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SJ8A's)~á) SUBCONTRACTiNG PROGRAI~=
MIINORITTY ENTERPRliSE
r77~I ~
HEARINGS
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT PROCUREMENT
OF THE
SELECT COMMITTEE ON SMALL BUSINESS
UNITED STATES SENATE
NINETY-SECOND CONGRESS
FIRST SESSION
ON
THE SMALL BUSINESS ADMINISTRATION'S 8(a)
SUBCONTRACTING PROGRAM
SAN FRANCISCO, CALIF-SEPTEMBER 29 AND 30, 1971
RUTGERS~' Oit~
GoVER~~T DOC~~
Printed for the use of the Select Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
70-654 0 WASHINGTON : 1971
~(qS~ t/p~: O27~J~-::
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SELECT COMMITTEE ON SMALL BUSINESS
[Created pursuant to S. lies. 58, 81st Cong.J
CHESTER H. SMITH, Staff Director and General Counsel
JOSEPH L. WARD, 4ssistant General Counsel
KEITH A. JONES, Minority Counsel
JOSEPH M. MONTOYA, New Mexico, Chairman
EDWARD J. GURNEY, Florida
J. GLENN BEALL, JR., Maryland
ROBERT DOLE, Kansas
JACOB K. JAVITS, New York*
ALAN BIBLE, Nevada, Chairman
JOHN SPARKMAN, Alabama JACOB K. JAVITS, New York
RUSSELL B. LONG, Louisiana PETER H. DOMINICK, Colorado
HARRISON A. WILLIAMS, Ja., New Jersey MARK 0. HATFIELD, Oregon
GAYLORD NELSON, Wisconsin ROBERT DOLE, Kansas
JOSEPH M. MONTOYA, New Mexico EDWARD J. GURNEY, Florida
FRED R. HARRIS, Oklahoma WILLIAM B. SAXBE, Ohio
THOMAS J. McINTYRE, New Hampshire J. GLENN BEALL, JR., Maryland
DAVID H. GAMBRELL, Georgia ROBERT TAFT, Ja., Ohio
SuBcoM~fIrrEE ON GOVERNMENT PROCUREMENT
RUSSELL B. LONG, Louisiana
JOHN SPARKMAN, Alabama
DAVID H. GAMBRELL, Georgia
ALAN BIBLE, Nevada*
*Ex officio member.
11
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4
CONTENTS
Statement of-
Aitken, Capt. Douglas G., Supply Corps, U.S. Navy, Officer in Charge,
Naval Regional Procurement Office, Naval Supply Center, Oakland,
Calif.; accompanied by Robert M. Gilbertson, small business spe-
cialist; and Lt. Comdr. Ray N. Beeman, Jr., Director, Purchase Page
Division 181
Allstead, Robert A., Chief, Procurement Division, Office of Deputy
Chief of Staff for Logistics, Sixth U.S. Army, Presidio of San
Francisco, Calif 198
Angello, Joseph C., vice president, Bank of America, San Francisco,
Calif 2
Beeman, Lt. Comdr. Ray N., Jr., Director, Purchase Division; ac-
companied Capt. Douglas G. Aitken, Supply Corps, U.S. Navy,
Officer in Charge, Naval Regional Procurement Office, Naval
Supply Center 181
Blackledge, Charles, community development program, Small Business
Administration; accompanied Donald E. McLarnan, Regional
Director, Region IX, SBA 98
Cochran, Col. Robert W., Director, Procurement and Production,
Sacramento Air Material Area, McClellan Air Force Base, Calif.;
accompanied by Mrs. Kathryn Scheld, small business specialist~~ 209
Curtis, Emory C., vice president, Plan of Action for Challenging Times,
San Francisco, Calif 129
Dones, Ray, president, National Association of Minority Contractors,
San Francisco, Calif 22
Fore, Wallace, vice president, operations, North American Rockwell
Aerospace Group; accompanied Kenneth B. Gay, vice president,
material, North American Rockwell Corp 48
Gay, Kenneth B., vice president, material, North American Rockwell
Corp., El Segundo, Calif.; accompanied by Wallace Fore, vice
president, operations, North American Rockwell Aerospace Group 48
Gilbertson, Robert M., small business specialist; accompanied Capt.
Douglas G. Aitken, Supply Corps, U.S. Navy, Officer in Charge,
Naval Regional Procurement Office, Naval Supply Center 181
Grayson, John, president, Univox California, Los Angeles, Calif 31
Hernandez, Mike, D. & H. Wood Products, San Jose, Calif 169
Hum, Charles K., president, Aerospace Services, Inc., Oakland, Calif 78
Hutton, Jerry, representative, Office of Minority Business Enterprise,
U.S. Department of Commerce, San Francisco, Calif.; accompanied
Jay I. Leanse, Deputy Director, Office of Minority Business Enter-
prise, U.S. Department of Commerce, Washington, D.C 144
Ireland, Robert J., Regional Director of Business Affairs, General
Services Administration Region 9, San Francisco, Calif.; accom-
panied by Mr. Snodgrass 236
Leanse, Jay I., Deputy Director, Office of Minority Business Enter-
prise, U.S. Department of Commerce, Washington, D.C.; ac-
companied by Jerry Hutton, representative, Office of Minority
Business Enterprise, U.S. Department of Commerce, San Francisco,
Calif 144
Malo, Dr. Anthony, assistant regional vice president, National
Economic Development Association, San Jose, Calif 119
Maxwell, Anthony, president. Banco del Pueblo, Santa Ana, CaliL - - 16
111
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Statements-Continued
McLarnan, Donald E., Regional Director, Region IX, Small Business
Administration; accompanied by Harry Swinkels, Assistant Chief,
Procurement and Management Assistance Division; Charles
Blackledge, community development program; and Carl Warren, Page
Assistant Chief, business development program 98
Medina, George, vice president, Latin-American Chamber of Com-
merce, San Francisco, Calif 140
i\'Iilsap, Quentin L., Quantum Associates, Inc., Oakland, Calif 31
Nash, Thomas, Pride Unlimited, Inc., San Jose, Calif 43
Ramirez, Ricardo D., R. D. Ramirez Construction, South San Fran-
cisco, Calif 173
Rogan, John P., vice president, Administration, McDonnell Douglas
Astronautics Co., Huntington Beach, Calif 67
Scheld, Mrs. Kathryn, small business specialist; accompanied Col.
Robert W. Cochran, Director, Procurement and Production,
Sacramento Air Material Area, McClellan Air Force Base,
California 209
Swinkels, Harry, Assistant Chief, Procurement and Management
Assistance Division, Small Business Administration; accompanied
Donald E. McLarnan, Regional Director, Region IX, SBA 98
Taylor, John G., owner and proprietor, Tayko Industries, Sacramento,
Calif 179
Tom, Henry W., H. W. Tom and S. F. Tom Co., San Francisco,
Calif 97
Warren, Carl, Assistant Chief, business development program, Small
Business Administration; accompanied Donald E. McLarnan,
Regional Director, Region IX, SBA 98
Williams, Larry, Nairobi Corp., Richmond, Calif 90
EXHIBITS
Letter dated January 13, 1971, from E. E. Barrington, president, Alliance
Ventures, Inc., to Hon. James Corman, Representative, U.S. House of
Representatives 65
Personnel makeup of Aerospace Services, Inc., and Western Airmotive Co.,
Inc., as of June 1971 83
List of social and welfare agencies worked with on 8(a) programs by
Aerospace Services, Inc., and Western Airmotive Co., Inc 84
Small Business Administration loans approved to minorities, nationwide,
fiscal year 1971 109
Small Business Administration loans approved to minorities in the State
of California, fiscal year 1971 109
Small Business Administration financings of minority small businesses by
regular SBIC's and MESBIC's, fiscal year ending March 31, 1970 110
Letter dated November 11, 1971, from David S. Brown, Chief Counsel,
Office of Minority Business Enterprise, U.S. Department of Commerce,
to Hon. Joseph M. Montoya, U.S. Senate 169
Procurement in the United States by the Naval Regional Procurement
Office, Oakland, Calif., fiscal years 1970-71 187
Awards by claimant program as applicable to the Naval Regional Procure-
ment Office, Oakland, Calif., fiscal years 1970-71 188
Section 8(a) program awards to the Small Business Administration, by
number of contracts, total value, fiscal years 1969-71 189
Supplement to the statement provided by Robert A. Allstead, Chief,
Procurement Division, Office of Deputy Chief of Staff for Logistics, 6th
U.S. Army, with accompanying charts 201
Fifteen itemized contracts of the Sacramento Air Material Area, by con-
tractor name, contract number, item, value, fiscal years 1968-71 220
Letter dated October 4, 1971, from Robert J. Ireland, Regional Director
of Business Affairs, General Services Administration Region 9, to Keith
A. Jones, minority counsel, Select Committee on Small Business, U.S.
Senate, with accompanying chart 234
iv
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Letter dated October 1, 1971, from Capt. Douglas G. Aitken, Supply Corps,
U.S. Navy, Officer in Charge, Naval Regional Procurement Office,
Naval Supply Center, to Senator Joseph M. Montoya, chairman, Sub- Page
committee on Government Procurement, with accompanying graphs - - 241
Letter dated November 24, 1971, from George Kelsey, president, San
Francisco Local Development Corp., to Joseph L. Ward, Assistant
General Counsel, Senate Select Committee on Small Business 246
APPENDIXES
I. Exhibits provided by the Office of Minority Business Enterprise, U.S.
Department of Commerce:
Summary of funding of Office of Minority Business Enterprise
affiliate organizations during 1969, 1970, and 1971 250
List of affiliate staffing, by professionals, black, Spanish-speaking/or
brown, Indian, other, percent - 251
Official list of the National Advisory Council on Minority Business
Enterprise, by name, title and business, address, and phone - - - 252
"Minority-Owned Businesses: 1969," a report on minority-owned
business enterprises, issued August 1971, U.S. Department of
Commerce, Bureau of the Census 255
HEARING DATES
September 29, 1971:
Morning session 1
Afternoon session 48
September 30, 1971:
Morning session 119
Afternoon session 181
V
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1
SMALL BUSINESS ADMINISTRATION'S 8(a) SUBCON-
TRACTING PROGRAM-MINORITY ENTERPRISE
WEDNESDAY, SEPTEMBER 29, 1971
U.S. SENATE,
SUBco~rMIrrEE ON GOVERNMENT PROCUREMENT OF THE
SELECT Co~Ii\IIT~E ON SMALL BUSINESS,
San Franci~sco, Galif.
The subcommittee met, pursuant to notice, at 10 mm., in the Cere-
monial Courtroom, Federal Building, 450 Golden Gate Avenue, San
Francisco, Calif., Senator Joseph M. Montoya (chairman of the sub-
committee) presiding.
Present: Senator Montoya.
Also present: Joseph L. Ward, assistant general counsel; and Keith
A. Jones, minority counsel.
Senator MONTOYA. The committee will come to order.
The Subcommittee on Government Procurement of the Select Small
Business Committee is assembling here today to seek information with
respect to many problems affecting minority enterprises and mem-
bers of ethnic groups.
We have called this hearing to hear testimony from representatives
of Government agencies, community action organizations, bankers,
large Government contractors, subcontractors, and individuals on the
8(a) subcontracting program administered by the Small Business Ad-
ministration.
As all of you know, the 8(a) program is a device by which the
SBA enters into a procurement contract with Government buying
agencies and then subcontracts the work to firms owned or operated
by members of disadvantaged or minority groups.
The 8(a) subcontracting program is but one effort in many being
made by the Federal Government to foster the creation of growth
of viable "minority" firms. A recent survey-the first of its kind-
taken by the U.S. Census Bureau indicates that we have approxi-
mately 322,000 minority-owned businesses in the country today with
total receipts of $10.6 billion. This amounts to less than 1 percent of
total annual business receipts and 4 percent of the total number of
firms of the entire busiiiess community.
The rationale behind these efforts to improve the percentages is
both humanitarian and economically practical. It is humanitarian
because we are, as Americans, continuously striving to make equal
opportunity.a living reality of our democracy. It is economically prac-
tical because the utilization of the vast, but largely untapped, res-
ervoir of business talent and skill found in our minority groups can
spur us on to an even higher productive output than we now possess.
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2
As I have said, there are many programs, both public and private,
to achieve greater participation of disadvantaged persons in American
business. Almost every Federal agency has such a program. Many
private organizations, some publicly funded, have minority business
development as their objective. Industry is beginning to realize the
benefits to be accrued from assisting fledging minority businesses.
There are programs for business loans and guarantees, management
and technical assistance, information dissemination services. However,
some of these efforts are not what they should be: some are uncoor-
dinat.ed, underfunded, understaffed, or lacking in clear guidelines.
I believe the 8 (a.) subcontracting program is a very practical ve-
hicle for bringing new or fledgling businesses into the mainstream of
our free enterprise system. Naturally, we have looked at the vast power
of the Federal procurement budget when seeking to implement this
program and bring minorities in more sufficient numbers into the regu-
lar business community. However, the private sector must share this
social responsibility, and this will be an area of continuing concern to
the subcommittee.
The approach in this context is predicated on the proposition that
our Nation's growth has been sparked by the realization of the full
potential of every citizen and in providing an opportunity for full
participation of all individuals and groups in the progress of our
society.
The program is not designed to foster a giveaway but rather to in-
troduce these firms to the hard realities of the marketplace. Obviously,
many of them need access to long- and short-term financing and man-
agement and technical assista.nce. We hope to find out at these field
hearings whether the various types of assistance are being made
available to those businesses qualifying as 8(a) subcontractors.
We hope to pinpoint some of the elements of success of these sub-
contractors and make them of record as living examples of how this
program can work. By the same means, we hope to isolate the pitfalls
to be avoided by oncoming firms seeking aid under this program.
This is an informal hearing. Many witnesses are joined in panels of
similar interest. I would apprecia.te it if each witness would briefly
state for the record some background information on his affiliation and
his relationship to the 8(a) program, if any. All written statements
will be entered into the record of these hearings. After each panelist
has presented his introduction, I would like to ask several questions
and encourage active responses from all members of the panel. We
are especially interested in having your views on what can be clone to
improve this program.
Our first witness this morning is scheduled to be Mr. Joseph C. An-
gello, vice president, Bank of America of San Francisco. Mr. Angello
and Mr. Maxwell-Mr. Anthony Maxwell, would you like to join with
him, and we will deal with you immediately after and then we will have
some questions.
STATEMENT OF 3~OSEPH C. ANGELLO, VICE PRESIDENT, BANK OF
AMERICA, SAN FRANCISCO, CALIF.
Senator MONTOYA. Do you have a written statement?
Mr. ANGELLO. Yes, I have.
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3
Mr. Chairman, thank you for the invitation to be with you today.
My remarks will relate in the first part to your experiences with the
SBA-minority entrepreneur programs for the most part. They will
not necessarily describe our business loan relations with our many
minority busimi essmen outside that program.
We draw from our experience of 354 SBA-ME loans made totalmg
$12,250,000. I will also reflect on experiences of the $4 million funded
California Job Development Corp. sponsored by the nine San Fran-
cisco and Los Angeles clearing house banks. To date, this effort has
produced 77 loans for $2,500,000 to minority entrepreneurs who could
not qualify for bank credit even with SBA guaranty.
Overall, our involvement in these programs has been satisfactory.
\\Te find ourselves in a constant state of research and education to
improve our capability and the chance of success of our minority
businesses. The knowledge gained the past 3 years that we have partic-
ipated in the program has increased our abilities and resourceful-
ness; but we recognize critical problems remain unsolved. Not so
much in the loan acquisition, most of the California banks are suffi-
ciently acquainted with SBA procedure and have determined a partic-
ipation.
The major problem now is in the handholding after the loan is
made. Management and technical assistance and the lack of these
must receive the highest priority of required research and develop-
ment.
Other problems that need attention include: the need to improve
the communications between the minority business community and
the financial institutions~ including the Federal agencies. I sense a
kind of "credibility gap" exists. A better rapport could prevail.
The lack of technical and business management experience contrib-
utes heavily to the failure of any small business and especially when
qualified management and technical assistance is not available. In this
regard, let me share with you a recommendation we are considering
for our own bank's utilization as we analyze our progress and prepare
for the future.
\~Te need to be patient with problems and accept failures as part
of the learning curve, yet learn from our experiences that we may
overcome the obstacles, such as that at the time an application is
taken, a condition be placed in the term loan agreement that would
identify a resource to monitor the credit. This resource would be a
paid CPA or consultant or a member or team from a community or-
ganization such as ICBO or PACT or SBA-SCORE or SBA-AGE,
or the like.
It would be required~ at least for the first year of the existence of
the loan, that a monthly progress report he made at the entrepreneur's
place of busihess with the entrepreneur, the monitor, and the bank lend-
ing officer in attendance. If progress is sufficient, that first year, the
condition could then be required on an every other month or even
quarterly basis the second and following years of the life of the loan.
ICBO officials have told me the entrepreneur frequently drops them
and their consulting services, even though free, once the loan has been
granted and he has the money. We could, therefore, assist the corn-
mumty organizations by providing a continuity of contact beyond
the loan and granting phase.
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4
`~\Tit.h regard to SBA's 8(a) contracts. Bank of America has had a
very limited experience with this financial program. The Los Angeles
Job Development Corp. has also had little experience. There has been
only one failure and I believe it is fair to state this was caused by a
very poorly operated business and not due to lack of funds or gov-
ernmental redtape and delays.
The Bank of America has three 8(a) contracts in process, and they
appea.r to be progressing well, but it cannot be determined that they
are successful until they have been completed.
LAJDC has one company with three separate 8(a) contracts in
progress. Two appear to be progressing satisfactorily, while one, it is
anticipated, may result in a loss.
Our research indicates there are pros and cons to the 8(a) contract
but the negative factors are not insurmountable. The following re-
marks are general in nature as certainly there may be exceptions. First,
the advantages as we see them:
1. Subcontracts, a definite unexpected and low-cost increase in sales
to the minority contractor.
2. Elimination of highly competitive bidding. SBA is the prime
contractor and may sublet the contract to their choice.
3. Built-in profit that. should be more generous than normal, con-
sidering the elimination of competitive bidding.
4. Financing of accounts receivable is made easier at a preferred
rate for this type financing.
Now, for the problems as we see them:
1. Communications between the borrow-er and SBA need to be im-
proved, and here it is more of an understanding as to contract content
and appreciation of what. is involved.
2. Paperwork delays. There is excessive lag-time between issuance
of contracts and purchase orders. t.o shipment schedules and, in some
instances, from bidding to approval of prototypes.
3. Point of inspection and acceptance is critical.
4. Start-np cost.s are in some cases prohibitive. A company may be
required to manufacture a prototype and to do this may even require
additional machinery. Should the contract be awarded, the costs could
get out of hand easily if they have t.o step up their operation sub-
stantially, particularly in equipment, personnel, and inventory.
5. Many 8(a) contracts require long production runs with which
the minority contractor has had little or no experience. This coupled
with a strained working capital condition, new employees and limited
production capability produces problems.
6. Although the 8(a) contract relieves the minority contractor from
the formal bid process, lie must have sufficient understanding of the
contract content to cost out the production. That is, relate SBA's
anticipated net profits to his own operation.
I have four brief recommendations:
1. Greater care should be exercised by SBA in awarding contracts
to firms which lack reasonable capabilities to perform.
2. Purchase order st.yle of financing could be integrated with the
accounts receivable financing in order to provide the necessary work-
ing capital to manufacture the product..
3. Attention should be given to reduce the time delay from point
of contract award to first shipment date.
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5
4. Provide on-site inspection for acceptance of the completed
product.
Senator MONT0YA. Thank you very much, Mr. Angello, for a very
fine statement.
Now, would you relate for the record, for the benefit of this sub-
committee what your direct experience has been with respect to the
8 (a) contracts and also loans to small business concerns in which your
bank has participated?
Mr. ANGELLO. The three 8(a) contracts we have in existence are all
in southern California and are B. & W. Maintenance, a $185,000
contract.
Senator MONTOYA. What is B. & W. Maintenance?
Mr. ANGELLO. This is a plant maintenance type of operation, clean~
up, et cetera.
Mr. Chairman, is it possible to call my associate, Mr. Sergeant, our
SBA officer, to join me on the panel.
Senator MONTOYA. Certainly.
Mr. ANGELLO. There are some items here that I may not be suffi-
ciently clear on, so I would like to ask him to assist me. This is Fred
Sergeant, assistant vice president of the Bank of America and desig-
nated as our SBA loan officer.
B. & W. is essentially involved in cleaning plants and keeping them
in order?
Mr. SERGEANT. Yes, this is my understanding.
Senator MONTOYA. Well, when you speak of B. & W. Maintenance,
do you mean to say that this is a firm that concerns itself with provid-
ing j anitorial services and other maintenance services to plants in the
area?
Mr. ANGELLO. Yes.
Senator MONTOYA. Well, do they do this under 8(a) contracting?
Mr. ANGELLO. They have an 8(a) contract. -
Senator MONTOYA. From whom?
Mr. ANGELLO. From the SBA.
Mr. SERGEANT. From the SBA.
Senator M0NTOYA. But to which Government agencies do they pro-
vide these services?
Mr. SERGEANT. Well, this type of loan is handled through. one. of
our branches so that the research as to, you know, the procurement
of the contract, e.t cetera, is not available to our information here
today.
Senator MONTOYA. But the point I want to make is: Do they offer
this type of service to any Government agency in the area, and, if so,
to which agency or agencies?
Mr. SERGEANT. 1 do not have the answer to that.
Senator MONTOYA. Is it the GSA?
Mr. SERGEANT. Is it-
Mr. ANGELLO. Not GSA.
Mr. SERGEANT. Probably, a military-type installation.
Senator M0NTOYA. OK. You do not have the answer, apparently.
Well, tell us about the other ones.
Mr. ANGELL0. The second one is Barrazo Construction Co. This is
a $257,585 SBA 8 (a.) contract.
Senator MONTOYA. What is that?
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6
Mr. SERGEANT. Here. again, you see, these types of loans are handled
and administered right directly through the branches, and the infor-
mation w-e have compiled, these statistics are represented in terms of
dollar totals and the size of the contract., et cetera.
Senator MOXTOYA. You just have the. loan data?
Mr. SERGEANT. Yes, sir; that is correct.
Senator MOXTOYA. I noticed your recommendation here about sur-
veillance of operation. You recommend that.. especially through a
CPA or some other type of consultation. I think that. is a very good
idea. But is there any way possible for the banking institution and
SBA to require., as a part. of the lending contract., that the individual
submit himself to this type of surveillance by volunteer agencies?
Mr. ANGELLO. Mr. Chairman, there are conditions in SBA's terms
for granting a loan that. include educational processes in attending
certain types of classes. I have asked some of our legal department. if
there would be a problem here, and I'm told that it is worth a try; a
condition which requires or would tie the entrepreneur to that resource
is very much needed. As I stated. all to frequently, once lie has the
money lie discards the consulting agency even though it may be free.
Senator MONTOYA. Is it. not better to insure that lie will submit. to
it as a part of his borrowing contract?
Mr. ANGELLO. Yes, as a. resource; and this is why we state here
that. it. would be a. condition of the bank's terms on the agreement, and
if it. is a condition that the SBA would permit as an inclusion, I
think we caii eiiforce it.
Senator MONTOYA. Does the Bank of America. have any such coun-
seling services?
Mr. ANGELLO. When you get into the counseling services, Mr. Chair-
man, bankers usually can make a pretty fair fiscal judgment as the
entrepreneur submits financial information. But I find all too often
that. lie is not capable of making the. other types of management,
skilled judgments with regard to inventory control or marketing,
advertising, and that sort of thing, and I think we are going to have
to call on other industries for support here.
Senator MONTOYA. Well, t.lie only reason I mention it is because the
Bank of America. is reputed to be oiie of the biggest banking institu-
tions in this country, and I was trying to ascertain whether you had
this type of service for these minority entrepreneurs. Some banks do.
Mr. ANGELLO. We have it oii a limited basis. We have produced
material, written material, we condluc.t seminars occasionally, and we
support community organizations, and SBA programs and seminars,
and the like. We have not geared a counseling service, as such, for those.
We have put our efforts in support. of the. community ageiicies.
Senator M0xT0TA. What community services would be available to
these business people for surveillance and monitoring the progress of
the operations?
Mr. ANGELLO. Presently, the services available would be through
the community organizations, as I have mentioned here, tying them
in, or if the entrepreneur can afford a. fee-paid consultant or CPA
or PA, include hum aiid identify him. What we suggest here is that
we become specific at the. outset. of the loan, that the monitoring agency
be identified.
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Senator MONTOYA. Here is what I am concerned about. We have
had a lot of grants made to so-called community organizations for
the purpose of advising minority entrepreneurs, and if you look at
some of these community organizations you find there is not one
person in there who has had business experience, and still they are
offering advice. And I am very concerned about exposing the small
business entrepreneur to bad advice or inexperience, because that
compounds his problems.
Mr. ANGELLO. In Los Angeles, for example, there is a company,
private and federally funded operation called MECLA, which is paid
technical assistance and consultants that are assigned to the entrepre-
neur. At the present time it is on a limited basis. We hope that it can be
expanded. I agree, I think that the paid counselor is listened to more
emphatically than the free.
Senator MONTOYA. I would rather see businessmen in the community
on the `banking community assemble some business talent to work on a
voluntary basis with these minority entrepreneurs. I think that would
be more effective than just calling in somebody who has been given a
grant to provide counseling services to minority business enterprises-
irrespective of whether the counselors in that particular firm has the
competency or capability to do so. I think that that is what is wrong
with this type of setup. Do you not agree with me?
Mr. ANGELLO. Well, I think we, in the banking industry, are looking
for a way to attend to this. We have volunteer programs within the
organizations that are somewhat effective, but, yes, generally, I would
agree with you on that theorists usually cannot provide too much assist-
ance. It takes the man with the practical experience to help the
entrepreneur.
Senator MONTOYA. Then, SBA can also perform an important fimc-
tion, because, usually, the capital that goes into these minority enter-
prises is furnished to a large extent by SBA and the rest of it is furn-
ished by bank participation; correct?
Mr. ANGELLO. Well, the capital, for the most part, is furnished by
the bank with quarantees by SBA, yes; correct.
Senator M0NTOYA. Under SBA guarantees?
Mr. ANGELLO. Yes.
Senator MONTOYA. And what can you tell me about what the role of
SBA should be as far as surveillance and monitoring and checking
with these small business enterprises? Because at the present time, I do
not feel that SBA would overload itself since they are not making too
many direct loans to start with?
Mr. ANGELLO. Well, I think they have the dollar availability to pro-
vide that mechanism, at least to assist the private sector. I cannot say
that the SCORE or the ACE program has been that effective. I feel
that it needs some better direction, maybe a combination of these two
with a closer relationship with the expertise. Yes, SBA should take a
part and could take a part.
Senator MONTO~'-A. I have only seen one of these people working, and
that `was on the Navaho Reservation, and he did a magnificent job on
the Navaho Reservation, but I have not seen it anywhere else.
Mr. ANGELLO. I have met a number of these men in a group and
individually, and the dedication seems to be there. I believe they need
some very firm direction.
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8
Senator MONTOYA. Now, what has been your experience with respect
to the loans made to 8(a) contractors? Do they keep up their pay-
ments, or do you have to prod them?
