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SMALL BUSINESS SUBCONTRACTING PROGRAM

(Part 1)

HEARING

BEFORE THE

SUBCOMMITTEE ON SBA AND SBIC AUTHORITY, MINORITY ENTERPRISE AND GENERAL

SMALL BUSINESS PROBLEMS

OF THE

COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES

NINETY-EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC, APRIL 5, 1984

Printed for the use of the Committee on Small Business

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1984

38-430 O

4

1205U 12250

COMMITTEE ON SMALL BUSINESS

PARREN J. MITCHELL, Maryland, Chairman NEAL SMITH, Iowa

JOSEPH M. McDADE, Pennsylvania JOSEPH P. ADDABBO, New York

SILVIO O. CONTE, Massachusetts HENRY B. GONZALEZ, Texas

WILLIAM S. BROOMFIELD, Michigan JOHN J. LAFALCE, New York

LYLE WILLIAMS, Ohio BERKLEY BEDELL, Iowa

JOHN HILER, Indiana HENRY J. NOWAK, New York

VIN WEBER, Minnesota THOMAS A. LUKEN, Ohio

HAL DAUB, Nebraska ANDY IRELAND, Florida

CHRISTOPHER H. SMITH, New Jersey IKE SKELTON, Missouri

DAVID DREIER, California CHARLES W. STENHOLM, Texas

GUY V. MOLINARI, New York ROMANO L. MAZZOLI, Kentucky

TOBY ROTH, Wisconsin NICHOLAS MAVROULES, Massachusetts GENE CHAPPIE, California CHARLES HATCHER, Georgia

SHERWOOD L. BOEHLERT, New York RON WYDEN, Oregon

MICHAEL BILIRAKIS, Florida
DENNIS E. ECKART, Ohio

DAN SCHAEFER, Colorado
GUS SAVAGE, Illinois
BUDDY ROEMER, Louisiana
NORMAN SISISKY, Virginia
ESTEBAN EDWARD TORRES, California
TOM J. VANDERGRIFF, Texas
JIM COOPER, Tennessee
JAMES R. "JIM" OLIN, Virginia
C. ROBIN BRITT, North Carolina
RICHARD RAY, Georgia
CHARLES A. HAYES, Illinois

MAJOR L. CLARK III, Staff Director
THOMAS G. POWERS, General Counsel

SARAH ETHEREDGE, Staff Assistant

Lois LIBERTY, Publications Specialist
CHRISTINE A. RUSSELL, Minority Staff Director

SUBCOMMITTEE ON SBA AND SBIC AUTHORITY, MINORITY ENTERPRISE AND GENERAL

SMALL BUSINESS PROBLEMS

PARREN J. MITCHELL, Maryland, Chairman NEAL SMITH, Iowa

JOSEPH M. McDADE, Pennsylvania JOSEPH P. ADDABBO, New York

HAL DAUB, Nebraska JOHN J. LAFALCE, New York

GUY V. MOLINARI, New York
RON WYDEN, Oregon

SHERWOOD L. BOEHLERT, New York
DENNIS E. ECKART, Ohio
GUS SAVAGE, Ilinois
THOMAS A. LUKEN, Ohio

CONTENTS

Page

1

56

3

4

Hearing held on April 5, 1984.

Opening statements of:

Addabbo, Hon. Joseph P., a Representative in Congress from the State of

New York..

Daub, Hon. Hal, a Representative in Congress from the State of

Nebraska.

Mitchell, Hon. Parren J., chairman, Subcommittee on SBA and SBIC

Authority, Minority Enterprise and General Small Business Problems...

Molinari, Hon. Guy V., a Representative in Congress from the State of

New York..

Testimony of:

DeLuca, Anthony J., Principal Assistant to the Deputy Chief of Staff

Contracting and Manufacturing, Air Force Systems Command, Depart-

ment of the Air Force, accompanied by David H. Oswalt, AFSC Com-

mand Executive for Small and Disadvantaged Business Utilization, and

Larry L. Jones, specialist, Air Force Contract Management Division,

Small and Disadvantaged Business Utilization....

Denlinger, Stephen, president, Latin American Manufacturers Associa-

tion .....

