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PREPARED STATEMENT OF REAR ADM. JOSEPH S. SANSONE, JR., DEPUTY CHIEF OF NAVAL MATERIAL FOR CONTRACTS AND BUSINESS MANAGEMENT, DEPARTMENT OF THE Navy
It is a pleasure to appear before your committee today to discuss the
De partment of the Navy's implementation of the subcontracting program
established under Section 211 of Public Law 95-507.
The Na vy's success in actively supporting and fostering the Small Business
Program is a matter of record.
I believe that our performance in fiscal year
1983 illustrates our solid commitment to the small business community. During
the past year, for example, the Navy posted the largest one-year increase in
small business awards in the history of the Navy's program.
In total, $5.9
billion was awarded to small business on a prime contract basis.
represents a 28.6 percent growth in small business awards over the previous
Moreover, the Navy achieved unprecedented real dollar increases
in our small business set-aside awards (from $2.3B to $3.2B) and small
disadvantaged business awards (from $469M to $621M) during fiscal year 1983.
Also, subcontract awards to small businesses and small disadvantaged
businesses increased from $1.8 billion to $2.1 billion and from $70.5 million
to $86.3 million, respectively.
Awards to women-owned small businesses
increased from $64.3 million to $104 million.
These accomplishments can be
attributed, in part, to the positive actions the Navy has taken.
the Navy has enthusiastically participated in 25 conferences, cosponsored by
members of Congress and our Office of Legislative Affairs, since March 1983,
in which over 2,700 small business firms were briefed on "How to do Business
with the Navy" in both the prime and subcontract roles.
We have 12 more
planned during the next three and a half months.
Similarily, over the last
two years the Navy participated in 47 Federal Procurement Conferences for
small businesses, having lead coordination responsibility on 12.
At each of
these conferences the Navy routinely provided counselors to assist small firms
on a one-to-one basis.
With regard to motivating and training our small
business advocates, since December 1981 the Navy conducted two All-Na vy Small
and Disadvantaged Business Utilization Conferences in which most of our 171
Small and Disadvantaged Business Utilization Specialists, as well as a large
number of contracting officers, met to discuss, in detail, additional ways to
improve the Na vy's Small Business programs.
And just last month the Navy
participated in a DoD-Wide Small and Disadvantaged Business Utilization
Conference with similar objectives.
In addition to these Navy-wide
initiatives, individual commands have conducted various training programs at
the local level to ensure their contracting and technical personnel are kept
abreast of small business program initiatives and of their importance in
broadening the industrial base. Also, wany of our personnel involved in the
acquisition process have a personal interest in the program, not only because
they recognize its positive impact on the nation's industrial base, but also
because of Navy policy to include small business program accomplishments as
part of their performance evaluations.
For military personnel, it is an
element of their fitness reports and for civilian personnel it is used in
annual merit pay decisions pursuant to the Civil Service Reform Act of 1978.
Not only are the members of the workforce evaluated but as well Heads of
Contracting Activities who are responsible for the attainment of assigned
small business and small disadvantaged business utilization goals at their
In another initiative, the Navy has gone beyond the Defense Acquisition
Regulation (DAR) requirements by establishing regulatory guidance which
requires Navy contracting offices to display in a public place all small
purchase solicitations in order to stimulate competition and small business
interest. Speaking of competition, the Navy's performance is dramatically
improving in this area as well, and much of our success can be attributed, I an sure, to increased participation by small businesses in our procurements.
Through the first four months of fiscal year 1984 the Navy awarded $1.6
billion more competitively than during the same period in the previous fiscal
The competition percentage for this period in 1983 was 21.8 percent,
and I am pleased to report that it increased to 41.3 percent for the same
period in 1984. This improvement will continue during 1984 as the Navy's
initiatives continue to gain momentum.
Let me discuss for a moment a few of
these initiatives First, the competition advocate program which we
established in over 150 of our buying activities.
