profit prime contractors whose small business subcontracting programs are above average and to penalize those that are below. 12. Coordination with Small Business Administration in fiscal years 1966-1967 in furtherance of small business programs, including the establishment of goals for set-asides and awards to small business. 13. Representation of small business in industry-wide groups and councils sponsored by the Department of Defense, such as the Defense Industry Advisory Council. 14. Analysis of small business procurement by dollar amounts during fiscal years 1964-1957, showing procurements (a) not offered to small business with reasons for exclusion, and (b) offered but not awarded to small business with reasons for failure. 15. Such comments as you may wish to make regarding the subject matter of the hearings. It will be appreciated if you would furnish names of witnesses and 12 copies of their statements by October 10 and additional copies at the time of your testimony. Sincerely yours, ABRAHAM J. MULTER, Chairman, Procurement Subcommittee. OFFICE OF THE SECRETARY OF DEFENSE, Hon. ABRAHAM J. MULTER, DEAR MR. CHAIRMAN: Secretary McNamara has asked me to respond to your letter of September 19 in which you invite him and Defense Department officials to testify on October 17, at hearings before Subcommittee No. 2 on Government Procurement and Economic Concentration. The Secretary regrets that he will not be able to attend these hearings. However, Mr. John M. Malloy, Deputy Assistant Secretary of Defense (Procurement), and Mr. Albert Lazure, Director for Small Business and Economic Utilization Policy, who are fully conversant with the matters under discussion, have been designated to testify before your Subcommittee. Sincerely, JACK L. STEMPLER, Assistant to the Secretary (Legislative Affairs). HOUSE SELECT COMMITTEE ON SMALL BUSINESS, Hon. ROBERT S. MCNAMARA, Secretary of Defense, Department of Defense, Washington, D.C. DEAR MR. SECRETARY: This is in further reference to our September 19 letter regarding procurement hearings scheduled for October 17. In the event you should find it inconvenient to attend, we request, in view of the level of policy involved in various matters to be reviewed, that your Assistant Secretary of Defense (Installations and Logistics) testify in your place. Your cooperation is appreciated. Sincerely yours, ABRAHAM J. MULTER, Chairman, Procurement Subcommittee. Mr. CORMAN. We are pleased to present our first witness, Mr. John M. Malloy, Deputy Assistant Secretary of Defense for Procurement (Installations and Logistics), who is accompanied by Mr. Albert Lazure, Director for Small Business and Economic Utilization Policy. Mr. Malloy, we have your prepared statement. We would be glad to have you read that or, if you prefer, have you summarize it and have it placed in the record, whichever way you desire. TESTIMONY OF JOHN M. MALLOY, DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR PROCUREMENT (INSTALLATIONS AND LOGISTICS); ACCOMPANIED BY ALBERT LAZURE, DIRECTOR FOR SMALL BUSINESS AND ECONOMIC UTILIZATION POLICY; AND ROBERT OWENS, DEPUTY DIRECTOR, DIRECTOR FOR SMALL BUSINESS AND ECONOMIC UTILIZATION POLICY, DEPARTMENT OF DEFENSE Mr. MALLOY. Mr. Chairman, I think it would be better if I read the statement and then submitted myself to any questions you or your colleagues might like to ask. I have with me on my left, Mr. Albert Lazure, who is Director for Small Business and Economic Utilization Policy, and on my right, Mr. Robert Owens, who is Deputy Director of that office. First, I would like to report to you the results of our fiscal year 1967 small business program at the prime contract level. Small business firms received $8.4 billion in defense prime contract awards during fiscal year 1967, compared to $7.6 billion in fiscal year 1966, an increase of $749 million. It was the highest dollar volume awarded to small business firms since records became available in fiscal year 1951. Prime contract awards to all U.S. business firms during fiscal year 1967 amounted to $40.6 billion, which is $5.7 billion more than awarded in fiscal year 1966. This result for fiscal year 1967 is closely related to the product mix, that is, the kinds of items we buy. There was an increase of $2.9 billion from fiscal year 1966 to fiscal year 1967 in procurement of missiles and space systems, airframes, and ships, which yield from 1.2 to 15 percent to small business. Procurement of commercial-type items, textiles, clothing and equipage, subsistence, and small purchase increased only $733 million and yield from 15 to 60 percent to small business, We have maintained the small business percentage level above the 20-percent point which we have attained for the past 3 fiscal years. The percentage was 20.6 percent for fiscal year 1966, and 20.3 percent for fiscal year 1965. As requested in your letter of September 19, 1967, the attached chart (attachment No. 1) shows prime contract awards for the past 4 fiscal years to all business firms in the United States and the small business share in dollars and percentage. (The chart referred to, attachment No. 1, follows:) |