Mr. MULTER. And again I would like to indicate that there is language in the statute now, which we are not changing, which permits anyone who finds fault with the definition as it applies to any particular concern or industry, to come in and on a presentation of facts, ask for and obtain, if entitled to it, a different certification. So we have not tied his hands. He may take all of the facts as they apply throughout the country, or as they may apply in a particular industry, or a particular company. He will retain full discretion and right to act. What we are trying to do is stop him from continuing the old 500 employees rule, which we took out of the statute and which we have several times told him is not a realistic approach to procurement. The CHAIRMAN. Does not the number of employees, whether a large or small institution, depend upon the character of the business? Mr. MULTER. Yes. The CHAIRMAN. A grocery store with 500 employees would be a very large institution but a steam plant with 500 employees would be a small institution? Mr. MULTER. Yes. We have that in mind in the language we use in the bill. Mr. SEELY-BROWN. Is it not true that the testimony before the subcommittee indicated the definition used in providing financial assistance was working out reasonably well, and that that definition had a degree of flexibility that made it work? What we tried to do was to suggest since that definition with its flexibility has worked out well for loan assistance, let us see if we cannot write an equally flexible definition which will provide bona fide help to the recognized small business community for procurement purposes. If I understand Mr. Rains' argument, his only question was that the language of the bill might preclude a small business, rather than make it possible for it to come in under the terms of the act. Mr. RAINS. Of course, a glance at it, and reading of the bill, indicates to me you are adding a restriction instead of broadening the base. I think you are trying to broaden the base. Mr. MULTER. We are trying to broaden the base and not limit it. Mr. Seely-Brown is quite right; the testimony before the subcommittee indicates the financial assistance definition is working well. None of the procurement agencies, all of whom appeared before the committee, could indicate why they could not work satisfactorily with that definition. They were just reluctant to try it. We think what they should do is try the financial assistance definition for procurement. If it does not work out, the Administrator has the right to change it overnight. At least they ought to give it a trial. The next change suggested in the bill is a purely technical one at the bottom of page 2. There is no objection to the language change. It refers to Federal Executive Pay Act. There is no increase of pay called for, but it merely makes the same language applicable to this agency as to all the other agencies. We simply put in the same language that applies to other Federal agencies. On the next page, page 3, we increase the authorization to $700 million, instead of as it presently appears in the act. Mr. Barnes has indicated that if in the judgment of this committee, that should be the amount, he will go along with it, although he has recommended a smaller sum. We believe this is the more realistic sum to be asked for, having in mind he still must go before the Appropriations Committee and justify his request for appropriations. An authorization like this making money available for loans is actually not spending of money. Nevertheless, we follow the language of the various statutes that apply to almost all the other lending agencies, of requiring the agency to come in before the Appropriations Committee and justify their request for the amount needed for the new fiscal year. Twice now, the Small Business Administrator has been compelled. to come in and ask for more money because his original request and our authorization was not enough. Mr. BROWN. What is the maximum loan now? Mr. MULTER. The maximum loan now is $250,000, and in our proposed bill we do not change that. Mr. BROWN. What about $500,000? Do you think that would be better? Mr. MULTER. I think you will find, sir, in this economy-minded Congress, and I am not saying that to find fault-I think we must be economy-minded-I voted for some cuts, as many of these Members did, and I voted against others, but in this economy-minded Congress, I don't believe you can convince most of the Members that a $500,000 loan is a loan for a small-business man. In our hearings, before this Banking and Currency Committee, I asked Mr. Burger, who represents one of the largest small-business men's associations in the country, one of the most effective ones, if he knew of any cases of a small-business concern which sought a loan of more than $250,000 and he said he knew of no such instance. If the time comes when small business does need a loan of more than $250,000 from this agency, and it will be able to make out a case, I think SBA will call it to our attention. At no time, in our hearings either in the field or in Washington have we had anybody approach us and say the $250,000 maximum loan from the Small Business Administration is too little. Even with the limitation of $250,000 from the Small