Law 323, 84th Congress (69 Stat. 618), provides for the purchase of bonds by the Government to cover officers and employees who are required to be bonded; and Public Law 681, 84th Congress (70 Stat, 519), permits departments and establishments of the Government to pay expenses relating to notaries public.

Section 107 (a) provides that small business concerns shall receive contract awards as to which it is determined by the Administration (1) to be in the interest of maintaining or mobolizing the Nation's full productive capacity, (2) to be in the interest of war or national defense programs, or (3) to insure a well-balanced national economy. The first two items are in the present law, however, the third item introduces an entirely new factor under which the Administrator would be in a position to control the awarding of Government contracts to small business concerns by a finding that such action would "insure a well-balanced national economy."

In the absence of specific language setting forth the manner and conditions under which contracts should be awarded to small business concerns "to insure a well-balanced national economy" there could be many reasons-involving economic and other policies not considered or approved by the Congress—which might serve as the basis for making determinations that Government business should be assigned to small business concerns in complete disregard of the procurement statutes requiring generally that contracts for supplies and services be awarded to the lowest responsible bidder after advertising. We feel, therefore, that the provision is too broad and might be detrimental to the interests of the United States. Accordingly, we recommend that item (3) be deleted from section 107 (a) of the bill.

Title II of the bill proposes this establishment of an insured loan program. The Administrator of the Small Business Administration would determine the qualifications of lenders and the terms and conditions of the loans, with certain limits as to amount and duration. Premiums of not to exceed 11⁄2 percent would be paid on insured loans. The bill further provides for the establishment by each lender of an insurance reserve equal to 10 percent of its total loans less insured losses paid. The insurance coverage would be limited to the lender's insurance reserve or 90 percent of the unpaid balance of a loan, whichever was smaller. Program operational expanses would be defrayed from a revolving fund, consisting of premiums and other moneys received, together with an initial appropriation of $10 million authorized by the bill.

We are not in a position to evaluate the adequacy of the maximum premium rate of 12 percent on insured loans, and farttthis reason we cannot comment on the probable effectiveness of title II of thdoill. We do urge, however, that if the bill is to receive favorable consideration, section 207 (f) of the bill be deleted since we believe no specific mention of our authority to audit is needed. The Budget and Accounting Procedures Act of 1950 provides specific statutory authority for the General Accounting Office to make the type of audit most suited to the activities of various agencies in accordance with generally accepted principles of auditing. This would enable the Comptroller General to prescribe the type of audit that would be the most practicable and useful for financial operations under the proposed revolving fund without the necessity for special accounting or auditing provisions in the bill. Section 301 (b) would require that payments be made to the civil service retirement and disability fund for the Government's share of the cost of the civil service retirement system applicable to the employees engaged in carrying out the functions of the act. Since this would appear to be automatically required by section 4 of the Civil Service Retirement Act of May 29, 1930, as amended by title IV of the Federal Executive Pay Act of 1956, Public Law 854, 84th Congress (70 Stat. 747), we perceive no need for the provision.

It appears that line 12, page 32, should be eliminated from the bill.

DEAR MR. CHAIRMAN: Further reference is made to your letter of April 11, 1957, requesting our views on S. 1789, which would amend the Small Business Act of 1953, as amended.

The bill is designed primarily to give permanent status to the Small Business Administration. Whether the agency should be made permanent, is, of course, a matter of policy for the Congress to decide; however, certain advantages could accrue from making it a permanent agency. It would tend to have a stabilizing influence on its personnel and might enable the agency to attract and retain more capable personnel. In addition, it would permit more orderly planning of the agency's financial budget.

Section 205 (a) of the bill authorizes the Administrator to provide bonds for employees and pay the cost of qualification of certain employees as notaries public. It appears that this provision is unnecessary because Public Law 323, 84th Congress (69 Stat. 618), provides for the purchase of bonds by the Government to cover officers and employees who are required to be bonded; and Public Law 681, 84th Congress (70 Stat. 519), permits departments and establishments of the Government to pay expenses relating to notaries public.

Section 206 (a) provides that the Administrator may borrow from the Treasury and that the amounts borrowed shall be placed in the revolving fund heretofore established under the authority contained in section 204 of the act of July 30, 1953 (15 U. S. C. 633). Inasmuch as this bill provides that section 204 shall be amended to read as indicated therein, we believe it would be preferable to include in section 204 of this bill a provision for establishing the revolving fund.

Section 206 (d) would require that payments be made to the civil service retirement and disability fund for the Government's share of the cost of the civil service retirement system applicable to the employees engaged in carrying out the functions of the act. Since this would appear to be automatically required by section 4 of the Civil Service Retirement Act of May 29, 1930, as amended by title IV of the Federal Executive Pay Act of 1956, Public Law 854, 84th Congress (70 Stat. 747), we perceive no need for the provision.