The Navy has a flag rank
officer assigned as the Navy's Competition Advocate General and during the
last eight months we have concentrated our efforts on achieving maximum
For example, the Navy CAG was successful in negotiating from a large
pride the release of proprietary data rights for over 4,500 parts.
enhance competition and create further opportunities for small business
Second, we are concentrating on breakout and competition for
spare parts at the Navy Inventory Control Points and Systems Commands.
Na vy's two Inventory Control Points, using the additional resources Navy has
dedicated to competition and breakout, we are seeing results; for example,
1,400 spare parts items have been screened, resulting in 40% being broken out
to competition and another 17% being broken out to the original equipment
manufacturer. Third, the Navy's multifaceted program called Project BOSS (Buy
Our Spares Smart) has been implemented and contains over 100 initiatives
actively working to improve the procurement of spare parts in the Navy.
Positive top-down efforts like these are producing measurable results for the
Navy and account for many of our recent accomplishments in our Small Business
and Competition programs.
I would like to emphasize that we are in the early
stages of producing results.
With this as background, I will now provide specific comments on our
The Navy's subcontracting program is conducted within
guidelines established by the Department of the Defense (DOD) in its
In 1981 when Public Law 95-507 was enacted the Navy
responded and conducted 12 workshops and seminars nationwide for over 1,500
contracting officers, negotiators, buyers and administrators to ensure proper
Since that time the Navy has continued the subcontracting
training program and through this contact with the people that make the
subcontracting program work the Navy has some observations on how it can be
In fiscal year 1981, 1,878 Navy prime contracts contained subcontracting
plans; in 1982, 2,206; and in 1983, 2,501.
Dollar values of these contracts
were $17.5 billion, $24.9 billion and $30.8 billion, respectively. Although
the Navy has not yet received the SBA Annual Report for fiscal year 1983, of
the 6,585 Navy prime contracts awarded during the last three years with plans,
only six have been identified by the SBA as not having the required
subcontracting plan or a determination by the contracting officer that the
contract did not offer subcontracting opportunities.
In four of the
identified cases the Navy determined that the required plan was either
inadvertently omitted from the contract or the required documentation was
erroneously omitted from the contract file.
Ultimately, the contracts and
contract files were modified to correct the identified deficiencies. In the
other two cases the responsible contracting offices are taking appropriate
actions toward resolution.
Although the SBA does not identify in its annual
reports the number of plans it reviewed each year on a department or agency
basis, it does identify the total number of proposed plans and post-award
reviews it made to determine prime contractor compliance with approved
subcontracting plans. Of the 12,251 proposed subcontracting plans and 13,658
post-award reviews conducted by the SBA in fiscal years 1981 and 1982, only
107 Navy plans were identified as needing improvement because, in the opinion
of the SBA, they did not contain maximum practicable opportunities for small
businesses to participate in the performance of the prime contracts.
these plans were improved as recommended by the SBA, and the SBA report
indicates that some contracting officers may have failed to apprise SBA of
final contract actions prior to the end of the SBA reporting period for
purposes of their annual reports.
For example, the Navy's analysis of the 35
plans identified by the SBA in fiscal year 1982 found that in most cases
either the SBA ultimately concurred in the plan or the contracting officer was
unable to identify any recommendation calling for improvement.
I am aware of
no instance in which a Navy prime was ultimately in non-compliance
necessitating remedial actions including debarment proceedings.
Subcontract data is compiled and transmitted to the Office of the
Secretary of Defense by the DOD component that has contract administration
For example, a significant number of the Navy's contracts are
administered by the other Services, particularly the Defense Logistics Agency,
and these contract administration offices compile and transmit subcontract
data direct to OSD for Navy primes. Conversely, Navy contract administration
offices report subcontract data for prime contractors when the Navy has
cognizance of the facility.
Therefore, I cannot identify the total dollar
va lue of all subcontracts awarded under Navy prime contracts containing plans,
including the percent and dollar value to small and small disadvantaged
Table 1 provides information with respect to all DoD contracts