Business Administration they can get a much larger loan by getting a bank to participate. They can get as much as $500,000 if the bank takes half and the Small Business Administration takes half. As a matter of fact, the bank can lend anything up to 90 percent with the agency making the other 10 percent of the participating loan, as long as the agency's limitation does not exceed the $250,000. Mr. BROWN. I notice Mr. Patman is in favor of taking off the limitation altogether. What do you think about that? Mr. MULTER. Our committee does not agree with him. I am now talking about the subcommittee, and I think most of the members of the full Small Business Committee would not go along with that thinking at this time. If at some future time a case can be made out for it, we would be the first to recommend it, but as it stands today, we say "No." If you take the limitation off, this is no longer a Small Business Administration bill. That is a principle that the Banking and Currency Committee will have to determine. If you want to do that, let's take the word "small" out and call it a business administration bill. But I don't think we will agree to that. I think the principle we are agreed on is that we must give this special assistance to small business. Taking the limit off will not do that job. Bear in mind you can get a $5 million loan under this very act for small business, if you will get 20 small-business concerns together, each one of whom will be entitled to $250,000, and if they qualify, they can get as much as $5 million. That is helping them get into a very strong competitive position with big business. Mr. RAINS. Talking about the bank participation, the trouble is, they won't have it on too short a term, and it is my observation they will not participate in too small amounts, or any time you find onethat will participate above 25 percent, you will find it a rarity. Isn't that about true? Mr. MULTER. I think that is right, Mr. Rains. Mr. RAINS. I don't know what you said before, but I would like a couple of questions answered and perhaps you could straighten me out on them. In the first place, I can't see the necessity of making this a permanent organization. I can't see the wisdom of that. Would you mind discussing that? Mr. MULTER. Yes. When we first brought this agency into being, it was the feeling we should do this on a temporary basis and see how it worked out. I think the experience has been good. While the agency got off to a slow start, I think they are making progress and doing a better job. As they get more experience with the functions assigned to them, they continue to improve their service. There is still room for much improvement, but I think the time has come when we must decide either to make this a permanent agency, or abandon it. Mr. RAINS. You take these agencies in the field who represent the Small Business Administration. Under your bill would they be blanketed into civil service, or are they already under it? Mr. MULTER. They are already under civil service. Mr. RAINS. Who in this agency is not under civil service? Mr. MULTER. The Administrator, his deputies, and I believe his counsel. I think everyone else is civil service. I am not sure, sir, whether the regional directors are exempt or not, but I can get that information for you and supply it to you. Mr. RAINS. I would like to have it. SMALL BUSINESS ADMINISTRATION, OFFICE OF THE ADMINISTRATOR, Hon. ABRAHAM J. MULTER, House of Representatives, Washington 25, D. C. DEAR MR. MULTER: Pursuant to the request of your counsel, Mr. Irving Maness, I am forwarding to you the following information pertaining to the personnel staffing of the Small Business Administration. Employees serving under competitive appointments__ 940 Employees serving under excepted schedule C appointments (positions of Total number of SBA employees as of May 22, 1957----- 136. 15. 4 1,095. If there is any further information you desire in this matter, please do not hesitate to call on me. Sincerely yours, WENDELL B. BARNES, Administrator. Mr. MULTER. I have been told that while the regional directors are in the classification of exempt positions, they nevertheless must qualify under civil service rules. Now may I continue for a moment in answer to your question about why this should be a permanent agency? Mr. RAINS. Yes. Mr. MULTER. If this agency is to continue to do a job for small business in procurement, it must have the status of a permanent agency in order to be able to get the attention and the treatment it deserves and should be able to get from other permanent Government agencies. In both the procurement field and in the financial assistance field, if we did not make this a permanent agency, we will never be able to build up a corps of employees who will be able to render the kind of service we demand from that agency. It must have permanency in order to keep good men for a fair length of time. As it is now, men come to them, particularly the financial officers, come to them on a temporary basis. The agency loses them almost as fast as it can train them. If we really want this agency to do a good job, we must be able to say to the men they recruit, that this is a permanent agency where you can make a career. Mrs. GRIFFITHS. Mr. Chairman, may I ask a