One basic problem we have had and I wondered when I came to SBA how the program has gone on so long with something so elementary and basic not happening.

The law, Public Law 95-507, requires SBA each fiscal year to tell the major agencies what it needs to satisfy the portfolio, manufacturing, construction, services. We go out with a list to each agency. We say, this is what we need by way of volume. The agencies are not required by law to respond to that, and therefore few agencies if any-and I must applaud the Corps of Engineers who did this past year-few will come forth and say, here are the projects that you may consider SBA for the 8(a) program for the next fiscal year. They are required to set goals for 8(a) but they are not required to identify projects. Sixty to seventy percent of 8(a) activities happen in the last quarter of the fiscal year. Therefore, how do we plan that company's ability to, on a continuous basis, to have support? He is looking during the year, we are looking during the year, we are fighting and scratching for procurements from those agencies and we are dumped on in the latter part of the fiscal year.

Mr. CONYERS. Excuse me, Mr. Browne, but we are rapidly running out of time and I wanted, at least, to offer those gentlemen at the desk with you an opportunity to at least have their voice heard on the record, probably little else than that. We will be coming back. Mr. BROWNE. Thank you, Congressman Conyers, we look forward to the additional session you may have.

Mr. DAUB. Could I ask quickly, Mr. Chairman.

Witness, there are GAO reports and I understand from testimony I listened to a week ago before the Small Business Committee that a directive caused a committee to be formed within the Small Business Administration, and that committee has concluded much of its work and shortly it will have a BA report.

Mr. BROWNE. Yes, I am part of that committee.

Mr. DAUB. I wondered if you might be a member of that committee. How soon do you think that report will be available to the various committees of Congress for examination?

Mr. BROWNE. The committee that is making recommendations to the Administrator has already identified certain things we should do as interim policy to change the standard operating procedures to make it more effective to 8(a).

Secondly, the committee that I chair is an implementation of 96-481, which requires us to establish program dates on all 8(a) participants prior to June 1981, and that is what I am about and that is why I have been unavailable to subcommittee counsel. Mr. CONYERS. How is that coming along?

Mr. BROWNE. We will brief the new Administrator on Tuesday. He reports on Monday.

Mr. DAUB. When will the reports I inquired of be ready to be examined by Congress?

Mr. BROWNE. It should be available within 10 days after reporting because we are recommending that our Administrator take action immediately. We are either going to affect that date or we are not. It's important that you know and the other committees know how we are making that progress. I would suggest within the next 10 days. Mr. DAUB. Can we ask you then to specifically advise our chairman

for this hearing; he in turn would advise our senior chairman, ranking and majority and minority members as soon as that can be examined by those two committees?

Mr. BROWNE. Absolutely.

Mr. CONYERS. Mr. Gordon.

Mr. GORDON. Mr. Chairman, members of the committee, it's a pleasure for me to be here. I will just briefly state a couple of points that I would like to make.

I can only echo Mr. Browne's comments on resources. I think Mr. Browne mentioned the tremendous growth in the program from 1967 or 1968 to the present. However, I would like to note that there has been no additional staff basically from 1978 to the present, although there has been twice the activity in this program. There has not been additional staff. I think we are fast coming up on a period of time whereby, if we continue to bring firms into this program, we will certainly not be able to effectively manage this program.

Mr. CONYERS. I hope your recommendations are incorporated in the studies that are coming forward.

Mr. GORDON. Right.

Mr. CONYERS. Director Harshman, I want to acknowledge your presence here. You have been the subject of much of the discussion today.

Mr. HARSHMAN. Thank you, Mr. Chairman.

Yes, indeed, I have and for 6 hours I have listened to issues that I think are important issues, issues that need to be addressed, some of which need to be resolved.

My statement you have and I look forward to our next meeting when perhaps I can help the committee in answering many of the problems and allegations that have been raised. There are serious issues and issues that we all need to face.

Mr. CONYERS. I very much appreciate your attitude about this. It's very constructive. I hope you will take into consideration the further discussion that has gone on since you prepared your statement.

On that note, gentlemen, I thank you all, particularly my colleague who has given very generously of himself. I knew from the first question that he asked on the committee that he shared a very deep concern about the activities of small business as well as minority business, and his presence on Government Operations is going to be very, very important.

I also want to thank the staffs, both his staff and my staff, Mr. McSpadden and Mr. Shaw, who have worked assiduously, they have both been to Detroit before, my own congressional staff, both in Washington and Detroit, Mr. Alvin Thornton is here from Washington, and my entire staff in Detroit has labored long on this, and we thank all of you very much for attending.

The subcommittee stands adjourned.

[At subcommittee's request, SBA Director Harshman submitted an additional statement; subcommittee was not able to reconvene before printing of this transcript. The statement follows:j

Thank you for providing me with a copy of the transcript of the Subcommittee's March 28, 1981, Detroit hearing dealing with the 8(a) Program. In view of the fact that time did not permit me to appear as a witness, I very much appreciate the opportunity to offer a statement.

After reviewing the transcript, I am of the opinion that the statement I was prepared to make on March 28, 1981, addresses the major issues. A copy is enclosed.

