Credit Needs of Small Business

Mr. FLOETE. That is right. And of the purchases that we make direct, approximately 57 percent go to small business.

Senator CAPEHART. That is in dollars and cents or number of contracts?

Mr. FLOETE. That is in dollars, about 75 percent in contract actions. Senator CAPEHART. What counts is the dollars. There again, of course, I do not suppose that if you bought automobiles from Studebaker you would consider that small business, would you.

Mr. FLOETE. No, sir.

Senator CAPEHART. That would not be considered small business. Yet they are small in the automobile business.

Mr. FLOETE. As compared with General Motors.

Senator SPARK MAN. Somebody before this committee a few years ago defined small business as being one that could not afford to keep its own representative in Washington. Studebaker can afford to do that all right.

Senator CAPEHART. That definition would not be too good because the small-business men in Washington and around Washington and in Baltimore are itching, of course, to get in here, and they are here all the time. So that would not be a good definition.

Mr. FLOETE. Well, the greatest trouble I always had was getting any money to do business on.

Senator SPARKMAN. That is one of the principal bills before us at the present time, to recognize that very problem. You know, it was first called to my attention several years ago when the Securities and Exchange Commission-this committee has jurisdiction over legislation pertaining to that--had a gentleman before us from time to time. But I remember 1 day they were testifying with reference to the use of the securities market. And I remember very well the statement made that, as a result of the study-a well carried out, thorough study-made by the Securities and Exchange Commission, it had been determined that no borrower of less than a million dollars could afford to use the securities market. The cost was too high.

That is pretty well in the range of small businesses; so, in other words, I think the chairman of the Securities and Exchange Commission would tell anybody today that small business, as we generally understand it, simply cannot afford to use the securities market.

Mr. FLOETE. I hope we can get someplace with this legislative omnibus bill. It would correct a good many things that have needed correcting for a long time, but I don't know whether you want to go into it today or not.

Senator SPARKMAN. That is a bill you are referring to

Mr. FLOETE. That we have already sent over to the Bureau of Budget.

Senator SPARK MAN. I presume that would go before the Government Operations Committee, would it not?

Mr. BARRON. Yes, sir.

Senator SPARKMAN. And, of course, we would not have jurisdiction over that.

Mr. FLOETE. I see. I think it would do a lot if we could get it through.

Senator SPARKMAN. I notice what you said about it. It is described here. It says it has been submitted to the Bureau of the Budget.

With the support of the President and the cooperation of Federal agencies on December 31, 1956, we issued a governmentwide regulation providing for progress payments under fixed-price supply contracts. Based on operating experience, we hope to make revisions and improvements in providing for progress payments and now have this subject under further study.

Through the excellent cooperation of the Comptroller General of the United States, a helpful directive has been issued warning agencies against the taking of unearned discounts, a practice which hinders small business.

Acting, in part, at our request, the Comptroller General also directed the discontinuance of the requirement for inclusion on invoices of a special certification in vogue for more than half a century. This milestone in improvement of Government procurement procedures will eliminate costly delays in payments to small business concerns resulting from the huge volume of invoices being returned unpaid because of noncompliance with this requirement.

Some of the problems now under consideration by the task force relate to: Simplification of construction contract forms (a new short form for use on small construction jobs up to $2,000 has already been drafted and a comparative study of various agency clauses has been completed as a basis for standardizing necessary clauses and cutting down on others); method for increasing small business participation in Government-financed research and development; difficulties in compliance with packing, marking and packaging requirements; inability to obtain Government contract specifications in sufficient time for bidding purposes; need for a uniform Government procedure for small business set-asides. Study groups composed of representatives from various agencies are now working on these problems and we look for definite improvements to result.

We know the committee will be keenly interested in the work which has been done toward drafting remedial legislation which would amend various Government procurement laws as a result of information and data acquired by the task force. This legislation has now been drafted and has been submitted to the Bureau of the Budget. The measure seeks, among other things, to effectuate the following:

(1) Provide greater uniformity in Government procurement and greater flexibility to help small business by extending, through delegation, the procurement procedures of title III of the Federal Property and Administrative Services Act of 1949 to all civilian executive agencies;

(2) Remove certain obstacles limiting effective standardization and codification of contracting procedures of civilian executive agencies;

(3) Reflect the original legislative intendment, in the light of changes in economic conditions, of certain statutes regulating the performance of Government contracts;

(4) Permit the making of progress and advance payments on Government contracts to small-business concerns with a minimum of burdensome and expensive administrative procedures; and

(5) A number of provisions designed to promote the placement of contracts with small-business concerns.

