Air Force awards by claimant programs to business firms in the United States

[Dollars in thousands]

A-2: Guided missile systems..

A-6: Ammunition.

A-8a: Petroleum.

A-9: Textiles, clothing, and equipage.

Air Force contracts awarded to small business firms involving set-asides

Defense subcontracting small business program-Payments to small business concerns by defense contractors reporting through the Air Force

Net value of Air Force prime contract awards with business firms for experimental, developmental, test, and research work in the United States1

Includes the Commonwealth of Puerto Rico, U.S. possessions, and other areas administered by the United States.

Mr. MULTER. Thank you, Mr. Racusin. The Air Force, I think, has always been a good example to the rest of the services in its cooperation and endeavor to promote small business and to help it get à fair share of Government procurement.

Mr. RACUSIN. Thank you, sir.

Mr. MULTER. I am very happy to see that you have Colonel Garcia with you. He has very frequently been in attendance at our hearings. He is most cooperative. I know of no officer in the military services who is more devoted to duty or who is more cooperative with the Members of the Congress and various agencies concerned with your work. I am going to give you a backhanded pat on the back this time. I am disturbed that even your Department shows a falling off in the percentage of small business procurements.

Mr. RACUSIN. Nevertheless, we are disturbed, Mr. Chairman, and as part of our continuing effort to see what can be done, as I did last year,

I personally visited every air materiel area and the buying divisions of Air Force Systems Commands to discuss with them personally and pass on to them the word of the Secretary of his very serious continuing interest in the small business program.

I am convinced, Mr. Multer, that this is paying off, that these folks take seriously the word of the top level and make very diligent efforts to do what can possibly be done to improve our position in this respect.

Mr. MULTER. I would like to have a detailed explanation, I know the committee would welcome it, as to why there has been such a substantial falling off in your Department, as there have also been in the other two services of noncombat vehicle procurement.

Mr. RACUSIN. In that respect, Mr. Chairman, I think we will have to furnish it for the record. I have no ready explanation for it. Mr. MULTER. Will you please furnish it at your early convenience? Mr. RACUSIN. Yes, sir.

(The requested information follows:)

This is a relatively small dollar-value program in the Air Force, amounting to slightly less than $22 million in fiscal year 1963 and slightly less than $18 million in fiscal year 1962. The only noncombat vehicles procured by the Air Force are highly specialized pieces of equipment such as crashtrucks and firetrucks for use on runways; especially designed utilitarian trucks and trailers for use in the Arctic, plus spare parts for many of the above.

In fiscal years 1962 and 1963, the 2709th Air Force Vehicle Control Group, now deactivated, accounted for nearly all procurement dollars in this program. In fiscal year 1962 small business concerns, in response to solicitation, bid on 80 percent of the total dollars involved. In fiscal year 1963 they bid on 85 percent of the total dollars. In fiscal year 1962 small concerns failed to submit low bids or proposals on 36 percent of the procurement dollars on which they bid. In fiscal year 1963 their bids were too high to be acceptable on 62 percent of the procurement dollars on which they bid.

Procurement actions at other Air Force installations in this program were extremely minor and consisted of small change-orders and supplemental agreements to contracts previously awarded by the 2709th Air Force Vehicle Control Group.

In summary, the decline in the small business percentage in this program from 57.1 percent in fiscal year 1962 to 30.6 percent in fiscal year 1963 was due to the fact that small business concerns were less competitive than previously.1

Mr. MULTER. And, too-I guess this is something for DOD rather than you an explanation why the other two services have fallen off substantially in small business procurement of an item where you show a substantial increase. That is construction equipment.

That, of course, is not for you to answer, but we will have to have somebody tell us about that. I think we have the same situation in production equipment. There are several other instances, but I won't take the time to state them here.

Mr. HARVEY. Mr. Chairman, concerning that observation you made concerning construction equipment, could you tell me, Mr. Racusin, roughly what is involved in items in this area?

Mr. RACUSIN. Mr. Harvey, I would be guessing, but I surmise that it is some rather specialized type of equipment. I am just not in a position to discuss any of the details, but we will be more than happy to furnish it to you.

1 Responded to in Air Force letter of Dec. 6, 1963, which can be found in subcommittee files.

(The requested information follows:)

This is an extremely small program in the Air Force totaling only $965,000 in fiscal year 1963 out of a total $111 million for the Department of Defense as a whole. It consisted of simple commercial equipment for base maintenance work such as air compressors, paint sprayers, etc. It is not comparable to the heavier type of construction equipment, bulldozers, cranes, etc., procured by the other services.1

Mr. HARVEY. In connection with furnishing this other information

Mr. RACUSIN. Yes, sir; the kinds of production equipment we are talking about; yes, sir.

