SMALL BUSINESS AND PROCUREMENT-ECONOMIC

COOPERATION ADMINISTRATION

WEDNESDAY, JUNE 21, 1950

UNITED STATES SENATE,

SELECT COMMITTEE ON SMALL BUSINESS,

Washington, D. C.

The committee met, pursuant to recess, at 10 a. m., in room 301, Senate Office Building, Senator John Sparkman (chairman), presiding. Present: Senators Sparkman, Gillette, Benton, and Thye.

Also present: Charles E. Shaver, chief counsel of the committee. The CHAIRMAN. The committee will come to order.

We have with us today Mr. Paul G. Hoffman, Administrator of ECA, and several members of his staff.

Mr. Hoffman, we are glad to have you with us and would like for you to proceed in your own way. You understand what it is that we are interested in. We are trying to find out what is being done to make certain that small business gets its fair share of business, and what more can be done, if anything, to that end.

STATEMENT OF PAUL G. HOFFMAN, ADMINISTRATOR, ECA, ACCOMPANIED BY WILLIAM C. FOSTER, DEPUTY ADMINISTRATOR; C. TYLER WOOD, ASSISTANT ADMINISTRATOR FOR OPERATIONS; CHARLES A. RICHARDS, ACTING SPECIAL ASSISTANT TO ADMINISTRATOR FOR SMALL BUSINESS; ROBERT R. MULLEN, DIRECTOR OF INFORMATION; EDWARD E. KUNZE, DIRECTOR, PROGRAM METHODS, CONTROL STAFF; WILLIAM E. HAINES, DEPUTY ASSISTANT FOR SMALL BUSINESS, AND WILLIAM T. McCORMICK, ASSISTANT TO THE ACTING SPECIAL ASSISTANT FOR SMALL BUSINESS

Mr. HOFFMAN. Mr. Chairman, we are very happy to have the opportunity of appearing before your committee and reporting to you on what we have done.

The CHAIRMAN. I may say this: You may remember that a year or so ago you appeared before the Senate Banking and Currency Committee and told us of some of the things that you were doing and planning to do. We were pleased with the interest manifested by you and by your staff in small business, and we welcome the opportunity to hear from you further.

Mr. HOFFMAN. Thank you, sir.

I would like, first of all, to present those associates of mine who are here with me.

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Mr. William C. Foster, Deputy Administrator, and Mr. Charles A. Richards, on my immediate right here at the table, who is the Acting Special Assistant to Administrator for Small Business.

We also have with us Mr. C. Tyler Wood, who is Assistant Administrator for Operations; Mr. Edward E. Kunze, Director of the Program Methods Control Staff; Mr. William E. Haines, Deputy Assistant for Small Business, and Mr. William T. McCormick, Assistant to the Acting Special Assistant for Small Business.

I have a statement here in which we have attempted to give the briefest accounting possible on what we have done, and what we are planning to do, with the thought that that might be a guide to any questions that the chairman or members of the committee might wish to ask.

With your permission, sir, I think we will save time if I just read this statement.

The CHAIRMAN. Go right ahead.

Mr. HOFFMAN. On April 19, 1949, the ECA Act of 1948 was amended as follows:

1. To make available to suppliers in the United States, and particularly to small independent enterprises, information as far in advance as possible with respect to purchases proposed to be financed with ECA funds.

2. To make available to prospective purchasers overseas information regarding products and services produced by small United States independent enterprises.

3. To otherwise help small business to participate in ECA programs. On June 6, 1949, Î appeared before the Subcommittee on Small Business of the Committee on Banking and Currency, accompanied by Mr. Bert H. White, Special Assistant to the Administrator for Small Business. At that time Mr. White outlined the program which had been set up to carry into effect the amendment above referred to. This program provided for:

1. The gathering of pertinent information from various sources here and abroad, for dissemination to potential small business exporters.

2. The dissemination of this information expeditiously and effectively to small business enterprises.

3. The dissemination of information about the availability of the products of small American producers to potential purchasers in ECA countries.