Another project of the task force of which we have great expectations is the codification project. If we can establish a Governmentwide Federal Manual of Procurement Policies and Procedures to replace many of the manuals and instructions now in use and to fill the gap where there aren't any, a tremendous stride forward will have been taken in developing uniformity and simplification in communicating and understanding to the business world of how the Government agencies do their contracting for supplies and services.

III. RELATIONSHIP OF GSA AND SBA

The work of GSA, which I have just described, is conducted in full cooperation with the Small Business Administration. GSA does not directly participate in the SBA programs for loans or technical management aids. The GSA procurement-related programs supplement and strengthen certain activities of the Small Business Administration relating to Government contracts. For example, SBA field offices refer prospective contractors to GSA business service centers and contracting officers for the type of activities and services furnished by such offices. GSA, on the other hand, utilizes some of the publications published by SBA in this field and refers concerns to SBA for loan assistance and technical aids. The two agencies, in general, seek to avoid any overlap or duplication.

amount of $5,000 or over are screened to determine whether small-business concerns can perform the contract requirements. Where procurements from small business concerns are determined feasible, either total or partial set-asides are made. During the first 9 months of the current fiscal year, we have entered into contracts restricted exclusively to small business concerns amounting to approximately $13 million. This compares with less than $5 million in all of fiscal year 1956. The fiscal year 1957 monthly statistics are set out in an attached summary. (2) Equal low bids.-Under GSA governmentwide regulations, when two or more equal low bids are received, award is made to the equal low bidder having the highest priority status, considering both the small-business status of the bidders and whether or not the contract will be performed in an area of substantial labor surplus.

(3) Disaster relief.-To assist in the rehabilitation of disaster stricken areas, GSA, in cooperation with Federal Civil Defense Administration and other agencies, provides surplus Government property to stricken States which in turn sell the property, on a nonprofit basis, to small-business concerns in need of rehabilitation.

Other specific measures have also beeen taken-these include: enabling small concerns to participate in large procurements by prescribing terms to permit bids for less than the total requirement; the development of specifications in accordance with industry standards to permit businessmen to sell to the Government their regularly produced products; the provision, in the procedure for surplus labor area set-asides, of a priority for small business.

Construction and repair contracts.—A program has been initiated in GSA regional offices to contact small-business construction and repair contractors to stimulate increased competition and small-business participation in GSA contracts for construction, maintenance, renovation and repair of public buildings.

INTENSIFIED BUSINESS INFORMATION AND ASSISTANCE ON GOVERNMENT CONTRACTS

GSA has had since 1951 business service centers, located at the headquarters offices of our regional offices, designed to provide businessmen interested in participating in Government procurement or surplus property disposal with information and assistance including copies of specifications, the display of bid invitations and similar aids.

Our new program will provide centralized direction; will be responsive to the needs of the centers for information and facilities; and furnish the necessary guidance for a more intensified program by providing uniform standards, detailed operating guides and assisting in the proper organization and development of each center.

II. WORK OF THE INTERAGENCY TASK FORCE REVIEW OF GOVERNMENT PROCUREMENT POLICIES AND PROCEDURES

The Task Force for Review of Government Procurement Policies and Procedures is an interagency activity established in Ocober 1956 in response to a directive of the President, based on a recommendation of the Cabinet Committee on Small Business, that a comprehensive review of Government procurement policies and practices be made with the objective of eliminating needless inconsistencies, simplifying procedure, and removing inequities.

Its membership has included representatives from SBA, the Departments of Defense, Interior, Agriculture, and Commerce, the Atomic Energy Commission, Veterans' Administration, Post Office Department and GSA. The Bureau of

the Budget and the General Accounting Office have had advisory representation also.

The task force is endeavoring not only to identify problem areas in this field but to initiate remedial actions which will facilitate business participation in Government contract work.

We will be glad to submit for inclusion in the record if desired the first summary report on progress of the task force covering the 4 months from November 1956 through February 1957. The second summary report is now in draft form. The first summary report indicates that during the short period of its existence the task force has reviewed much material from both Government and business sources, has identified a significant number of major problem areas, and has initiated special projects or designated study groups to develop corrective actions.