Mr. HARVEY (Continuing). I have one brief question that I would like to ask, because out of your rather detailed and intimate study of contracting with small business in past months, you indicate in your statement a concern.

I am wondering this is just a matter of your own personal judgment, let me state, and it really doesn't involve the Navy particularly or the Defense Department-to what do you attribute this apparent weakening of small business?

Mr. RACUSIN. That is a rather difficult question, Mr. Harvey. As a matter of fact, that is one of the things, as I have indicated in my statement, that we intended to inquire about. Why has there been this failure to respond?

A total of 3,114 instances amounted to almost half a billion dollars. We have already taken action to try to determine on a rational basis what brings this about. In other words, what occasions their failure to submit proposals and bids.

Mr. HARVEY. I am certainly not in a position to attribute this to the Defense Establishment. I am rather wondering if it isn't, instead, an indication of a general weakening of small business, and if it is, of course, it is a matter of great concern to this committee.

Mr. RACUSIN. I would not want to characterize it as that, sir, at this point in the discussion. I am not sure yet.

Mr. WEDDELL. I would like to address myself, just for a moment, to that, because it has been a matter of growing concern to me.

When we talk about no small business bids, we are talking about these 3,000 procurements on which many of them were solicited, and not one single small business concern submitted a bid, not one, even though we solicited 8 or 10 or 15, not 1 ever came in. That has increased; it has doubled in dollars in the Air Force in the last 2 years. Percentagewise, it has also gone way up.

As Mr. Racusin stated, last year, alone, $450 million in procurements, on which small businesses were solicited, because we felt it was within their competence, without getting a single nibble. Now we have gone this far in our research. We have secured records, installation by installation, to see what particular purchasing installations are responsible for the largest amount of this.

Now, having found that out, our next step is to try to develop the mechanics of finding out, from the companies themselves, why they did not bid. Was it something that we could cure or correct, or were they simply not interested in Air Force procurement?

1 Responded to in Air Force letter of Dec. 6, 1963, which can be found in subcommittee files.

I think, mainly, we find they are, to a great extent, situations where we need to improve, not our procurement methods, but our solicitations with actual drawings and specifications. I think that is where we are going to find the major area of failure on our part.

Mr. HARVEY. In other words, you are saying that many of these small businesses just don't have the staff personnel to undertake these bids. They can't afford to employ the engineers, draftsmen, and so forth.

Mr. WEDDELL. Partly that, sir, but also I know that there are many procurements going on where we send bid sets and requests for proposals and do not include the necessary drawings and specifications. Now that is up to us to correct. The small business concern might consider all he has got is a hunting license instead of an opportunity to bid.

Mr. RACUSIN. The point that Mr. Weddell is making, of course, touches on a very difficult complex area, the availability of drawings, which in turn involves the things that Mr. Smith was talking about: to what extent do you get drawings? To what extent are proprietary rights involved?

This is an extremely complex situation, which, there is no question, has a direct effect on our ability in soliciting proposals to make the necessary drawings available. But this is something we are going to have to explore further.

Mr. HARVEY. With the chairman's permission, I would like to continue a thorough study as to why there is this falloff, because I think it will be most helpful to the committee to have that information.

Mr. RACUSIN. We will make it available to you, Mr. Chairman, the moment that we get it; yes, sir.

Mr. HARVEY. It will be very welcome.

Mr. MULTER. Mr. Beller.

Mr. BELLER. Mr. Racusin, I notice your statement makes reference to an AFPI Form 46.1

Mr. RACUSIN. Yes, sir.

Mr. BELLER. This is a checklist record that the procurement has been screened. We do not seem to have a copy of this form. Would you be kind enough, sir, to supply the committee with one?

Mr. RACUSIN. Form 46?

Mr. BELLER. That is right.

Mr. RACUSIN. Yes, sir; I thought we had.

Mr. BELLER. I now learn that you did; we received a packet of these forms; they weren't affixed to the individual statements.

Mr. Chairman, may I ask this witness a question? At the bottom of the paragraph, page 9 of your statement, you state:

These last three charts, I believe, make clear that in Air Force procurement, there is a diminishing market for small business concerns as prime contractors, and also that in this smaller market the competition is becoming increasingly difficult.

I would like to know what, if anything, the Department of the Air Force is doing to reverse this trend. What are you doing to obtain specifications and drawings on sole-source procurements?

Mr. RACUSIN. Mr. Beller, I think statistics will indicate, first, that there has been a rather dramatic reduction in the amount of sole-source procurements that the Air Force has made this year as compared to

1 Form 46 appears as chart I on p. 100.