A total of 10 weeks will be given to the orientation phase of training. The day will be divided into pre-employment training and basic training. During the 10 week job conditioning period trainee will be exposed to: 1. ED&D complete facility via ED&D counselor with oral presentations and demonstrations. 2. ED&D product usage (field trip is necessary). 3. Training situations that parallel career fields. 4. Exposure to actual job for which he is being trained. 5. Complete and detailed training for job type with emphasis on personal gain and responsibility. After the 10 week period is completed, trainee will enter skills training portion of program which should last for 20 weeks, depending upon job type and trainee abilities. This portion will include applied problem solving in simulated work, reading comprehension, mathematical usage relative to job type, logic and planning regarding diagrams, blueprints, etc. Objectives of this phase are to develop job type related skills and install a non-threatening industrial/manufacturing experience designed to enhance the individual's feeling of responsibility and positive work attitude. New processes and uses of old and new tools and tooling shall constantly be injected into this phase of training. At the end of this period, the skills instructor will prepare a brief summary report on each trainee's progress, which will be used to develop his job training schedule. At this time, the O-J-T phase shall begin and should last 22 weeks. This phase is intended to orient the trainee to actual employment situations and demands made by it, without the threat of failure hanging over him. All conditions of actual job requirements shall be presented during this phase, as well as actual on the job work to be performed by the trainee. After the O-J-T phase, trainees will become permanent employees of ED&D with advancement and continuation of employment an almost certainty. ED&D will subject the employees to our proficiency traning phase at this time. This will last until employee is completely capable of entering into full time production. STAFFING Training Counselor.—It is estimated that a full time counselor is needed for each job type. These are avialable in our assistant foremen now on the job. Office clerk, administration.—An office clerk will maintain all individual trainee personnel records, prepare reports and other related information. Note: Total annual cost per trainee equals $9,184.80. E.D. & D. Inc. will absorb 40 per cent of cost, making cost to the Government equal $5,510.88 per trainee. ED&D Inc. has an existing assistance program in which we now are training 3 personnel (Hard Core type). Our existing program is simliar to the one proposed in this project. However ED&D bears the full cost of assisting the people now being trained. In keeping with the objectives of our project and the program of the maximum development of human resources and the utilization of these resources to the highest possible level, ED&D Inc. will provide for the continued upgrading of individual to further ensure his success in our society. Mr. CORMAN. Very well, the committee stands adjourned until 10 o'clock tomorrow morning. (Whereupon at 3:50 p.m., Friday, March 22, 1968, the subcommittee was recessed, to reconvene at 10 a.m., Saturday, March 23.) THE POSITION OF SMALL BUSINESS IN GOVERNMENT PROCUREMENT SATURDAY, MARCH 23, 1968 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT PROCUREMENT AND ECONOMIC CONCENTRATION OF THE SELECT COMMITTEE ON SMALL BUSINESS, Los Angeles, Calif. The subcommittee met, pursuant to recess, at 10 a.m., in room 1345, U.S. Courthouse, Temple and Spring Streets, Hon. James C. Corman presiding. Present: Representatives Corman and Burton. Also present: Henry A. Robinson, subcommittee counsel, and John J. Williams, minority counsel. Mr. CORMAN. The Subcommittee on Government Procurement and Economic Concentration of the House Small Business Committee will come to order, and resume our hearings. I think there are some folks here today who are here for the first time and because of that I shall read a portion of our opening statement: In previous sessions of these hearings held in Washington the Subcommittee obtained testimony regarding the small-business procurement policies and programs of the Department of Defense, the Departments of the Army, Navy and Air Force, the Defense Supply Agency, and major civilian procurement agencies, including the National Aeronautics and Space Administration, and the General Services Administration. In those sessions we also heard from representatives of private industry, principally small-business firms in the East. We are out here now to hear from operating agencies, procuring agencies of the Government at the regional level from prime contractors, from associations of small businessmen and individual small businessmen. It is the obligation of this committee to serve as a watchdog in procurement. The Government spends about $48 billion a year and we want to be certain that money is not spent to adversely affect the small business community. That is the purpose of our hearings. We are pleased that you are all here. Mr. Burton, would you like to comment? (967) WESTERN ELECTRONIC MANUFACTURERS ASSOCIATION (The subcommittee's invitation to testify follows:) Mr. STANLEY EVANS, SELECT COMMITTEE ON SMALL BUSINESS, Government Affairs Manager, Western Electronic Manufacturers Association, DEAR MR. EVANS: This is in further reference to your previous correspondence and discussions with Subcommittee counsel, Henry Robinson, regarding the hearings of the Subcommittee on Government Procurement and Economic Concentration of the House Small Business Committee to review the effect of procurement policies and practices of Federal departments and agencies upon small business. The Subcommittee is interested in documenting the views of your association and the views and experiences of its member firms regarding the recent discount policy of General Services Administration. Accordingly, we are pleased to invite you and such officials and members of your association as may be designated to testify on March 23, 1968, at 10:00 a.m. in Room 1345 of the Federal Courthouse, 312 North Spring Street, Los Angeles. Please let Mr. Robinson know as soon as possible the names of the witnesses and arrange to have six copies of each statement forwarded to this office by March 18. If you wish, additional copies may be supplied at the time of the hearing for distribution to the press and other interested parties. Your cooperation is appreciated. Sincerely yours, (The answer follows:) JAMES C. CORMAN, Member of Congress WESTERN ELECTRONIC MANUFACTURES ASSOCIATION, Palo Alto, Calif., March 12, 1968. Hon. JAMES C. CORMAN, DEAR MR. CORMAN: In response to your recent communication, the following are the witnesses from WEMA