Section 209 (d) provides that the Department of Defense shall make monthly reports not less than 45 days after the close of the month. It appears that this language should be changed to read “not more than 45 days after the close of the month."

DEAR MR. CHAIRMAN: This is in response to your letter of April 11, 1957, requesting a report upon S. 1789, 85th Congress, 1st session, a bill to amend the Small Business Act of 1953 (title II of Public Law 163, 83d Cong.), as amended. As presently existing, the Small Business Act is in the nature of temporary emergency legislation with a termination date in 1957. The bill proposes to revise this act in a number of particulars and to extend it indefinitely by omitting any expiration date. The preservation of the effective operation of small business in our economy is an objective of direct concern in the work of the Federal Trade Commission and we are fully in accord with the view that a further extension of this legislation for aiding small business is desirable and should be made.

A number of the provisions of both the existing law and of the present bill have some relationship to the work of this agency and others deal with matters which are clearly outside our province. As to provisions which would affect this agency, there is but one upon which we feel there is need for specific com. ment. This is one of the provisions relating to immunity from the antitrust laws and the Federal Trade Commission Act.

The bill proposes to retain antitrust exemptions contained in the present law, both that with respect to "voluntary agreements and programs" in section 210, and that in section 207 with respect to "any corporation formed and capitalized by a group of small business concerns." The revisions made in the latter seem to us to leave some doubt as to its coverage. In view of the fact that the provisions of section 207 include civilian operations unrelated to defense needs and 93527-57-5

the further fact that the proposal is now in the nature of permanent legislation we wish to invite your attention to this phase of the proposal.

The first part of section 207 (5) refers to encouraging the formation of corporations by small business concerns and the exemption which follows seems to refer to acts requested with respect thereto and findings that such formation would contribute to the needs of small business. In the latter part of this paragraph, however, in referring to withdrawal of approval, the bill speaks of "approval of the voluntary agreement or program" upon which the request or finding is based. It would thus appear to contemplate approval and perhaps exemption of specific plans and methods of operation of such corporations formed by groups of small business concerns.

If any exemption is to be afforded with respect to such corporations, we think it should be clearly and strictly limited to preventing any application of the antitrust laws to such corporation or its operations solely because it is owned and its operations controlled and directed by a group of competitors consisting of small business concerns. On the other hand we think it should be entirely clear that no exemption could be invoked if such corporation should in its business operations engage in acts or practices violative of the antitrust laws or the Federal Trade Commission Act.

We see no justifiable reason why a corporation formed under this section of the act should have been any grounds to claim an immunity permitting it to indulge in price discriminations or other discriminatory practices prohibited by the Clayton Act, the use of unfair or deceptive practices in violation of the Federal Trade Commission Act or acts violative of the related statutes dependent upon the Federal Trade Commission Act such as the Wool Products Labeling Act, the Fur Products Labeling Act or the Flammable Fabrics Act. Corporations formed under this section will necessarily compete with other concerns in the same line of business including other small business concerns and no basis appears for drawing any distinction in this area between such corporations and their competitors.

It is also noted that in section 207 (5) in referring to the immunity provisions the existing law designates this as "within the prohibitions of the antitrust laws * This has been changed in the present proposal to "within the provisions of the antitrust laws ***." The word "prohibitions" clearly affords exemption from things prohibited whereas the word "provisions" might well extend to inquiries or investigations which might be entirely proper under sections 6 and 9 of the Federal Trade Commission Act.

We feel that the suggested clarification of the exemption from the antitrust laws and the Federal Trade Commission Act is desirable, especially in view of the fact that these laws are directed to protecting and preserving fair competitive opportunity for all legitimate enterprises including those operating without Government financial assistance as well as those who receive such assistanceand bring themselves within the scope of the proposed legislation.

By direction of the Commission.

JOHN W. GWYNNE, Chairman.

N. B.-The Bureau of the Budget advised on June 19, 1957, that there would be no objection to the submission of this report to the committee.

ROBERT M. PARRISH, Secretary. Senator CLARK. As our first witness we are very happy to welcome the very distinguished Senator from Colorado, Senator Gordon Allott. Good morning, Senator.

STATEMENT OF HON. GORDON ALLOTT, A UNITED STATES SENATOR FROM THE STATE OF COLORADO

Senator ALLOTT. Mr. Chairman and members of the committee: I am very happy to have this opportunity to appear here this morning to discuss the various bills which have been offered and to support my own position with respect to the passage of these bills.

The bill offered by myself, S. 55, simply extends the Small Business Act of 1953 and makes permanent the Small Business Administration. I have felt for some time this should not be on a temporary basis, and

that it should be perpetuated. That is the reason for the form of my bill.

