Mr. KEAST. I would say the percentage was high and about the same as for anybody else in the electronic instrument business. I think the business is pretty heavily supported by buying under Government contracts. Mr. CORMAN. I want to be certain I get this point straight now: GSA wants a cut below whatever you are selling for in the industrial field, and yet you have a price warranty with those industries that buy under Government contract and that you can't sell to them at more than you sell to your lowest purchaser? Mr. KEAST. That's right, so there is a conflict of requirements between the present GSA policy and the ASPR regulations. In the written statement there, there are other things of this sort that concern me, such as a possibility of violating State price discrimination statutes by selling the same thing at different prices to people in the same locale. I am also concerned about the possibility that GSA could in effect, administratively establish a monopoly for a given supplier were that supplier the only one who was willing to grant them the discount they wanted. GSA could in effect, as in the case of centrafuges that Mr. Ward mentioned, say to many Government agencies that, "Through this convenient means you may only buy centrafuges from one supplier." Mr. CORMAN. Are you aware of any specific instances where that has occurred? Mr. KEAST. No sir, I am not. Mr. CORMAN. This is something we should look into, because it defeats the whole purpose of attempting to buy by competitive pricing. Anything else, gentlemen? You have been very helpful, we appreciate your appearing here sir. Mr. KEAST. Thank you. WESTERN STATES MEAT PACKERS ASSOCIATION, INC. (The subcommittee's invitation to testify follows:) MR. L. BLAINE LILJENQUIST, SELECT COMMITTEE ON SMALL BUSINESS, President and General Manager, Western State Meat Packers Association, Inc., Washington, D.C. DEAR MR. LILJENQUIST: The Subcommittee on Government Procurement and Economic Concentration of the House Small Business Committee is conducting a series of public hearings to review small business procurement policies and practices of various Federal departments and agencies. Small firms have been invited to testify in these hearings to be held in various cities, including Los Angeles, regarding their procurement experiences, complaints and recommendations. The Los Angeles hearings are scheduled for March 21-23, 1968, at 10:00 a.m. in Room 1345 of the Federal Courthouse, 312 North Spring Street. In view of your association's interest in these hearings, we are pleased to invite you to testify on March 23 at 11:30 a.m. Please deliver six copies of your statement to Subcommittee counsel, Henry Robinson, either at the Courthouse or at the Biltmore Hotel on March 21. Your cooperation is appreciated. Sincerely yours, JAMES C. CORMAN, Member of Congress, TESTIMONY OF L. BLAINE LILJENQUIST, PRESIDENT AND GENERAL MANAGER, WESTERN STATES MEAT PACKERS ASSOCIATION, SAN FRANCISCO, CALIF. Mr. CORMAN. Our next panel of witnesses is from Western States Meat Packers Association, Mr. Liljenquist, president? Do you care to come forward, sir, and bring with you whomsoever you wish? Gentlemen, we are pleased to have you here and while we do not mean in any way to limit the time in which you may testify or that we may develop points by questions, but if we conclude by 12:15 we shall not have to return this afternoon. Please proceed howsoever you wish. (The prepared statement of Mr. Liljenquist was ordered to be inserted at this point.) STATEMENT OF L. BLAINE LILJENQUIST, PRESIDENT AND GENERAL MANAGER, WESTERN STATES MEAT PACKERS ASSOCIATION, INC., WASHINGTON, D.C. Mr. Chairman and Congressman Burton: My name is L. Blaine Liljenquist. I am President and General Manager of the Western States Meat Packers Association. Western States Meat Packers Association appreciates this opportunity to appear before your Subcommittee on Government Procurement and Economic Concentration. First, I would like to commend you for your encouraging and continuing interest in the problems of small business contractors. We have, in the recent past, had occasion to seek the advice of the Committee on Small Business and are grateful for the courtesies extended to us. WSMPA represents the independent meat packers in the Rocky Mountain and Pacific Coast States, Alaska, Hawaii and Texas. We have 670 member firms and have been a major factor in our industry since our formation in 1946. Our members are progressive, well-informed and articulate. Most of these member firms are family-owned, closely-held businesses, changing dramatically with respect to management skills, automation, applied technology and improvement of products and services. The meat industry is a vital one (representing a substantial part of the economy of this country) and most especially that portion doing contract work for the Department of Defense. It is an industry that must provide immediately meat for the armed services during times of national emergency. It