Mr. ANGELLO. The three that we have had in the Bank of America
have been, to this point, all satisfactory. They are on target. The third
one I did not mention was Hi-Pro Foods. This was a $300,000 contract.
Each of these, incidentally, also has a separate SBA term loan or
some kind of revolving line in addition to the 8 (a.) contract financing;
Within the Bank of America, the three contracts we have in southern
California are performing satisfactorily, as I understand it. The one
that is in the Los Angeles Job Development Corp. is California
Golden Oaks. They have three separate contracts, and it is my under-
standing that two of them are performing well. The third one we
may have problems with, and I cannot expand on what those problems
are at this time.
Senator MONT0YA. Well, do you think that the 8(a) contractors are
performing very frugually on this? Are they operating on. a small
margin?
Mr. ANGELLO. Well, I wonder-again, lack of experience cautions me
to generalize, but from what I hear I wonder if, in the main, the con-
tractor has a full appreciation of what it takes to perform on an 8(a)
contract. I won'der if he is fully realizing and understanding the in-
volvement because he is not required to go through the bidding proc-
ess. I wonder if he is a little bit misled by the total amount of the
contract.
Senator MONT0YA. And perhaps, I will ask you: Is it a 15-percent
maximum profit permitted on a Government contract?
Mr. ANGELLO. Generally, 10 to 15 percent, but when all of the `work
is performed and all of the problems that are attendant to a new con-
tractor, a relatively new contractor, who has been working on a small
plane and begins gearing up on a large level, I think his profit is great-
ly minimized from what he expects it to be.
Senator MONTOYA. Did I understand you to say that you had only
made loans to three of these subcontractors?
Mr. ANGELLO. To my knowledge, yes.
Senator M0NTOYA. Out of the Bank of America?
Mr. ANGELLO. To my knowledge, yes.
Senator MoxTorA. `What is the total of all of these three loans?
Mr. ANGELLO. $185,000, $237,000. and $300,000. About $725.000.
Senator MoxToYA. I see.
Mr. ANGELLO. I would qualify that by saying I believe we would
look forward to more participation, as we have participated in the
other SBA programs with full cooperation, and in this 8(a) program
I think there are some built-in features for the banker that are attrac-
tive, especially when you consider the advances made and the con-
tracts receivable type of arrangement. I think this is attractive to
the banker. I cannot explain the minimum number, and I am not sure
that is all we have had. Our communications sometimes are not all the
very best.
Senator M0NT0YA. The point I am trying to make, Mr. Angello, is
this: SBA holds itself out as a great friend of minority enterprise, and
there are a lot of press releases coming out of Washington these days
about it. And then SBA offers to participate in some loans and tells
PAGENO="0015"
9
the potential borrower: "We will consider making a guarantee on any
loan that you might procure from a financial institution but get a
letter from a banker that they will participate and we will consider
your application." Then the minority enterpreneur goes to a banking
institution and asks: "Will you participate in this loan?" And he finds
the door closed on him, and there is where the fault lies-SBA is re-
quiring bank participation and there is no bank participation even on
the distant horizon.
So, where are we? We are nowhere. We are in a land of promise
and no action, you see.
Now, what do you conceive to be the bankers' role in trying to open
a few more pockets here in this particular plate of potential lending?
Mr. ANGELLO. If I could relate to three of the major banks that have
participated in SBA, Wells Fargo, I believe, has been outstanding,
particularly in northern California; Security Pacific, particularly in
the last 18 months or 2 years I feel has done an outstanding job in SBA
minority entrepreneurships. Finally, the Bank of America, I feel, has
demonstrated a full cooperativeness with the SBA programs. I think
this could be related to the 8(a), because it is a part of the overall
SBA program, and I certainly would not want to overlook, at least in
the Los Angeles area, where I have firsthand knowledge, the minority-
owned banks, the Bank of Finance, for example, the Pan American
Bank. These are heavily involved in SBA. The banking community, for
the most part I think, has geared itself to SBA minority entrepreneur
credit. I would hope that same cooperative attitude would spill over
into the 8(a) program.
Senator MONTOYA. How much would you estimate your bank has
participated in loans to minority entrepreneurs?
Mr. ANGELLO. Oh, my goodness, that would be extremely difficult.
We have, for example, 90 branches that are located in predominantly
minority populated communities, and through the years, discounting
SBA activities, I would say that we have been totally involved in pro-
viding business loans to the minority entrepreneur, and that is one of
the reasons why I prefaced my remarks, that I was talking only about
the SBA-ME program, and approximately $12,500,000 has been ex-
pended. I think there has been, and I have experienced, a sense of co-
operation.
More than that, at the very senior level of the bank, there is dedi-
cation.
Senator MONTOYA. Is there a program specifically designed to help
minority enterprises in the Bank of America?
Mi. ANGELLO. Yes; yes. Mostly-
Senator MONTOYA. What do you call that program?
Mr. AXGELLO. Our urban affairs program, which encompasses hous-
ing, employment, the full spectrum, including minority business loans.
It is a total effort, and the SBA program is easiest to identify as far
as a direct contribution into a minority business loan program per se.
The Job Development Corp. is another such effort.
Senator MONTOYA. Well, the Job Development Corp. is a more or
less united effort by some of the banks in California.
Mr. ANGELLO. Nine California banks, yes, collectively.
Senator MONTOYA. How many loans have they made?
Mr. ANGELLO. I believe it is 77, Mr. Chairman.
PAGENO="0016"
10
Senator M0XT0YA. Seventy-seven for $2,500,000?
Mr. AXGELL0. Yes.
Senator MOxToi'-A. And the Bank of America has expended $12,-
250,000 on minority enterprise loans?
Mr. ANGELLO. Yes.
Senator MOxTOYA. That is over a period of how many years?
Mr. ANGELLO. Since about September 1968, so we are talking about
3 years.
Senator MOXTOYA. About 3 years. Do you think that represents good
effort on the part of the Bank of America?
Mr. ANGELLO. Well, I would say that the effort has been there; I
would say that for the most part-and I believe SBA would substan-
tiate this, as far as availability of credit to the minority entrepreneur
by most branches, it is there. It has been a matter of education, train-
ing. You know. the program almost doubled each year. which is an
indication of the effort of people like Fred Sergeant who conduct
seminars with our people and groups, in conjunction with SBA, on a
regional basis. We see it growing year by year.
Senator MOxTOYA. I am not trying to deprecate. I think it is won-
derful that you have done that much. Tam just trying to ascertain
whether this program could be expanded, because I notice that you
have SBA guarantees on every one. every bit of $12,250,000 in loans.
Mr. ANGELLO. This is the SBA program, Mr. Chairman. There
are countless numbers of loans made to minority entreprenuers outside
of the SBA program, but I cannot identify and relate in numbers
to you these loans.
But in this program alone, this is what we have.
Senator MONTOYA. Well, there was a very wealthy man in my com-
munity when I was out in Santa. Fe, and his name was Sento Conda-
lodia. He was very wealthy. And, so, an entrepreneur came into see him
and told him: "Mr. Conda.lodia, the First National Bank told me if I
could get you to sign my note that they would lend me the money"; and
I think that is what the Bank of America has done with all of these
entrepreneurs: Uncle Sam has signed the note. So, Sento Condalodia
told this man: "You go back and tell the bank that if they will sign the
note, I will lend you the honey."
Now, I think your testimony has been very valuable, Mr. Angello,
and I know that the Bank of America has tried to do certain construc-
tive things to recognize the minorities in the California area. I do not
expect the banking institution to open its coffers and lend out money
without determining whether or not that loan is repayable, whether
there is capa:biity for repayment. I do not think that is a. good bank-
ing practice to do that. But I am tryii~g to ascertain how SBA can
have a more meaningful coordinating role to see that the `banlthig in-
stitutions do lend money to meritorious businesses.
Mr. ANGELLO. We would look forward to that..
Mr. JoNEs. Mr. Chairman, with your permission, I would like to ask
Mr. Angello a further question about the possibility of coordinating
the 8(a) contract program with the guaranteed loan program.
As I understand it, the SBA will analyze an applicant for the 8(a)
program and then determine whether or not that applicant is quali-
fied to participate in the program. It occurs to me that at the time of
the SBA's decision that the applicant is qualified, it might be appro-
PAGENO="0017"
11
priate for the applicant, a representative of SBA, and the applicant's
banker to sit down and talk about whether a line of credit arrange-
ment could be possible for any future 8(a) contracts and at that time
the banker and the SBA could determine what are the proper financial
limits for the 8(a) contractor, and at the same time the contractor
would be assured that once he was given a contract within these hmits
appropriate financing would be available. Do you think that is a fea-
sible way of going about financing contractors' contracts?
Mr. ANGELLO. I think it would be a sensible approach. In the 8(a)
contracts we have had, I would guess that-you might substantiate
this, Fred. I recognize a couple of these as being our customers. I
know that Hi-Pro was prior to the 8(a) contract. And in most-I
would not say "most," but I would say in many instances the 8(a)
contractor prospect is already a customer of the bank. I think, gen-
emily, lie would go to his own bank and I think that anything that
can happen in advance, has to be helpful.
Mr. SERGEANT. I would like to add to that, in our experience with
these three with which we are familiar, they came to us, and they al-
ready had the 8(a) contract awarded; so, it was not a case of coming
to the bank and saying: "Would you be willing to participate in it,
if we can obtain the 8(a) contract?"
Mr. JONES. In Mr. Angello's statement, he mentioned the prohibi-
tive startup cost and advance working capital conditions, and that
these were problems that might be alleviated if, prior t.o the entering
into the contract, there was some determination of financial limits with-
in which the contractors ought to work, some undertaking in terms
of the line of credit, or otherwise, which would peimit him to oper-
ate safely within those limits.
Mr. SERGEANT. You see, we, I think, are all saying the same thing.
We are saying that we would like to see more selectivity in the award-
ing of the contract, where the contract emanates, and if we can be
assured that the cont~a.ct is not going to be out of the limits of capa-
bility of the company. It sounds like it would be a very nice type
of financing for us to participate in.
Mr. JONES. Well, as a practical matter, what could you do to ef-
fectuate coordination at the point of qualification?
Is there something the bank can do, or should we talk to the SBA
about this tomorrow?
Mr. ANGELLO. I see a practicality and feasibility of the three-way
meeting if the leadtime for credit analysis, especially for a new com-
pany to the bank, would not prohibit or delay the 8(a) contract let-
tmg, but I think if we had the opportunity to look at the experience
of the man ahead of time and then add to it what will happen and
what can happen with the 8(a), I think we can make more sensible
judgments.
Yes, I agree with you; I think there is a feasibility to this.
Mr. JONES. I think, then, Mr. Chairman, it might be appropriate to
mention this possibility "when the SBA testifies tomorrow. That might
be a very helpful way of solving some of the problems that have been
encountered with the 8 (a) program.
Senator MONTOYA. What is your experience with the minibank
concept?
70-654 0-72-2
PAGENO="0018"
12
Mr. ANGELL0. The mmibank-Mr. Walter Hoadley, I believe, who
is with our Bank, was one of the strong advocators of this concept.
It had been in the ABA Urban Affairs deliberations for many
months.
From what I know of it, this is an infusion of capital by the larger
banks or by the ABA member banks into the minority banks, those that
have been in existence for at least 3 years and have shown that they
relate to the needs of their communities.
Is t.his correct?
Senator MONTOYA. Yes.
Mr. ANGELLO. Well, as I discussed it with Mr. Hoadley, I would
certainly support it.
Senator MONTOYA. Has the Bank of America participated in this?
Mr. ANGELLO. Absolutely. I think we were probably one of the first
investors.
Senator M0XT0YA. Fine.
I believe that is all, Mr. Angello.
Mr. ANGELLO. Thank you.
Senator MONTOYA. Thank you, Mr. Angello.
Next we have Mr. Anthony Maxwell, who is president of the Banco
del Pueblo. Santa Ana, Calif.
You have submitted a statement, have you not?
Mr. MAXWELL. No. The invitation to appear before your committee
only asked me to submit a summary of my experience, and I did not
prepare a statement to give to the committee.
Senate M0XT0YA. Yes. The summary will be made a Part of the
record, and you may proceed, Mr. Maxwell.
(The summary referred to follows:)
PAGENO="0019"
13
~anco d~1
COMMERCIAL BANK
September 29, 1971
SUMMARY OF MINORITY ENTREPRENEURSHIP
ACTIVITIES OF ANTHONY MAXWELL
PRESIDENT, BANCO del PUEBLO
SANTA ANA, CALIFORNIA
After an early career as a farm laborer and construction.
worker, Mr. Maxwell worked as a postal clerk.
In 1956, he migrated to California where he began his
banking career with Bank of America, Boyle Heights Area
of Los ~~igeles, as Teller.
Subsequently, Mr. Maxwell was appoimted to the Officer
Training Program at Bank of America.
Upon completion of Officer training, Mr. Maxwell received
his first Officer assignment as Head of the Loan Depart-
ment at the Huntington Park Branch. The following years,
he was the Assistant Operations Officer at the Lynwood
Branch, Operations Officer at the Montebello Branch,
Operations Officer in East Los Angeles, and Assistant
Cash Operations Officer at the 4th. and Spring Branch
downtown Los Angeles.
In April 1965, Mr. Maxwell joined the original staff of
Pan American National Bank as Operations Officer. In
November 1965, he was appointed Cashier; at that time,
427.429 NORTH SYCAMORE STREETS SANTA ANA~CALIFORNIA 92701 (714) 558-3333
PAGENO="0020"
14
only two Mexican-Americans were holding that position in
California. Pan ~merican National Bank was the first
Mexican-American Bank in this country.
During the next few years, Mr. Maxwell served as Cashier
and Lending Officer in a bank serving primarily the
Spanish-speaking of East Los Angeles.
It was during this time that Mr. Maxwell became more
aware of the iniquities facing the Spanish-speaking in
regards to banking services.
In August 1969, he became Bank President, at that time,
the on1~ Mexican-American Bank President in California~
In October 1970, Mr. Maxwell left Pan American National
Bank to organize the Banco del Pueblo Commercial Bank
in Santa Ana, California. Banco del Pueblo is the only
bank in this country with a complete Mexican-American
Board of Directors, and featuring a bilingual staff in
all areas of banking. Banco del Pueblo is dedicated to
providing all banking services to all our Mexican-American
and Latin communities, with emphasis on the disadvantaged
minorities.
PAGENO="0021"
15
Member Board of Directors .of Banco del Pueblo.
Member Executive Committee and Board of Directors of
Southern California Minority Capital Corporation.
Minority Enterprise Small Business Investment
Corporation.
Member Urban Affairs Committee and Executive Council of
the American Bankers Association.
Member Executive Council National Bankers Association.
Member Small Business Advisory Council, Los Angeles Area.
Member Board of Directors of the Mexican-American
Opportunity Foundation.
PAGENO="0022"
16
STATEMENT OF ANTHONY MAXWELL, PRESIDENT, BANCO DEL
PUEBLO, SANTA ANA, CALIF.
Mr. MAXWELL. The Ba.nco del Pueblo is one of the newest minority
banks in the country, opened about 12 weeks ago with a capital of
a million dollars, about. 90 percent owned by the Mexican-Latin coin-
munity in Santa. Ana. During this time, we have accumulated a. mil-
lion and a half dollars in deposits, which is an infinitesimal amount,
small in relation to the major banks in California..
However, in these few weeks we have been open we have already
made over $200~000 in loans to the community of Santa Ana. We have
approved proposals. SBA-related proposals, totaling $300,000, eight
different proposals.
Senator M0XT0YA. What do you mean by that?
Mr. MAXWELL. WTe have had clients coming in who have been inter-
ested in obtaining a participating bank for SBA loans. We have re-
viewed the proposals. We have made investigations as to the expertise
of the applicants in the business that they are relating to and checked
their credit.s and made sure that they are good members of the com-
inunity and we have approved these proposals, and in total they add up
to approximately $300,000.
Senator M0NTOYA. Has SBA given their approval?
Mr. MAXWELL. No. They are at. the SBA office, presently being
reviewed by the SBA.
Senator MONTOYA. How long have you been working on these loans?
Mr. MAXWELL. Oh, we started about 4 weeks ago. After we got-
Senator MONTOYA. So, SBA has not had adequate time to investi-
gate these applicants?
Mr. MAXWELL. No, no, they have not. Now, I ~mderst.and-and this
is hearsay, but I understand-t.hey have approximately 350 loan pro-
posals at the SBA. Los Angeles office that they are working on. aiid
I do not know- amid I cannot relate because.I do not know the size of
their staff and what. the workload is there in relation to the number
of applicants they have.
Senator MONTOYA. What has your relationship been with SBA
so far?
Mr. MAXWELL. When I was president of the Pa.n American National
Bank, we became involved with the SBA for the first time, and in a
period of approximately 1 year we made approximately $1 million
in SBA-related loans, which represented at that time something like
15 percent of our total loan portfolio. This, in my opinion, was a tre-
mendous vote of confidence for the minority businessmen in that
minormty bank since they are r&at.ively new in our economic scene,
and they do not have the loan-loss reserves that the older banks have.
Therefore, when they make a loan, it is really a commitment to the
community, because we do not have an account. where, if the loan
goes bad, you just charge it off against the account without affecting
your profits and your capital.
I think this points out one very important thing, that the minority
banks with which I am familiar, for example, with the Bank of Fi-
nance and the Pan American National Bank, they are doing, percent-
agewise, a much bigger job in the minority enterprise field, SBA-
PAGENO="0023"
17
related and otherwise, than the major banks, even though they have a
very small amount of deposits.
Take, for example, I think, if we combined the total depositions of
the Pan American National Bank and the Bank of Finance, they have
about $30 million in deposits, and yet they have, both, approximately
$4 million in SBA loans. This shows a commitment; this shows a con-
cern, and yet they do it with very limited staff. For example, at our
particular bank, since we are new, all of the SBA applicants that come
in-in fact, most of the applicants that come in-I have to personally
interview and personally make decisions on whether or not they have
a viable package.
Senator MONTOYA. Do you have any followup services provided for
these?
Mr. MAXWELL. No; we do not.
Senator MONTOYA. Is it your intention to so provide these services?
Mr. MAXWELL. It would perhaps be a year before we could provide
these services at the present time.
Senator MONTOYA. Do you think they are essential?
Mr. MAXWELL. I think they are absolutely vital to the survival of
most of these programs.
If I could relate it to the 8(a), when I was at the Pan American
Bank we made an SBA loan to an 8(a) contractor. I believe the
amount, if my memory serves me right, was about $200,000 on top of
another SBA loan they had at another bank, and the production there
involved making practice bombs for the Defense Department. These
people were very knowledgeable as to their business, and they made
their bid properly, and I understand the program is working quite
well. There were, however, a couple of problems that developed.
No. 1, the payment coming from the Defense Department put a
tremendous drain on the cash flow.
Senator MONTOYA. In what way?
Mr. MAXWELL. Well, by the time, say, for example-this was, for
them, an entirely new line of productioii. Now, you get an SBA loan,
and your first payment starts down the line somewhere about 45 to 60
days from the time you fund the loan. There is no way on this new
product that is being produced there will be a cash flow shown in that
length of time. It is going to be usually about 6 months before-they
buying their equipment, installing it in their plant, getting the nec-
essary skilled labor, producing the item, delivering it-before they
can get paid.
So, the payment schedule that starts within 2 months after the loan
is funded is really very unrealistic, unless iii the loan proposal there is
included enough money to take care of the first four or five payments.
Senator MONTOYA. Do you not usually ta.ke care of it yourself in the
loan agreement?
Mr. MAXWELL. Well, we do now, but at one time we did not.
Senator MONTOYA. I never knew a bank that did not take care of
itself.
Mr. MAXWELL. This is one of the things we learned through eXperi-
ence with the SBA program.
Senator MONTOYA. That is the way it should be, you get so much per-
centage of the progress payments; and you do that in these loan agree-
ments; do you not?
PAGENO="0024"
18
Mr. MAXWELL. `We do now, yes. But when I was at the Pan American
Bank, we did not necessarily provide for this.
Senator MOXTOYA. `What was your experience when you were loan
officer at the Pan American Bank as far as default on these minority
entrepreneur loans?
Mr. MAXWELL. I am going to answer specifically relating to the SBA
loans. `We had one loan that did not pay back. It was a. $6,000 loan
with a 90-percent guarantee. There was another one later on that was
100 percent, and it was about a. $25,000 loan. The loss to the bank was
about $5,500. But when you relate that to the interest that the bank
earned on the million dollar Portfolio-
Senator MONTOYA. So, you did not lose anything?
Mr. MAXWELL. ~O.
Senator M0XTOYA. `What was your experience with the minibank
operation?
MiS. MAXWELL. I serve on the Urban Affairs Committee of the ABA,
and I was involved in the idea and in selling it, and we, at the Banco
del Pueblo. are going to put a percentage of our stock in the minibank.
Senator M0NT0YA. You cannot participate in it until you have had
3 years' experience; is that right?
Mr. MAXWELL. `We cannot participate; that is true. `We have no need
to participate at this time. We hope we never have to.
Senator MoxToi-A. Do you make small loans, too, in your bank?
Mr. MAXWELL. Yes. Our loans are primarily small loans. We have a
limitation of $800,000, legal limitation-I am sorry, not $800,000, but
$80,000. to any one borrower. The largest loan we have made to date
was a $25,000 loan to a minority person to purchase a restaurant.
Senator M0XT0YA. And are you a State bank or nationally chartered?
Mr. MAXW~IJL. `We are a. State bank.
One comment that I would like to make regarding the 8(a) program
is that in some, in one or two, the problem has been improperly pricing
the product in that there has not been enough allowance, profit al-
lowance, for the business to be able to turn a profit. over and windup
with a profit.
Senator MONTOYA. `Whose fault would that be?
Mr. MAXWELL. IVell, this would be the fault of the person that
worked the numbers to arrive at. a figure for selling t.he service.
Senator MOXTOYA. Well, usually, since SBA is the prime contractor,
SBA should be able to figure out. what. that small businessman who is
an 8(a) contractor could make in the way of profit on a markup.
Mr. MAXWELL. They should be able to, yes.
Senator MONTOYA. Because usually the small entrepreneur w-ho is
going into a contract. for the first time is not going to have the ability
to figure his profit; is he?
Mr. MAXWELL. He would have an extremely hard time, because he
is not cognizant of all of the factors that. affect the price of a product.
Many times they consider this, or most of the time people do, but not
all of them, you know. and they end up at the end with no profit.
Senator MOXTOYA. In view- of your experience with Mexican-Amer-
ican business people who are starting a business for the first time,
or have tried to increase their business on a more sophisticated basis,
is it your feeling that there should be some monitoring or surveillance
service to help this individual better orient himself and give his busi-
ness a better sense of direction?
PAGENO="0025"
19
Mr. MAXWELL. Yes. We naturally make direct loans also that have no
involvement with the SBA, but there are two areas that we are very
insistent upon in counseling with the minority businessman: (1) That
he obtain the services of a. certified public accountant so that he can get
the necessary information as to sales and costs, and their net profit,
and things of this nature, so that they can properly inlay the different
parts of their financial statement. That is No. 1.
And (2) is an area that they do not generally allow enough im-
portance, and that is as to life insurance. So, in these two areas we are
leaning very heavily on them.
Senator MONTOYA. You require life insurance on your business loans?
Mr. MAXWELL. Well, it depends on the amount of life insurance the
man already has. If his life insurance is adequate, no. If it is not-for
example, I made a loan to a man the other day, $6,000, and lie had a
net worth of $110,000, and $10,000 worth of life insurance. Well, ob-
viously, there is no relationship. The man needed more life insurance.
Senator MONTOYA. I know some banks require from their borrow-
ers a life insurance policy which someone in the bank usually writes.
Mr. MAXWELL. Yes. The credit life and disability insurance is avail-
able through our bank, but it is not a requirement. Most people, par-
ticularly installment loan borrowers, want it., because, you know, of
the leace of mind that it gives them on it.
Senator MONTOYA. Is there any way that a bank like the Bank
of America can help your bank directly?
Mr. MAXWELL. The Bank of America was helpful to us in our orga-
iiization, and, in fact, they are our prime correspondent bank. What we
need more than anything else is more involven'ient. As you can see, just
in 12 weeks we have more volume, and, as you can see, in 12 weeks,
what we have been able to generate, and we obviously cannot continue
at that rate with the deposit structure that we have.
Senator M0NTOYA. What about Government deposits?
Mr. MAXWELL. Yes. I have been working on that since shortly after
the bank opened. We have received two deposits that are Government-
related, or three, rather. The two major ones, one for $200,000, and
another one for $115,000, and both are through the U.S. Marine Corps
canteen fund in Washington, D.C. Of course, these are time-certificate
deposits, and we aie paying the going rate of interest on them. We also
have about a $15,000 deposit from the Operations SER Office in Santa
Ana.
Senator MONTOYA. What about the Post Office?
Mr. MAXWELL. No, we have not received anything at all from the
Post Office.
Senator MONTOYA. Have you asked them?
Mr. MAXWELL. Yes, and their auditor has been out to talk to us, and
we have be~iu promised deposits from the Post Office, and we have
been promised deposits from HUD, and we have been promised addi-
tional deposits from HEW. We have a lot of promises, but we have
about four major corporations that have helped us with tax money.
North American Rockwell gave us $250,000; Southern California Gas
gave $50,000; Southern California Edison gave us $50,000, and these
are in for 30 to 60 days, and they cannot be considered in the normal
lending functions of the bank, because they are such short-term de-
posits. But they do help in the earning factor.
PAGENO="0026"
20
Mr. JoNEs. In this connection, Mr. Chairman, it might be helpful
to call Mr. Maxwell's attention to Opportunity Funding Corp. which
is an OEO-grantee and which also makes deposits to minor banking
enterprises. Are you familiar with that?
Mr. MAXWELL. Yes, I am. The Pan American National Bank and
the Bank of Finance have obtained some of their deposits. We are
still working on it.. We find, for example, wheii we apply to HUID
for these deposits, that there is an area that creates problems for us,
and I certainly consider ourselves to be in the Los Angeles area but
many of these deposits are funneled into the local area through the
county or the city treasuries. At that point, they become subject to
the regulations of the St;ate of California involving deposits in the
cities and counties. One of the limitations that is placed on these de-
posits is that a bank may not have more than an amount equal to its
capital. So, for Pan American Bank or for ourselves that would be $1
million. In other words, what we are saying is that by channeling
the funds through this avenue-and I think with about 28 or 30 mi-
nority banks in this country, about $30 million, and we shut our mouth
That is all that can happen. I really think that some way `should be
found for the minority bank to be able to fully participate in the.
Federal Government deposits witrhout, these restrictions; because the
restriction is very unrealistic, due to the fact that these deposits are
collateralized by the minority banks.
Senator MoxTorA. Are you saying the State law places a restric-
tion that you shall not. have governmental deposits in excess of $1
million?
Mr. MAXWELL. Those are in the county treasuries and the city
treasuries.
Senator M0NT0YA. That. is State and local funds?
Mr. MAXWELL. Yes.
Senator M0NT0YA. But there is no prohibition on the amount of
Federal Government. funds that. can be put into a bank?
Mr. MAxWELL. Not directly, no; but when they go into the county
treasury first they become subject to this limitation because they then
become part of the funds of the county. they go to the county treasury.