for the hearing in Los Angeles on March 23. Robert M. Ward, president, Western Electronic Manufacturers Association, accompanied by Stanely Evans, WEMA government affairs manager. Louis G. Washburn, manager, government sales, John Fluke Manufacturing Co. W. Hunter Simpson, president, Physio-Control Corp. I, myself, will have no statement to deliver, but will be present to assist Mr. Ward. We are looking forward to the hearing and keenly appreciate the opportunity to address this problem of GSA procurement. Sincerely, STANLEY EVANS, Government Affairs Manager, (968, Mr. CORMAN. Mr. Robert M. Ward, of Western Electronic Manufacturers Association, and I think Mr. Ward is to be accompanied by Mr. W. Hunter Simpson, Mr. Washburn and Mr. Evans. You may pull up one more chair if you should all like to get to the witness table at the same time. If you will present all of your principal papers we can move on to a question and discussion period and you may respond as a panel, but it will help us if first you present all of the statements you may wish to. Sometimes the second statement answers the questions we have after the first one. TESTIMONY OF ROBERT M. WARD, WESTERN ELECTRONIC MANUFACTURERS ASSOCIATION, PALO ALTO, CALIF.; ACCOMPANIED BY W. HUNTER SIMPSON, LOUIS G. WASHBURN, AND STANLEY EVANS Mr. WARD. Mr. Chairman and members of the committee, I am Robert M. Ward. In my capacity as president of Western Electronic Manufacturers Association I am here today to testify on a problem which distresses much of our industry and, most critically, the small companies in electronics. Membership in WEMA is open to firms in the 13 States of the Far West, which are engaged in manufacturing electronic products or perform research and development alone. In the nature of things our 450 members range in size from large corporations to miniscule companies, but more than 75 percent falls into the category of small business. The subject of our presentation this morning is procurement policy of General Services Administration. Last week in your hearings in the capital you listened to a spokesman for one of our member companies, Electro Scientific Industries of Portland, Oregon. Moreover, on February 7 of this year, the unhappy experience of another WEMA member, William Ainsworth & Sons, of Denver, Colorado, was brought to the attention of your counterpart committee in the Senate. Each of these companies, plus the two additional WEMA members represented here this morning, is a small company. Each manufactures electronic instruments which, because of their superiority and uniqueness, distinguish the firms and enable them not only to survive competition from much larger companies, but to grow. Yet, in order to survive and grow, none of these companies dares rest for a minute in its research and development effort. R. & D. is not merely desirable in the electronic industry, it is absolutely essential. In our industry an investment of ten percent of annual sales in R. & D. is common. This is true for both large and small electronic firms. It is not true, by the way, for the shoemaker or the aspirin maker, whose products have remained substantially unchanged for the past 50 years. But if it is necessary for the big, diversified company to make this substantial investment to maintain its momentum, it is a matter of life or death for the small company relying, as it usually does, on its leadership in a few lines. I emphasize this point because I think it is a critical one to understanding the context of our grievance with General Services Administration. As you have heard in previous testimony, GSA in 1965, em 84-790-68- -62 barked on a policy of demanding special concessions, usually of a very minor sort, as a condition to admitting would be suppliers to its list of approved contractors. By late 1967, however, it was quite clear that these concessions had passed out of the realm of tokenism. Now when a company's 1-year "license" expires it is virtually certain to be told it won't be kept on the list unless it is prepared to concede, flat out, price discounts ranging anywhere from one-half of 1 percent to 15 percent. At this point two things should be made crystal clear: first, regardless of the terminology GSA may use we are not talking about quantity discounts. When I said earlier that GSA issues a "license" I meant premisely that. GSA itself does not itself buy sophisticated, esoteric instruments in volume and proceed to warehouse them. It does purchase standard, general use items in great numbers but it seldom buys electronic equipment in quantity. Both GSA and the manufacturer know that the buyer for this equipment usually is a scientist who understands what the device can and cannot do. GSA is not competent to judge quality and performance and it wisely refrains from speculating on Government-wide needs for stockpile purposes. Not so wisely, GSA takes it upon itself to decide which companies shall and which companies shall not be allowed through its door to talk to the FAA, the FCC, the National Institutes of Health-all the hundreds of agencies which are obliged to handle their procurement through GSA. My second point is that from all we can determine it is the percentage of the discount a contractor will concede, rather than the lowest price offered the Government that interests GSA. This discovery astonishes me, I trust it will astonish this committee, too. You find one instance of this in the case of the Denver company, Ainsworth & Sons, to which I referred earlier. We know of another instance reported by another company here in southern California, whom we shall call Company X. Negotiators for this company asked GSA officials if a vendor of a $1,000 item were to yield a 10-percent discount, and a competitor offered the equivalent product for $500 at a discount to GSA of 1 percent, who would be considered the low bidder. Negotiators for Company X advise they were told the vendor offering the 10-percent discount would get a contract and be approved as a vendor in FSC Class 6625; his competitor would not, even if his price were substantially lower. We submit there are two inescapable, ominous conclusions to be drawn from this examination of GSA's policy; one, the small manufacturer is placed in grave jeopardy; two, the civilian agencies pay more for poor quality equipment and, in some cases, will simply get no equipment at all. The small manufacturer is really taking a gamble if he yields the discounts demanded by GSA; if he does it is on the chance, and I emphasize "chance," that he will garner enough sales to make it all right in the end. If he does land an order at one time for multiple units he can justify a quantity discount. Overhead costs of production, marketing, distribution, credit, and general administrative expense, which are prorated on a unit basis, come down on large |