SMALL BUSINESS ADMINISTRATION PROGRAMS OF PROCUREMENT AND TECHNICAL ASSISTANCE TO SMALL BUSINESS

I. INTRODUCTORY REMARKS

The passage of the Small Business Act of 1953 by the 83d Congress gave recognition to a growing national awareness that unless the small business segment of the national economy was afforded positive measures for assistance, the outlook of small-business men was uncertain. This act, in effect creating the Small Business Administration, was the culmination of a decade of attempts by business and legislative leadership and Government departments and agencies to aid small business. A national program, based on a policy enunciated by Congress, was in this act established with the stated objective of preservation of free, competitive, small business enterprise, of insuring that a fair proportion of Government purchases of supplies and services would be placed with small business, and that the Government would aid, counsel, and assist and protect, insofar as possible, the interests of small business.

This national legislation, designed to provide the kind of Government service that would meet the specific needs of individual small business concerns, was extended to June 30, 1957, by the 84th Congress, 1st session, by the passage of Public Law 268. In this extension the original act was amended in several instances.

The Small Business Administration is primarily a service organization, providing financial, procurement, managerial, and technical assistance to individual small businesses requesting such aid.

In setting forth that the Small Business Administration was established to carry out the policy of Congress in order that "* * * the interest of small-business enterprises may be recognized, protected, and preserved * * *"it was indicated that the Small Business Administration should consult and cooperate with other Government departments and agencies. The act, and hearings and reports preceding this legislation clearly indicate that the intent of Congress is to make the Small Business Administration the spokesman for small business in the establishment of policy and an advocate in the correction of particular problems of small business.

To carry out this policy, Congress provided specifically for certain programs wherein the Small Business Administration exercised complete control. In other instances, the agency is not given complete jurisdiction but is directed to cooperate and consult with other agencies of the Government.

The Small Business Act of 1953, as amended, gives the Small Business Administration itself the authority, in addition to making business and disaster loans, (1) to determine and cooperatively set aside for award to small firms, all or any part of a proposed procurement; (2) to provide technical and managerial aids to small firms; (3) to enter into contracts with Government procurement agencies; (4) to make an inventory of all production facilities-of small firms; (5) to certify as to capacity and credit to perform a specific Government procurement contract, and (6) to certify as to size of business concerns.

The Small Business Administration is directed to consult and cooperate with other agencies and to recommend policies which would be beneficial to small firms; to consult and cooperate with officers of the Government having procurement powers; to encourage the letting of subcontracts by prime contractors; to make studies and recommendations to appropriate agencies to insure that a fair proportion of total purchases and contracts be placed with small business enterprises; to consult and cooperate with all Government agencies for the purpose of insuring that small business concerns receive fair and reasonable treatment; and to make recommendations concerning the effect of price, credit, and other controls imposed on small business under war or defense programs. By drawing on the technical staff and research facilities of other Government departments, the Small Business Administration is placed in the position to render an effective job of helping small business without duplication of efforts on the part of either the Small Business Administration or other Government departments.

Furthermore, this cooperative undertaking with respect to various Government departments-and particularly with reference to activities of procurement and managerial and technical aids-provides tangible evidence that the Small Business Administration is directing its program activities to bring about close and cooperative working relationships in recognition of the intent of Congress,

II. PROCUREMENT AND TECHNICAL ASSISTANCE ACTIVITIES

Exhibit A provides a summary of progress and accomplishments of the Small Business Administration. This summary shows the cumulative results of programs since the Agency started operations in August 1953. A review of the 6-month period ending December 1956, and a comparable period for the previous year is also given. The details relative to programs are discussed in a later part of this report.

In brief, highlights reflected in exhibit A show:

A. The number of set-aside actions increased 120 percent for the 6 months ending December 1956 compared with the 6 months of the previous year.

B. A substantial increase is recorded for contract awards resulting from these set-asides, the increase over the similar period a year ago amounting to 69 percent.

C. Corresponding increases were recorded in the dollar value of set-asides and awards. The value of set-asides increased 79 percent and the value of awards increased 38 percent.

D. The increased emphasis that was directed to developing subcontract opportunities is reflected in the 65 percent increase in the number of contacts made during the 6 months ending December 1956, as compared with the previous 6 months. During this same period, subcontracting opportunity referrals were made to around double the number of small firms reached by referrals for the comparable period of the previous year.

E. The number of firms assisted to bid on specific procurements increased 85 percent.

F. A 91 percent increase is marked for additional sources of supply on bidders' lists.

G. The number of applications received for certificates of competency increased 29 percent and COC's issued is 37 percent greater. The value of COC's issued in the 6 months ending December 1956 was 32 percent more than for the comparable previous year.

H. The increasing number of loans and other types of small business cases involving technical production assistance is observed in the 36 percent increase in engineering surveys related to these items.

I. SBA Small Business publications are being requested in increasing numbers as small firms become aware of their availability. The most significant increase is with respect to the technical aids series. While the number distributed in this series increased 785 percent over the similar period for the previous year,

this is not a complete reflection of increase in demand. As with other publications in the aids series, the greatest distribution is of new issues. In the previous period (July 1-December 31, 1955) because of difficulty in obtaining suitable manuscripts, no new issues were released, whereas during the same period of 1956, there were three releases.