cannot wait 2 weeks, 3 weeks or more to move into high gear. It must be ready. Our industry has recently undergone a drastic cost-price squeeze and is beset with multitudinous difficulties. One could say, everyone must go through hard times occasionally and in due time, recoup any losses. Unfortunately, this is not true of the meat industry anymore and in particular those engaged in supplying boneless beef to the armed services who now appear to be involved in a permanent depression. Their product meets a special need and government procurement is a major source of their revenue. During the past 2 months, 6 small business companies out of 16 in this specialized field have had to sharply curtail or temporarily halt their boning operations. Why? Because they were unable as small business companies to bid on and obtain a fair portion of the DOD setaside contracts at prices that would return a profit or break even. If this trend continues, our industry will soon experience a period in which 3 or 4 larger companies will control virtually all of the small business set-aside program. Now even more than ever, it is essential and necessary to have a broad base for procurement. The elimination of these smaller firms will have a far reaching effect. Like a stone tossed into a small pool, the ripples will widen until the entire surface is disturbed. The small firm, without its contracts, cannot buy beef; without raw material the firm cannot continue to keep its employees busy; without work these employees, through no real fault of their own, will have a decreased spending capacity which in turn will affect their family and community economy. The circle is unlimited in its implications. Another factor, these small plants frequently employ members of minority groups whose limited education presents a real employment problem. Think, gentlemen, of the total implications if all but 3 or 4 of these 17 boning firms were to call it quits! Not only are the boning plants affected, but the people who supply them with raw materials have their markets reduced, unemployment increases and so on ad infinitum. WSMPA recommends the following items for your consideration: I. An ad hoc committee be formed under direction and supervision of the Department of Defense, consisting of one representative of DOD, one representative from SBA and 2 industry representatives, to thoroughly review, recommend and report to the Subcommittee on government procurement such revisions in current programs as may be deemed advisable to identify impediments in the law, regulations or practices which inhibit the purpose of small business setaside programs relating to boneless beef contracts. II. The maximum employee criteria be reduced from the current 750 to 500 for meat packing plants. This increase was granted on July 7, 1967 after publication in the Federal Register. For purposes of competing on DOD set-aside business, a 500 employee maximum seems more realistic. Technological advancement and application in this highly specialized field make a company of 500 employees large business. The raising of the maximum number of employees has, to date, benefited only one company in the boning business, reflecting an unfair competitive situation. III. A clarification of relationships be established in determining "dominance." The criteria should be based upon relevent industry situations. For instance. for the purposes of determining dominance the percentage of boneless beef contracts currently awarded one contractor should be related to the boneless beef DOD set-aside and not to the meat industry at large. One company consistently getting a substantial part of the DOD set aside contracts is "dominant" in this specialized field, while giving the appearance of being small in relationship to the large packers such as Swift and Armour. IV. SBA regulations should be amended to insure that under certain circumstances, once a company has been declared ineligible to bid on small business DOD set-aside it cannot repeatedly modify its business arrangements and reapply as many times as the papers can be changed. This should not apply to legitimate small business concerns but those who resort to subterfuge, and/or collusion for the sole purpose of circumventing the intent of the small business DOD set-aside program. V. At the present time the most stringent effect of being denied small business status is the loss of the DOD awards set aside for small business. Therefore, a company wanting to get into this program can simply reapply, modifying its paper structure; and, proceed until challenged. We suggest that possible penalties should be written into the act for use when willful subterfuge is evident. It seems unfair that the burden of proof must now rest on the legitimate companies. This is not to be construed as meaning that the challenge procedure should be eliminated. It should remain. However, it seems reasonable that a firm faced with a stiff penalty is going to think twice before trying