4. The development of a mechanism for hearing the problems of potential or actual small business exporters and providing, where possible, a solution thereto.

5. The analysis of ECA policies and procedures and the procurement methods employed by the participating countries as a basis for recommending changes which would promote the aims contemplated by the amendment.

After Mr. White's presentation, Senator Maybank congratulated him regarding what had been done, and this we took to be in some measure an endorsement of the program which Mr. White had outlined. I should now like to report to you on what has been done to carry out the program, both as to the five points Mr. White mentioned and other new developments which have been undertaken to improve the help to small business.

1. Information has been gathered by the staffs of our missions overseas, and here in Washington. In this connection we have secured the cooperation of the participating governments and our own Government agencies, particularly the Department of Commerce.

2. Information received from abroad on various purchases has been disseminated through the medium of frequent small-business circulars, which reach about 8,000 firms who have requested them. Smallbusiness circulars are also distributed to the Department of Commerce field offices and to the field counselors.

The field counselors have been recruited from banks and business service groups throughout the country, to establish a more effective informal contact between small business and ECA. There are at present over 500 field counselors in over 230 cities in 41 States and the District of Columbia. With the assistance of the American Bankers Association and other groups, this national network is being vigorously developed.

I would like to say, Senator, that we consider this development of the field counselor service of very great importance and value, because regardless of how much information is available, regardless of how much information is disseminated, the average small-business man, when it comes to this problem of embarking in a new field, his problem is best met if he can talk to someone and indicate to him the particular question in his mind. I really feel that in this counseling service we have developed something of rather lasting value to small business.

Senator BENTON. Are you not the authority, Mr. Hoffman, on the subject of reading circulars, or is it just the small-business man that does not read?

Mr. HOFFMAN. I have made the statement at times that none of us read, and it is very difficult to get attention to circulars. I think that we have even found difficulty with some of our dealers in the automobile business to open their mail and find their rebate checks.

3. Dissemination of information about the availability of the products of small American producers to potential purchasers in ECA countries has been undertaken by obtaining the names of over 15,000 small-business enterprises, together with their products, which information is being incorporated in a directory now being printed in London with counterpart funds. This directory will receive wide distribution in Europe and will be printed in French, Italian, and German, as well as in English.

I think one of the most ambitious and useful projects ever attempted was to get the names of these 15,000 firms, the products that they have available; get that assembled into a directory and make it available all through Europe to prospective purchasers of American goods.

4. The hearing of the problems of small enterprises connected with exporting has been covered by two sections of the Office of Small Business, one known as the Export Counseling Section and the other as the Inquiries Section. The men in charge of these two sections are well qualified to interview visitors and answer letters of inquiry which, up to date, have amounted to 1,000 and 5,426, respectively, that is, over 1,000 personal interviews with small-business men and over approximately 5,500 letters to date. I might add that the Department has attempted to get an answer out to every letter within 48 hours of its receipt.

5. Many improvements have been made in the procurement methods designed to increase the opportunity for small business to participate. Illustrations of these are the Austrian advertisements in the Wiener Zeitung, German advertisements in the Bundes Anzeiger, the handling of Greek invitations to bid, and improved cooperation of the Italian Government in advising of the issuance of import permits, the procurement of supplies for Formosa and Korea through the General Services Administration, and the Turkish road program handled by the Bureau of Public Roads.

6. Further assistance to the small-business man is provided through the publication of the Commodity Supplier Data. This publication lists the records of payments made by ECA during 10-day periods, and shows the shipper, the product, the value, and the buyer. It has been materially improved and made more useful during the past year, by dividing it into five sections, according to the general commodity category, so that a firm interested in shipping foods does not have to wade through listings of payments to machinery manufacturers. It will shortly be changed and improved by changing the alphabetical listing in each section to listing by commodity code numbers.

What any business wants to know is: Who is going to buy? What does he intend to buy? When? This we keep constantly in mind, and most of our current small-business circulars are issued for this purpose. Our future work will be largely devoted to perfecting this type of information. The means of using it, we have made available to the small-business man.