Another pronounced increase was recorded in the sales of the United States Government Specifications Directory, an increase of 680 percent, largely due to the publicity it received at the small business opportunity meetings during the fall of 1956. The overall total of SBA publications distributed during the 6 months ending December 1956 is 445,400 copies. Since August 1953, a grand total of 2,976,000 copies have been distributed.

J. There has been a 56 percent increase in the number of requests to the Agency for products assistance. A total of 459 new products was listed in the Agency's Products List Circular during the 6 months covered by this report, and 1,371 requests were received by the Agency for information and data on the items so listed.

III. PROCUREMENT ASSISTANCE TO SMALL BUSINESS

Progress has been made by the Agency to strengthen and expand the programs of aiding, counseling, and assisting small-business concerns to participate in purchases and contracts for supplies and services for the Government. The Small Business Administration recognizes fully, however, that the optimum results with respect to assistance to small business in achieving a fair proportion of Government contracts and in participation in subcontracting opportunities still remains to be obtained (exhibit A).

The most persistent problem continues to be how best to divide the available manpower in order to meet all of the many requests arising throughout the country for this assistance and to fulfill the various functions required in extending procurement assistance to small firms.

A. Joit set-asides; the joint determination program

The SBA cooperative program of set-asides for small business was begun August 1953. The increasing tempo of activity and progress in the program is reflected in the data on proposed set-asides initiated by SBA, set-asides agreed to by procuring officials, and contracts awarded to small business as a result of these set-asides (exhibit B).

Exhibit B provides these data by 6-month periods, starting with the last half of fiscal year 1954, continuing through December 1956. A compilation of awards under the joint set-aside program, by States, cumulative through December 25, 1956, is given in exhibit C.

In the table of exhibit B, for the period July-December 1953, SBA proposed 733 set-asides for small business covering purchases totaling about $180 million. For the 6 months ending December 1956, there were 4,892 set-aside actions, totaling $381 million. The fact that a substantial increase is reflected in initiated set-asides, an increase of 567 percent, is indicative that SBA procedures are becoming increasingly effective. The dollar volume of these initiated set-asides increased 112 percent.

Inasmuch as SBA was just getting underway in 1953 and due to normal lagtime, data would include statistics of Small Defense Plants Administration for the period of July-December 1953. Therefore, the period of July-December 1954 has been taken for comparative purposes of this statement.

In using these data for purposes of contrast between selected periods of time, it was kept in mind that there is a normal timelag between the initiation of the set-aside and award of contract. Because of this lag, a misleading conclusion is possible in comparing awards for a selected period with the initiated set-asides for that period. On the other hand, contrasting initiated set-asides, set-asides agreed to, and procurement awards between like calendar periods does permit a measure of progress and accomplishment.

In comparing the period of July-December 1954 to the July-December 1956 period, set-asides initiated increased from 1,532 to 4,892, an increase amounting to 219 percent. For these same periods the dollar value of initiated set-asides increased 91 percent, from $199 million to $381 million. The dollar value measure of set-asides as reflected by data for these 2 periods discloses a substantial progress of 301 percent increase in the number of procurement awards, with the dollar value increasing from $71 million to $218 million, an equivalenc increase of 206 percent.

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The joint set-aside program is carried out by the Small Business Administration with the cooperation of Government agencies having procurement authorities and related requirements. Section 214, Public Law 163, as amended, empowers the SBA and Government contracting officers to set aside proposed procurements for competition among, and award to small-business concerns when the procurement agencies concur that such action is in the interest of maintaining or mobilizing the Nation's full productive capacity or is in the interest of war or national defense programs.

This program is directed toward the discharge of their common responsibilities: that a fair proportion of total purchases and contracts for supplies and services of the Government shall be placed with small-business concerns. It provides the means to assure small businesses an opportunity to compete with other small businesses for procurements which have been exclusively earmarked for small firms. This program accomplishes this objective of increasing the number of items acceptable for restriction to small-business competition. This, in turn, broadens the base by increasing the number of small-business bidders and suppliers.

To carry out the program, the Small Business Administration has assigned representatives to certain major Government purchasing offices. These representatives review proposed purchases, determine the type of facilities needed to produce the items, evaluate the prospects for small-business competition, and advise procurement officials of those which they believe should be earmarked for competition exclusively among small firms. The entire purchase can be set aside for small-business firms by restricted advertising. Or, partial quantities of the total proposed requirements can be set aside after the contracting official has determined the economical production run that will produce a fair price to the Government. Small business then must engage in open competition for the unrestricted portion to be eligible for consideration for any award of the part reserved for award by negotiation.

Coverage of purchasing offices by SBA personnel has been increased to 140 military and civilian installations. During the July-December period of 1956 for instance, coverage was extended to 53 additional offices. Joint set-asides operations are carried on at these 140 installations by 16 full-time representatives, and 21 who can devote but part of their time to the activity due to other pressing assignments, such as counseling small firms or aiding them to resolve problems at purchasing offices.