Harrington, Capt. Phillip H., Supply Corps, U.S. Navy Commanding Offi-

cer, Naval R ional Contracting Center, Long Beach, CA, accompanied

by Sheryl Cabey, Small and Disadvantaged Business Utilization special-
Martin, Lawyer A., president, Black Presidents' Roundtable Association,

accompanied by Marshall D. Joseph, president, TechMatics Corp.; and

Gordon D. Alexander, president, Congressional Education Associates.....

Rush, Col. Thomas A., Commander, Defense Personnel Support Center,

Defense Logistics Agency, Philadelphia, PA, accompanied by Vera Zap-

pile, adviser, Small and Disadvantaged Business Utilization..

Stallings, Maj. Gen. David W., Director for Procurement and Production,

U.S. Army Material Development Readiness Command, Department of

the Army..

Tidd, Donald W., preside it, Association of Small Research, Engineering

and Technical Services Companies .....
Voorhees, Brig. Gen. John H., Commander, Defense Contract Administra-

tion Services Region, U.S. Air Force, Los Angeles, CA, accompanied by

Bud Ganalon, adviser, Small and Disadvantaged Business Utilization.....
Additional material supplied for the hearing record:

DeLuca, Anthony J., Principal Assistant to the Deputy Chief of Staff

Contracting and Manufacturing, Air Force Systems Command, Depart-

ment of the Air Force: Prepared statement with attachments ....

Denlinger, Stephen, president, Latin American Manufacturers Associa-

tion: Prepared statement with attachments.

Harrington, Capt. Phillip H., Supply Corps, U.S. Navy Commanding Offi-

cer, Naval Regional Contracting Center, Long Beach, CA: Prepared

statement.

Martin, Lawyer A., president, Black Presidents' Roundtable Association:

Prepared statement with attachments.....

Rush, Col. Thomas A., Commander, Defense Personnel Support Center,

Defense Logistics Agency, Philadelphia, PA: Prepared statement with

attachments.

Stallings, Maj. Gen. David W., Director for Procurement and Production,

U.S. Army Material Development Readiness Command, Department of
the Army: Prepared statement ............

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SMALL BUSINESS SUBCONTRACTING PROGRAM

(Part 1)

THURSDAY, APRIL 5, 1984

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON SBA AND

SBIC AUTHORITY, MINORITY ENTERPRISE AND GENERAL
SMALL BUSINESS PROBLEMS, COMMITTEE ON SMALL
BUSINESS,

Washington, DC. The subcommittee met, pursuant to notice, at 10:12 a.m., in room 2359-A, Rayburn House Office Building, Hon. Ron Wyden (acting chairman of the subcommittee) presiding.

Mr. WYDEN. The subcommittee will come to order. It is particularly unfortunate today that our very distinguished chairman, Chairman Mitchell, cannot be with us. The chairman had a death in the family. On behalf of the whole Committee on Small Business, we want to extend our condolences, and our thoughts are with our chairman today. The chairman has an opening statement and I will read his statement for the record.

OPENING STATEMENT OF CHAIRMAN MITCHELL Today is the first in the series of hearings that this subcommittee will conduct to determine compliance with the Subcontracting Program for Small and Small Disadvantaged Businesses. This program was established by section 211 of Public Law 95-507, and mandates that most Federal contracts over $500,000, $1 million if for construction, awarded to large business must contain a subcontracting plan containing six specific elements designed to increase subcontracting opportunities for small and small disadvantaged business concerns.

When Public Law 95-507 was signed into law on October 24, 1978, it was hailed at that time as a landmark piece of legislation. Substantial increases were expected in the amount of subcontracts awarded to small and small disadvantaged businesses. While some success has been achieved, much more clearly remains to be done.

On the positive side, the number of large businesses participating in the subcontracting program increased from 810 in 1978 to 1,173 in 1983 for an increase of nearly 45 percent in the number of reporting businesses. In terms of dollars, small businesses received $7.6 billion in subcontract awards in fiscal 1978 as compared to $20.3 billion in fiscal 1984, an increase of 167 percent. Small and disadvantaged business subcontracting statistics were not available for years previous to fiscal year 1980. However, in that year, these firms received $748.2 million in subcontracts; last year, fiscal 1983,

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