Senator MoxTorA. I am speaking of the Federal Government and
not t.he county or the State.
Mr. MAXWELL. But you see, it originates at the Federal level and
goes to the county first.. Once it becomes part of the county funds or
within the control of the county treasury the limitations step in.
Senator MOXTOYA. No, you do not understand me. You are speak-
ing of funds that become integrated into State funds?
Mr. MAxW-ELL. Yes.
Senator M0xT0YA. But. I am speaking of funds like the Post Office
funds. Should the Post Office IDepartment. tell you that. they want. to
depost. $2 million in your bank; there is no State limitation or pro-
hibit.ion on that, is t:here?
Mr. MAXWELL. No; there is not.
Senator M0NT0YA. That is the point I am making.
\`\That about. the requirement that for SBA loans the borrower must
obtain bank participation?
Is that an inhibition or a serious obstacle as von see it.?
PAGENO="0027"
21
Mr. MAXWELL. The way I understand it works is this: The SBA
has very limited funds for making direct loans, so, therefore, as I
understand, they have a waiting list of loans to be funded directly
by SBA, which means that if a person is interested in gettmg a loan
within a reasonable~ period of time, he more or less has to obtain bank
participatioii; otherwise, he could be waiting and waiting and waiting.
and you know business does not wait for anyone.
Senator MONTOYA. Well, have you encountered situations where in-
dividuals with good repayment capability have failed through no
fault of their own to find bank participation on an SBA-guaranteed
loan?
Mr. MAXWELL. Most of the packages we are currently looking at
came to us because the other banks had not shown any interest in
them.
Senator MONTOYA. Well, as a matter of fact, most of these banks
are not interested in small loans of, say $5,000 to $10,000, to minority
enterprises, are they, unless the individual has triple A credit?
Mr. MAXWELL. I do not know to what extent their interest is, but I
do know that when my people, particularly-and I am talking about
the Latin-American, Spanish-American, or whatever name is attached
to it-go to these banks, they are either turned or given the impression
that it is going to take such a long time that it discourages them; and,
so, they wind up at my bank, and, of course, we have a very limited
staff, and we are trying to do the best we can to get these things proc-
esseci. I do not know how meaningful this is, but all of the packages
that have come to our attention have been good packages.
Senator MONT0YA. Have you had referrals to your bank from other
banks on loan applications?
Mr. MAXWELL. No; no, we have not. Since I was in the East Los
Angeles area and I am a known banker in banking circles there, some
of the people that have come to us, in fact, most of the people that
have come to us, have come from referrals from either groups or per-
sons in the East Los Angeles area. Some of these people go to the office
in East Los Angeles to obtain assistance in preparing their packages,
and then they are referred, after attempts are made at another hank
to place a loan, t. us.
Senator MONTOYA. Do you have an organization here known as
CABBIO?
Mr. MAXWELL. I do not know. I know the organization exists but
I do not know how active it is. I have never been involved with it
anyway.
Senator MONTOYA. How about MESBICs, have you had experience
with them?
Mr. MAXWELL. I am a member of the board of directors of
MESBICs that is currently being funded, and we were lacking
something like $30,000 in subscriptions to get the thing going the
other day. We still have not begun our lending.
Senator MONTOYA. What can you tell me abou.t the counseling serv-
ices that are available from organizations which have been funded
through grants under OEO?
Mr. MAXWELL. I have not been familiar with any specific cases.
Senator MONTOYA. You know of some of these organizations?
Mr. MAXWELL. I know they exist, yes.
PAGENO="0028"
22
Senator MOXT0YA. Do you, in your opinion, feel they have the capa-
bility to advise business people?
Mr. MAXWELL. Well, the people that work there, generally speaking,
are not, you know, hard-core businessmen who have been forced to
make a dollar. They are people who have trained in the field of finance
but have not had the practical experience of having to do it themselves.
Senator MOXTOYA. Woulcl you start thinking in terms of whether
or not an organization can be fornmlated from among successful
business people so that such an organization can provide know-
how and counseling services to new minority entrepreneurs ?
Mr. MAxwELL. This would be a tremendous challenge to anyone,
because there are several of them that have to be overcome to effect
an organizatioii such as this, No. 1 being that an active businessman,
which is really the best one to help in this instance, generally is ex-
tremely busy within his own business, there being many demands on
his time from charitable groups. government., and different areas;
so, finding a group of men who have the, time and would be willing
to give to this purpose would be hard. There is also the problem that
many times the local businessman does not want another businessman
with whom he is familiar looking into his business.
Senator MONTOYA. How about. the SCORE program?
Mr. MAxwELL. I know they exist. I am not familiar with any clients
they have worked with.
Senator M0NT0YA. Thank you very much, Mr. Maxwell.
Do you have anything else to acId?
Mr. MAxWELL. No; except to say that it has been quite a thrill for
me to be here today.
Senator MoxToYA. Well, I wish you success in your banking opera-
tion. We are doing the same thing in New Mexico. starting some new
banks there. Thank you.
Mr. Ray Dones, president. National Association of Minority Con-
tractors, San Francisco. Calif.
STATEMENT OF RAY BONES, PRESIDENT, NATIONAL ASSOCIATION
OF MINORITY CONTRACTORS, SAN FRANCISCO, CALIF.
Senator MoxToYA. Do you have a written statement, Mr. Dones?
Mr. DOXES. Yes, sir, I have.
Senator MONTOYA. Do you have a. copy?
Mr. DONES. I was not able to get copies to you earlier, but I have
some copies here if you would like them.
Senator MoxToyA. Thank you. You may proceed, sir.
Do you wish to reacT your statement?
Mr. DONES. Yes, sir.
Senator MONTOYA. It is not a lengthy statement, and if you desire
to read it, you may prOceedi to dlO so.
Mr. DUNES. I will read parts of it.
Senator MONTOYA. Well, it will be made a. part of the record, and
you may proceed to emphasize parts as you wish and make comments
on it as you wish.
(The prepared statement submitted by Mr. Dones reads in full as
follows:)
PAGENO="0029"
23
STATEMENT BY:
MR. RAY DONES, PRESIDENT NAMC, NON-PROFIT EDUCATIONAL ASSN.
801 McALLISTER STREET, SAN FRANCISCO, CALIFORNIA
BEFORE U.S. SENATE SMALL BUSINESS COMMITTEE
SEPTEMBER 29, 1971
At the minority builders conference here in San Francisco in
July 1969 where the National Association of Minority Contractors
(NAMC) was born, SBA came under severe and caustic criticism
from 300 black, brown, oriental and American Indian contractors
from all over the country. The Small Business Administration
has moved to improve its image in the minority business
community in general and with black and brown builders in
three special programs. The programs that have been most
helpful are the 8(a) "Set Aside" subcontracts, loan guarantee
and bonding guarantee programs. The SBA has spent the last
two years trying to find ways that would increase their ef-
fectiveness and offer meaningful help to minority contractors.
The National Association wishes also to thank the Small Business
Administration, the Senate select committee on Small Business
and this subcommittee for your efforts, for they are beginning
to bear fruit.
SBA is moving to guarantee letters-of-credit as well as loans
made to contractors. These advances can now be subordinated
to the interest of surety companies after two years of NAMC
urging. SBA is now beginning to understand the need to make
their guarantees available for revolving lines of credit, as
well as for fixed-amount loans.
"Set Aside" is a term that NAMC members are beginning to hear
around the country. Under Section 8A of the Small Business
Act, the Samll Business Administration is authorized to act
as prime contractor on "Set Asides" of various increments of
government work.
There are set asides which are developed for areas of high un-
employment because of their labor surplus. There are set asides
which are developed to channel a share of Federal procurement
contracts through a mechanism designed specifically for small
businesses. Both of these set asides when applied to the
construction industry are now available to our membership.
Due to the efforts of many people in SBA and out, the urgings
of Arthur McZier and of Joseph Conrad from the SBA Washington
office the support of Senator Joseph M. Montoya (D.N.M.),
sympathetic involvement of the staff and members of this sub-
committee and the push of th~ NAMC and its member, the Administra-
tion has recently defined 8(a) set aside in such a manner that
the current regulations permit the inclusion of the construc-
tion industry as a part of the program.
Under 8(a) programs the Small Business Administration acts
as the General Contractor for the Federal agency which wishes
to contract for a specific construction task. SBA then has
the option of negotiating with a subcontractor of its choice
and of requiring or waiving a surety bond, at its option.
PAGENO="0030"
24
Since SBA does not bid or compete with private industry for
contracts, 8(a) deals only in jobs that have not yet been
publicly announced. Once a contract has been awarded, SBA
is responsible to the agency to see to it that the contract
is fulfilled in all respects.
When a contractor approaches SBA for an "8 (a)" contract several
things happen. First, the contractor has to qualify as being
"disadvantaged." Secondly, he must prepare financial state-
ments, a work history or resume, a 5-year projection of his
business and other detailed information. SBA's thinking is
that "8(a)" contracts, being preferential, should only serve
to get a business on its feet, and so projections must show
how the company can become self-sufficient within three years.
Although SBA is committed to providing technical and managerial
services to its clients, the agency is understaffed in this
area and clients must usually look elsewhere for assistance
in putting together the necessary paperwork. NAMC strongly
recommends an increase in Technical Assistance funds available
to expedite the contractors learning process. The funding of
the educational and training efforts of Minority Contractor
Associations by SBA could greatly enhance the development of
minority builders.
Once a client supplies~ the needed documents, SEA sets out to
find contracts for him. This may involve actively promoting
a client, as well as merely attempting to match his capabilities
with currently listed jobs. Once a job is found and a suitable
price agreed upon, SBA awards the subcontract to the client.
The agency, being responsible as prime contractor, follows
through with advice and assistance to make sure the contract
is completely fulfilled.
The NAMC Directors meeting in New Orleans last Saturday and
Sunday asked me to inform you of the need to expand the 8(a)
contracting capability to state and local government agencies
and their political sub-divisions. Although the $100 million
that should be available to the program from Federal agencies
will doubtless increase the effectiveness of this business-
development mechanism, the bulk of Federal funds will not be
available without some legislative changes.
SBA needs the ability to bring DOT and HUD Programs under the
8(a) contracting capability. Section 3 of the 1968 Housing
and Urban Development Act states that: "the Secretary shall
require that local contractors and low-income residents be
employed to the greatest extent feasible in the development
of housing under the specified federal programs." This
is one of the strongest provisions which has been enacted re-
garding disadvantaged minority contractors and the employment
of the poor and should, when properly implemented, provide
substantial opportunities for attaining parity in our industry.
PAGENO="0031"
25
Several billion dollars are being spent annually under pro-
grams which include a statutory mandate of maximum employment
opportunities for low-income area residents and the utilization
of low-income contractors in federally assisted construction
projects. The issue of employment of the disadvantaged
minorities and the poor in general is rapidly coming to a
head.
The significance of developments of this nature is apparent
in light of the fact that the federal government parcels out
more than $20 billion each yearfor building contracts, covering
about half of the construction done in major cities.
Jobs are available in the cities where the poor live, and should
be linked to programs designed to upgrade the environments of
the poor. It is fitting that the development or urban physical
and human resources should provide reciprocal benefits. The
need for human rehabilitation is certainly as great as the
need for physical reconstruction of slum areas. Employment
opportunities and requirements relate to both low-income employees
and minority contractors as their potential employers.
Minority contractors in the nation's capital have been given
only one-half of one percent of work on the Washington Metropolitan
Area Transit Authority's 96-mile regional rail transit system
now well into the construction phase. The program, on which
Department of Transportation (DOT) Secretary John A. Volpe has
threatened to freeze contract awards for the third time, will
take 10 years to complete and require a peak labor force of
6,000 by July, 1973.
All indications are that the Small Business Administration
wants to make the construction industry in the Washington
Metropolitan area, and the transit system project in particular,
a model for equal employment opportunity.
SBA needs legislative support for their attorneys' rulings
that 8(a) can apply to this type of work for "Authorities" or
political sub-divisions of local governments in order to ex-
pand their sphere of assistance.
The NAMC asks you to provide legislation enabling an expansion
of 8(a) to all federally-funded programs.
PAGENO="0032"
26
ii\Ir. DONES. At. the minority builders conference here in San Fran-
cisco in July 1969 where the National Association of Minority Con-
tractors (NAMC) was born. SBA came under severe and caustic
criticism from 300 black, brown, oriental, and American Indian con-
tractors from all over the country. The Small Business Administration
has moved to improve its image in the minority business community
in general, and with black and brown builders in three special pro-
grams. The programs that have been most helpful are the 8(a) "set.-
aside" subcontracts, loan guarantee, and bonding guarantee programs.
The SBA has spent the last. 2 years trying to find ways that. would in-
crease their effectiveness and offer meaningful help to minority con-
tractors. The national association wishes also to thank the Small Busi-
ness Administration, the Senate Select. Committee on Small Business,
and this subcommittee for your efforts, for they are beginning to bear
fruit, we believe.
The 8(a) program has now been expanded, and we understand that
during fiscal year 1970 there were about $22 million worth of contracts
awarded and last. year the contracting process was expanded to in-
clude about $66 million. And we understand from our friends in SBA
that the Government plans additional expansion so that $100 million
for the next fiscal year will be incorporated.
But according to SBA, some of these 8(a) subcontracts let to sub-
contractors who had had no Pre\~ious Government. contracting experi-
ence go at approximately 10 percent more to do a job thaii it would cost.
if subject. to a competitive bidding piocess. We think that this cost is
part. of a learning process that is essential to the development of minor-
ity contractors and it probably could be decreased with more technical
assistance funds available to organizations that. are funded and who
have ability to provide some managing assistance in order to make sure
that the contractors have the job figured out as it should be.
We also think that SBA needs the ability to bring the I)epartment
of Transportation and HrD programs under the 8(a) contracting
capability. Section 3 of the 1968 Housing and Frban Development Act
states that "The Secretary shall require that. local contractors and
low-income residents be employed to the greatest extent feasible in the
development, of housing under specified Federal programs." This is one
of the strongest provisions which has been enactedi regarding dlisa dvan-
taged, minority contracts and the employment of the poor andi should,
when properly implemented, providle substantial opportunities for
attaining parity in our industry.
Several billion diOllars are being spent annually under programs
which includle a statutory mandlate of maximum employmeiit. oppor-
t.unities for low-income area residlents andi the utilization of low-income
contractors in fedlerally assistedi construct ion proj ects would improve
the employment of the dlisadlvantaged minorities and the poor in gen-
eral in the communities that they are designedi to aid.
Jobs are available in the cities where the poor live and should be
linked to programs designedi to upgrade the environments of the poor.
It is fitting that. the development, of urban physical audI human re-
sources should provide reciprocal benefits. The need for human reha-
bilitation is certainly as great. as the need for physical construction
of slum areas. Employment opportunities and requirements relate to
PAGENO="0033"
27
both low-income employees and minority contractors, so that as we
help minority contractors from the disadvantaged communities we can
certainly increase the amount of construction work that is available
to the low-income inhabitants of these communities.
I would also like to call the subcommittee's attention to the fact
that mmority contractors in the Nation's capital have been given only
one-half of 1 percent of the work on the Washington Metropolitan
Area Transit Authority's 96-mile regional rail transit system now well
into the construction phase. `We have been informed that the Small
Business Administration attorneys have ruled that the 8 (a) program
should be available for Metro construction work.
I think that SBA needs now some legislative support for their attor~
neys' rulings, so that 8(a) can apply to this type of work for political
subdivisions of local governments in order to expand this specific
sphere of assistance.
The NAMC asks you to provide some legislation enabling an expan-
sion of 8(a) to all federally funded programs.
Senator MONTOYA. Where is your organization located?
Mr. DONES. Our office is 801 McAllister Street in San Franci'sco.
Senator MONTOYA. Are you acquainted with the problems in the Los
Angeles area?
Mr. D0NE5. Yes, I am acquainted w-ith the problems in the Los
Angeles area in that our NAMC secretary and some of our board mem-
bers are from Los Angeles.
Senator MONTOYA. We had some hearings, through another coin-
mittee of which I am chairman, the Economic Development Committee
of the Senate, in Watts, and I was very much amazed at the statistical
information obtained in the testimony we elicited there, to the effect
that the commercial activity in `Watts has gone down from what it
was before the riot, in spite of the fact that over $300 million have
been spent in `Watts, and most of the money that has been spent in
Watts has been on studies and no actioii.
Would you agree with that?
Mr. DONES. Yes, I agree w-ith that, and I think that there is not an
availability of equity funds for people in the minority community for
development, or for entrepreneurship that would provide some mean-
ingful employment opportunities.
Senator M0NTOYA. `Well, many of the people in `Watts were work-
ing way out and commuting sometimes 20 or 30 miles, aiid there is
very little industrial activity within Watts. The same is true of east
Los Angeles, and the unemployment rate in Watts and east Los An-
geles is enormous, way ahead of the rest of the country.
Now, speaking of minority contractors and the difficulties which
they have had with respect to getting bonded, that. has been a concern
of the subcommittee for quite some time, as you know, and we have
tried to get SBA into this picture so that these people can make bonds
under SBA auspices.
Now, I do not know what progress was really had, because since I
pressed for this we have not had any followup hearings to find out
what SBA has done, and we are going to elicit this tomorrow and in
future hearings in `Washington. But have you noticed any participa-
tion from the private sector w'ith respect to giving small contractors a
little more recognition?
70-654 0-72-3
PAGENO="0034"
28
Mr. DONES. I think there has been a great increase in the under-
standing of the problem, Senator Montoya, and I think there has been
some increase in the development of the contractors, so I think they
have gained a far greater share of available work, but, we must real-
ize that when you relate it to parity with the total majority popula-
tion, we still have a long way to go. To illustrate what I mean, I think
of the $100 billion in construction work that currently is annually
available, and of the $76 billion or so that was available about 5 years
ago when organizations of minority contractors began to orgamze
around the country, the minority contractors were getting about one-
tenth of 1 percent of the total construction dollar. So, I would say
that within the last 5 years their contracting ability has sustained a ten-
fold increase, so that now- we have about 1 percent of the total construc-
tion dollar. But in order to gain parity, we need a fifteen-fold increase
again, in order to get what w-e deem to be the proper share of construc-
tion.
Senator M0NTOYA. Well, do you not feel that this share would be
increased if you convinced the private sector that you had the capa-
bility and also the financial ability to take care of these contracts ? Is
that not the cause of this gap?
Isn't it true that the private sector does not have full confidence in
the ability of the minority entrepreneur to serve as a contractor?
Is that not where the real fault lies?
Mr. DONES. Yes. I think it is the combination of both the lack of
ability to work in the private sector and lack of ability to work in
the public sector, too.
Senator MONTOVA. A lack of communication, too, lack of rapport,
and the fact that many minorities have gone into contracting without
knowing the full impact of contracting and many of them have gone
broke in the process, and when one in a minority goes broke it. reflects
on all of the others.
Mr. DONES. That is true. Senator. But w-e also need a development
of the ability of the minority contractor himself. I think now we are
beginning to solve this communications problem so that the private
sector and also the Government sector understand now- the basis of
the need for developing minority contractors. But we now have the
very difficult job of really developing the capabilities and the orga-
nizations of the minority contracting entities so that they can take
advantage of the opportunities that are available to them. This means
tha.t we must increase the capability. the equity capital that lie has,
his organizationa.l structure, and also his bondability so that we can
move into both the l)ublic and private sectors, because the private sec-
tor usually requires some guarantee of performance from either build-
er-control mechanisms or a bonding-company mechanism in order to
assure the owner that. no loss will be sustainedl in the contracting.
Now. the majority group contractors are fairly well organized, and
they can provide these kinds of assurances, but minority contractors
always, to be competitive. have to be able to provide these same kinds
of performance assurances that the maj oritv-group contractor can,
and at a competitive rate. Now-, if it costs the majority group con-
tractor six-tenths of 1 percent to provide a bond, and it costs the mi-
nority contractor 4 or 5 percent.. welL then, lie cannot be competitive
working in this field.
PAGENO="0035"
29
Senator MONTOYA. Well, is there such disparity?
Mr. DONES. Yes, sir; there is a standard bond market and a sub-
standard bond market also, and there is a disparity in rates.
Senator MONTOYA. Why can you not go to your State legislature to
prevent this kind of disparity or discrimination?
Mr. DONES. I think that we are afraid that we will have no market
if this happens.
Senator MONTOYA. What about the provisions of Pubhc Law 91-
G09 which permits SBA to guarantee 90 percent of the loss?
Mr. I)oNEs. I think this approach is one that will be successful in
alleviating the conditions I lust talked about, so that this bonding
guarantee from the Small Business Administration, as soon as it is
universally administered, will go a great way toward alleviating this
disparity.
Senator MONTOYA. Do you know of any instances where small con-
tractors are being charged more for their bonds than the big con-
tractors?
Mr. DONES. Well, I know of many instances where contractors are
being charged or are paying as much as 5 percent for bonds, and I
know of several instances where builders control is required by a bond-
ing company or some control mechanism is also required before they
will write the bond so that the total cost is larger.
Senator MONTOYA. Would you furnish such information in writing
for the committee?
Mr. D0NE5. Yes, sir; I will be happy to.'
Senator MONTOYA. We will be glad to receive it. We would like to
look into it.
Mr. DONES. But I think that this is because of the development of the
small contractor. It is a sort of system that we live in, and rather than
an overt kind of discrimination, because bonding companies write
bonds when they feel that there is no risk to assuring there will be corn-
pletion; then, if the loss percentage goes up, then it is natural to as-
sume there will be some attempt to increase the rates also, and if we
try to eliminate what we call the substandard market, it means many
of the smafler and newer contractors who have not had a wealth of
experience in construction and have not established a track record will
not find any source of bonds at all if we try to equalize these rates.
Senator MONTOYA. Even with the SBA guarantee?
Mr. DONES. I think the SBA guarantee has, so far, only been avail-
able to contractors at the standard bond rates and I do not know of any
guarantees that have been written for a substandard bond market.
When that 90-percent guarantee is available, I think that it will lessen
the risk of bonding companies, although, frankly, if bonding com-
panies feel-
Senator MONTOYA. And if it lessens the risk of bonding companies,
then it should necessarily reduce the rate; but will it?
Mr. DONES. If bonding companies believe there is even 10 percent
risk and the guarantee is only 90 percent of the job, they will not write
the bond anyway, even at a 5-percent rate. If they think there is an
appreciable risk that they will lose even 10 percent, they still will not
write the bond.
Senator M0NT0YA. Thank you very much.
1 Material not furnished.
PAGENO="0036"
30
Mr. JONES. Mr. Dones, under the SBA guarantee program, does not
the SBA charge the surety company a fee?
Mr. DONES. Yes; I think there is a fee of two-tenths of 1 percent
that is charged.
Mr. JONES. So, it is really not large enough to be significant?
Mr. DONES. No; I do not think the two-tenths of 1 percent charge, in
addition to the bondiiig fee if it is a standard market, is going to raise
the rate so that it will appreciably affect the job.
Now, you know that most construction contracts, particularly those
in the FHA sector where bonds are required, or usually required, there
is another mechanism that can be used now, I understand. But the
profit rate for the contractor is sometimes limited to a. maximum of 4
percent, and if a contractor has a bond market available at 2 percent or
3 percent or 4 percent. well, we use up all of the potential profit. But
two-tenths of 1 percent is down within the realm where it is not likely
to be a deterrent to this type of contract.
Mr. JONES. Did I understand you to say this program is not yet in
effect here in San Francisco?
Mr. DONES. I think that it is a little too early, you understand, of
course, to make an assessment of what the impact will be. There have
been probably, 100 applications in process, but I have yet to see the
instance where the SBA guarantee was used for a contractor's bond.
I think within a month we will know how effective the program is,
but it is a little early yet.
Mr. JONES. The program was operated on a pilot basis in Los An-
geles. Are you familiar with the results there?
Mr. DONES. I have talked to John Brown a.nd others there who had
some bonds written under this basis, and they indicate that it is ex-
tremely helpful to them, and it has been successful in getting bonds for
contractors who would not have been bonded before.
Mr. Jo~s. Thank you.
Senator MONTOYA. Thank you very much, Mr. Dones.
The next witness is Mr. Quentin L. Milsap.
Mr. Arthur F. Thomas of Pride Unlimited.
And Mr. Al Hicks, of San Francisco, and Mr. John G-ra.yson, presi-
dent, Univox California.
You may all come forward, and we will interrelate your testimony
if we possibly can.
Mr. NASH. I am a substitute. I am Thomas Nash, the general man-
ager, and I am substituting for Mr. Thomas, who is ill.
Senator M0NT0YA. You are Mr. Thomas Nash, are you not?
You are representing Mr. Thomas?
Mr. NASH. Yes, I am.
Senator MONT0YA. Who is representing Mr. Hicks?
Mr. Hicks is not here.
Since Mr. Milsap appears first on the list, would you lead off, sir?
PAGENO="0037"
31
STATEMENT OF QUENTIN L. MILSAP, QUANTUM ASSOCIATES, INC.,
OAKLAND, CALIF.
Senator MONTOYA. Do you have a written statement?
Mr. MILSAP. No, I do not.
Senator MONTdYA. Who has a prepared statement?
Mr. GRAY50N. I do, sir.
Senator MONTOYA. AU right, Mr. Grayson, you may proceed and sub-
mit your statement. How long is it?
Mr. GRAYSON. Three pages. It will take about 3 minutes.
STATEMENT OF JOHN GRAYSON, PRESIDENT, UNIVOX CALIFORNIA,
LOS ANGELES, CALIF.
Senator MONTOYA. Well, we have a copy here, and it will be made a
part of the record at this point, and you may proceed, sir, to summarize
it and give us the highlights, and I will ask you some questions after
you do that.
(The prepared statement submitted by Mr. Grayson reads in full as
follows:)
PAGENO="0038"
32
Statement to the Select Committee on Small Business.
House of Representatives of the United States Ninety Second Congress
13 September 1971
~ President
Univox California
Scope
My experience and concern cover a wide range of topics under the
heading of Minority Business Enterprise Development; however, I
understand this hearing concerns itself with Government Procurement.
My comments will therefore be limited to the subject of Government
Procurement as it is viewed by this minority business venture (Univox
California). I will share my perceptions regarding both the acquisition
and performance phases of the procurement cycle.
Background
Univox California, an electronics manufacturing company, is an unusual
minority enterprise for a number of reasons worth mentioning to estab-
lish the context in which my experiences are evaluated.
My partner, Mr. Bernard Weiss, and I, each bring over 20 years of
directly applicable preparation and experience to this venture. This
preparation includes training as graduate engineers and work experience
with above average achievement as engineers, engineering managers,
project managers, and business managers.
The start up capital costs, initial market penetration time and costs,
along with internal operational procedures and methods effort, were
among the major factors which influenced our choosing to begin with
the acquisition of an existing firm. This acquisition gave us, among
other things, current customers including the major airlines, some
of the largest aerospace companies, and many government procurement
agencies. These customers were, at that time and since that time,
ordering and receiving products from Univox California meeting all
specifications and schedules. The products were used by commercial
airlines, in military aircraft and equipment, and in other defense
programs.
To this baseline operation, we intend to develop through all avenues
available to us, a major growth activity and a model for minority
business development which leverages more business development per
dollar than has been the rule. The major obstacle we must hurdle to
achieve this goal is low business volume. Our long range plans indicate
a transition from solely military and aerospace markets to a number of
commercial opportunities. To provide the resources and posture
necessary to compete in these areas, a significant increase in sales
volume is needed.