question? The CHAIRMAN. Mrs. Griffiths. Mrs. GRIFFITHS. May I ask you, Mr. Multer, have you done any checking in the Small Business Administration on their role in procurement? Mr. MULTER. Yes, we do that constantly. Mrs. GRIFFITHS. Just exactly what has been their experience? Mr. MULTER. In some areas their experience has been good. For instance, in the Jacksonville Naval Airbase, their experience there is good because the commanding officer, the military officer, is in tune with our thinking, in tune to congressional thinking in helping the small-business man. He goes out of his way to do a good job. He has a small business specialist on his staff who thinks the way he does and believes that small business has a real place to fill in Government procurement. There the Small Business Administration gets the utmost cooperation from everybody in that procurement office. Mrs. GRIFFITHIIS. But it is because of an individual, it is not because of any method of the armed services, generally, nor is it because the Small Business Administration is doing anything. Mr. MULTER. In any number of other procurement offices it is bad. Philadelphia and New York are typical of the resentment which procurement has against small business. They go out of their way to disqualify small business from participating in procurement. There we find the Small Business Administration is doing a job against opposition, but they go in there and fight with the procurement officer. Many times they have to go so far as to issue a certificate of competency to a small-business concern that is obviously qualified, but the procurement officer does not want it to get the business. He disqualifies the concern. It goes to the Small Business Administration, and they make a complete check and issue to him a certificate of competency, which under the law-which will continue if we enact any of the present bills, as we all agree on this-the Small Business Administration issues a certificate of competency which is binding on the procurement offices. Mrs. GRIFFITHS. You mean the procurement officer can send in his own inspection people to say this business cannot be handled under this plan. But they have to accept the SBA certificate? Mr. MULTER. Yes. Mr. SEELY-BROWN. Mr. Multer mentioned the name of the naval air station in Jacksonville-is it not also true that certain agencies of the Government, such as Atomic Energy Commission and General Services Administration in particular, and other Government agencies as well, have done a very good job in the filed of procurement help to small business? I think it is also true, as the testimony indicated, that a special task force has been set up to see if it could not be possible to come up with a program which would meet the desire that all of us have to help small business participate to an even greater degree in Government procurement. There was filed with our subcommittee a preliminary report, which was encouraging certainly to the members of the subcommittee, who read the report carefully and listened to the testimony. So I agree with you, we have a problem. You put your finger on the problem, but I think that proper steps have been set up to help resolve that problem and the Small Business Administration, and the Administration with the help of the committee are working together on a task force program which I think will help answer to a very large degree the question you raise, and I think the testimony Mr. MULTER. Mr. Seely-Brown is absolutely right. As he points out, General Services Administration and the Atomic Energy Commission are doing a good job. As a matter of fact, they lead the way and the Small Business Administration has learned from them how they can go to other procurement agencies and do a better job for small business. Mr. ADDONIZIO. To what extent is small business participating? Mr. MULTER. Today about 17 percent of all procurement is going to small business and everybody agrees that is not enough. Mr. ADDONIZIO. Is it your contention if this is made a permanent agency they would participate to a greater extent? Mr. MULTER. I believe the Small Business Administration, if made a permanent agency, can do an even better job than they are doing, for the small-business man. For the first half of 1957, the percentage was 16.4 percent that went to small business. Last year it was 19.6. So it has fallen off. We find as each 2-year period comes to a close, there is a falling off. Which is another reason we feel it should be a permanent agency. The fellows in procurement feel it is going to fold up and proceed to ignore them. If this were a permanent agency, and they knew it was going to be sitting on them all the time, we could get the percentage up and keep it up. Mr. RAINS. I don't want to be a prophet of doom, and I don't want to prognosticate, but don't you think if conditions continue as they are, interest wise, tight moneywise, hurts to small business, that 2 years from now what we are talking about now of this $700 million will be-oh, just chips in the bucket, and that instead of a small-business deal such as you are talking about making permanent, that it may become absolutely essential for us to go back to-we won't call it RFC, but it made a success in its day, and therefore it might be wise |