The allegations that SBA sometimes rejects contract opportunities offered by other Federal agencies is true. However, among factors that must be considered by the SBA before a requirement can be selected are:

a.

b.

C.

The possibility of any adverse impact on a small business as a result of accepting the work for the 8(a) Program.

The timing, magnitude and technical requirements of the offering in relation to the business development objectives of a specific 8(a) firm.

The availability of subsequent requirements so that SBA may provide continuing support to the 8(a) firm throughout its participation in the 8(a) Program.

Any requirements offered to the Detroit District Office that are not suited to the business development needs of our 8(a) firms are subsequently referred to the Regional and Central Offices for other firms before being rejected.

A non-certified firm being referred to the SBA by a procuring agency to perform a particular 8(a) offering must meet the eligibility criteria under P.L. #95-507. It normally takes at least six months for a company to become certified and the procuring activity is usually not willing to delay procurement action for this length of time to find out whether or not the firm will be certified by SBA.

Three of the witnesses disagreed as to reasons given by SBA for their non-certification for the 8(a) Program:

83-190 0 - 81 - 26

1.

2.

3.

Hughes Research and Development, Inc.: (It was SBA's statement that additional documentation was requested of the applicant and that it was not submitted by the applicant).

Efforts during the Fall of 1979 to identify contract support for this firm revealed an unwillingness on the part of the procuring activities to contract for toxicology services under the 8(a) program.

At that time, Dr. Hughes was also asked to submit additional data needed to process his 8(a) application. Since Dr. Hughes was aware of the procuring agencies' reluctance to contract through the 8(a) Program, he asked that his file be put into suspense until this situation changed. As a result, Hughes Research and Development, Inc. did not submit the required documents to permit SBA to complete the processing of its 8(a) application.

During the Spring of 1981, Dr. Hughes again approached SBA to pursue 8(a) certification. At this time, the SBA Detroit Office worked with Dr. Hughes to determined the probability of 8(a) support in the area of toxicology services. Hughes Research and Development, Inc. subsequently submitted a complete application for 8(a) participation (see enclosed letters dated April 22, 1981 and June 9, 1981).

This application has since been processed to the SBA Washington Office through the SBA Chicago Regional Office. An official Agency decision will be made in the SBA Central Office concerning this company's request for 8(a) program certification.

Carol Lee Industries, Inc.: (Eligibility was misrepresented and documentation not submitted).

During the latter part of 1979 through the first seven months of 1980, Carol Lee Industries, Inc. (CLI) sought entry into the 8(a) Program. Originally, the company represented itself as a manufacturer. However, after surveying the company, SBA determined that CLI did not have manufacturing capability of its own and that the company's equipment list was actually to be leased 100% from a non-disadvantaged company, Grico Manufacturing, Inc.

Moreover, the required documentation submitted by CLI concerning the ownership, daily management, and control was incomplete and contained conflicting information.

SBA District officials have met with CLI several times in an effort to obtain appropriate documentation. The last such meeting was held on July 17, 1981 (see enclosed letter dated July 21, 1981), during which the problems were again discussed and CLI was given new application forms. A new 8(a) application has not been resubmitted as of this date.

American Office Products: (SBA indicated that no support was available for the firm).

Since 1978, when Mr. Sewell first attempted to gain entry into the 8(a) Program (see enclosed letter dated September 5, 1978), SBA has softened its prohibition regarding the eligibility of dealers and wholesalers. Mr. Sewell was informed of this policy change several times, most recently on April 9, 1981, and has been invited to reapply for 8(a) certification. To date, no application has been received by this Office.

It is the policy of this Office to have an in-depth interview with the principal of each 8(a) applicant firm during which program regulations and procedures are explained and the applicant describes his business, its general business development objectives, and the extent of 8(a) assistance that will be needed. After this interview, the applicant is asked to submit an SBA Form 1017 (Capability Review and Requirements Request). This is then used by both the District and Central Offices to trigger a requirements search in order to determine the degree of probability that SBA will be able to receive the required 8(a) support from other agencies necessary to support the firm's business development objectives.

If a determination is made that insufficient support is available, the applicant is so informed. Often the applicant states that he knows where there is 8(a) support and asks the SBA to consider any sources of support that he can locate. In that event, we have allowed the applicant to submit his information. If such support is available, the SBA will reconsider its initial determination. This procedure is designed to enhance the 8(a) applicant's chances for 8(a) Program entry, not to evade an SBA responsibility.

Enclosed is a list which provides you with the current status of the 39 firms who had applications for the 8(a) Program in process at the time of the March 28, 1981 hearing.

The total dollar value of Fiscal Year 1981 8(a) contracts awarded through August 28, 1981 is $14,554,017.24. This is 91% of our year-to-date goal.

Operational changes implemented within the 8(a) Program in the Detroit District Office since the March 28, 1981 hearing are:

1.

2.

3.

A redesigned 8(a) application log and procedures for its maintenance.

Implementation of a new system to handle and process Capability Review and Requirements Requests (SBA Form 1017) and incomplete applications.

Temporarily assigned an additional employee to assist in processing 8(a) applications in order to eliminate the backlog.

I hope that this information is helpful to the Committee and I appreciate the opportunity to be of service.

Sincerely,

Raymond L. Harshman

District Director

Enclosure(s)