PAGENO="0039"
33
The U. S. Government could be the source of those increased sales.
I understand it is the intent and goal of our government to use its
ability to solve such problems. Government procurement policies,
therefore, are crucial to the success of Univox and many other
minority enterprises.
Attempts over the past nine months to acquire an increased sales volume
through government procurements have to date utterly failed. I find
myself today with a number of immediate and very promising oppor-
tunities which would launch Univox toward its objectives, and yet
realizing that nine months ago I would have said the same thing. The
nine months have been 38 weeks and close to 270 days of "being on the
brink of acquiring sizeable government contracts," without one success.
This condition has persisted in spite of:,
1. Having the technical and managerial expertise of the principals
2. Being a firm certified under the SBA 8(a) program
3. Having a facility meeting federal specifications for performing
electronics manufacturing for military equipment
4. Actually performing on orders from government and military
agencies meeting specifications, costs and schedules
5. Providing the Small Business Administration with descriptive
information about our capabilities, lists of those agencies of
government to whom we have sold items, and the part numbers of
the items sold
6. Having a current sales volume insufficient to support the personal
financial needs of the principals.
Conclusions and Recommendations
Whenever I attempt to analyze why this condition exists, inevitably the
magnitude and complexity of problems the Small Business Administration
and the other agencies have are transferred to me. Instead of experiencing
a boost from affirmative and supportive action, I am the constant
recipient of delay, declarations of impotence, and often obstruction. My
course of action then shifts to the obstacles which hopefully when cleared
will open the way for success, while fighting the growing feeling that
today's obstacles are not between me and success, but rather between
me and other obstacles and other obstacles....
PAGENO="0040"
34
1. Goals for procurement by the government from minority businesses
must be consistent with objectives. If ta piece of the action" is
believed to provide the stated benefits to both the minority community
and the whole nation, then the `piece" necessary to achieve those
benefits should be defined and should become the goal. The plans
and efforts of those agencies which are crucial to making the
intentions a reality must be aimed to goals which are consistent
with the objectives. Current goals are established in a vacuum and
are keyed to levels which support "successful" annual reports.
This kind of goal setting allows an infinite amount of resources to
be expended without ever achieving objectives. The result being
an expensive, aimless program of `doing something' but producing
in the end a pattern of frustration, disappointment, and worst of
all the perpetuation of the current dilemma.
2. The profit making organization cannot be excluded from participating
in minority business development for profit. The intimate relationship
between an organization aiding a minority business and the minority
businessman contains the opportunity for a transferral of the
"entrepreneurial spirit" which is rightly not a part of the non-profit
organizations makeup. Further remuneration based on objectives
of business progress, instead of "look good" records would add
subtle but effective impetus to results based on objectives. The
multitude of difficulties encountered by minority firms in performing
on government contracts would be greatly diminished and controlled
by the participation of profit-oriented organizations whose partici-
pation was purchased. This recommendation is made in an inclusive
sense not instead of what is now being done.
In summary, I must say that current procurement policies and agencies
have failed to capture the opportunity to achieve the intent of the charter
of the Small Business Administration's Minority Business Program or
the Office of Minority Business Enterprise. I am convinced that without
changes in policy such as I have suggested, we shall not achieve what is
within our capability and our grasp. The massive and unprecedented
action required to bring the minority community into the American economy
will grow to impossible proportions unless men such as yourselves act now.
I am at your service to provide any additional supportive data you may
require and I stand available to participate in helping to develop detail
methods of implementing some of my suggestions.
PAGENO="0041"
35
Mr. GRAYSON. Thank you, sir.
I began my statement, sir, with the fact that I have had some con-
siderable experience in the area. of minority business development over
the last 4 or 5 years, but I am going to try to aim most of my principal
comments and concerns today to the idea of minority business develop-
ment in terms of procurement. I am referring to some background in-
formation about. Univox California, au electronic manufacturing coin-
pany, because I believe it to be an unusual minority enterprise for a
number of reasons worth mentioning to establish the context in which
my experiences are evaluated.
My partner, Mr. Bernard Weiss, and I, each, bring over 20 years
of directly applicable preparation and experience to this venture. Tins
preparatiomi includes training as graduate engineers and work ex-
perience with above average achievement as engineers, engineering
managers, proj ect managers, and business managers.
Senator MONTOYA. Would you state your educational backgrouiid?
Mr. GR~-soN. I have a bachelor of science degree in engineering.
Senator M0NTOYA. From what. univeristy?
Mr. GRAYSON. Pacific State University in California.
We chose in our venture to select an ongoing operation rather than
a. startup, because of the vast difference in capital outlay required.
This also gave us, among other things, current customers including the
major airlines, the largest aerospace companies, and many Government
procurement agencies. These customers were, at that time and since
that time, ordering and receiving products from Tjnivox California
meeting all specifications and schedules. The products were used by
commercial airlines, iii military aircraft and equipment, aiid in other
defense programs.
Senator M0NTOYA. What products do you manufacture?
Mr. GRAYSON. We manufacture electronic cable, connectors, control
boxes, assemblies for airlines, and military and commercial aircraft.
Se1lator M0NTOYA. What was your gross last year?
Mr. GRAYSON. We were anticipating $100,000.
Senator MONTOYA. Last year?
Mr. GRAYSON. That is right. We have been in operation 9 months.
Senator M0NTOYA. Oh, I see. Up to now, what has been your gross?
Mr. GRAYSON. Approximately, $72,000.
Senator MONTOYA. All right, proceed.
Mr. GRAYSON. To this baseline operation, we intend to develop
through all avenues available to us, a major growth activity and a
model for minority business development which leverages more busi-
iiess development per dollar than has been the rule. The major obstacle
we must hurdle to achieve this goal is low-business volume. On long-
range plans indicate a transition from solely military and aerospace
markets to a number of commercial opportunities. To provide the
resources and posture necessary to compete in these areas, a significant
increase in sales volume is needed.
The U.S. Government could be the source of those increased sales.
I understand it is the intent and goal of our Government to use its
ability to solve such problems. Government procurement policies,
therefore, are crucial to the success of Univox and many other
minority enterprises.
PAGENO="0042"
36
Attempts over the past 9 months to acquire an increased sales vol-
nine through Government procurements have to date utterly failed.
I find myself today with a. number of immediate and very promising
opportunities which would launch TJnivox toward its objectives, and
yet realizing that 9 months ago I would have said the same thing. The
9 months have been 38 weeks and close to 270 days of "being on the
brink of acquiring sizable Government contracts," without one
success.
This condition has persisted in spite of very significant things:
1. Having the technical and managerial expertise of the principals;
2. Being a firm certified under the SBA 8(a) program;
3. Having a~ facility meeting Federal specifications for performing
electronics mannfacturing for military equipment;
4. Actually performing on orders from Government and military
agencies meetmg specifications, costs, and schedules;
ö. Providing the Small Business Administration with descriptive
information about our capabilities, lists of those agencies of Govern-
ment to whom we have sold items, and the part numbers of the items
sold; and
6. Having a current. sales volume insufficient to support the pel~so1la1
financial needs of the principals.
CONCLUSIONS AND RECOMMENDATIONS
Whenever I attempt to analyze why this condition exists, inevitably
the magnitude and complexity of problems the Small Business Ad-
ministration and the other agencies have are transferred to me. In-
stead of experiencing a boost from affirmative and supportive action,
I am the constant recipient of delay, declarations of impotence, and
often obstruction. My course of action then shifts to the obstacles
which hopefully, when cleared, will open the way for success, while
fighting the growing feeling that today's obstacles are not between me
and success, but rather between me and other obstacles. And I would
like to add that I have met twice this year, as recently as 2 weeks ago,
with the National Association of Black Manufacturers, which is an
organization recently formed, comprised of abont 70 manufacturing
organizations under black ownership and leadership, and out of that
experience I might say that I have found the same thing true of all
other minority manufacturers I have met.
I submit, then, for your consideration, two recommendations which
I am sure, if implemented, would undergird all efforts currently op-
erating in a realistic and effective way, an undergirding which would
certainly insure men the end of hopes and promises and give them
a fulfillment of dreams.
The recommendations are:
1. Goals for procurement by the Government from minority busi-
nesses must be consistent with objectives. If "a piece of the action"
is believed to provide the stated benefits to both the minority commu-
nity and the whole Nation. then the "piece" necessary to achieve those
benefits should be diefinedi and shiouldi become the goal. The plans and
efforts of those agencies which are crucial to making the intentions a
reality must be aimed to goals which are consistent with the objectives.
PAGENO="0043"
37
Current goals are established in a vacuum and are keyed to levels which
support `successful" annual reports. This kind of goal-settmg allows
an infinite amount of resources to be expended without ever achiev-
ing objectives. The result being an expensive, aimless program of "do-
ing something" but producing in the end a pattern of frustration, dis-
appointment, and worst of all the perpetuation of the current dilemma.
2. The profitmaking organization cannot be excluded from partici-
pating in minority business development for profit. The intimate
relationship between an organization aiding a minority business and
the minority businessman contains the opportunity for a transferral
of the "entrepreneurial spirit" which is rightly not a part of the
nonprofit organization makeup. Further remuneration based on ob-
jectives of business progress instead of "look-good" records would
add subtle but effective impetus to results based oii objectives. The
multitude of difficulties encountered by minority firms iii performing
on Government contracts would be greatly diminished and controlled
by the participation of profit-oriented organizations whose participa-
tion was purchased. This recommendation is made in an inclusive
sense not instead of what is now being done.
In summary, I must say that current procurement policies and
agencies have failed to capture the opportunity to achieve the intent
of the charter of the Small Business Administratioii's minority busi-
ness program or the Office of Minority Business Enterprise. I am con-
vinced that without changes in policy such as I have suggested, we
shall not achieve what is within our capability and our grasp. The
massive and unprecedented action required to bring the minority
community into the American economy will grow to impossible pro-
portions unless men such as yourselves act now.
I am at your service to provide any additional supportive data
you may require, and I stand available to participate in helping to
develop detail methods of implementing some of my suggestions.
Senator M0NT0YA. Thank you very much, Mr. Grayson, for a very
fine statement, and I mean that sincerely. I know the frustrations
about which you speak, because many of the business people in my
State have come to me with similar problems, and I want to say, in
all sincerity, that I do not think that this problem is engendered
by any attitudes on the part of SBA but rather by some of the pro-
curement agencies of the Government.
Now, for example, I think the Defense Departmeiit could do a
better job in recognizing minority entrepreneurs, but they do not do
it. They have greater requirements for goods and services in the
Defense Department, and there are many communities here that could
be reactivated and become economically viable if only the Defense
Department would infuse these communities with a little economic
plug. I think that is where the fault lies.
I think GSA has been doing a fair job in trying to recognize
minority enterprises in this country. I w-ant to say that they could
do a better job than they are doing, but at least the GSA is trying.
And the SBA is merely an instrumentality. They are the agents
of the small entrepreneurs, and they are trying to do something.
But I am not satisfied with the statistics, because in the Federal
procurement pie small business has been going down percentagewise
in the last 4 or 5 years, and we keep a study of this on a year-by-year
PAGENO="0044"
38
basis. We have been conducting hearings for the last 7 years on
what small business derives from the Federal Government.
Now, you are a small enterprise, just starting, and you are en-
titled to some help. I did not hear you allude to any monetary re-
quirements. Your allusions were strictly confined to your hope that
the Federal Government. through its vast procurement empire. would
recognize your enterprise. Now. you say that you have been certified
by SBA to do this t.ype of work is that correct.?
Mr. GRAYSON. Yes, sir.
Senator M0NT0YA. How many employees do you have?
Mr. GRAYSON. Five, sir.
Senator MONTOYA. And has SBA or any other agency surveyed your
plant
Mr. GRAYSON. Yes, sir. Sir, if I might: My reference to IJnivox is
more as a demonstration, in the specific, of a condition that exists.
Senator MONTOYA. Well, I understand that., and `I have taken it in
that light.
Mr. GRAY50N. What I hope to communicate to the committee is that
there is a fundamental lack, in my judgment, of an implementing way,
to make economic development and minority business development
a reality in this country, and that is why I take the dangerous time
away from my business toda.y to be here, to address that issue.
I think that it is not something as va.gi.ie as, when. I go to the SBA,
or another agenc . or if I come to this subcommittee, it. is another
military procurement policy. I think it is a. question of national
urgency. If I read and believe haif of all of the reports, if we are
talking about the economic development of a people just as we talk
about the economic development of Europe a.t the end of the Second
World War, or the Far Ea.st a.t the end of the Second World WTar, we
are ta.lking about scoping a development and talking about making a
commitment that has something to do with the end result; and I sub-
mit, sir, that. that. has never hanpened. either by the Congress or any
other group who has said that they really want to make the minority
community a part of the economic mainstream of America. And I am
saying that it takes something. persons like yourself, to work on the
national level of our country who can draft. legislation to say, just
like we developed Europe after the war, we need to look at the minority
community in America. and we need to develop it., and nothing as
small as the typical procurement policies of the Federal big agencies
or the typical procurement policies of the private sector can stand in
our way. It is the `traditionalism that has created the problem that we
are faced with today.
So, what I am hoping that. the subcommittee would consider is p05-
turing itself toward looking at: "How can we do this t.he way we have
done everything else ?" When we said we were going to the moon, for
example-and I was privileged to work in the aerospace business for
18 years-we selected a goal there, and we made a commitment; we
formed a Government agency, but we gave the private organizations
the opportunity to make money, a profit., to get us to the moon. We
have excluded private organizations for profit from participating in
helping minority businesses. We have deliberately brought in only
those organizations that do it on a voluntary or a non-profit-oriented
basis, and I think that is fundamentally an error; and I think the
PAGENO="0045"
39
only people that can do it are PeoPle such as yourself. I think the whole
process of SBA saying one year that we did $30 million in the minority
cornmumty and the next year saying that we did $66 million and hope
to do $100 million in the minority community the following year does
not relate to perhaps maybe the $30 billion or $40 billion that is
necessary to make the minority community economically viable. Yet,
those are the kinds of goals and those are the kinds of reports you will
hear tomorrow.
They are not related to what we are trying to accomplish, and I
am concerned that at the highest levels of our Government that that
awareness which has been applied to every endeavor this country has
ever cared about is not being applied to this whole process of minority
business development, and it seems to me that what we find ourselves
doing is denying that if we want to go to the moon we will go to the
top of Mount Everest, because it is closer, and it does not matter
whether it is closer on the. top of Mount Everest or whether it is closer
in I)eathi Valley, it takes a rocket to get to the moon. And, so, we spend
our time talking about better ways to climb a mountain because we are
going to the moon, and we evaluate the SBA and we call them names
and criticize them and make them better when they are a mountain-
climbing operation and we need a rocket. That is what I would like the
subcommittee to address itself to.
Senator MOXTOYA. I agree with you wholeheartedly, Mr. Grayson
in what you have said. But it all spells the frustration of the past and
the hopes of the future-that is what it spells. And we have been try-
ing to work into a fiber that will bring this realization to bear.
Now, of course, in this committee, we are confining our jurisdiction
to what we can do through Federal procurement to help small busi-
ness enterprises and small business generally. Through other commit-
tees in the Congress~ we are trying to do the very thing that you es-
poused~ and it is a slow process, and I am very disappointed myself.
Mr. GRAY5ON. Could, then, this committee have something to do with
setting the goals instead of organizations themselves setting them?
Senator MONTOYA. Well, we are trying to. We will have hearings
in Washington, and we will ask the Defense Department why they
are not doing more. This is not a legislative committee, so we cannot
recommend legislation out of this committee. This is merely a commit-
tee to hear the problems of small business, and we certify the results
of the hearings to the Congress in a report, and then we depend on the
other legislative committees to formulate the legislation.
Mr. GRAYSON. Could this committee recommend, for instance, that
the goals for procurement by all of the Government agencies through
the 8(a) program be a specific percentage of the procurement?
Senator MONTOYA. Yes, yes; we could do that.
Mr. GRAYSON. Well, that is the kind of thing I mean, so that when
they set their goals, if there is no legislation, at least the goals they set
can be compared against the recommendations of a committee such as
this.
Senator MONTOYA. Well, we have been trying to do this for years,
and we have called in the Defense Department. You do not realize
how hard we have tried. If you would just read the hearings, we have
been very vocal about our insistence that they do more for the small
business community; and I say this from knowledge and I say this
PAGENO="0046"
40
most sincerely-the Defense Department could do more and could
contribute substantially to the rehabilitation of many communities
in this country if they would just spread the procurement pie a little
more equitably and with a better economic direction.
So, anyway, thank you, Mr. Grayson, for your observations. We
appreciate them.
Mr. JoNEs. Mr. Chairman, in this connection, I would like to ask
Mr. Grayson some questions.
Senator MONT0YA. Yes.
Mr. JONES. First of all, Mr. Grayson, I am glad you made your
comments. I think they are very important, and they were eloquently
made.
It is helpful to have these suggestions about the types of goals we
might wish to set. One of the Problems in setting goals is that all great
programs are finally reduced to a question of administration.
Goals are fine, but unless they are pursued earnestly at all levels with-
in the Government. they merely remain goals.
For that reason, I would like to pursue you with some of your own
experience with your business, because it may shed some light on the
administrative effectiveness of the program we now have. In this con-
nection, when did you first go to the SBA for certification under the
8(a) program?
Mr. GRAYSOX. I was certified in November of last year.
Mr. JONES. So that, in fact, was just about the time you organized
the business?
Mir. GRAYSON. That is right; at the same time.
Mr. JONES. And did you have any difficulty with the certification
process?
\\Tas that a fairly ra.pid and prompt process?
Mr. GRAYSON. I had some difficulty, but it. was overcome in a
short period of time. I might acid that. I have an opinion regarding
that process. I was certified within about 2 months total from the
time I first applied, and it. took a number of things-perseverance,
and whatnot. But I am personally convinced that the certification
was held up the short time it was and was made because my volume
goal was reduced by a factor of 10. And in direct language, I am
convinced that was so that the SBA would have a. good-looking
record at the end of the year. And, here., again, it is beca.use the
program of goal setting a.nd evaluation of those persons who are
supposed to be supporting me are motivated by and reporting to a.
system that makes them diO the opposite.
Mr. JONES. What. was your originally stated goal and what was
the goal as finally established?
Mr. GRAYSON. My originally stated goal was to develop the busi-
ness volume to a rate of $80~000 pa" month by the 12th month of the
operation, which would have been a rate of $1 million a year. My
present facility has the capability to do a.t least twice that..
The business plan was not going to be approved imless that total
amount. was changed to $70,000 for the total year. And I might add
that I have dione that. without one 8(a) set.-aside contract. That kind
of work comes in on the telephone.
Mr. JONES. But at the time of the certification it was essentially a.
requirement. of certification that you reduce the goal to that?
PAGENO="0047"
41
Mr. GRAYSON. I cannot say it was an essential requirement. In the
discussion of what would have to be done to my business plan before
it would be approved, that became very clear to me, and I was also told
if anything in excess of that came, it would not be effected by the
business plan.
Mr. JONES. Since then, you have done approximately $72,000 worth
of business. How much of this is with the Government?
Is that all with the Government?
Mr. GRAYSON. I would say that. 50 percent of it is probably with the
Government, directly, and maybe 25 percent indirectly through major
contractors.
Mr. JONES. And on these Government contracts, did you obtain
them through formal bidding procedures?
Mr. GRAYSON. Yes.
Mr. JONES. So, you located-
Mr. GRAYSON. Our business is the "phone," because our business from
various procurement agencie.s was where larger outfits would not bid
on them, because it is low quantity.
Mr. JONES. And you have informed the SBA of all of these contracts
and your capability for similar such contracts in the future?
Mr. GRAYSON. Yes, I have.
Mr. JONES. To what do you ascribe their failure to locate these con-
tracts or similar such contracts for you?
Mr. GRAYSON. I think it is a combination of a number of factors.
One of them is their preoccupation of what their objectives are and
what is going to be among them more successful and what resources
they have to apply to any kind of situation. For instance, they are fear-
ful of an operation, and I heard in the previous testimony of Mr. An-
gello from the Bank of America what he was suggesting was something
that I disagreed with, that they be more careful before they give a con-
tract to a minority firm. There is a tremendous amount of carefulness,
if anything, and is supported by the self-fulfilling prophecy idea. That
is one part of it-they are afraid of an ambitious program, and they
do not have to move into ambitious programs, because their goals are
the ones they have set.
Mr. JONES. Have you spoken to other firms which have been certified
for the 8(a) program?
Mr. GRAY5ON. Yes.
`Mr. JONES. Are their experiences similar to yours?
Mr. GRAYSON. Similar and worse. I might add also-
Mr. JONES. I do not see how they could be much worse.
Mr. GRAYSON. I located a contract, the only 8(a) contract that I
am now working on, and I have invested a considerable amount of
money in the pursuit of it. I located the procurement source, convinced
the procuring agency, the Marine Corps in this case, that lJnivox
should be considered on it, and I expedited their proposal, had a copy
of it prepared, worked on the proposal -for over 2 weeks before it got
to the SBA office and submitted that proposal. And the size of that
contract was $866,000. My business proposal was being reviewed by
the SBA while the technical proposal was being reviewed by the Ma-
rine Corps. When the Marine Corps called the SBA, the SBA was not
going to negotiate a contract until we got an answer from the Marine
Corps on the technical portion. The Marine Corps called the SBA and
PAGENO="0048"
42
told them that they were dissatisfied with my technical proposal. Ill
that phone conversation, the SBA told the Marine Corps: "Then, can-
cel the procurement." They did not contact me; they did not let me
participate in a~ conference or a discussion as to what the differences
were or as to why they were dissatisfied. There was not supportive or
prenegotiation discussions or any kind of thing which, in my busi-
ness, in previous experience in the aerospace business, was the normal
next step. and I had to personally fly t.o Washington, D.C., to pur~sue
a conference where I could determine the specifics as to why my tech-
nical proposal was not satisfactory.
As a sidelight, as a result of that, the whole thing was opened up
again, and I am given another opportunity to make another presenta-
tion to the Marine Corps.
But I raise the example to show that the supportive commitment
aspect is not there, not because there is someone in the SBA who does
not like me or does not want the program to work, it is because the
success is not based on him doing the most ambitious, or being the
most supportive, or causing the thing to really happen; it is based
on the most conservative point, of view that possibly can be taken, and
it is based on the guaranteed success-but that is what. we are up
against to begin with.
Mr. JONES. In connection with s-our second recommendation, Mr.
Grayson, I w-oncler if you could be more specific in exactly what you
mean by involvement in profitmaking organizations?
iMir. GRAYSOX. Yes. I understand that. if an organization wanted to
pi'~pose, for instance, to the SBA or any Government agency with the
responsibility for minority business development, and would want to
~ropose that, they would take either a new or existing minority busi-
ness in some particular condition and Propose a plan of development
for a company and provide the expertise and support and tra.ining,
or whatever it took, the assistance in negotiating the best contract
as well as financing and would write out a program, just like any
other kind of program.
Then, they would have that program priced and funded. and then
be paidi against. those. cost.s. And some of the profit., based on their
performance or development of that minority business, such a rela-
tionsliip, is not allowed in minority business development; the only
kind of organization that can get funded by the Government. to assist
the minority business is a nonprofit organization, and I am suggestmg
that we have never dlone anything in our country of any significance,
anywhere near the magnifudle of what we are addressing ourselves
to here today in that. manner.
When we wanted to go to the moon, we formed NASA, and NASA.
immediately hired people who, for profit, put. us on the moon. WThen
we have triedl to do anything of that. nature. that is exactly what. we
have done, and I am saying: When you take on a massive task of de-
veloping. economically developmg. in the minority community and
you exclude this profit-oriented person, you have taken, it. seems to
me, the germ of the magic combination we have used in this country
of the Government. andi private sector together solving problems. and
I am suggesting that at a fraction of the millions of dollars we have
spent now-and I am not even saying "Do not dlO it., do not do the
other." but I am saying that if we just. in adidlition to that, allow
PAGENO="0049"
43
this to happen, then we wouki see a tremendous difference in the
effectiveness of aH of these programs~ just where they stand.
`Mr. JONES. Thank you, Mr. Grayson, Mr. Chairman.
Senator MONTOYA. Thank you, sir.
Next will be Mr. Nash.
STATEMENT OF THOMAS NASH, PRIDE UEIIMITED, INC.,
SAN JOSE, CALIF.
Mr. NASH. Senator, I am Tom Nash, as I said before, and I am rep-
resenting Mr. Thomas of Pride Unlimited.
Senator MONTOYA. Would you state who you represent?
Mr. NAsH. Pride Unlimited, Inc.
Senator MONTOYA. And what is that?
Mr. NAsh. Pride TJnlimited is a group of businesses whose primary
source of income, comes from the building maintenance busmess, and
we are involved in the 8(a) program; and we feel grateful to SBA
and your committee for permitting us to speak. I would like so much
to go to the defense of some of what I have heard with reference to
the Small Business Administration, for prior to our becoming involved
with SBA we w-ere struggling, barely able to keep our heads above
water because of the closed doors for minority enterprises regardless
of what venture they were going into.
Senator MONTOYA. How many individuals work in your corporation?
Mr. NAsii. At the present time?
Senator MONTOYA. Yes.
Mr. NAsh. At the present time, we have 73.
Senator MONTOYA. Seventy-three ?
Mr. NASH. Employees.
Senator MONTOYA. And ~he.re do they work? What kind of con-
tracts do you service?
Mr. NASH. We are servicing right now the Hamilton Air Force Base,
the Federal Aviation Administration contracts. The two contracts
that we have under the 8 (a) program are those, but as the direct result
of having acquired these two w-e have been able to get others, not under
the 8(a) program but other businesses. And as a direct result of that,
of acquiring this business, these contracts with SBA being with a prime
contractor, we have been able to siphon off from some of our other
jobs key people, and theii go into the welfare and get people from the
welfare program and people who are on work furlough and parolees
and people who are trying to get started again in life, and we have
been able to pull those into a training program, working through the
department of employment, and we have been able to institute a
training program wherein we have been able to fill those vacancies
with these people. who are working in nonsensitive areas. However,
the thing that I am so proud of is the fact that we met a very out-
standing member of the SBA here who made available to us not only
Ins expertise in this field as far as administrative, functions of it, the
administration of our business, was concerned but who also gave to
us the right to contact him on a 24-hour basis on any problems that
might arise.
Now, in my opinion, that, to me, was over and above what was
naturally expected of him as an administrator of the business, in or-
der to help us. This ~vould show that lie had a real interest.
70-654 0-72-4
PAGENO="0050"
44
And this man was Mr. MacPherson, who is available to us on a 24-
hour basis on any problem that might arise.
As the result of that, we have been able, from the 8(a) program,
to bill out a sum total of $17,640 per month, running to $11,680 a year
profit, which caused us then to be able to expand Pride Unlimited, and
now we are involved in the. second phase of our program which, to us,
is the most important, because we feel the most important thing now
for minorities is to get involved in the economic mainstreams of the
country, and to do so we must have education.
So, Pride Unlimited has now become the. principal investor in the
American Business College which is located at 330 South Second
Street, where we are still instituting training.