The bill offered by Senator Thye, S. 1789, of which many are cosponsors, as well as myself, does the same thing that S. 55 does, with some important additions. It clarifies the congressional intent with regard to small business concerns, that they shall receive a fair proportion of Government construction contracts.

The second additional thing it does is to authorize the Small Business Administration to borrow funds from the Treasury Department for its revolving fund. This, of course, is designed to give the Small Business Administration additional flexibility in the administration of its funds. It is my understanding that twice the Small Business Administration's funds have been completely depleted. I do not know whether that is overstating it. If it is depleted, it is depleted, I presume. Any way they were depleted causing great delay in the loan

program.

The provisions of the law which are to provide additional flexibility in disaster programs will allow more efficient service to victims of disasters, and, finally, it authorizes the Small Business Administration to make studies and recommendations of problems affecting the competitive strength of small businesses. This latter, in my opinion, is one of the most important phases of this offered legislation. Despite all of the apparent attempts that have been made in the tax field to give advantages to smaller businesses, it seems to be working in reverse and to the disadvantage of the small-business men.

As a cosponsor, Mr. Chairman, of S. 1789, I am much interested in seeing these technical changes made. They will assist the Small Business Administration, and they will assist the small-business man in improving on the tremendous job they have been doing for the smallbusiness firms of this country.

Twice within the last month I have had occasion to insert in the Congressional Record stories contained in the newspapers of Colorado, regarding the excellent job that the Small Busness Administration is doing in that area of the country. Mr. Harold R. Smithills, who is the regional administrator, has, in my opinion, done an outstanding job. He has applied to the administration of this Department some of the principles that you would expect to find in business itself. For example, he was one of those who developed and cooperated in holding the small-business clinic last fall, in which they brought in exhibits from many, many Government contractors, and for 2 days they had members of the military and other Government contracting agencies informing the Colorado, New Mexico, Arizona, Utah, Wyoming, western Kansas, and western Nebraska people, the small-business men, how they could participate and how they could make the contacts to get in on these Government contracts.

More recently, Mr. Smithills has held a series of meetings in that region, that being the same area I have just named, in key towns. And, after notifying the businessmen there, he has gotten them into these meetings and let them tell their problems on credit and procuring business, and has put the other process in reverse again by telling them how they could get in on these various Government contracts. It is particularly important that this agency be continued on a permanent basis because, first, it has proven its worth many times

over; secondly, it occupies an important position in the credit structure of this Nation, providing loans to small-business men who are unable to obtain financing from private sources. I want to reemphasize this because, particularly with respect to small businesses is this true; the means and sources of credit are becoming more limited to them all of the time.

Third. Many of the problems of small business can only be solved through long-range planning. This also connot be done through other credit agencies, particularly the banks, and the banks are about the only source of credit an ordinary business has.

Fourth. The staff of this agency needs the assurance of a permanent status in order to be able to provide definite plans and to make workable plans and sensible plans for the continuation of this program. Fifth. The other Government agencies and credit institutions doing business with the Small Business Administration are entitled to a less fleeting relationship than is now currently possible.

In addition to these credit problems, it seems to me that there is a definite, proven need to continue the Small Business Administration's work in its assistance to small businesses in the procurement and participation in Government contracts under the production-assistance program, in bringing together the originators of new products and the manufacturers.

In closing, I want to point out what this has meant to my own State, although the figures are available to this committee for the entire United States. Up to the first of this year, 118 loans totaling $3,043,000 had been made to firms and individuals in Colorado. Since the beginning of 1957, approximately 25 loans have been completed, totaling $654,000.

Mr. Chairman and members of the committee, as I see the situation with respect to these bills, these things are important. First, that this shall be continued on a permanent basis so that the plans and the program can be permanent rather than temporary.

Second, that this credit is a necessary and needed part of the small business of this country.

Third, that unless we find some means to enable small business to participate in the economic growth, in new products, and in Government contracts and subcontracts, which are going on constantly, we are probably going to find ourselves where we will be continuing to choke small business down and will only make large business larger. Therefore, I recommend and commend to this committee particularly S. 1789, and thank the committee for having this opportunity to be here.

Senator CLARK. Thank you very much, Senator. I wonder whether in Colorado, or generally in the Mountain States area, you found any need for a method of long-term, equity financing of small business? There has been some thought that it is very difficult for them to raise equity capital under the present conditions.

Senator ALLOTT. I do not think there is any question but what it is needed. In talking with businessmen when I am in the State and when I am around that area of the country, I find that this is true. One of the chief handicaps of the small-business man today, and that is not just true in the last 2 or 3 years, but has been true ever since World War II, has been to get equity capital.

Senator CLARK. Thank you very much, Senator.