I know that you are interested in learning to what extent small business has participated in business financed by ECA. To learn the full extent of small-business participation is extremely difficult because of the fact that a good proportion of production financed by ECA involves subcontracting, and a very considerable volume of ECA business is handled through exporters, whose sources of supply are not known to us. We did, however, make a survey covering payments to manufacturers during May and June, and during November and December 1949. We learned that of $218,000,000 paid to all manufacturers during those 4 months 20.2 percent, or $44,000,000 was paid to manufacturers having less than 500 employees. Of this total 26.7 million was paid to manufacturers with 100 to 499 employees, 8.4 million to manufacturers with 50 to 99 employees, and 8.9 million to manufacturers with less than 50 employees.

A further study will be made this year of payments made during May-June, and November-December. These figures, as well as others, were set forth in the Twenty-first Report for the Public Advisory Board.

Mr. HOFFMAN. Through the cooperation of a prime contractor, we were also able to obtain a breakdown of one $2,000,000 project, the results of which we set out in Small Business Circular 119, copy of which is also submitted for the record.

(The data referred to will be found in the appendix, p. 25.)

Mr. HOFFMAN. The primary contractor retained only $670,000 of the work. Of the balance he subcontracted $850,000 to 68 smallbusiness firms, of whom 43 had less than 200 employees, and 25 between 201 and 500. The subcontractors also passed along $300,000 worth of business to 40 second-tier subcontractors. This particular case may involve a higher percentage of subcontracting than is usually

found, but is an illustration of indirect participation in ECA-financed programs by small-business firms which may not have realized that they were filling Marshall plan orders.

I know you are also interested in knowing what more, if anything, can be done to assist small business.

One thing we can do, in fact are doing now, is getting out better information on projects involving the expenditure of a million dollars or over. On June 2, we issued Small Business Circular No. 120, copy of which is submitted herewith, in which we gave much more complete information than we have ever been able to obtain before, on 10 projects-8 French, 1 Austrian, and 1 Italian-involving several million dollars.

(The data referred to will be found in the appendix, p. 25.)

With the issuance of the procurement authorization to the governments concerned, we have requested that they inform us, within 10 days, of the prime contractors which will become involved in these projects. This information will be publicized and the prime contractors will also be requested by us to inform subcontractors that they are working on ERP business.

In addition, we know that there are many small business firms which find it difficult to have their products financed under ECA, but which also know that they have a market abroad for which dollars are not available. We hope to be of help to some of these firms who may have secret formulae, special techniques, patents, or otherwise to ally themselves with some foreign manufacturers which would be interested in producing their product on a royalty basis.

A recently issued bulletin has been sent to the field counselors asking them to inform us of any firms who would be interested in this type of operation; and this information, when received by us, will be forwarded to Europe where it will be distributed so that interested firms there may have an opportunity of getting in direct contact with the manufacturers here. At the same time, we also hope to obtain from Europe the names of firms which could be interested in contacting American small enterprises and working out a deal of this character. On Friday, June 23, I have called a meeting to be attended by some 16 or more field counselors who have been asked to meet here for the special purpose of permitting us to ascertain at first hand what their views are on how the small-business program is going, what can be done to improve our operations, and to foster increased business by small business in the ECA program.

A month ago, Mr. Bert H. White, whom as you know I appointed Special Assistant to advise and assist me in carrying out the amendment, accepted my invitation to go to Paris and represent the Office of Small Business in Europe as special adviser to the Special Representative. Mr. White will succeed Mr. Raymond R. Dickey, who is returning to the United States to reenter private business. I have appointed Mr. Charles A. Richards as Acting Special Assistant to succeed Mr. White. Mr. Richards has been with the Office of Small Business since July 1, 1949, and prior to the current appointment was in charge of the Export Counseling Section of the Office of Small Business. He has had very broad experience in exporting, and considerable Government service. He is fully aware of the problems of the small business firms in trying to do an export business, whether under ECA financing, or otherwise. I should appreciate it if you

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