Senator M0NTOYA. Do you receive a grant from the Federal Gov-
ernment for training?
Mr. NASH. Negative. WTe are using an assistance program wherein
we are reimbursed a portion of the. amount that is being utilized for
training purposes from the St.ate.
Senator M0NTOYA. Are you talking about the on-the-job training?
Mr. NASH. Right; on the job.
Senator MONT0TA. Well, you receive some compensation then?
Mr. NASH. \`\Te are receiving some compensation along those lines.
Senator M0NTOYA. You have a total-
Mr. NASh. Seventy-three employees in the janitorial field, in jani-
torial services.
Senator M0NTOYA. Up to date, you have been the recipient of $381,-
533 in 8 (a.) contracts?
Mr. NASH. Negative. I think it is around-
Senator MONTOYA. Well, you have the contract with the Air Force,
do you not., in the amount of $101,000?
Mr. NASH. Right., and we have a contract with the Federa.l Aviation
Administration in the amount of $110,000.
Senator MONTOYA. $110,000 from the Department of Trans-
portation?
Mr. NASH. Right.
Senator MONTOYA. And $64,292 which you had in 1970?
Mr. NASH. Oh, that includes 1970?
Senator MONTOYA. I am talking about the 2 years.
Mr. NASH. I see. Ye.s; yes.
Senator MONTOYA. Do you have any other contracts?
Mr. NASH. Yes; we have.
Senator M0NT0YA. In the private sector?
Mr. NASH. Right; we do have. For example, we have the Inter-
national Business Machines as one of our contracts in the janitorial
field. We have a number of other smaller contracts.
Senator M0NT0YA. Have you experienced a profit since you have
been in operation?
Mr. NASH. WTe have. The profit, of course, has been small, because of
the fact that we have been in the process of expanding and training of
additional personnel which means that we have to overload our staff
in order to have a continuing training program. But., there again, the
open doors that we have been trying to get open for many years were
opened to us. V\Te have submitted ProPosals of all kinds to try and
procure contracts. In fact, t.o tell you the truth, w-e did not even know
PAGENO="0051"
45
that bids had been let for our Government contracts; these doors were
closed to us. But through the SBA, with the SBA bemg in f rout of
us, we were able then to deal directly through the SBA, and we have
been able to survive and be successful. I think that, as I said before, I
am very proud of. I am very proud of our association with Mr. Mac-
Pherson out of the SBA office here.
Senator MONTOYA. Well, as far as your organization is concerned,
8 (a) has worked for you?
Mr. NAsH. It really has.
Senator MONTOYA. WTell, that is the first instance I have seen where it
is has worked successfully with an organization.
Mr. NAsh. Well, we have had a successful operation, and we are
looking forward to even greater successes. At the present time, of
course, we need more jobs because we have applicants that are stacked
up very high.
Senator MONT0YA. Well, would you say that because 8(a) made
possible the seeds for the existence of your business that you have been
able to branch out into the private sector?
Mr. NAsI-I. T his is exactly what I have stated froni the very begin-
ning. This is why we are very proud of it.
Senator MONTOYA. Thank you, sir.
Now, Mr. Milsap, what do you have to say, sir?
Mr. MIL5AP. I did not know- that I was supposed to bring a pre-
pared statement.
Senator MONTOYA. Well, you do not have to. You can just give us
what you want to give us out of your own mind.
Mr. MIL5AP. I would like to say something along the line here that
this gentleman here said; 8 (a) did work for us.
Senator MONTOYA. What is Quantum Associates?
Mr. MILSAP. We specialize in electronic assembly. We do subassem-
bly w-ork. We are a job shop for a large electronic company. Now,
8(a) did not put us in business at all. Another company put us into
business.
Senator MONTOYA. What was the gross of your company during the
course of the last year?
Mr. MILSAP. Last year, about $130,000.
Senator MONTOYA. How many e'mp'loyes do you have?
Mr. MIL5AP. We have 17.
Senator MONTOYA. And aie you doing 8(a) work?
Mr. MILSAP. Presently, yes. We have completed-
Senator MONTOYA. Is that the bulk of your work?
Mr. MIL5AP. How is that?
Senator MONTOYA. Is that a substantial part of your work, 8(a)
work?
Mr. MILSAP. No; it is not. It was at one time, and that is the thing
I wanted to say. We probably would have been out of business if we
had not gotten the first contract. We probably would have been out of
business because the economy dropped and the private industry was
way down in part of our business, and, then, along came 8(a).
So, we have managed to survive for that 6-month period, I think
until the economy picked up again.
Senator MONTOYA. Is your business doing all right now?
Mr. MIL5AP. Yes, fine.
PAGENO="0052"
46
Senator MONTOYA. But you are interested in more 8(a) work?
Mr. MILSAP. Oh, yes, we are; definitely.
Senator M0XTOYA. Is there any question that comes up as to your
ca.pability to do the work?
Mr. MILSAP. You mean for SBA?
Senator M0NT0YA. Under 8(a) contracts.
Mr. MILSAP. No, not yet.
We went through all of the preliminaries, like they sent somebody
out to inspect the shop and somebody came there to work. and somebody
else came and inspected the shop, and, aside from the amount of paper-
work, everything went OK in the amount of time that it. took to get
everything going.
Senator MOXTOYA. What do you suggest for improvements in the
8(a) program?
Mr. MILSAP. First. of all. I suggest. that SBA have more muscles than
they have. I do not think they have enough to work with. and I can
understand people looking for successes when they start the first
time-
Senator MONTOYA. WThat do you mean by "muscles?"
Mr. MILSAP. Have a. little more authority t.o say where work will go.
You see, if McClellan does not say that we have a job that we are will-
ing to let out on an 8 (a) contract, then they cairnot do anything about
it.
So, what are they doing up there ? They are up there twiddling their
thumbs and listening to us when we come here, and yet they cannot
get on them, you see, for iiot. doing anything. Well, there are probably
a few villians. but. I do not think SBA is a villian within itself.
So, what I think is that. they should have more authority to say
where the work is going. They should know about it when it comes
up, and I am Pretty sure they do know about it but they do not have
anything to say about. it.
Senator MOXTOYA. Well, let me say this, let me say this in all frank-
ness. I want to be fair. We are always getting SBA into these hearings
and asking them to do a little more in a procureiueiit system, but
when we evaluate the evidence. SBA is not in a position to find out
about all of the procurement that goes on in Government; they do
not have that kind of manpower. And the Defense Department has
a way of hiding some of these procurement opportunities.
Mr. MILSAP. OK~ why dlO they hide them?
Senator M0NT0YA. What. is that?
Mr. MILSAP. Why dlO they hidle these opportunities?
Senator MONTOYA. That is what we are t.rying to find out.
Mr. MILSAP. Well, then, I do not know. All I say is that you a.re a
Senator. and-
Senator MONTOYA. Trying to find out what goes on in the Defense
Department. is just as hard as trying to find your way to the moon.
Mr. MILSAP. OK. I can understand that.. But my only point is this,
that you are a. Senator and it. takes you and your colleagues to regu-
late DOD.
Senator MONTOYA. Well. we are doing it; I think we are starting to
do a good job in the Congress on that.
Mr. MILSAP. OK, OK, let me make another suggestion. In NASA
we cut down on the amount of paperwork. It has been sa.id by many,
PAGENO="0053"
47
many people that you are not finished until the weight of the paper-
work equals the weight of the products, and I can realize there are
things that have to be documented, but I think that is a little ridiculous.
Senator MONTOYA. Well, we are on the same course.
Mr. MILSAP. I really do, and I am sure that Carl Warren will agree
with me, because he has to do as much as I do.
Mr. JONES. Mr. Milsap, how- long after your company was certified
did you receive your first 8(a) contract?
Mr. MILSAP. Pardon me?
Mr. JONES. How long after your certification was it before you got
your first 8(a) contract?
Mr. MILSAP. Oh, I would say about 3 months. I do not really know.
I do not know if that is true or not, but I would say maybe 3 months.
I do not know.
Mr. JONES. Approximately 3 months, at any rate.
In your conversations with other minority contractors who have ap-
plied for 8(a) subcontracts, do you feel that Mr. Grayson's experience
or your company's experience is more typical?
Mr. MILSAP. Do I feel-What?
Mr. JONES. Well, Mr. Grayson testified that his company, after 9
months, had received no 8 (a) contract and that that was the experi-
ence which other applicants for 8(a) contracts had had, and I won-
dered, in talking with applicants for 8(a) contracts, if you formed
the same general impression?
Mr. MILSAP. I do not know really of any who have had any. I do
not. know any personally.
Mr. JONES. I see.
Mr. MILSAP. Most of the people I talked to have complaints. They
cannot get certified. Something goes wrong some place, they cannot
get money. That is another problem; you cannot get money. As far as
I know, and if I am wrong I want somebody to correct me, we have not
been able to qualify for an SBA guarantee, but Wells Fargo loaned us
some money. So, ~ou see, I do not know where the hang-up is there.
I really do not.
Mr. JONES. As a legal requirement, the SBA cannot extend a guaran-
tee unless the bank has shown that it is unwilling to make a loan, so
if Wells Fargo would make a loan to you, you see, then under the law
the SBA could not make the guarantee.
Mr. MILSAP. I have to admit one thing: We did not feel we should
have to go through all of the red tape of 6 months of paperwork and
then be turned down when we could go to Wells Fargo with a. 3 per-
cent higher interest, 3 percent higher interest rate, and take 2 weeks
to get what has amounted to a total of $145,000.
Senator MONTOYA. Well, you did not complete your application with
SBA?
Mr. MILSAP. No, we did not. We sent them a financial statement, and
it did not look good enough for them.
Senator MONTOYA. Thank you, gentlemen. We will stand in recess
until 2 o'clock this afternoon.
(Whereupon, at 12 :20 p.m., a recess was taken until 2 p.m. this same
day.)
PAGENO="0054"
48
AFTERNOON SESSION
Senator MONTOYA. The committee will come to order.
This afternoon we are going to listen to some witnesses from the
business sector.
We have, as our witnesses here, Mr. Kenneth B. Gay, staff vice pres-
ident, material, of North American Rockwell Corp., El Segundo,
Calif.; Mr. John P. Rogan, vice president, administration, McDonnell
Douglas Astronautics Co., Huntington Beach, Calif., and Mr. Fore.
Who are you with Mr. Fore?
Mr. FORE. Wallace Fore, vice president of operations, North Amer-
ican Rockwell Aerospace Group.
STATEMENT OF KENNETH B. GAY, VICE PRESIDENT, MATERIAL,
NORTH AMERICAN ROCKWELL CORP., EL SEGUNDO, CALIF.; AC~
COMPANIED BY WALLACE FORE, VICE PRESIDENT, OPERATIONS,
NORTH AMERICAN ROCKWELL AEROSPACE GROUP
Senator MONTOYA. Do you want to proceed?
Do you have a written statement, sir?
Mr. GAY. Yes; we have submitted a written statement, and, with
your permission, I will not go through it; but I would like to make a
few comments. I would like to enter it into the record, if I may.
Senator MOXTOYA. Yes; you may proceed to summarize it, and the
written statement will be made a. Part of the record at this time.
(The prepared statement submitted by Mr. Gay reads in full as
follows:)
PAGENO="0055"
49
STATEMENT OF KENNETH B. GAY, STAFF VICE PRESIDENT - MATERIAL
NORTH AMERICAN ROCKWELL CORPORATION, BEF9RE THE SUBCC~1MITrEE ON GOVERNMENT PROCUREMENT
SENATOR JOSEPH M. MONTOYA, CHAIRMAN, SAN FRANCISCO, CALIFORNIA SEPTEMBER 29, 1971'
Gentlemen, my name is Kenneth B. Gay, I am the Staff
Vice President, Material, for North American Rockwell Corporation's
Aerospace and Electronics Groups. I am the designated Small Business
Liaison Officer for the corporation.
We appreciate the opportunity to give you this presentation
about our experiences in the 8(a) subcontracting program.
To give you a little of the background leading up to
our 8(a) activities, let me explain that we have a subsidiary called
NARTRANS CORPORATION located in East Los Angeles. NARTRANS stands
for North American Rockwell Training and Services. Originally, we
opened NARTRANS to have it serve as a training center for the "hard-
core" unemployed. That story is part of the development leading up
to our current 8(a) work.
In December 1967 North American Rockwell began to
investigate the feasibility of developing an on-the-job training
plan to train disadvantaged persons for positions in industry. In
May 1968 the company's Board of Directors authorized the formation
of NARTRANS in which it invested approximately $1 million. At
about the same time the company negotiated a contract with the
Department of Labor under which it was to be paid approximately
$1475,000 over a 15-month period to help defray the high cost of
training which was necessarily involved in this kind of a project.
The objective of the subsidiary was to provide through
continuous and productive work programs an opportunity for so-called
"hard-core unemployed" persons to develop vocational skills and
work attitudes which would enable them to obtain and keep jobs
in the mainstream of American industry. It was originally
contemplated that employees who successfully passed through the
training program would be transferred to other North American
Rockwell divisions in Southern California and other "hard-core"
unemployed persons hired to replace them. In addition to training
in productive work programs, remedial courses in English and
arithmetic were provided in a classroom atmosphere.
Starting from the 75 "hard-core unemployed" persons
employed in June 1968, employment rose in November 1968 to a peak
of 205 "hard-core unemployed" personnel and a staff of 80. Employ-
ment has gradually declined since July 1969 to the present level
Thf 70 direct workers and a staff of 38. Of these 108 employees,
2~4 are caucasian and the remainder minority.
Unfortunately the inception of this program coincided
with the beginning of the steep decline in employment in the
PAGENO="0056"
50
aerospace industry. Employment in North American Rockwell's
aerospace and electronics divisions was at approximately 93,000
in mid-1968. Since that time, employment in these divisions
has declined to 37,500. In this climate the original plan to
transfer persons successfully completing the training course
was not practicable. Of the 86 persons who completed the
NARTRANS course and found employment with other companies, only
a few were actually transferred to North American Rockwell
aerospace and electronics divisions.
As originally conceived, NARTRANS was to provide goods
and services to the Los Angeles area divisions of the corporation
in such fields as drafting, reproduction, typing, key punching,
plastics, woodworking, simple machine shop work and tool grinding.
Again, the steep decline in North American Rockwell's aerospace
business reduced the requirements for NARTRANS products and it
became necessary, in order to keep the operation alive, to find
work from other sources.
Small contracts were obtained from various companies
for such work as the manufacture of computer racks, electrical
motor repairs, wood products and refurbishment of office furniture.
In addition, NARTRANS developed and is now successfully marketing
a line of cassette albums. The prices for this item are competitive,
the quality good and production is approaching 1300 units per day.
However, one successful product line plus miscellaneous small
contracts does not provide sufficient volume to maintain NARTRANS
as a viable commercial entity.
As a result, the company began to explore the possibility
of qualifying NARTRANS for Government contract awards under the
provisions of Section 8(a) of the Small Business Act. To be
eligible for an 8(a) subcontract, a concern must be owned by
socially or economically disadvantaged persons or plans must be
made for the sale of control of the firm to such persons within
a reasonable period of time. In December 1969 planning for the
divestiture of NARTRANS by North American Rockwell was initiated
and in May 1970 a divestiture plan was submitted to the Small
Business Administration. The Small Business Administration acted
promptly and approval of a plan was obtained on June 2 of that year.
On January 19, 1971 NARTRANS received its first contract
award under 8(a) from GSA, in the amount of $66,29~ for plastic
goods. During the following seven months NARTRANS has received
$922,132 of 8(a) contracts. These contracts were for additional
plastic goods and for electronic kits for the Air Force F-lOO and
T-33 aircraft. Deliveries on these contracts have started and
NARTRANS' plans are based on using these contracts in addition
PAGENO="0057"
51
to approximately one million in additional awards to provide
the basis for making NARTRANS viable. In conjunction with this,
the plan includes further expansion of our successful plastic
products for the commercial market and entry into the commercial
market for electrical assemblies. Commercial sales for cassette
albums, numerous other plastic products, and electrical assemblies
are projected at $1436,088 for FY-1972.
Although the approved plan schedules the divestiture
for June 1973 or earlier, our present planning indicates that
divestiture may be possible as early as April 1, 1972. We are
anxious to accelerate the divestiture providing we can be confident
that the operation is on a sound basis with ample backlog to
provide support until commercial products and competitive govern-
ment contracts will provide the necessary cash flow.
In summary, it must be noted that we are disappointed
that the earlier training objectives were not fulfilled to the
degree we had hoped. The number of employees prepared for work
elsewhere during 1969 and 1970 was short of our goal because
we did not anticipate the sharp decline in the aerospace industry
which reduced our work inputs to NARTRANS and dried up the
requirement for its graduates.
It has been fortunate, however, that the SBA program
for seeding minority business through Section 8(a) of the Small
Business Act has permitted us to change the objectives of the
enterprise. Most important, we can now see that the goal of
developing NARTRANS into a viable operation ready for divestiture,
may be attained as much as a year earlier than planned.
In conclusion, gentlemen, our experience with the 8(a)
program has been positive. We have no suggestions for improve-
ments in either the basic program or its administration. If
anyone has any questions I will be happy to answer them.
PAGENO="0058"
52
Mr. GAY. Well, this morning, you indicated that you had heard of
only one successful 8 (a) program, and I would like to say that we
feel that we have had a very successful 8 (a) program, and I would
like to tell you a bit about it.
When we started out XARTRANS organization we started it for
the p~~ir~ose of training the so-called hard core unemployed to the
point where they would be able to move into the various divisions of
North American Rockwell.
Unfortunately, at the time we started the organization, the aero-
space industry in general fell into hard times. Our employment fell
from some 100,000 to approximately 30,000 to 40,000 during this pe-
riod of time. WTe had to change our plans, and we eliminated, if you
please, the training program and tried to come up with an organiza-
tion that would have a product that the company could sell and that
could help in making for a viable organization.
We started it. off with many kinds of skills. We ended U~ with
basically two types of skills. I have given to Mr. IVard some products
that we produced at NARTRANS, the plastic products, the notebooks,
and this has been a very successful program. I have some pictures here
that I would like to show you. Here are some cliflerent kinds of piod-
ucts, plastic Products that our organization makes: cassette holders,
tapes, and I have here a picture of our facilities. This represents plas-
tic envelope machines which are being utilized by people within our
organization. Here is a rotary l1ess that is used for notebooks and
cassettes where the operators are put into various stations and the
press rotates around to complete the various operations.
Here is a picture of the operator putting the product into the piess
as it goes around, and the product comes out. And here is a l)icture of
one of the finished products, one of the tape-cassette type machines,
and I might say that these are being sold throughout the country,
through Sears Roebuck, Montgomery Ward, and that. kind of dis-
tribution.
Senator MoxTovA. I might say that the Library of Congress is
using these cases now in sending cassettes to the blind.
Mr. GAY. Good.
Here is a typical silk screen operation where one of those briefcases
such as you have up there can be individualized for individual cus-
tomers.
Then, here is another big program that represents one basic product
line. This has been sponsored and headed by the 8 (a) program that I
will talk about in a minute, but this is the central unit for the F-100,
ATh'lS program. This is the airboriie integrated marker system. As
you can see, there is a substantial amount. of sheet metal type work and
electronics work involved.
Here is a cable harness assembly or harness board that you can see
going through and out as a finished product.
And here we have a picture of the electrical assembly area with four
of these F-100-D central units in the foreground. You probably can-
not see from here, but we have two people here that are, by any defini-
tion, the worst disadvantaged that you can have. They are black; they
are female; and they are deaf and dumb. They have done an extremely
good job under all of these kinds of hardships.
Here is a picture of the sheet metal area in our operation and a
closer detail of the sheet metal work on the AIMS program.
PAGENO="0059"
53
When we decided that we would have to go out of the training
busmess and try to get into a viable product sales organization, we got
into these two basic product lines.
Back in May of 1970, we were able to work out an arrangement with
the SBA whereby we establiShed a divestiture plan to divest ourselves
of this organization and turn it over to minority ownership ultimately.
The ultimate goal that we had set was 3 years, the middle of 1973.
Our plan was approved, and we were able to get our first SBA
contract, first 8(a) contract~, for GSA work in January of 1971. That
work was for notebook binders, half inch, 1 inch, and so on, the kind
of bmders similar to the ones that you have up there.
Along this period of time, we were competitively bidding for Gov-
ernment work and commercial work. We started off in 1969 with about
$4,000 worth of commercial work that we were able to obtain competi-
tively. Up to this point in time, North American Rockwell divisions
were supporting our NARTRANS operation exclusively.
In 1970, we had extended our commercial work to some $56,000 and
built tins up through 1971. During 1971, we have gotten several 8 (a)
contracts that have provided the seed program, if you please, to make
this organization a viable organization.
We have gotten some F-l00 AIMS programs and some T-33 AIMS
programs.
As the result of the 8(a) assistance to this organization, where we
had planned to divest ourselves of NARTRANS in the middle of
1973, it appears to us that it will be a viable organization almost a year
earlier than we hoped and that during 1972 we will be able to accom-
plish our divestiture.
We think that without the 8 (a) program that we would not have
been able to accomplish this, and it is possible that this organization
would have had to have been closed up.
So, we are rather enthusiastic supporters of the 8(a) program.
Senator MONTOYA. I believe you indicated in your statement that
you have 108 employees?
Mr. GAY. Yes, sir; 40 percent of our employees at the present time
are Mexican Americans, 40 percent are black, and we have three
orientals, one American Indian, and the balance are Caucasian.
Senator MONTOYA. Are you not discriminating against the
Caucasians?
Mr. GAY. That is possible. Where we are located is in the east-central
part of Los Angeles, and just because of the nature of where we are
oriented, we feel we have gotten this kind of a mixture of employees.
Senator MONTOYA. Off the record.
(Discusthon was had outside the record.)
Mi. GAY. I might say that our management structure at NAR-
TRANS also follows this ratio. We think that we have a very strong
management, as a matter of fact.
Senator MONTOYA. I think it is wonderful that your company has
oriented one facet of its operation toward helping minorities. That is
very commendable. I believe you are the only company to have done
this, to my know-ledge. I want to hear from McDonnell.
Now, you say that you are divesting yourself of this operation, and
through an arrangement approved by SBA you are transferring it to
someone else. Now, what is the transition?
PAGENO="0060"
54
Mr. GAY. No, sir; I did not mean to say that. I said that in 1970 we
entered into a divestiture agreement with SBA which said that if we
could have a viable organization on or before the middle of 1973 that,
at that pomt in time or at some time prior to 1973, we would divest
ourselves of the company. What I did say was that with the help of the
8 (a) program it appears to us that this will be a viable organization
probably sometime next year.
Senator Mox'roYA. Well, how will you divest yourself?
I understand "divestiture" to mean that you will rid yourself of the
operation.
Mr. GAY. Of ownership.
Senator MONTOYA. Yes. How will you transfer it ? And who will you
transfer it to?
Mr. GAY. We have not. gone into the details of that. We. are working
with the president of the organization. There appears to be Plenty of
minority money available to take over. It is just a. question that we do
not want to let that go until we are certain, in our minds, it will be a
lasting organization and that the clay after we turn it loose it will not
fall apart.
Senator M0NTOYA. That. is the way it should be.
Now, do you have enough business for this operation now?
Mr. GAY. No, sir. That is why the S (a) program has been very
helpful. We have run, in terms of business--North American Rockwell
opened the organization the first year, which was almost. a half year,
with about, roughly, a half million dollars worth of work out of the
North American Rockwell divisions. The next year, we contributed in
the. neighborhood of a million and three-quarters, and about a quarter
of a million we were able to get, as I say, elsewhere, partly from the
Department of Labor, contracts for training purposes, and partly for
commercial work. This year, we anticipate our commercial work will
be in the neighborhood of a quarter of a million dollars. We have Gov-
ernment contracts. and part. of those were competitively bid. One con-
tract is for Navy work, in the neighborhood of a quarter of a million-
closer to a half million, really; but. next. year we are anticipatmg sales
of about a half a million commercial and almost. a million and a half
Government.
Senator MOXTOYA. Well, this plastic casset.te holder i~ coming into its
own. WTere you the pioneers
Mr. GAY. Our NAR.TRANS people, themselves, were the ones who
developed this, introduced it, made the sales and have made a dra-
matic inroad in terms of business there.
Mr. FORE. May I add, I think this is a good example of the benefits
of the 8 (a) program. The plastic. notebooks w-ere a product line that
the management of the organization decided they should promote.
They did get, initially, an SBA non-8 (a) award, and, subsequently an
8(a) award. At the same time this was going on they were developing
this new- product line, and in the year since they first conceived of the
cassette holders, they have built that line of business up to a point
w-here it will be approximately a~ quarter of a million dollars worth of
commercial sales.
That is the true benefit of the 8 (a) seed contract concept.
It is probably going to be a fair amount of time before they w-ill
be able to completely do without this support that they are gettmg
PAGENO="0061"
55
from the 8(a), but it seems that this is an excellent example of what
can be done.
Senator MONTOYA. Now, what kind of business management do you
have in this special operation for minorities?
Mr. GAY. Go ahead.
Mr. FORE. When we first instituted the NARTRANS program we
staffed it almost entirely with North American Rockwell employees of
demonstrated ability, both minority and Caucasian.
In the 3 years that the organization has been in existence, there has
been a gradual phasing out of the North American Rockwell em-
ployees, as we brought onboard either from lower levels of the North
American Rockwell organization or from outside sources qualified
people to move into the management slots. I w-ould say, from a p~'~-
fessional view, that the majority of the people tend to come from the
eiigineering ranks, whether it be minority or Caucasian. The strengths
tend to be technological strengths rather than business strengths. Our
most recent addition to the organization is a man by the name of Ben
Gonzales who has aH the desirable traits of a hardheaded controller;
this has been one element that has been missing in our organization in
preparation for this divestiture. It is his presence that leads me
to believe that by mid-1972 w-e will have completed the divestiture
and it will be completely minority manned and operated.
Senator MONTOYA. Do you feel that Government is doing enough to
promote the partnership arrangement with industry to bring about
this kind of minority ownership
Mr. GAY. Well, in our case, we think it has been very successful.
Senator MONTOYA. Have you had adequate cooperation from the
Government agencies?
Mr. GA1~. Yes, sir.
Senator MONTOYA. In view of your experience, what do you think
that Government should do and what responsibilities should industry
assume to try to extend this example across the broad spectrum of
business activity in this country
Mr. GAY. Well, I do not know that I can add anything.
As far as other organizations are concerned, if they received the
same kind of treatment and the same kind of help that we did. I think
that is sufficient.
Senator MONTOYA. How did you happen to embark upon this, and
what kind of help did you furnish by way of seed money and seed
talent to get this thing started?
Mr. GAY. As I say, in 1968, we started off with, roughly a half mil-
lion dollars. In 1969, about a million and a half dollars. In 1970, our
contribution was about a million seven hundred thousand, and it will
be in that rough range this year.
Senator M0NT0YA. How much have you recovered of this invest-
ment?
Mr. GAY. Well, not recovered. This is an expenditure that we have
put out.
Senator MONTOYA. But you have had some sales.
Mr. GAY. No, sir; I am speaking only of the North American Rock-
well expenditures within NARTRANS and not the commercial sales
that we have been able to make to other organizations.
PAGENO="0062"
56
Senator MOXTOYA. I am trying to ascertain how much of a return
you got back on your investment.