a second time to get around the letter of the law. VI. We strongly urge that the small business set-aside portion of DOD procurement of 60 percent be adhered to closely. We realize that this entire area of setaside is quite complicated and appreciate the efforts being made. But, we feel it is essential that 60 percent be the minimum base for awards to small business. Thank you, Chairman Corman and Congressman Burton, for your courtesy in permitting WSMPA to present these viewpoints to you. Your interest is sincerely appreciated. Mr. LILJENQUIST. We are very grateful to you gentlemen for giving us this opportunity to come before you to call your attention to some of the problems of our industry that relate to procurement. We have with us here today some of our beef boners. They are a very specialized segment of the meat industry that produces meat, primarily for the Department of Defense. I should like to introduce the gentlemen that are here: To my left is Robert Miller, Union Packing Co., Los Angeles, who has been an important boner for many years, supplying beef to the Armed Forces. He is also on the board of directors of Western States Meat Packers Association. To my right is Armando Flocchini, Durham Meat Co., up near San Francisco, also a beef boner. Next is Iriving Gronsky, who is president of Gold-Pak Meat Co., here in Los Angeles, also on the board of directors of Western States Meat Packers Association. Our fifth member here today is Phil Bauer, who is head of Salem Meat Co., a beef-boning company in Los Angeles. Western States Meat Packers Association is a western organization of slaughtering and processing companies. We have a total of 670 member firms located principally in the Rocky Mountain and Pacific Coast States, Alaska, Hawaii, and Texas. Our Association is an important factor in the beef boning field because it represents and has sponsored the National Meat Contractors Advisory Board, which consists of about 16 boning companies throughout the United States that supply beef to the Armed Forces. The chairman of the National Meat Contractors Advisory Board is Mr. Flocchini, who is here with us today. The vice-chairman, Irving Gronsky, is also here to testify. They represent not only their own companies and the Western States Meat Packers Association, but also nearly all of the independent beef boners in the United States, through their membership in the National Meat Contractors Advisory Board. This morning we shall each have a few comments to make relating to our special problems at this time, and I shall call upon the chairman of the National Meat Contractors Advisory Board, Mr. Bud Flocchini, of Durham Meat Co., to commence our testimony. NATIONAL MEAT CONTRACTORS ADVISORY BOARD (The subcommittee's invitation to testify follows:) SELECT COMMITTEE ON SMALL BUSINESS, Mr. ARMANDO J. FLOCCHINI, Jr., HOUSE OF REPRESENTATIVES, Washington, D.C., March 15, 1968. DEAR MR. FLOCCHINI: The Subcommittee on Government Procurement and Economic Concentration of the House Small Business Committee is conducting a series of public hearings to review small business procurement policies and practices of various Federal departments and agencies. Small firms have been invited to testify in these hearings to be held in various cities, including Los Angeles, regarding their procurement experiences, complaints and recommendations. The Los Angeles hearings are scheduled for March 21-23, 1968, at 10:00 a.m. in Room 1345 of the Federal Courthouse, 312 North Spring Street. In view of your company's interest in these hearings, we are pleased to invite you to testify on March 23 at 11:30 a.m. Please deliver six copies of your statement to Subcommittee counsel, Henry Robinson, either at the Courthouse or at the Biltmore Hotel on March 21. Your cooperation will be appreciated. Sincerely yours, JAMES C. CORMAN, Member of Congress, TESTIMONY OF ARNOLD J. FLOCCHINI, CHAIRMAN, NATIONAL Mr. CORMAN. Mr. Flocchini, do you have a prepared statement? Mr. FLOCCHINI. Yes, sir, Mr. Chairman, I do. Mr. CORMAN. Without objection we will make your prepared statement a part of the record. Mr. FLOCCHINI. Thank you, sir. Mr. CORMAN. And you can supply it to the reporter, the full statement. I don't know how long your statement is, we will make your statement a part of the record, and then you may either read it in full or summarize it. Mr. FLOCCHINI. I shall summarize on it. Mr. CORMAN. All right, sir, but the full statement will appear in the record, at this point, Mr. Reporter. (The statement referred to follows:) STATEMENT OF ARMANDO J. FLOCCHINI, JR., CHAIRMAN, NATIONAL MEAT CONTRACTOR ADVISORY BOARD AND VICE PRESIDENT AND GENERAL MANAGER, DURHAM MEAT CO., MOUNTAIN VIEW, CALIF. I am Armando J. Flocchini Jr., Vice President and General Manager of Durham Meat Company. I am here today representing my Company; the Western States Meat Packers Association, as Chairman of its Beef Boners Committee; and the National Meat Contractors Advisory Board (as Chairman). |