Prime Contracts Assistance

A principal tool for assuring a fair share of Government contracts to small business is through SBA's Set-Aside program. The Agency now has 43 procurement center representatives covering 200 Government buying installations which account for about 80 percent of the Federal purchase dollar.

Procurement center representatives seek to increase the amount of business which small firms may do with Government agencies.

They review purchase requests and initiate a set-aside if sufficient competition is expected to assure a fair and reasonable price to the Government.

In fiscal year 1969 this program resulted in savings to the Government of $10.2 million.

Property Sales Assistance

The Property Sales Assistance program helps small firms obtain a fair share of the material and property which the Government sells as surplus, or supplies as raw material.

This program resulted in more than 180 sale set-asides in fiscal year 1969 at a value of about $14 million.

Subcontracting Assistance

The Voluntary Subcontracting program (VSP) helps small firms obtain subcontracts from major Government prime contractors. Sixty-six prime contractors with approximately 340 plants are enrolled.

In fiscal year 1969 over $4.3 billion in subcontracts were awarded to small firms by members of the VSP. Other prime contractors awarded an additional $1.7 billion to small businesses.

Facilities Inventory

SBA's Facilities Inventory lists about 14,000 small firms showing items they are capable of producing to supply the needs of the Federal Government.

General Counsel

The SBA represents the interests of the small business community before other Federal agencies. Significant actions in 1969 were:

1. As a result of intervention by SBA and others, the Federal Maritime Commission on August 19, 1968, ordered a lowering of the outbound rates from the United States to the United Kingdom. The Circuit Court of Appeals for the District of Columbia sustained the FMC order on June 27, 1969. (American Export-Isbrandtsen Lines, Inc. v. Federal Maritime Commission.)

2. SBA petitioned the Federal Communications Commission on February 3, 1969, to reallocate a sufficient amount of idle UHF TV channels to land mobile use, and urged reallocation of existing operating UHF TV assignments to relieve frequency congestion and to insure optimum usable frequency space for small business users of land mobile radio. This matter is pending.

3. Because of the effect on competition of a proposed acquisition by Western Union Telegraph Co. of A.T. & T.'s Teletypewriter Exchange Service properties, SBA petitioned the Federal Communications Commission for leave to intervene in the proceedings. Also pending.

4. SBA also protested a number of small shipment tariffs filed with the Interstate Commerce Commission by various motor carrier conferences on the grounds that they unjustly discriminated against small business.

Two rulings of the Comptroller General of the United States affected SBA:

• In the first, the Comptroller General ruled that Section 8(a) contracting authority granted SBA by the Small Business Act was not limited to supply contracts, but included all types of contracts, including service and construction contracts as maintained by SBA.

• In the second, the Comptroller General found that small business investment companies could not participate with SBA in loans to small busi

ness concerns.

SBA was also involved in litigation in the areas of bankruptcy, disclosure of information, foreclosure, lien priorities, local taxes, and personnel actions.

In an internal legal decision, SBA, in an interpretation of the law, held that it could not make economic injury disaster loans as a result of a Federal ban on the use of a cyclamate sugar substitute in foods and beverages for human consumption.

New Legislation

Several laws affecting SBA were enacted in 1969.

First, Section 6 of the Disaster Relief Act of 1969, Public Law 91-79, approved October 1, 1969, provided the Agency with certain additional temporary authority to be used in the administration of the Disaster Loan program under Section 7(b) (1) of the Small Business Act, as amended (15 U.S.C. 636 (b)).

Effective in connection with major disasters declared by the President after June 30, 1967, and on or before December 31, 1970, the new law authorizes:

(a) The forgiveness of up to $1,800 in amounts owing on a disaster loan under certain circumstances;

(b) The making of disaster loans without regard to the availability of financial assistance from private sources, but at a higher interest rate and without benefit of the forgiveness provision, and,

(c) The refinancing of outstanding mortgages and liens on property which has been totally or substantially destroyed.

Second, section 301 of Public Law 91-151, approved December 23, 1969, provided that $70 million in funds be made available for use by SBA in its Small Business Investment Company (SBIC) financing functions under the Small Business Investment Act of 1958. Such moneys were to be allocated from funds already appropriated to the business loan and investment fund established under Section 4 (c) (1) (B) of the Small Business Act. (See "Small Business Investment Companies," page 17.)

The Tax Reform Act of 1969, Public Law 91172, approved December 30, 1969, contained the following two provisions also affecting small business investment companies (SBICs):

(1) Section 431 of the Act added a new Section 586 to the Internal Revenue Code of 1954 providing that, in the matter of reserves for losses on loans, any new SBIC or any new business development corporation may during the first 10 years of its existence base its bad-debt reserves upon the industry average. After the first 10 years of its existence, it must then generally base additions to its bad-debt reserves on its own experience. Section 431 also added language to Section 172 of the Code to provide loss carryback and carryover benefits to SBICS.