Mr. GAY. None.
Senator MONT0YA. None?
Mr. GAY. None.
Senator MONTOYA. Do I understand you to say that NARTHANS
still retains its profit? Or were there any profits?
Mr. GAY. There have not been any profits. That is what my point is.
We anticipate that it will become a profitable organization sometime
this coming year, Probably the middle of 1912. Our initial plan was
that it probably would not become a profitable organization until
1973. With the 8(a) business which we had not contemplated and
which we have gotten in the past year, well, I should say in the past. 7,
8 or 9 months, we feel that it will turn the corner and become a profit-
able organization sometime next year.
Senator MOXT0YA. Well, in view of your experience, do I understand
you to say that it is almost impossible to realize a profit before a 3-
year experience?
Mr. GAY. I would say "Yes." I think we have done a remarkable
job. I am prejudiced, of course.
Senator MONTOYA. Well, then, how can we induce Government to
start a business that will take 3 years to make a profit?
Mr. GAY. I think you have to look at it as that is what it does take.
Anybody who thinks that it will take a lesser period of time than that,
I believe is not being realistic. Now, there may be exceptions and there
may be specific instances. I know of very few. I can think of only one,
as a matter of fact, that I have known that has started up and has
made a Profit within a year. A new organization can be profitable in
not much less than 3 years, and it is unrealistic to think that it can.
Senator M0NT0YA. Well, we are not going to eiicounter many North-
Anierican-Rockwells that will put $3 million into this type of opera-
tion before the operation realizes a profit. That is the point I am try-
ing to make and the alternative that we have is through Government
incentives or contract bonuses or more intensive 8(a) activity.
Mr. GAY. Yes.
Senator M0XT0YA. But I doubt very seriously whether you can
lmprove upon this timetable even with more 8(a) subcontracting.
Mr. GAY. I beg your pardon?
Senator M0NT0YA. I doubt very seriously whether you can improve
upon the results that you have realized b more 8(a) contracting
activity.
Mr. GAY. If we had had- let me put. it this way: It it. is to be cx-
pected and it. was natural. that our 8(a) contracts. as with any other
type of contract., started off rather small and were rather slow in
developing. It has only been within like the last few months that. we
have gotten substantial volume, andi in any kind of a manufacturing
organization tlia.t is the key to maintaining your operations. If you
can get. a substantial volume, maintain it over a time. operate efficiently,
that is when ou are going to break even or make money. And when you
say if we could have had more and couldi have had it faster-which we
probably were not ready for-we might. have been able to have done
better: well. I am ~iving that. realistically I do not think that could
have happened.
PAGENO="0063"
57
Senator M0NT0YA. Did GSA come into this picture at all?
Mr. GAY. Yes. Our initial contracts were, as I say, for binders, half-
inch, 1-inch, 2-inch type binders for some $600,000 with GSA. That was
our initial 8 (`a) contract.
Senator MONTOYA. `What about the Department of Defense?
Mr. GAY. There is the F-100, AIMS program. The first picture that
I showed you is the basic unit of the F-100 AIMS program.
Since then we have gotten a T-33 AIMS program very similar to
that kind of work.
Senator MONTOYA. Have you been able to take care of these contracts
within the time prescribed?
Mr. GAY. `We have-these contracts are yet to be completed, but we
can say that the very first orders, the first deliveries that were called
for~ were met on schedule with complete shipments, no shortages or
anything, and, as a matter of fact, ahead of schedule.
Senator MONTOYA. And were all of these-
Mr. GAY. So, the answer is "Yes."
Senator MONTOYA. WTere all of these contracts 8(a) contracts or
were there some set-asides?
Mr. GAY. No, all 8(a).
Senator MONTOYA. Of course, you would not be qualified for the set-
asides, as North American Rockwell.
Mr. GAY. No, sir.
Senator MONTOYA. Did you do any work for the private sector?
Mr. GAY. Yes, sir. As I say, the commercial business was only some
$4,000 in 1969. It went to $56,000 in 1970. This year, it will be over a
quarter of a million, and will approach probably a half million this
year. Next year, we are anticipating a half million in commercial work,
straight commercial work. As I say, these cassette holders are being
sold not only through Sears and Montgomery Ward but several of the
other big chain stores.
Senator MONTOYA. `Well, they are just coming into their own are they
not?
Mr. GAY. We hope so.
Senator MONT0YA. `Well, the cassette business is just coming into its
own now, but the cases for the cassettes are a very new thing. In fact,
the Library of Congress just started buying them for shipping cas-
settes. They are putting much of the material that they used to put in
Braille for the blind into cassettes now. The cassettes are now being
placed in these plastic cases. So, that means quite an expansion for this
particular industry.
Mr. GAY. Yes.
Senator M0NTOYA. How do you think Government can help provide
proper incentives so that other companies can follow your example?
Mr. GAY. I do not know that I can answer that.
Senator MONT0YA. Have you had any on-the-job training provided
by the Department of Labor?
Mr. GAY. Yes, sir. As I said, initially, our initial contracts that we
had when we set this organization up were for helping in the excess
training cost from the Department of Labor. In 1969, we had a
$321,000 contract, for instance, from the Department of Labor on the
MA-2 program.
Senator MONTOYA. Was that training successful?
PAGENO="0064"
58
Mr. GAY. It was successful. Our problem was having trained the
people ~ ~ i~ace to put. them, because we were laying off peopie
in all of the divisions of North American Rockwell. As I say, we went
from some 100,000 to around 30,000 or 40,000 people during this period
of time.
Senator MOXTOYA. Have you been able to bring them into the new
expanded operation, the ones you have trained?
Mr. GAY. No, sir.
Senator M0NT0YA. They went into other industries?
Mr. GAY. Yes, some did; some did not.. We, during 1968, had seven
voluntary-well, we had 24 what we call "departures." Seventeen of
them were involuntary; seven were voluntary. Of these, four were for
personal reasons, and three went to other employment.
In 1969, we had 49 that left for personal reasons, a.nd 40 that went
to other businesses.
In 1970, 42 left for personal reasons, and 32 were employed else-
where. We laid off, in 1970, 28 people, and we were not able to place
these 28 people anywhere.
In 1971, we had 11 that left for personal reasons, and 11 went to
other employment. Thirty nine were laid off, and we were able to
place only six of those 39, and, as far as we Imow, the 33 have not
been placed and are unemployed.
Senator MOXTOYA. What is the average salary of the ordinary em-
ployee? What does he earn on a per-month basis?
Mr. Fomi. I cannot put it on a per-month basis, but it would be ap-
proximately $2.25 an hour.
Mr. JoNEs. Mr. Gay, I think that North American Rockwell's
establishment of NXRTRANS is quite admirable, and I do not want
my further questions to be interpreted differently from that, but I
wondered to what extent North American Rockwell in its own con-
tracting has an active program of trying to recruit minorities?
Mr. GAY. Yes, we have a very act.ive program. We have developed a
minority business listing which we feel constitutes the most adequate
listing in the country.
There are all sorts of different listings, but there is not a.n authori-
tative one. I have used t.he ICBO. I have gotten from the Aerospace
Industry Association and other companies, their source lists of minor-
ity enterprises, and we have established a catalog of these kinds of
companies. As our buyers become aware of other minority companies,
they send us the information into a central place and we add this to the
listing. Each of our buyers are instructed that they are to concentrate,
as well as going along with the normal business progra.m, t.hey are to
concentrate upon the minority business enterprises as a part of that
particular program.
And at each of our divisions, we have a small business administrator
who is assigned for this specific purpose of assistiiig small businesses
and especially assistmg minority business enterprises. Any minority
business enterprise coining in or that we are aware of, is funneled from
this man to the particular buyer that would be interested in that com-
pany's product so t.hiat he goes straight to him; he does not have to
cut through a lot of redt.a.pe to get right to the buyer who has tlie~
orders to place.
PAGENO="0065"
59
In addition to this, many of our employees are very active in going
outside and looking for these companies, rather than waiting for them
to come in. We have people assigned at several of our larger divisions
who actually spend a lot of their time touring the minority commurn~
ties and, if you please, knocking door to door, finding out what the
capabilities are and then guiding them back into our business.
We are very active in urban affairs. Down in the Torrance-Compton
area some of our procurement people are very active in an EDTJCOM
program, trying to help these people understand what they have to do,
how they have to react to get business from not just us but from any-
body.
Mr. JONES. Is there anything in the Federal Government that can
be done, either through the SBA or otherwise, which would facilitate
this activity?
Mr. GAY. Yes, sir. I think one of the big things that could be accom-
plished would be if you could find the funds and the people to prepare
and maintain on a current basis a minority business enterprise list.
That would be valuable.
Now, in my case, I am interested in manufacturing concerns only.
I am not interested in the retail types of businesses; so, what I would
like is a valid listing of minority enterprises with some very short
listing as to what their capability is so that I could get this informa-
tion to each of our buying personnel, and then those individuals, the
buyers, will take it upon themselves to validate the capabilities of the
company.
I am not suggesting that the Government has to back it but at least
if we knew who to contact or who to call, it would be very helpful.
I think this should be broken down by areas so that we would know
the people, let us say, in the California area or in the Colorado area or
in the New York area and where we have a requirement-~and we have
plants all over the country-the people that are in a particular locality
would be able to know where they could go for what type of product.
I think this would be a very helpful thing that the Government could
do.
Mr. JONES. Thank you very much, Mr. Gay.
Mr. Rogan, has the McDonnell Douglas Co. been actively involved,
as has North American Rockwell, in recruiting minority subcon-
tractors?
Senator MONTOYA. Well, Mr. Rogan is going to summarize his state-
nient, and then we will ask him some questions.
Mr. JONES. All right.
Senator MONTOYA. So, your statement will be made a part of the
record at this point, Mr. Rogan.
(The prepared statement submitted by Mr. Rogan reads in full as
follows:)
70-654 0-72-5
PAGENO="0066"
60
STATEMENT BY
JOHN P. ROGAN, VICE PRESIDENT-ADMINISTRATION,
MCDONNELL DOUGLAS ASTRONAUTICS COMPANY
5301 BOLSA AVENUE, HUNTINGTON BEACH, CALIFORNIA
BEFORE SUBCOMMITTEE ON GOVERNMENT PROCUREMENT OF THE SENATE
SMALL BUSINESS COMMITTEE
SEPTEMBER 29, 1971
In September, 1968, MDAC, a Division of Douglas Aircraft
Corporation, opened a training center in South Central Los Angeles
to hire and train hardcore minority unemployables, principally
blacks and Mexican-Americans. In the first two years of operation
318 trainees were hired and trained. Of the trainees hired 17
were transferred to other lqcations of MDC, 16 found better Jobs
with other firms and 101 are still employed at the facility, which
is now known as AVI Manufacturing (AVIM). The balance quit or were
terminated for various reasons. Lack of aerospace work was the
principal reason more people were not trained and that many of the
employes had to be laid off. The training was principally supported
by a two year training contract with the Department of Labor. That
contract expired 30 June 1970.
In mid 1970, McDonnell Douglas Corporation and a group of
employes at the facility started considering a divestiture plan for
the enterprise. Agreement was reached and MDC filed an agreement
to form AVI Manufacturing, a California Corporation, on December 1,
1970. A divestiture plan was submitted to the Small Business
Administration on 21 October 1970 in order to qualify a new corpora-
tion for Small Business Administration Regulation 8A set asides.
PAGENO="0067"
61
MDC holds' 119% of the stock, AVIM 51%. The divestiture plan requires
MDC to reduce its holdings to 20% in less than 5 years after the
initial agreement date. The SEA approved the divestiture plan and
qualified AVIM on February 5, 1971.
Total personnel of AVIM as of July 14, 1971 was 101. Estimated
sales for calendar 1971 are $l,1428,000.
Potential commercial product lines being investigated by AVIM
are telecommunications components, air aargo containers and commercial
furniture refurbishment.
The goals and objectives of AVIM are similar to those of other
free enterprise companies - profit and growth. The management wishes
to develop a viable and versatile company in the South Central area
of Los Angeles. A natural adjunct to these objectives will be the
employment of people who live in the Watts and Compton areas. It
is felt that the status of the employes and their ability to support
themselves will be enhanced more in the long run through their profit
sharing participation of such an enterprise rather than through
simple skills training.
It may be noted that the 8A plan was submitted to the
~Los Angeles SEA Office in October 1970, but was not approved until
PAGENO="0068"
62
February 5, 1971, and then only through the assistance of
Representative Jaynes Corman, Van Nuys, California. This, despite
nany discussions by our staff people with SBA Representatives in
Los Angeles, San Francisco and Washington, D.C. and further despite
universal praise from SBA personnel in these offices that our
plan proposal was the best they had ever seen.
Los Angeles SBA Office personnel in fact recommended that we
visit the Washington, D.C. Office to determine the exact cause of
approval delay. Our staff man in charge of the plan proposal, Mr.
D. J. Garrity and E. E. Barrington, President-AVIM, did discuss the
delay with both San Francisco and Washington, D.C. SBA personnel and
were unable to obtain any commitment other than "it will be approved
within 2 weeks". This occurred almost three months prior to approval,
(see Attachment 1.)
Our staff people, Mr. Barrington (a former MDAC employe) and
the undersigned have the following candid criticism and recommenda-
:tions as a result of our experiences:
1. Both SBA and GSA office personnel were most cooperative at
all times but were of little assistance in our attempts to set
up an approved 8A b~isiness. While the SBA has published many
fine reports and studies for small business ventures, they have
little or no "how to qualify for 8A" literature.
2. There seems to be very little decentralized authority. All
decisions seem to go to the regional or Washington, D.C. office.
This puts local office personnel in the position of sympathetic
advisors without authority to act.
PAGENO="0069"
63
3. There were definite indications of understaffing of
qualified, energetic personnel through our inability to make
appointments promptly, to get all required information at one
time rather than piecemeal as indicated by Attachment 1, and
finally, approval of our plan through Congressional inter-
cession. This might be said to add up to typical bureaucratic
inertia.
~. Since the 8A approval AVIM has been successful in obtaining
two Government contracts. One, we are told, is the largest
technical set aside issued to date through the SBA in the
amount of $l,5~O,OOO. The Los Angeles office has been most
cooperative and helpful in expediting the paperwork involved
in the execution of these contracts. AVIM has good prospects
for additional contracts in both Government and private industry.
5. Our recommendations, of course, would be that action be
taken to remove the problems discussed above. Further, one
of the heaviest burdens on a new minority business is that of
marketing or finding set aside work for which the business is
qualified. In the case of AVIM, management people who should
have been in the plant `minding the store" had to travel to
some 25 procurement centers at great expense of money, time and
plant efficiency. Centralization of Government set aside
procurement to one agency with immediate notification to 8A
qualified contractor8, while difficult to accomplish, would do
much to remove this burden upon understaffed and often in-
experienced management.
PAGENO="0070"
64
In my opinion, and in the opinion of many businessmen
associated with minority business projects, this problem
will cause more minority businesses to fail than any
operational or financial difficulties.
Respectfully,
~ Joh~~. Hogan
Attachment 1. Letter E. E. Barrington, President-AVI Manufacturing,
to Representative James Corman, January 13, 1971.
PAGENO="0071"
65
ATTACHMENT 1.
(` 4~\flI7 ALL~AN~ VENTURES ~
&l\L/ LI 4034 BUCKIN~3HAM RD. SUITE 206 LOS ANGELES. CALIF. 90008 (213) 206-7873
January 13, 1971
Congressman James Cornan
1141422 Victory Blvd.
Van I~uys, California 911401
Dear Sir:
Alliance Ventures Inc. Manufacturing represents a joint venture between
the HeDonnel). Douglas Corporation and members of the minority community
to develop a training facility, formerly operated by McDonnell Douglas,
in South Central Los Angeles into a viable manufacturing operation.
Success of this venture is predicated upon government support, through
the SPA 8 (a) program, to establish a solid base of capability during
our first three years of operation. `ro date the response to our efforts
from SPA has been nil. The sItuation, at present, is critical in that
we began operations January lith and face the possibility of layoffs and
financial loss if not given the opportunity to obtain government business.
Following is a su~rnary of our experience with SPA:
1. In mid August we met with Mr. Ed Lush of the Los
Angeles Office of SBA to discuss our divestiture
plan with McDonnell Douglas and to find out what
docwnentation was required to participate in the
8 (a) Program. We were given a model proposal to
use as a guide and a suxrnnary of requirements.
2. The first week of October, upon consunation of our
negotiations with McDonnell Douglas, we contacted
Mr. Lush and gave him three copies of our proposal
(see attached Proposal For The Divestiture Of The
MDAC-WFST Couth Central Los Angeles Operation).
After examining it he stated that it had all of
the required information and that approval would
be forthcoming.
3. The middle of October I met with Mr. Ed Odell,
Chief, Government Contracts Division, SPA, in
Washinp-ton, D.C. During our convernatlon I
asked about the status of our proposal. He
stated that he had no knowledge of it and issnedi-
ately called his San Francisco office. After
conversing with them he assurred one that the
matter would be taken care of and that we would
PAGENO="0072"
66
Congressm~.n James Corman -2- Ol-l3-7l~
have anproval shortly. I left a copy of the pro-
posal with him so that the General Counsels Office
there would have an immediate onnortunity to review
it so that the matter could be resolved in a short
period of tine.
14. Dy the first week of ?~ovcinber we still had received
no notice from SPA so I again contacted Mr. Luck.
Re infor~od me that they r.occlcd a ccr~y of the Duci-.
noesmeans Agreement entered into bat'~een ourselves
and McDonnell Douglas. A copy, signed by Donald
Douglas Jr. for McDonnell Douglas, was submitted.
(see attachment i)
5. Two more weeks passed end again no notice from SPA.
I contacted Mr. Luck who informed me that approval
could not be given until they had a copy of the final
agreement between ourselves and McDonnell Douglas.
The second week of December we delivered three copies
of the final agreement to Mr. Luck's office.
6. The last week of December Mr. Lusk informed me that
Mr. James Roxie of the local General Counsels Office
was holding up approval because he had some questions.
I contacted Mr. Moxie and determined that he needed
evidence that the ownership of Alliance Ventures Inc.
was controlled by minorities. In addition he question-
ed the enforceability of the divestiture clause of our
agreement. We have attempted to resolve these matters.
through subsequent telephone conversations and written
memoranda between ourselves, our counsel, counsel for
McDonnell Douglas and Mr. Moxie. (see attachments II
and III)
In summary, over three months have passed since we first submitted our
prooosal to SBA. We have attempted to comply with all of their requests
and feel that we have been reasonable and patient. The ~oint hns been
reached, however, where we feel that we can no longer depend upon normal
channels to transact business with the government through them. S~'A
cim~ly has not boon responsive. Several government agencies, inc~.u~.ir.g
GSA and the Air Force, are willing to do business with us immediately
upon 8 (a) certification. Recognizing the urgency of the matter your
assistance in expediting our request to participate in the program will
be very much appreciated.
Sincerely yours,
E. E. Barrington
President
Alliance Ventures Inc.
gEB:cm
PAGENO="0073"
67
Senator MONTOYA. And, now, you may proceed to try to excell the
performance of North American Rockwell. if you wish, Mr. Rogan.
STATEMENT OF FOHN P. ROGAN, VICE PRESIDENT, ADMINISTRA-
TION, McDONNELL DOUGLAS ASTRONAUTICS CO., HUNTINGTON
BEACH, CALIF.
Mr. ROGAN. Thank you, Mr. Chairman.
I would like to emphasize some specific parts of my submitted state-
ment.
In September 1968, the Astronautic I)ivision of the then Douglas
Aircraft Corp., which then moved into McDonnell Douglas, opened a
training center in south central Los Angeles to hire and train hard-core
minority unemployables, principally blacks and Mexican-Americans.
In the first 2 years of operation, 318 trainees were hired and trained.
Of the trainees hired, 1? were transferred to other elements of the
McDonnell Douglas Corp., 16 found better jobs with other firms, and
101 are still employed in the facilities now known as AVI Manu-
facturing Co. The balance quit or were terminated for various reasons.
Lack of aerospace work was the priiicipal reason more people were
not trained. Many of the employees had to be laid off. The training was
principally supported by a 2-year training contract with the Depart-
ment of Labor. That contract expired on the 30th of June, 1970.
If I may excerpt from my submitted statement, I would like to
note that the Allied Ventures, Tue., Co., which was essentially the
financial supporter of Allied Ventures Inc., Manufacturing and Mc-
Donnell Douglas Corp. submitted to the Los Angeles SBA office in early
October 1970, an 8(a) divestiture plan. This divestiture plan was not
approved until February 5, 1971, and then only through the assistance
of Representative James Corman, Van Nuys, Calif. This, despite many
discussions by our staff people with SBA representatives in Los An-
geles, San Francisco, and Washington, D.C., and further, despite urn-
versal praise from SBA personnel in these offices that our plan pro-
posal was the best they had ever seen.
I have assumed here that the Senator has come to San Francisco not
for a diet of pabulum but facts.
1. Both SBA and GSA office personnel were most cooperative at
all times but were of little assistance in our attempts to set up an
approved 8 (a) business. While the SBA has published many fine re-
ports and studies for small business ventures, they have little or no
"How to Qualify for 8 (a) "literature.
2. Within the SBA, there seems to be very little decentralized au-
thority. All decisions seem to go to the regional or Washington, D.C.,
office. This puts local office personnel in the position of sympathetic
advisers without authority to act.
Obviously, we cannot criticize without making some recommenda-
tion would be that action be taken to remove the problems discussed in
my written statement.
Further, one of the heaviest burdens on a new minority business
or any small business is that of marketing or finding set-aside work
for which the business is qualified. In the case of AVIM, management
people `who should have been in the plant "minding the store" had to
travel to some 25 procurement centers at great expense of money,
PAGENO="0074"
68
time, and plant. efficiency. In my opinion, centralization of Govern-
ment set-aside procurement to one agency with immediate notification
to 8 (a) qualified contractors, while difficult to accomplish, would do
much to remove this burden upon understaffed and often mexperi-
enced minority management.
I realize this would be a. very difficult thing for the Federal Gov-
ernment to accomplish, yet I feel that this problem, plus inexperi-
enced management on the part of the small business managers, minor-
ity or not, will cause more minority businesses to fail than any oper-
ational or financial difficulty.
I would like to add to my written statement two personal observa.-
tions. SBA, as a prime contractor, is a. very tough negotiator. The
price negotiated between the SBA and AVI Manufacturmg on a
$1,540,000 contract was 10 percent lower thaii that. price that was
estimated by a team of McDonnell Douglas experts as a minimal
acceptance price.
Further, in my opinion-
Senator MONT0YA. Well, let me ask you a question at this point..
Mr. HOGAN. Yes, sir.
Senator Mox~roYA. But the $1,540,000 contract prevailed; is that
right?
Mr. RoGAX. That is correct, sir.
Senator MOXTOTA. What kind of a profit experience did you have
from that contract?
Mr. HOGAN. We are not sufficiently far into it, Mr. Chairman.
Senator MONTOYA. Have you had any indication?
Mr. HOGAN. No indication as yet. We are just in the second month
of a. 31-month contract.
Senator MONTOYA. Well, did you have similar experiences with other
contracts?
Mr. ROGAN. Most of the work that has been done in this facility,
I will say up to 90 percent of the work that has been done in this
facility has been either time and material or fixed-price subcon-
tracts. either with the McDonnefl Douglas Astronautics Co. or
Douglas Aircraft Company which are both divisions of the McDonnell
Douglas Corp. Ninety percent of it. A'\TI Manufacturing now has
three Government contracts, the one that I mentioned for $1,-
540,000 and two small set-aside contracts that total approximately
$95,000. They also have two commercial contracts that total about
$35,000.
Now, they have not gotten far enough along on any of these con-
tracts for me to really judge, as I am not an active part of the coin-
~any management, because it is 51 percent owned by minority people,
49 percent owned by the McDonnell Douglas, and I have not gotten
into sufficient detailed examination of the work efforts and the finan-
cia.l statements to say whether they are going to be successful or
whether they are going to fail. In my opimon, they are going to be
successful.
Senator MONTOYA. What do you do mider the $l~540,000 contract?
Mr. HOGAN. That is the contract from the Army-Missile Command
in Huntsville, Ala., to the SBA for a sensor system which goes into
the silos of the Safeguard system for the Spartan missiles of the
Safeguard system. It is, based on t.he information I have had from
PAGENO="0075"
69
the SBA, the largest technical contract that has been awarded as a
set-aside.
Senator MONTOYA. And how did you develop the capability to serv-
ice this type of a contract?
Mr. ROGAN. By the assistance of experts, various experts, in Mc-
Donnell Dougias Co., to train the personnel over the course of
the operations since September 1968.
Senator M0NTOYA. Did you have a Department of Labor grant for
this purpose?
Mr. HOGAN. We trained under our Department of Labor contract,
which, as I said before, lasted for approximately 2 years, through
mid-1968 to mid-1970, approximately. `We trained quite a few minor-
ity females in electrical harness work very similar to that shown to
you by North American Rockwell and my North American friend.
Senator MONTOYA. Mr. Gay, do you wish to leave?
Mr. GAY. May I? I have an urgent call.
Senator MONTOYA. Certainly. Thank you very much.
Mr. GAY. Thank you.
Senator MONTOYA. Proceed, Mr. Rogan.
Mr. ROGAN. The training under the Department of Labor contract
essentially developed the skills for the minority female people to do
the great majority of the work that must be done under this sensor
kit-the Safeguard sensor kit.
Senator MONTOYA. What does this involve?
Does this involve any electronic work?
Mr. ROGAN. It involves some very complex testing of some very
delicate humidity, water, and temperature sensors, and it also in-
volves manufacturing all of the electrical harnesses and the meta'
receptacles, junction boxes, if you will, that contain the sensors once
that kit is delivered to the Safeguard site. Then, it will be installed
either by the Corps of Engineers or by the McDonnell Douglas people
into the Safeguard-Spartan silos.
Senator M0NT0YA. There has been a tremendous technology devel-
oped in this field because of Vietnam; is that not right?
Mr. ROGAN. Oh, yes.
Senator MONTOYA. Sensing devices?
Mr. ROGAN. Yes, indeed.
Senator MONTOYA. So, time problem with you is not in the developing
of the technology but rather in manufacturing the finished product?
Mr. ROGAN. I believe, Mr. Chairman, the most severe technical prob-
lem on this contract is in time manufacturing of the sensOrs which will
not be done by AVI Manufacturing but will be purchased and tested
by AVI Manufacturing.
Senator M0NTOYA. What will they do, then? They will do the
testing?
Mr. ROGAN. They will purchase and test.
Senator MONTOYA. `Whom will they purchase it from?
Mr. ROGAN. There are only three qualified contractors in the coun-
try. I am sorry I do not have their names with me.
Senator MONTOYA. That makes my point, then. They aie not in the
manufacturing business; they are in the testing business.
Mr. ROGAN. They are in the manufacturing business to the extent
that they are manufacturing sheet metal parts very similar to the
PAGENO="0076"
70
type of things that Mr. Gay showed you. They are manufacturing
electrical harnesses which is principally assembly as opposed to com-
POnellt manufacturing.
Senator MOXTOYA. WTe11, what assurance do we have that there is
going to be a continuity of this type of work. because a. manufacturer
usually provides his own testing?
I am worried about the future of this organization.
