THE POSITION OF SMALL BUSINESS IN GOVERNMENT PROCUREMENT Part III.PRIVATE INDUSTRY TESTIMONY TUESDAY, JANUARY 23, 1968 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT PROCUREMENT COMMITTEE ON SMALL BUSINESS, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. James C. Corman, chairman of the subcommittee, presiding. Present: Representative Corman. Also present: Henry A. Robinson, subcommittee counsel; Myrtle Ruth Foutch, clerk; and John J. Williams, minority counsel. Mr. CORMAN. The subcommittee will come to order. Today, Subcommittee No. 2 on Government Procurement and Economic Concentration resumes hearings to review the small business procurement practices and programs of Federal departments and agencies. Today's hearing stems from a complaint by a small business firm and was brought to the subcommittee's attention by our distinguished colleague, Representative Tom Steed, a member of the House Small Business Committee. I understand that Representative Steed intended to introduce to us the members of the Oklahoma small business. firm, but that a longstanding speaking engagement in his home district prevents him from being here. Another distinguished gentleman from the great State of Oklahoma, Senator Fred R. Harris, has also expressed interest in the matter before us today. Senator Harris is a member of the Senate Small Business Committee and I know he is concerned that small firms receive ample opportunity to participate in Government contracts. The complaint is made to the subcommittee on behalf of small business in the communications electronics industry that Sacramento Air Materiel Area, McClellan Air Force Base, Calif. without justification, had discontinued set-asides in certain procurements of communications field services which had previously been reserved exclusively for small business bidding. On November 1, 1967, testimony was obtained by the subcommittee from Air Force representatives regarding their small business procurement programs. The small business share of Air Force prime awards had declined in fiscal year 1967 and set-asides fell in that year to a low of 2.2 percent of total awards. Air Force witnesses described 1 See p. 264. procedures designed to increase small business participation in procurements and to strengthen the set-aside program of the Air Force. In today's hearing, the subcommittee will review the circumstances under which Sacramento Air Materiel Area eliminated certain setasides effective at about the same time that testimony was given. We wish to inquire into the reasons which prompted this action and to determine whether existing provisions of the armed services procurement regulations or their implementation by Air Force personnel require correction so that small business in this industry will not be unfairly deprived of set-aside procurement opportunities. For this purpose, the subcommittee on December 19 invited Air Force representatives and industry representatives to testify here today. I understand that the Air Force had been furnished detailed information regarding the complaint so that ample opportunity was afforded the Air Force for the preparation of the response to the complaint. After hearing these witnesses, the subcommittee will request the Small Business Administration, the agency charged by law to aid, counsel, assist, and protect the interest of small business, to review their testimony and to submit comments and recommendations for the subcommittee's consideration. This procedure, I am certain, will be helpful to the subcommittee in evaluating the problem and in reaching appropriate conclusions n the matter. 1 See p. 544. COMMCRAFT, INC. Mr. CORMAN. Our first witness is Mr. William H. Barnhard, president of CommCraft, Inc., of Norman, Okla. Mr. Barnhard, would you care to come forward, sir. If you wish to bring anybody with you to the witness table, you are welcome. I understand, Mr. Barnhard, that you have a prepared statement. Mr. BARNHARD. I do, sir. Mr. CORMAN. I would like to suggest that if you wish we can make that full statement a part of the record, at this point, and you may summarize and highlight it for us. I would say to all the witnesses that we must conclude the hearings today. We are going to try to get permission to sit this afternoon if we do not conclude this morning. We are anxious that both sides have ample opportunity to present evidence to the committee, and particularly for the record, because members not here will study carefully the record of these proceedings. Mr. Barnhard, we will let you proceed in whatever way you wish. TESTIMONY OF WILLIAM H. BARNHARD, PRESIDENT, COMMCRAFT, INC., NORMAN, OKLA., ACCOMPANIED BY J. D. SANDIDGE Mr. BARNHARD. If I might, I would like to read the full statement, since it has not been distributed. We would like to preface our statement by assuring this committee of our awareness of the gravity of our actions, and that our presence here today is dictated by our deep and firm conviction that the survival of the small business segment of our industry is solely dependent upon the continuation of the small business set-aside program. We share, to a degree, the trepidation of the other affected small businesses who, through fear of reprisal, declined to participate in this protest. We do feel, however, that somewhere along the line, we must turn and fight for our very survival. This room, then, is apparently our battleground. This protest assumes added importance in our eyes in view of the adverse effects upon the small business segment of our industry caused by: 1. The overall reduction of Government spending within our area of activity. 2. The increase in the requirement for on-the-job training of military personnel, necessitated by the Vietnam conflict. 3. The increase in the systems concept which, by its very enormity, precludes the participation of small business. If, in addition to these factors, big business continues its inroads into our available market area, the small business service contractor will be as much of an anachronism as the dodo. At this point, we must emphasize that we are not asking for charity. The long and impressive performance record of the small business community amply demonstrates its capability. Our tax contribution to the economy is highly significant, since we cannot generate the writeoff's which are available to the large manufacturer. We have in the past, and will continue, to earn and pay our own way. We are asking for protection against the conditions that spark the survival-by-merger trend and thinking that exists today. If all were well with the American small businessman, he would not feel the necessity for affiliation with a holding company in order to successfully compete with big business. This submergency of the small business tolls the knell for the historic American individual enterprise and introduces the corporate big brother as our new national symbol. A short history of the communications service industry is in order at this point. Prior to 1963, virtually all of these services were performed by major corporations working under open end or call contracts. In 1963, we started getting small business set-asides in this area. By 1964, virtually all of these requirements were performed by small businesses. In the past year and one-half, a large portion of this work fell within the E.F. & I. classification, leaving a smaller share for competition among nonmanufacturing organizations. If this present situation becomes a precedent, it may well spell the end for the small business field services contractor. Specifically, our protest concerns two procurements emanating from the Sacramento air materiel area which, in their final form, were not set aside for small business in spite of a history of successful performance by small businesses. Now, let's examine these procurements: (A) RFP No. F04606-68-R-0132 providing for support services for the western GEEIA region of Vandenberg Air Force Base. It is estimated by the Government at only $500,000 and guarantees no minimum. Last year's requirement was estimated by the Government at $2 million, and guaranteed $315,000. It was set aside for small business. The identical requirement was set aside for small business in 1963, 1964, 1965, and 1966. I believe I am in error on the 1965 date. I don't believe there was a procurement in that year. (B) RFP No. F04606-68-R-0177 providing for support services for the western GEEIA region over a seven-State area. It is estimated by the Government at only $300,000 and guarantees no minimum. Last year's contract was estimated by the Government at $750,000 and guaranteed a $155,000 minimum. The similar requirement was set aside for small business in 1965 and 1966. We have now arrived at point 1. The present procurements are only a fraction of previous procurements, therefore, must-by precedent-be within the financial limitations considered applicable to small business. We understand that, in order to satisfy the requirements for a small business set-aside, there must be adequate sources for competition. Let's examine this aspect: Offeror's briefings were held at SMAMA for both procurements. We noted that all attendees had their bid sets with them upon arrival. |