(2) Section 433 of the Act amended Section 582 (c) of the Internal Revenue Code of 1954, relating to losses and gains of financial institutions in sales or exchanges of bonds, debentures, notes, certificates, or other evidence of indebtedness.

As amended, Section 582 (c) provides that financial institutions, including SBICs, must treat net gains from these transactions as ordinary income, instead of as capital gains, and that they will continue to treat losses from such transactions as ordinary losses. SBICS and business development corporations, however, may elect whether or not this amendment shall apply to their taxable years beginning after July 11, 1969, and before July 11, 1974.

Section 504 of Public Law 91-173, the Federal Coal Mine Health and Safety Act of 1969 (approved Dec. 30, 1969) amended Section 7(b) of the Small Business Act to authorize loans to assist small business coal mine operators in making additions to or alterations in their equipment, facilities, or methods of operation to meet requirements imposed by the Act.

SBA must determine that such concerns are likely to suffer substantial economic injury without this assistance.

These loans carry the same liberal terms presently available to applicants suffering substantial economic injury as a result of displacement by or location near Federally-assisted construction or renewal projects.

Finally, certain provisions of Public Law 91-177, the Economic Opportunity Amendments of 1969, approved December 30, 1969, extended SBA's authority to carry out the lending and other Title IV programs through fiscal year 1972; made the benefits of these programs available to small businesses in the Trust Territory of the Pacific Islands, and, to afford adequate notice of funding available under the Economic Opportunity Act, authorized appropriations for grants, contracts or other payments under the Act to be made for the fiscal year preceding the fiscal year for which they are available for obligation.

By April 1969, SBA began tightening its loan approval standards for loan applications, such as disaster business loans of $10,000 or more and all bank participation loan applications.

For the first time these loans were made subject to investigation prior to approval.

This action was taken to prevent loans going to illegal or underworld channels, and to protect the Government from fraud.

During the last 3 months of 1969 names checked through Security and Investigations increased to an average of 3,331 per month, from an average of only 1,886 per month during the first 3 months of the year. Total investigations for 1969 covered 33,000 loan applicants representing 20,000 busi

nesses.

SBA's Office of Security and Investigations worked closely with other agencies such as Secret Service, Bureau of Narcotics and Dangerous Drugs, Internal Revenue Service, Federal Deposit Insurance Corporation, the Organized Crime and Racketeering Section of the Department of Justice and the Federal Bureau of Investigation.

Equal Employment Opportunity

SBA's Office of Equal Employment Opportunity, in line with the Agency's commitment to make equal employment opportunity a reality, identified problems, proposed solutions and established new priorities in this critical area.

The Office of Equal Employment Opportunity canvassed regional and area SBA offices to identify individual problems, and devise new training programs and opportunities for personnel from disadvantaged and minority backgrounds. The result has been a broad, national SBA commitment to equal opportunity, and a sound foundation in local SBA facilities involving personnel at all levels.

New initiatives were taken in other areas, with the SBA Office of Equal Employment Opportunity represented at community and national gatherings such as the NAACP Convention and the National Business League Convention.

Advisory Councils

Among major changes in the advisory council programs made during the year was an expansion of the Council's structure to create 400 community advisory councils. The purpose: To bring SBA closer to the people.

Community advisory councils provide SBA with a valuable resource the experience of businessmen and women who advise the Agency of local economic conditions with special emphasis on the small business community.

A financial committee, comprised of 300 advisory council members active in banking, was formed to support, encourage and participate in SBA bank-participation programs.

During the year the 1,750 SBA council members helped SBA achieve increased bank participation in small business loans.

Throughout 1969 SBA received some 50 resolutions from council members, covering suggestions for new methods or revisions of existing programs.

Council members also played an active role in arranging SBA workshops and conferences throughout the country.

Many council members advertised SBA programs through speeches and local TV and radio. stations. Others expanded press coverage of the Agency's activities through their local newspapers and trade journals.

Size Standards

To insure that SBA assistance is directed only to small concerns, the Agency is continually reviewing and revising its size standards.

During 1969 industry hearings were held on the definition of size standards for the food service and laundry and dry cleaning industries, and new standards were established.

Size standards were increased in the following industries for purposes of:

1. Obtaining financial assistance.-Trailer

courts.

2. Bidding on Government contracts.-Food and laundry services; computer programing; computer maintenance; data processing; flight training, and tire recapping.

3. Both obtaining financial assistance and bidding on Government contracts.-Local and long distance trucking; warehousing, packing and crating, and freight forwarding; and for SIC Industry 3537 industrial trucks, tractors, trailers, and stackers.

A definition was established for the forest products industry and regulations were amended regarding the sale of Alaskan timber.