Mr. ROGAN. I am not sure I understand your question, Se1lator.
Senator M0NT0YA. If you are not going into the manufacture of
hardware in this operation and are merely offering the services of
testing, what assurance do we have that there is going to be a followup
contract. so as to insure the continuity of the operation?
Mr. ROGAX. We are. at AVI Manufacturing, a manufacturing
operation to the extent that we procure components, electrical coin-
ponents, electrical plugs, very high quality electrical plugs, very high
quality sensing devices, and then raw materials or essentially raw'
materials such as sheet metal, wire, and you build these into a designed
assembly. It is a manufacturing business.
Senator M0XTOYA. Then, this company makes the finished item;
is that it?
Mr. ROGAX. And this company sells the finished item; yes, sir.
Senator MOXTOTA. All right..
Mr. R0GAX. The contract calls for 32 of those kits.
Senator MOXTOTA. All right. WThat do you envision to be the time
it would take the company to realize the profit from this operation
and any other activities that it. might be able to attract?
Mr. ROGAX. Under our submitted divestiture plan which requires
that., of course, we reduce the McDonnell Douglas Co., holding in AVI
Manufacturing to 20 percent or less within 5 years or less from the
date of the organizational agreement., of January 1, 1970, I would cx-
Pect that AVI Manufacturing, with only minimal support from the
McDonnell Douglas Corp., will hopefully be profitable next year, a
minimal profit.. I would hope that in the third year of that. operation
that they would produce a profit commensurate to Government con-
tractors' profits.
Senator MONTOYA. Now, under this divestiture plan, the starting
pomt is that the McDoimell Co., owns all of the stock?
Mr. ROGAN. No, sir; 49 percent.
Senator MONTOYA. Forty-nine? Now, how did the minorities buy the
other 51 percent?
Mr. ROGAN. The minority provided the other 51 percent through
a financing plan, through a company called Alliance Ventures, Inc.,
who provided a basic amount of initial capital, plus an agreement to
supply working capital for a period of 5 years.
Senator M0NT0TA. All right. How was this company funded?
Mr. ROGAN. This company was funded by its parent company, the
Ralston Purina Co.
Senator M0XT0YA. And where does Ralston Purina come in on the
profits?
How does it get repaid?
Mr. ROGAN. Yes; they would be repaid through their interest in
Alliance Ventures, Inc., which is a minority company which they
established. I believe, in early 1968.
PAGENO="0077"
71
Senator MONTOYA. So, the loan from this company is bearing in-
terest?
Mr. ROGAN. That was the original agreement; yes, sir.
Senator MONTOYA. And there is a payment of principal due the
company from its operation; right?
Mr. IROGAN. That w-as the original agreement, but we are now in the
process of a legal and financial reorganization.
Senator MONTOYA. But you still have to pay what was advanced to
this operation?
Mr. ROGAN. Ralston Purina is giving up their interest in the AVI
Manufacturing Co. which had certain interests in the AVI Co.
Senator MONTOYA. Yes; but the AVI Co. has not released its inter-
est in entitlement of the payment to the repayment of the loan?
Mr. ROGAN. They are in the act of doing that, sir.
Senator MONTOYA. They are?
Mr. ROGAN. Because they are unable, any longer, to furnish working
capital.
Senator MONTOYA. All right. What is going to happen to the loan,
then?
Mr. ROGAN. Certain principals in AVI who are now managing
AVIM had a financial interest in AVI, and in return for that financial
interest which they personally have returned to AVI, AVI has held
AVIM harmless of all its obligations to AVI.
Senator MONTOYA. I do not get it. Let us talk in terms of dollars.
You ale talking about interest. Now, let us talk in terms of dollars.
How much did AVI provide for the AVIM operation?
Mr. ROGAN. If I may answer your question, Mr. Chairman-
Senator MONTOYA. If you do not know exactly, say approximately.
Mr. ROGAN. Approximately, yes. Approximately $25,000 in working
capital, approximately $25,000 in a management contract, and the
McDonnell Douglas Co. investment in facilities was evaluated at
approximately $49,000.
Senator MONTOYA. All right.
Now, there has been no profit in this operation by AVIM, so if
there has been no profit there has been no payment of the principal or
interest to AVI or to the McDonnell Co.; right?
Mr. ROGAN. There have been no payment of any kind to AVI.
Senator MONTOYA. All right. And yoti say that because of the trans-
fer of certain interests that the AVI has now canceled the indebted-
ness?
Mr. R0GAN. Yes, sir.
Senator MONTOYA. All right. Now, what kind of an exchange of
interest took place here?
That is what I am trying to find out.
Mr. ROGAN. The two major principals in AVI Manufacturing were
also principals of AVI.
Senator MONTOYA. So, they have received some remuneration of the
AVIM operations?
Mr. ROGAN. They have left the AVI operation and given back to
AVI their stock interest in AVI in exchange for the initial capital in
the initial management contract.
Senator MONTOYA. AVIM?
Mr. HOGAN. Which AVIM gave back to AVI.
Senator MONTOYA. All right.
PAGENO="0078"
72
Mr. ROGAX. It is rather complicated Mr. Chairman.
Senator MONTOYA. Yes, it is; yes, it is. But the reason I am devel-
oping this is because this will not necessarily happen with another
similar business arrangement of another company or companies.
Mr. ROGAN. It would not have happened, sir, if McDonnell Douglas
had not been a 49 percent stockholder.
Senator MONTOYA. Right. So, do I understand you to say that AVIM
will be ready to start on the basis of its indebtedness incurred in-
house rather than through advancements made by AVI?
Mr. ROGAX. Well, it is a case between AVI and AVI Manufactur-
in~ of "all is forgiven."
Senator MONTOYA. Yes.
Mr. ROGAN. AVI Manufacturing now holdes three Government con-
tracts.
Senator MONTOYA. And on those contracts, if they lose, they have
to assume the responsibility?
Mr. ROGAN. Yes, as a maj or stockholder.
Senator M0NT0YA. Yes; and McDonnell will be a 20 percent stock-
holder?
Mr. ROGAN. The way that we will transfer the McDonnell stock
interest in AVIM is based on the profit earned by AVIM. For every
certain number of dollars profit that A\,TIM manages to put on their
books, the McDonnell Douglas will transfer a share of stock to AVIM
to be put iiito a trust account as incentive a.wards to the employees of
AVIM.
Senator MONTOYA. Yes.
Mr. ROGAN. Aiid not just to the officers but to all employees of
AVIM. We felt that it was very necessary to create an incentive type of
remuneration for all employees of the company.
Senator M0NT0YA. Now. on the basis of this arrangement and the
McDonnell stock being placed in a. trust arrangement, will, in the
possible hquiclat.ion, McDonnell and the management. of the A'\TIM
be better served by such liquidation than the employees themselves
who might own some stock?
Mr. ROGAN. That portion of the stock which it has been agreed upon
to be put into an employee trust eventually becomes a gift to the
success of the employees of the A\TI Manufacturing.
Senator MONTOYA. And does McDonnell Douglas automatically
come out of the. picture, as far as management is concerned, or as far
as any claims upon the financial structure of AVIM?
Mr. ROGAN. None, whatsoever.
Well, may I put it this wa.y, Mr. Chairman: Our divestiture plan
which was submitted to and approved by time SBA states that in
less than 5 years from the date of the agreement, the McDonnell Doug-
las interest will be 20 percent or less, which is a requirement of sec-
tion 8(a.), as I am sure you know.
Senator MONTOYA. All right.
Mr. R0GAN. Now, we have not made-there is no written agreement
or decision as to what happens to that last 20 percent of the stock.
I am inclined to think that once AVI Manufacturing becomes success-
ful and totally self-sustaining that we will transfer the balance of that
stock to AVI Manufacturing employees similar to the transfer of the
previous 29 percent.
PAGENO="0079"
73
Senator MONTOYA. What kind of managerial surveillance and super-
vision and control will your company have in the future over AVIM
and to what extent?
Mr. ROGAN. Under our written agreement I have and will have until
January 1972, a resident advisory manager. He has no managerial
power other than being advisory to the management of AV1
Manufacturing.
Senator MONTOYA. Of course, you would expect him to report to you
if something were going wrong in the operation?
Mr. ROGAN. He reports to me on a regular basis.
Senator MONTOYA. And that is the way it should be.
Mr. HOGAN. Our interest, Mr. Chairman, is to create a successful
business. Now, we also give them reasonable amounts of free, some-
times McDonnell Douglas paid time, sometimes employee volunteer
time, such as I go down there on Saturdays myself to help them out~
in addition to which, where they need special fields of expertise such
as a specialized electronic engineer, we will transfer to them or loan
to them, at cost, that specialized individual.
At the present time, there are five such specialists, one man to be there
for a year, and the other four men to be there for periods of from 30
to 90 days, because they do need, because of the technical requirements
of this one particular contract, they do need speciality specialists.
Senator MONTOYA. Do you have a breakdown of the number of em-
ployees and what racial groups they comprise?
Mr. HOGAN. Yes, sir. As of the date of my statement, of the em-
ployees, approximately 45 percent were black, 45 percent Mexican-
American and 10 percent white.
Senator MONTOYA. How many employees do you have?
Mr. HOGAN. \Ve have 101, and the makeup of that employment is as in
the NARTRANS case, largely a product of the south central area of
Los Angeles, and, again, as I said before, the basic point in setting up
the business was to create employables out of so-called hard-core
nonemployables.
Senator MONTOYA. Have you heard of the plan recently announced
by Xerox where they will lend out some of their personnel to go out
and work with small corporations?
Mr. ROGAN. Yes, sir. I have read it with great interest and have
forwarded it to my corporate headquarters a copy of it.
Senator MONTOYA. You, of course, have done a lot in this enterprise,
particularly, and North American Rockwell has, too.
Mr. ROGAN. If I may volunteer a statement, Mr. Chairman?
Sehator MONTOYA. Yes.
Mr. HOGAN. I have approximately 35 percent who voluntarily are
working with minority groups either in terms of teaching or expertise
assistance in small business. et cetera, even in competition with my
minority, and I use that in the sense of dollars' business. I have one
engineer who spends a great deal of time with Southern California
Manufacturing who has consistently bid against AVI Manufacturing.
But that happens to be his area of interest, and I am happy to see him
do it. But we have approximately 35 percent who provide expertise or
training on their own time and, of course, we encourage this kind of
thing.
Senator MONTOVA. Yes, sir.
PAGENO="0080"
74
Mr. FORE. Not to be outdone by Xerox, I do not know whether any-
one is present from Xerox, but we have approximately 20 employees
on leave of absence working for minority firms in management posi-
tions from the eastern seaboard to the western seaboard. We arrived
at the leave of absence as being the best means of doing this. We pro;
vide all the fringe benefits, continuity of employment, in order to plo-
vide for adequate retirement plans, and so on, but the borrowing coin-
pany pa~ s their salaries. Several of the southern California minority
organizations have as one of the principal members of the manage-
ment of their company one of our leave-of-absence employees.
Senator MONTOYA. What do you do? Bill them for the cost. of that
employee to your operation?
Mr. FORE. No. 1~Te put them on leave of absence, and they pay t.he
basic salary; we pay the fringe benefits, the insurance, etc.
Senator M0NT0YA. You do not bill that to them?
Mr. FORE. No; we pay for it. That is part of our contribution. In
addition, to the same thing that Mr. Rogan pointed out, and in terms
of the several things that Mr. Gray poiliteci out. employees will dedicate
their evening hours. Some reference was made to the Golcleii Oaks
Products this morning. The manager of that enterprise happens to be
a North American Rockwell employee on leave of absence. For the
tecimology to get the same amount of tensile strength out of an oak
bat as one would get from-I do not know what they make baseball
bats out of-hemlock, or something like that, was a technology trans-
fer from North American Rockwell. The manager of Golden Oaks
Products is from our Space Division in Downy, where such tecimology
is readily available. In addition to the manager, six to 10 employees
volunteer their time on weekends. evenings, and sometimes during the
work days if there is a critical problem. There is a mutual understand-
ing of need. The man who needs the help is willing to ask for it, and
the man who can offer it is willing to give it. That is the best possible
situation. I think that we both, McDonnell Douglas and North Ameri-
can Rockwell enjoy this situation in southern California.
Senator MONTOYA. I think that is very commendable. I think that
more large businesses ought to do these things.
Do you have any questions?
Mr. JoNEs. Yes. Thank you~ Mr. Chairman.
Mr. Rogan, the problem whic:h AVIM experienced in its certification
process took place before the 8(a) program was fully decentralized by
the SBA. Are you sufficiently acquainted with the experience of other
8 (a) applicants to know \vhe.t.her the experience after the decentraliza-
tion has been more favorable?
Mr. ROGAN. I was aware of the fact that we had submitted one of the
first divestiture plans under section 8(a), and I am not familiar with
any other company's experience.
Mr. JONES. I see.
Mr. ROGAN. But it was quite a horrendous experience. Without the
skill of the McDonnell-Douglas Corp., staff, I do not know how long it
would have taken.
Mr. JONES. Were there problems in the certification process other
than those arising out of the divestiture arrangement?
Mr. ROGAN. There were no problem~ w~hatsoever. Our original plan
as submitted in October was accepted the following February.
PAGENO="0081"
75
Mr. JONES. I mean to ask: Had it not been for the existence of the
divestiture arrangement, do you think there would have been any prob-
lems in the certification process, or did all of the problems seem to relate
to the novelty of the divestiture arrangement from the point of view of
the SBA?
Mr. HOGAN. The divestiture arrangement was not novel. It followed
all of the requirements of section 8(a). The reason that I make a point
of the time involved in obtaining qualification under section 8 (a) and
therefore qualification for set-asides, had the company, AVI Manu-
facturing, been wholly dependent upon set-asides~ it would have gone
bankrupt before the program was ever approved. But, as I pointed out,
at that time they were 100 percent operating on McDonnell-Douglas
with fixed-price contracts of various types.
Mr. JONES. It took you 4 months after application to become cer-
tified?
Mr. ROGAN. Yes.
Mr. JONES. What was your post-certification experience?
How many 8(a) contracts has AVI received?
Mi. HOGAN. Our post-certification experience has been very happy.
We have, received three set-aside contracts since February of-
Mr. JONES. Of this year?
Mr. ROGAN. Of this year; yes.
Mr. JONES. And how `long was it `after certification `before you re-
ceived the first contract?
Mr. ROGAN. Approximately, our first contract that A'S/I Manufac-
turing received was approximately in late July, which would have
made it 4 to 5 month's.
Mr. JONES. I see.
Mr. ROGAN. The activity. postapproval, has been wonderful. One
of the difficulties, however, is the fact that you must send your best
people, your managers, out to do the marketing, and, therefore,
they are not there to manage the store. And one of the problems of
small business, whether it be minority or otherwise, is lack of expe-
rienced management.
Mr. JONES. Well, when you say that you have to send your managers
out to do marketing work, do you mean that `the SBA itself i's not doin'
an adequate job on obtaining certification for subcontracting contracts
Mr. ROGAN. `Well, you see, Mr. Jones, you must go out and look at
the potential Government work that you are capable of doing, and,
then, of course, you have to do that at the various Government pro-
curement cen'ters, of which, as you know, there are many.
Mr. JONES. Has it been your experience that AVIM w-ould sign the
contract and `take it to the SBA, rather than vice versa?
Mr. HOGAN. That has been our experience in the three contracts
that we have.
Mr. JONES. I see.
Now, w-ith regard to Mr. Gay's comments on the ways in which the
Federal Government might be of more assistance in helping large
corporations like McDonnell-Douglas issue subcontrac'ts to minority
enterprise firms, do you have anything further to add to that?
Mr. HOGAN. I fully endorse Mr. Gay's comment with regard to
helping us get the information on qualified small business contractors.
Senator MONTOYA. May I interrupt there?
7O-6~34 O-72-----6
PAGENO="0082"
76
I think you are absolutely right in this. I think this is one of the
great cases for the lack of rapport between the small business com-
munity and the procurement agencies of the Govermnent. Now, what
would ou suggest by way of a middleman to bring the two together,
that is, the procurement agencies of the Government and the 8 (a) sub-
contractor; how do you suggest that. this be accomplished?
Now, we can have a list of eligible minority contractors, but that
will not do any good. You have got to have a catalyst. in t.he arrange-
ment.
Now, how do you provide that catalyst?
Mr. ROGAN. Well, I believe that the DSA-
Senator MONTOYA. Defense Supply Agency?
Mr. ROGAN. The Defense Supply Agency, with its catalog of items
which is made available to anyone that. wants to pick up a copy of it,
and a rather thorough description of those items, and the prevailing
approximate prices is one of the best. ways of getting Government pro-
curement requirements to the 8(a) or the small business subcontractor
directly. But. outside of the kinds of items w~hich the Defense Supply
Agency which tend to be the common things which are used across the
various units of the Defense Department, outside of that area, pro-
curement centers are very frightening. There are literally, there must
be, hundreds of them, the many units of the Air Force, the Army
procurement centers, the Navy procurement centers.
When you have a subcontractor who is qualified to do a rather high
content of technica.l work, one who can produce aerospace kind of
quality, it is very difficult for him, too, to do anything but go one at a
time to these various ominous Army procurement centers and Navy
procurement centers of which we have contacted 25, and that is money
and time.
And, as I mention in my written statement, Mr. Chairman, I would
like to see certain procurements set aside by these procurement centers
and directed to the SBA and let the SBA contact those people who are
qualified to do that work.
Senator Mo~croYA. WTell, we have been trying to do this since we en-
acted 8(a) and since we began insisting that we make 8(a) meaning-
ful. We have had a little problem with the Department of Defense, and
I think we are going to have to have somebody else run a little surveil-
lance on the Department of Defense and give them the wherewithal to
do a little more prodding.
Mr. ROGAN. In all frankness, Mr. Chairman, each procurement or-
ganization is trying to do the best possible procurement job in terms of
quality and cost.
Senator MONTOYA. Yes.
Mr. ROGAN. They are probably-in view of their mission, their basic
mission-they are probably reluctant to set aside bids that might cost
them more money out of their budgets by going through SBA or some
other agency.
Senator MONTOYA. Well, are you trying to say-that is the practical
point, but are you trying to say, Mr. Rogan, that the 8(a) contractor
cannot compete with the big contractor costwise?
Mr. ROGAN. Not in all cases. Well, lie cannot compete with the more
experienced contractor in all cases. He must prove himself, and it is
very difficult to get enough contracts to prove yourself.
PAGENO="0083"
77
Senator MONTOYA. Well, I have had instances where small contrac-
tors had been the low bidders and they had the capability and
experience to indicate that they knew what they were doing when they
submitted such low bids, and some contracting officer or procurement
officer would reject the bid unless there is interference from some
Member of Congress, and that small contractor would just not be heard.
And I have urged reconsideration of quite a few of those bidders,
because their rejection was in violation of the law, and, to my knowl-
edge, none of these people had ever lost money by a low bid.
Mr. ROGAN. Well, I have a limited amount of experience in this area.
Senator MONTOYA. Of course, they had the know-how and they had
the experience, but they were small.
Mr. ROGAN. But in the particular case with which I am very familiar,
AVI Manufacturing, they had the know-how, somewhat through Mc-
Donnell Douglas support, and they are very competitive businesswise,
but the SBA, in my opinion, did not negotiate a price that they should
have negotiated with them, because of the pressure from the procure-
ment agency behind the SBA, if you will.
Senator MONTOYA. Well, as I understand your and Mr. Gay's testi-
mony, what we need first is a catalog of eligible minority contractors
who can work under 8(a) or under set-asides?
Mr. R.OGAN. Yes, sir.
Senator MONTOYA. And this catalog must become available to all
Government procurement agencies and, in turn, their names must ap-
pear in the bid lists of all Government procurement agencies?
Mr. ROGAN. I think that would go very far toward curing the
problem.
Senator MONTOYA. And then I would go further than that. I would
suggest that SBA provide some technical people to investigate, on
the basis of the small contractors' availability, the procurement needs
of the Defense Department and every other Government agency and
determine for itself, with its technical help, whether or not it can
siphon some of these contracts through 8(a) to the small contractor
and his community?
Mr. ROGAN. I agree with you completely, Senator. I believe only
the SBA could be the best catalytic agent, if you would.
Senator MONTOYA. But they must have agents dedicated strictly to
this, instead of hodgepodge of expertise which proliferate over the
vast spectrum of the DOD spending, and that is what is happening
today, a proliferation.
So, can you add any more to this?
Mr. ROGAN. I do not believe so, sir. I would hate to see a new agency
created because I believe-
Senator MONTOYA. You must be one of those conservatives?
Mr. ROGAN. I am somehow antibureaucratic. But I surely believe
that you have in the SBA the basic vehicle to accomplish this job.
Senator MONTOYA. Well, I do not care whether you call it a divi-
sion or what, but you must have some individuals who have the capa-
bility, dedication, and determination to bird dog this mission.
Mr. ROGAN. You will find that in my written statement, sir.
Senator MONTOYA. All right. OK.
Thank you, gentlemen.
Mr. ROGAN. Thank you very much.
PAGENO="0084"
78
Senator MOXTOYA. Mr. Hum, Mr. Tom, and Mr. Williams.
Do you have a written statement, gentlemen?
Mr. Hu~r. ~Tes
Mr. WILLIAMS. No.
Mr. To~r. No.
Senator MONT0YA. For the purpose of identifying you gentlemen
iii the record, the witnesses now on the panel are Mr. Charles K.
Hum, Aerospace Services, Inc., of Oakland, Calif., Mr. Henry WT.
Tom, of H. \V. Tom and S. F. Tom Co., San Francisco, Calif., and
Mr. Larry Williams, Nairobi Corp.
So, you may proceed, Mr. Hum.
STATEMENT OF CHARLES K. HUM, PRESIDENT, AEROSPACE
SERVICES, INC., OAKLAND, CALIF.
Senator M0XT0YA. You have a written statement, sir?
Mr. HUM. Yes, Mr. Chairman; I have.
Senator M0XT0YA. May I have the written statement?
Now, Mr. Hum, for the sake of time we will make your state-
ment a part of the record at this point, and you may proceed to
summarize it and comment on it and acid to it if you wish.
(The prepared statement submitted by Mr. Hum reads in full
as follows:)
PAGENO="0085"
70
COMMENTS BEFORE
SENATE SMALL BUSINESS SUBCOMMITTEE
ON GOVERNMENT PROCUREMENT
SANFRASCQ~EI~MBER29!1L1
My name is Charles K. Hum, President of Aerospace Services, Inc. Oakland,
California. As President of an active Small Business and one which has par-
ticipated in the original 8(a) hard-core type program, I have been asked to
appear before your Committee. May I thank you for the invitation to appear,
and the opportunity to give you my thoughts on the 8(a) program based on
several years of participation.
First allow me to give you a little'background on our corporation. It was
formed In 1964 by myself and a group of individuals who had worked together
on aircraft overhaul and modification programs when the company for which we
worked decided to quit the business. The original contract was for T-33 Air-
craft overhaul and was bid and won competitively, although since we were a
new company it took the intervention of the Small Business Administration and
a Certificate of Competence before award was finally made. The first con-
tract WEtS successfully completed and the cOrporation progressed slowly on
competitive contracts until 1968 at which time it was selected as one of the
first 8(a) contractors under the original program designed primarily to provide
jobs to disadvantaged hard-core untrained personnel. The workload since
that time has varied up and down with the availability of 8(a) programs and
other programs which could be won cprnoetitively. Employment peaked in
1970. We had approximately 15Qin'June 1971 and currently have dropped back
to 94 due to phasing out of contracts. Contracts have always been completed
satisfactorily from the standpoint of quality and schedule, and with little or
no cost penalty to the government. As was the case with many 8(a) companies
there has been no large company sponsorship in our case, I am the majority
owner and other employees own the balance. All technical knowhow, equip-
ment and funds for operation and expansion has been generated internally.
Banking arrangements were worked out with a local bank and all loans guaran-
teed personally by the owners
During this period ~ve have endeavored to expand and diversify so as to become
more independent. We operate an Avionics shop performing airline communication1
navigational and radar equipment repair and overhaul, and operate a fixed base
operation with a small aircraft dealership. We are constantlysearching for
new avenues to become independent from 8(a) assistance but our ties to hard
core employment and high cost location make it extremely difficult in our line
of work, I am attaching as part of this written statement some data on our*
organization as of June, 1971, including total employment and employee break-
down. Note that we employed 21% hard-tore and 53% minorities.
PAGENO="0086"
80
Bas&i on our experience I have some constructive suggestions toOffGt. I
think it should be made clear that we feel a properly run 8(a) program is bene-
ficIal and has a definite place in our economic system While information in-
dicated overall 8(a) program may have suffered some bad experiences In the
Past, we feel ours has been successful, and sincerely hope our experience
will be equated along with those who may have been judged as failures
Now for my suggestions. I feel there should be two types of 8(a) programs,
(a) Minority ownership per the new concept.
(b) Hard-core employment as the original concept,
As an example of one who has advanced under the minority ownership concept
I can hardly fault that approach, Any program that will assist a ~uel~fied (and
I repeat qualified) individual to start his own business has to be good for our
free enterprise system, If he-is a minority or-hard-core individual there Is an
even greater plus factor. There are many capable Individuals who can benefit
from the administrative and financial support afforded by the 8(a~ program,
But desire and capability aren't the only factors in startIng a business, Don't
underemphasize the necessity of business acumen and sources for funds to
operate, These are as important as technical know-how and good personnel.
Even with knowhow and personnel our own experience shows you can't get off
the ground without funds and woilcing capital to meet the payroll. Banks will
not lend money without guarantees or collateral. Progress payments and assign-
ment of government contracts are one means of solving this problem. In addition,
awarding of a government contract provides both technical and management recog-
nition which will get a new company off on a proper image, and this too is
important. One of your biggest problems Is simply that you~ a~~,company~
It is in these areas of administrative and financial assistance, and in the allied
areas of image, integrity, and responsibility that the SBA and 8(a) programs will
assist minorities to form and operate companies that will prosper and employ
themselves and others. -
But while we consider minority ownership a most important factor, I most
assuredly do not feel we should abandon the original concept of employment of
-hard-core and minority personnel -- those less able minority workers who by
reason of lack of education or iinances are just happy to have a job, While we
understand the track record under this old concept was rather poor, our own
experience has been good. We think there's a real need for providing meaning-
ful JObS to those hard core individuals who rea fly want to work. - Most experI~nce
has indicated it is almost impossible to build a viable and competitive firm
utilizing such personnel, To some extent this is true, - You do have high absen-
teeism and turnover, lower skill-levels and efficiency, less interest in safety
and discipline. Admittedly, as a result, even we who have had some
success are having continued difficulty in remaining competitive.
PAGENO="0087"
81
On the other hand on those programs we have received under 8(a) auspices we
feel little if any cost penalty has been experienced. I understand this has not
been the case with all 8(a) contractors. If so, let's still appreciate the program
for what it can do in the welfare field. Let's establish a hard-core class of 8(a)
work programs and openly recognize them as welfare programs. Then let's
establish a fund or other means by which any cost penalties can be paid. For
example, the Air Force has many programs which could be so assigned. The
big problem in these days of tight funding and squeezing of the defense dollar,
is the Air Force procurement people cannot justify nor afford to pay a penalty
in cost -- therefore, few 8(a) programs. All right then, if a program is developed
which will provide meaningful hard-core jobs, pay the Air Force the cost d1ffer~
ential out of a special fund. President Nixon just allocated $200 million to
help unemployment areas by providing jObs in public service occupation. What
I am suggesting here we do the same thing for hard-core areas using Small
Business and 8(a) programs as a medium. It is our experience minority and
hard-core personnel can be found who will and desire to work * If they work
they can stay off welfare. At the same time they can maintain personal and
family pride. As you well know, the concept of self supporting jObS in lieu of
a dole is desired by the majority of Americans.