In order to render the greatest assistance to small-business firms within the limitation of available personnel, the agency's main effort has been directed at covering the larger procurement installations. Appended is a list of procurement installations where joint set-asides for small business were made during the first half of fiscal year 1957 (exhibit D).

B. Effectiveness of the joint set-aside program with the military services

One measure of the effectiveness of SBA's joint set-aside program with the military services is the dollar amount of military purchases which have been earmarked for exclusive award to small business. Since the beginning of the agency on August 1, 1953, through December 25, 1956, 15,293 procurements totaling $1,429,482,882 have been jointly set aside exclusively for small-business firms with the military services. When civilian agencies are included with military services the cumulative total set-asides equal $1,458 million for a total of 16,409 set-asides (exhibit E).

The importance of the joint set-aside program in assisting small-business firms to obtain Government business is illustrated by the following statement made by the Acting Chief of Naval Material on October 17, 1956:

"Last fiscal year, the Armed Services Petroleum Purchasing Agency spent $840,369,000 for petroleum products; 175,255,000 or 20.5 percent of these dollars were placed with small business. With specific reference to the procurement of jet fuel, during the last 6 months' procurement period small-business refiners received awards totaling 6,856,000 barrels whereas under IFB 57-5 small-business refiners received awards totaling 10,907,000 barrels. This represents an increase of 4,100,000 barrels and increased the small-business share of the jet procurement from 21 percent to 35 percent. I feel that this increased smallbusiness participation * ** can be attributed directly to the utilization of small-business 'set-asides' ***."

C. Civilian agency set-aside program

In the area of Federal civilian agency purchasing, the Small Business Administration has expanded the set-aside program to additional civilian agencies.

Initial results of these new arrangements with civilian agencies have been satisfactory and indicate an earnest desire of all agencies to increase smallbusiness participation in their procurements.

During the past 6 months, for instance, purchases in the following amounts have been restricted to small business in cooperation with agencies where the set-aside program was begun during the latter part of fiscal year 1956: $13,294,967 with the General Services Administration; $3,757,418 with the Veterans' Administration: $761,363 with the Department of Interior; and $338,120 with the Department of Agriculture. The purchasing offices of the latter two Departments are so widely decentralized that Small Business Administration representatives are able to cover only a small number of them.

An agreement for a joint set-aside program with the Department of Commerce was signed on October 11, 1956. This program was implemented the early part of November with the central purchasing office of the Department, with the Census Bureau, the Weather Bureau, the Bureau of Standards, the Bureau of Coast and Geodetic Survey, the Maritime Administration, the Civil Aeronautics Administration, and with the Bureau of Public Roads. Negotiations are underway with the Bureau of Public Roads to restrict suitable Federal highway construction contracts to small business. Although total direct purchases by some of the Department of Commerce bureaus are small, procurements estimated at more than $2,329,559 already have been set aside for small-business concerns in cooperation with the Department.

The Post Office Department and the Small Business Administration signed an agreement on December 20, 1956, to jointly set aside suitable procurements for award to small firms. This program is expected to result in increased competition among small firms for Post Office Department contracts.

A joint set-aside program for small business has not been established with the Atomic Energy Commission because AEC purchases suitable for small business are made by their prime contractors. However, the AEC and SBA have a program to assist small-business subcontractors which will be discussed later. D. Certificates of competency

The certificate of competency program carried on by the Small Business Administration makes available to small firms an appeal procedure from decisions by military or civilian contracting officers. If a small company or group of companies is low bidder or within negotiation, but is being rejected because of question of credit or capacity, the company may apply to the SBA for a certificate.

SBA field office personnel make detailed plant inspections and financial studies of firms applying for certificates of competency. If the agency finds that the bidder actually is qualified to perform the contract, it issues a certificate of competency attesting to this finding. The certificate must be accepted as conclusive by the procurement officer as far as technical and financial requirements of the contract are concerned. When a certificate of competeny is issued by the SBA, the small firm is awarded the contract and the firm's progress under that contract is watched closely by the SBA regional office staff in order to assist the contractor in meeting his contractual obligations.

The Small Business Administration, from August 1, 1953, through December 25, 1956, has received 525 applications for certificates of competency with a total value of $96 million (exhibit A). As of December 25, 1956, certificates of competency have been issued to 254 firms covering contracts having an estimated value of $31 million. Additional details relative to these certificates of competency actions are given in exhibit F.

For the fiscal year 1957, through December 1956, a total of 86 applications were received for a total value of $13 million, of which 41 certificates were issued with an estimated value of $3.3 million.

E. Assistance to surplus labor areas

Small Business Administration assistance to surplus labor areas is extended to small businesses by helping individual small firms in the areas. The SBA's assistance to the individual small firms can take three forms: help in obtaining prime contracts and subcontracts, technical production information, and financial assistance. Requests for assistance which are concerned chiefly with area development problems, such as locating new industries for communities, are referred to the Department of Commerce, Office of Area Development.

The usual procedure is for the agency representatives to be invited by community leaders and groups of small-business executives to discuss employment