The third suggestion has to do with the total time period by which SBA will
support an 8(a) contractor before they deny support and let him "sink or swini'.
It is our understanding it has been arbitrarily established at 3 years. We are
not sure this is realistic, We feel it more a function of type, location, and
employee cost in the business. In our own case we operate in the highly
competitive defense area. We compete in a technical field and on a national
scale. We compete with low cost areas but actually operate in a high cost
area utilizing less efficient help. In a business known as one of the most
competitive it is highly doubtful that we or anyone else can consistently remain
competitive from a price standpoint. Yet at the end of three years, (and even
though our c'st penalty has been negligible) we have been told no more assist-
ance in the form of 8(a) contracts will be available, live may well go slowly
out of business. On the other hand, I have little doubt some minority owned
companies who develop a unique product and have low labor costs and good
management may need help for only a year or more. What I am suggesting Is
that such time determination not be established on the sole basis of an arbitrary
limit but on the value of the work being done by the individual company and its
overall benefits to the economy and social system. For example a company
willing to assume the added burdens of hard core empl~yment would receive
extended 8(a) assistance, and if useful enough, even continued assistance
so long as it provides hard-core employment.
Now let me emphasize:
1, We owe our continued existence in part to the support of the SBA
and 8(a) programs.
PAGENO="0088"
82
2. We think the 8(a) program is a success and has a place in
our social and ecor~mic system.
3. We feel continued consideration should be given to 8(a)
hard-core programs. We would be happy to assist in a con-
sulting capacity.
4. We think the 8(a) program properly administered can be an
effective social and welfare tool and provide a significant
means of reducing unemployment.
In conclusIon, once again let me express my appreciation for the opportunity
to appear before you and to pass on my thought on constructive Improvement
to a worthwhile program. I sincerely hope they will aid you In coming to the
best possible solutions.
PAGENO="0089"
83
AEROSPACE SERVICES, INC.
AND WESTERN AIRMOTIVE CO., INC. - WHOLELY OWNED SUBSIDIA~X
PERSONNEL MAKE-UP
AS OF JUNE 1971
Aerospace Services, Inc.
Total on Total Ethnic % Ethnic
Program Program on Program on Program
T-33 66 22 33.3
Pallets 23 22 95.7
Generators 33 24 72.7
Salaried 24 7 30.4
146 75 52.9%
W~sternAjrrnotive Co., Inc.
Production 2 1 50.0
Salaried 4 0 0
6 1 16.7%
ETHNIC ORIGIN OF EMPLOYEES
Caucasian ----- 76
Spanish Surname 6
Oriental 20
Afro-American 43
Other 7
Total 152
Certified HRD 21%
PAGENO="0090"
84
LIST OF SOCIAL AND WELFARE AGENCIES
WQRKED WITH ON 8 (a) PROGRAMS
~ Small Business Administration
450 Golden Gate Avenue
San Francisco, CalifornIa 94102
B. State of California
Human Resources Development
301 - 13th Street
Oakland, California 94612
C0 State of California
Human Resources Development Centers
(East Oakland - 8924 Holly Street)
(Frultvale Branch 3136 East 14th Street)
(Skill Center - 1100 -67th Street)
Oakland, California
D. Veterans Administration
49 4th Street
San Francisco, California
E State of California
Human Resources Development Center
Chinatown North Beach
661 Commercial Street
San Francisco, California
PAGENO="0091"
85
Mr. HUM. Thank you, Mr. Chairman.
What I would like to do,. Mr. Chairman, is just briefly highlight
the discussions we have here in these comments I have.
First allow me to give you a little background on our corporation.
It was formed in 1964 by myself and a group of individuals who had
worked together on aircraft overhaul and modification programs when
the company for which we worked decided to quit the business. The
original contract was for T-33 aircraft overhaul and was bid and
won competitively, although since we were a new company it took
the intervention of the Small Business Administration and a cerLiflcate
of competence before award was finally made. The first contract was
successfully completed and the corporation progressed slowly on com-
petitive contracts until 1968 at which time it was selected as one of
the first 8(a) contractors under the original program designed pri-
marily to provide jobs to disadvantaged hard-core untrained per-
sonnel. The w-orkload since that time has varied up and down with
the availability of 8(a) programs and other programs which could
be w-on competitively. Employment peaked in 1970. We had approxi-
mately 150 employees in June 1971, and currently have dropped back
to 94 due to phasing out of contracts. Contracts have always been
completed satisfactorily from the standpoint of quality and schedule,
and with little or no cost penalty to the Government.
This cost penalty we are talking about is a subsidy, added subsidy,
cost. As was the case with many 8(a) companies there has been no
large company sponsorship in our case. I am the majority owner and
other employees own the balance. All technical know-how, equip-
ment, and funds for operation and expansion has been generated
internally. Banking arrangements were worked out with a local bank
and all loans guaranteed personally by the owners.
We are constantly searching for new avenues to become independent
from 8 (a) assistance but our ties to hard-core employment and high-
cost location make it extremely difficult in our line of work. We would
like to have you look at one of the attachments I gave you. Note that
we employ 21 percent hard-core and 53 percent minorities.
Based on our experience, I have some constructive suggestions to
offer. I think it should be made clear that we feel a properly run
8(a) program is beneficial and has a definite place in our economic.
system. While information indicated overall 8(a) programs may
have suffered some bad experiences in the past, we feel ours has been
successful, and sincerely hope our experience will be equated along
with those who may have been judged as failures.
Now for my suggestions. I feel that there should be two types of
8(a) programs:
(a) Minority ownership per the new concept.
(b) Hard-core employment as the original concept.
As an example of one who has advanced under the minority owner-
ship concept I can hardly fault that approach. Any program that will
assist a "qualifled"-and I repeat, qualified-individual to start his
own business has to be good for our free enterprise system. If he is a
minority or hard-core individual there is an even greater plus factor.
There are many capable individuals who can benefit. from the adn'iinis-
trative and financial s~pport afforded by the 8(a) program. But desire
and capability are not the only factors in starting a business. Do not
PAGENO="0092"
86
underemphasize the necessity of business acumen and sources for funds
to operate. These are as important as technical know-how and good
personnel. Even with know-how and personnel our own experience
shows you can't get off the ground without funds and working capital
to meet the payroll. Banks will not lend money without guarantees or
collateral. Progress payments and assignments of Government con-
tracts are one means of solving this problem. In addition, awarding of
a Government contract provides both technical and management rec-
ogmtion which will get a new company off on a proper image, and
this, too, is important.. One of your biggest problems is simply you are
a `new company. It is in these areas of administrative and financial as-
sistance, and in the allied areas of image, integrity, and responsibility
that the SBA and 8(a) programs will assist minorities to form and
operate companies that will pr~sper and employ themselves and others.
But while we consider minority ownership a most important factor,
I most assuredly do not feel we should abandon the original concept
of hard-core and minority personnel-those less able minority workers
who by reason of lack of education or finances are just happy to have
a job. While we understand the track under this old concept was rather
poor, our own experience has been good. We think there is a real need
for providing meaningful jobs to those hard-core individuals who
really want to work. Most experience has indicated it is almost impos-
sible to build a viable and competitive firm utilizing such personnel.
To some extent this is true. You do have, high absenteeism and turn-
over, lower skill levels and efficiency, less interest in safety and disci-
pime. Admittedly, as a result, even we who have had some success are
having continued difficulty in remaining comi )etitive.
On the other hand, on those programs we have received under 8 (a)
auspices we feel little if any cost penalty has been experienced. I
understand this has iiot been the case with all 8(a) contractors. If so,
let us still appreciate the program for what it. can do in the welfare
field. Let us establish a hard-core class of 8 (`a) work programs and
openly recognize them as welfare programs. Then let us establish a
fund or other means by which any cost penalties can be paid. For ex-
ample, the Air Force has many programs which could be so assigned.
The big problem in these days of tight. funding and `squeezing of the
defense dollar, is the Air Force Pi~Ocuiement People cannot justify
or afford to pay a penalty in cost-therefore, few 8(a) programs.
All right, then, if a. program is developedl which will provide mean-
ingful hard-core jobs, pay the Air Force the cost differential out of
a special fund. President Nixon just allocatedl $200 million to help
unemployment areas by plovidling jobs in public service occupations.
What I am suggesting here we do the same thing for hard-core areas
using small business and 8(a) programs as a medium. It is our cx-
perience minority and hard-core personnel can be found who will and
desire to work. If they work they can stay off the welfare. At the same
time they caii mamt.ain peisoiial andi family pride. As you well know,
the concept of self-supporting jobs in lieu of a. dole is desiredi by the
maj oritv of Americans.
The third suggestion has to dlO with the total time period by which
SBA will support an 8(a) contractor before they deny support and
let him "sink or swim." It. is our understanding it has been arbitrarily
established at 3 years. We are not sure this is realistic. We feel it more
PAGENO="0093"
87
a function of type, location, and employee cost in the business. In our
own case we operate in the highly competitive defense area. We com-
pete in a technical field and on a national scale. We compete with low-
cost areas but actually operate in a high-cost area utilizing less ef-
ficient help. In a business known as one of the most competitive it is
highly doubtful that we or anyone else can consistently remain com-
petitive from a price standpoint. Yet at the end of 3 years-and even
though our cost penalty has been negligible-we have been told no
more assistance in the form of 8(a) contracts will be available.
We may well go slowly out of business. On the other hand, I have
little doubt some minority-owned companies who develop a unique
product and have low labor costs and good management may need help
for only a year or more. What I am suggesting is that such time deter-
mination not be established on the sole basis of an arbitrary limit but
on the value of the work being done by the individual company and
its overall benefits to the economy and social system. For example, a
company willing to assume the added burdens of hard-core employ-
ment would receive extended 8(a) assistance, and if useful enough,
even continued assistance so long as it provides hard-core employment.
I would like to digress from my comments, Mr. Chairman, if I
may, and discuss the thought that you just discussed with the gentle-
men from both large companies.
I think greater participation by the Department of Defense and
other agencies to channel programs into 8(a) programs should be done.
I think this can be probably done by utilizing existing Air Force De-
fense small business representatives that you now have.
We have found in some instances there is a conflict between it, or
an area of conflict between the Small Business Administration rep-
resentative (PCR's), and the Air Force Defense small business rep-
resentatives.
I think a closer coordination between the two offices would definitely
pinpoint many programs that would go 8(a).
To give you an example, Mr. Chairman, this type of situation is the
AIMS kit procurement. Aerospace Services was the successful bidder
on the T-33 AIMS kit procurement, and this procurement was set
aside for small business only. It was not an 8(a) program. However,
due to the interceding of NARTRANS and through the large busi-
ness pressure brought to bear by North American, NARTRANS
receive half of the program. The other half of the T-33 AIMS kit
fabrication, and now this completes a circle where an 8(a) contractor
like ourselves has become a successful contractor, and then in turn
we are competing against other or a portion of our contract was taken
away by an 8(a) program which we feel this type of conflict could be
definitely determined by the prime depot.
This is what I mean, the coordination between the PRC and the
Air Force Defense Small Business representative. Both of them either
could be channeled through an 8(a) program or could have been
left as small business set-aside. We were the successful bidders, so
actually w-e have tw-o procurements now. NARTRANS las still half
of the T-33 AIMS, and we have got the rest. We delivered the
prototype kit. We have also installed the prototype kit on a. T-33
aircraft which we offered to do for free to the Air Force.
PAGENO="0094"
88
Senator MONT0YA. Do you do complete manufacturing, or do you do
assembly work like they do?
Mr. Husr. We do assembly work, which is part of our work, Mr.
Chairman. The T-33 program which we have just completed, the
T-33 aircraft undergo "Iran" modification and we completely fabri-
cated and installed new electronic and electrical harnesses in the air-
craft. The airplanes were completely rewired from stern to stern. WTe
have a fabrication shop where we fabricate the entire wire harness
assemblies with the electrical connectors, aiid this is doiie by hard-core
or disadvantaged personnel.
Senator MONTOTA. When did you organize your company?
Mr. Hu~r. We organized in 1964, sir.
Senator MONTOYA. And what kind of business do you do now?
Mr. Ht~r. Right now, at present, as we mentioned in the comments,
we operate au avionics shop performing airline communication, navi-
gational, and radar equipment repair and overhaul and operate a fixed-
base operation with a small aircraft dealership. We have been branch-
ing away from, as I indicated in our comments, from 8(a) assistance.
Senator MONTOTA. Are you diversified?
Mr. Ht~r. \\Te are trying to, sir, but as we mentioned in our coin-
ment, by having disadvantaged and hard-core employees on our pay-
roll we find we are not. too competitive, and that is the reason when
we found out about this 3-yea.r limitation deal I made a special trip
to discuss the situation with the Small Business Administration in
Washington. And, Mr. Chairman, I would like to emphasize, too, that
the local SBA office here and the management of the local SB office,
especially with the gentlemen that are familiar with the 8 (a.) program,
have offered great help to us and assistance. through our 3 years with
the 8(a) program, and without their assistance we would iiot be here
today speaking to you.
Senator MONTOYA. The time is 3 yea.rs and it is 5 years for Indians.
You are acquainted with that.; are you not?
Mr. HUM. Yes; and that is t.lie reason why I say it would be a differ-
ent situation now, Mr. Chairman, if we started under the new concept
where it is strictly minority-owned business and you can go out and
hire any individua.l you can. But we started under the original con-
cept where it was minority ownership plus the hiring that was imposed
upon us was to hire and train disadvantaged, hard-core personnel.
We have these people on our payroll iiow, and they are less efficient
and, therefore, we are finding ourselves iiot too competitive.
Senator M0NT0YA. What was your gross last year?
Mr. Hu~r. Our gross was combined with the fixed base operation, and
so forth, at about $1.5 million.
Senator MONTOYA. And was it more than that the previous year?
Mr. Hrj~r. No; it is less, a little less, than the previous year because
the 8 (a.) programs have since curtailed.
Senator M0NT0YA. Would the 8(a) program help your business
substantially?
Mr. HUM. Yes; it is about 90 percent of our business. And also, Mr.
Chairman, I would like to comment- -
Senator M0NT0TA. I notice the concept that you have presented here
suggests that any penalty costs incurred because of hiring of less effi-
cient help or hard-core employees, should be absorbed by SBA.
PAGENO="0095"
89
Mr. Hrj~r. Either SBA absorb the penalty costs, Mr. Chairman, or
either have the Air Force able to absorb it out of a special fund because
that is the reason we feel the reluctance of the Defense Department.
Senator MONTOYA. What kind of a toleraiice would you provide?
Mr. Hri~r. I think the existing rule now allows it to 33 percent, 33
percent differential under regulations at present.
Senator MONTOYA. What do you mean by that?
Mr. HUM. The armed services procurement regulation does allow
a 33-percent margin, but I doubt very seriously very many programs
have been awarded under these, or under that concept.
Senator MONTOYA. They have abandoned the 33 percent.
Mr. HUM. Yes; they have. I think it is on the books, but whether
they actually follow it as a criteria is something that I do not know.
Senator MONTOYA. What would you suggest as a reasonable alter-
native?
Mr. HUM. I think it should be maintained, Mr. Chairman, in that I
tiunk the hiring of disadvantaged, hard-core people does take the
people off of welfare, and this is one of our Nation's biggest problems
at present.
Senator MONTOYA. Would you think that this was cheaper than wel-
fare for them?
Mr. HUM. I think it is; definitely. In other words, these people
become-
Senator MONTOYA. And the kind of help that would give them back
their pride?
Mr. HUM. That is definitely true, and to give you an idea, Mr.
Chairman, like in our operation, we have only lost in 3 years of opera-
tion one paint gun and one drill-motor, and for 3 years of operation,
from the loss standpoint, that is a remarkable record. And we find
out that among our disadvantaged, hard-core employees we have
people that are on parole, ex-convicts, and so forth.
We have had girls that have worked in our shop that we have been
asked by t'he Department of Employment, the Human Resources
Department, to put on our payroll to take them off of welfare, to pro-
vide jobs for them, and I think this is good; we have had girls that
worked with us for about 3 years, and then an electronic firm that
is just down the street offered them $1 to 75 cents more an hour more
than we were paying them after they had been trained by us, so I
think this proves there is a redeeming feature to this, and especially
these people that have come off the welfare rolls. And I think one
thing I would like to try to bring up, Mr. Chairman, is the consultation.
We have rendered quite a bit of consultation to other small 8(a)
contractors. There was a gentleman this morning, in this morning's
session, that we have consulted with and advised him. Their company
also received an AIMS, an 8(a) AIMS kit for the T-39 aircraft, and
he was having to borrow money from the local bank, all of it, to
finance it~. So we advised him that there are progress payments avail-
able that he should make a request for, and my associates, James A.
Thomas, who is vice president and general manager, who is with me
today, showed him a letter that we wrote to a contracting officer re-
questing that such consideration be given.
And this means, Mr. Chairman, additional profit to this company
by having it, and once it is allowed by the Defense Audit Department,
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90
the Defense Agency says it is an allowable item, then this means more
profit to him.
Senator MOXTOYA. Why does it mean more profit?
Mr. H~r. In other words, he did not. have to borrow that much from
the local bank.
Senator MOXTOYA. Paying interest on the loan?
Mr. Hu~r. That is right. It is a. fixed-price contract., and he is com-
mited, and I think this consulting effort., being that we are a small
busmess concern ourselves, we understand and realize the. little prob-
lems that these gentlemen run into.
There is another company that has come by and asked us to look
over an FAA bid with them. and we perform this service without any
added cost to them other than our own time, which helps add to the
success of 8 (a) contractors and minority companies. Everyone that
failed is a bad mark against other small business concerns so, there-
fore, by helping these little, small minority business concerns, the
more successes that we realize, we can show the general public that,
yes; it can be done.
Senator MoxToYA. Do you feel that there is a lack of counseling
available to these small firms?
Mr. Hu~r. I think the SBA has its hands full. I made the same
comment to Mr. Marshall Parker when I visited him earlier this
month, is that I think the field men are shorthanded, the SBA is short-
handed in some respects. I think additional counseling could be given
if there were more staff at the SBA, more staff, and they had the time
to do it.
Senator MOXTOYA. Thank you very much, sir. We appreciate your
testimony.
Now, Mr. Williams
STATEMENT OF LARRY WILLIAMS, NAIROBI CORP., RICHMOND,
CALIF.
Mr. WILLIAMS. Thank you, Mr. Chairman.
Senator MOXTOYA. Do you have a statement?
Mr. WTILLIAMS. No; I do not have, a prepared statement. I have a few
items-
Senator M0xT0YA. Who do you represent?
Mr. WILLIAMS. Nairobi Corp.
Senator MONTOYA. And what is the Nairobi Corp.?
Mr. ~\TILLIAMs. Nairobi Corp., is, at present, a group of three black
individuals that we incorporated in July 1968 with the idea of doing
economic development in the lower income, minority communities.
we origmally started there were eight of us altogether. All of us
had business experience and/or training of one sort or another, and
we come together with the idea of pooling this talent., an experience
which we felt we had at that time to make a more viable contribution
to some solutions to the economic problems in the community.
Over the course of the last 3 ears we have dwindled, or attrition
has eroded us to the present three. Currently, we operate two businesses
individually in California.
Senator M0XTOYA. What are the busniesses?
Mr. WILLIAMS. We have an offset and printing shop, Prestige
Graphics, a job shop doing commercial printing of all sorts.
PAGENO="0097"
91
Senator MONTOYA. What was the gross last year in that shop?
Mr. WILLIAMS. Gross last year would probably be roughly in the
neighborhood of, I would say, $130,000.
Senator MONTOYA. What is the other business?
Mr. WILLIA1\IS. Pardon me?
Senator M0NTOYA. What is the other business?
Mr. WILLIAMS. The other business is Wood Products, which is a
wood fabrication plant. We make cargo containers, shipping crates,
and other specialized, tailormade, rough wood items of that sort.
Senator MONTOYA. How much did you gross in that business?
Mr. WILLIAMS. Last year, well, our anticipated-we would expect
this year, possibly this calendar year, possibly to gross in the neigh-
borhood of $400,000 to $500,000 at the present trend of it.
Senator MONTOYA. How much did you gross last year?
Mr. WILLIAMS. Last year it was in the neighborhood of $209,000. We
have fortunately, I would say, doubled our sales each year since we
have been in business. Now, however, although we have doi~e that, that
does not necessarily mean we have a lot of profit, obviously.
Senator MONTOYA. Did you realize any profits?
Mr. WILLIAMS. We have had periods of profit `and of none.
Senator MONTOYA. What was reflected for the whole year profitwise?
Mr. WILLIAMS. We had a net loss.
Senator MONTOYA. You had a loss?
Mr. WILLIAMS. Right, as we are running, attained earnings at
this point, are running at $44,000 loss over the last 3 years, it is running
in this rough neighborhood.
Senator MONTOYA. For the 3 years?
Mr. WILLIAMS. Right.
Senator MONTOYA. Do you live off of these businesses?
Mr. WILLIAMS. Yes; we do. We have for the past 3 years, anyway.
Senator MONTOYA. How many of you?
Mr. WILLIAMS. Three of us. We are also recipients of several 8(a)
contracts, and I might point out that we would not probably `be in
business today had we not received those 8(a) contracts.
Senator MONTOYA. How much have you received in 8(a) contracts?
Mr. WILLIAMS. In the print shop we are currently recipients of two
contracts which are in a total amount of $45,000.
Senator MONTOYA. How much?
Mr. WILLIAMS. $45,000 total. That is over a year. And in the wood-
shop we recently completed a contract for about $141,000.
Senator MONTOYA. For who?
Mr. WILLIAMS. For the General Services Administration. We cur-
rently have an open-ended contract which is valued at approximately
$60,000 in the woodshop, but currently we do not anticipate that orders
will reach that amount.
Senator MONTOYA. What do you do in the woodshop?
Mr. WILLIAMS. We make, for example, in the GSA contract, it was
household shipping crates, boxes for shipping household goods over-
seas, et cetera. We make, for example, in commercial business we
make for IBM special shipping crates for their equipment that they
send us blueprints and specifications for. We make simple items such
as nursery flats where nurseries put their plant material in for storage
in the nursery. These kinds of items. It is basically rough carpentry,
70-654 0-72-7
PAGENO="0098"
92
although some of it, some of the work requires skill, but it is not a
highly polished, finished, fine furniture type of operation.
Senator MONTOY~. What else does your corporation do?
Mr. WILLTA~rs. Those are the two operations.
Senator MONTOYA. Are you a holding company?
Mr. WILLIAMS. We are a solely owned corporation by the three
individuals.
Senator MONTOYA. And you operate these businesses under different
business names, but they are part of the corporation?
Mr. WILLIA3I5. The corporation is the umbrella, as it were, and it
deviates with the names, the Westwood and the Prestige are deviates
for the corporation.
Senator MOXTOYA. How much do you have in 8(a) contracts for
this year?
Mr. WILIAIA~Is. Currently in the printshop we are still operating on
one small contract which was renewed in April of this year for ap-
proximately $6,000 for the publication of the Navy Newspaper.
Senator MOxTOYA. All right; $7,000, is it not?
Mr. WILLIAMS. Approximately, yes.
Senator MONTOYA. And you have $69,674 for boxes for the Navy;
right?
Mr. WILLIA~Is. That is the value of the contract, although as I said
it is an open-ended kind of contract. It is not a firm order contract.
They order against it, as they need to, so we may or may not realize
that out of the contract.
Senator M0NTOYA. I see.
Mr. WILLIAMS. The other contract that we have in the printshop is
currently in an extended period for the second time. This is one of the
complaints that we have regarding some of the problems that we have
experienced in the 8(a) program. WTe have had experiences of very,
very limited time to prepare proposals and consider all of the factors
involved in putting together a complicated bid for a. year's publication
of that sort. We have, as you saw, we are in second extension. Now, on
the major contract we have, which was valued at about $40~000 for the
publication of the Navy publication, the "Grapevine," and in the Navy
Shipyard-
Senator MONTOYA. What is your objection to the extension of the
contract?
Mr. WILLIAMS. Well, we object to a number of things. One, the fact
we are uncertain at this point as to whether or not the contract is go-
ing to be renewed under the 8(a) program. We have attempted to get
the specifications for which we can prepare a new bid. One of the items
we are particularly interested in on this contract is that as we under-
stand it, the concept of the 8(a) program is to facilitate and make it
possible for small businesses to become competitive in the market. And
over a period of time you should be able to take advantages of econo-
mies that you can introduce into your operation or offer the contractor,
or the vendor, or whatever. New improvements in materials, equip-
ment, et cetera.
One of the ideas we have for reducing the costs on our current
contract, which is in the extended period, is the acquisition of a new
type or new piece of typesetting equipment which will make it pos-
sible for us to do in-house the copy preparation for this publication
PAGENO="0099"
93
at a reduced cost over what we were paying out. We estimate, roughly,
at this point, without seeing any specifications, roughly in the neigh-
borhood of $200 to $300 per issue.
Senator M0NT0YA. Well, what impairments are you experiencing
now?
Mr. WILLIAMS. Pardon?
Senator MONTOYA. What are the impediments you are facing now
in accomplishing that objective?
Mr. `WILLIAMS. We cannot get the Small Business Administration
and/or the supplier to come to terms on this. In fact, we cannot get the
specifications. `We have not gotton the specifications in order that we
can make the proposals, even though we have made several attempts to
do that.
Senator MONTOYA. Are they ready to do it?
Mr. WILLIAMS. I do not know.
Senator MONTOYA. If they are not ready, they cannot, then.
Mr. WILLIAMS. Right. I would assume.
Senator MONTOYA. Would they extend your contract?
Mr. `WILLIAMS. That is the question we have at this point. We have
had a very `successful contract, we have performed on time, we have
given them a better quality product.
Senator MONTOYA. Have you received any indication that they will
not extend it?
Mr. WILLIAMS. We have no evidence, no indication to that effect.
We understand that there is a problem possibly occurring, as oc-
curred originally with the former vendor on this contract, who hap-
pens to be a former State senator, and we understand there are some
pressures being brought to bear there, as far as renewing this contract.
We also are aware that probably a similar problem is presented as
when we initially got the contract. There was a reluctance on the part
of the Navy at Mare Island to transfer the contract from a very con-
venient location to the Richmond operation.
Senator MONTOYA. Do you do any work for the private sector?
Mr. WILLIAMS. Most of our work is for the private sector. We did
work for approximately, I would say, a year or a year and a half or 2
years before we even approached the Small Business Administration
regarding 8(a) work, because we were of the firm conviction we had to
make it on our own, more or less. But, of course, things being as they
were, we realized this was another area where we could get some more
work.
Most of our work is commercial work. We solicit on our own, and
have gotten it on our own, and maintain on our own. We have the
government work for the print shop which represents, I would say,
less than, probably a quarter of our total volume.
Senator MONTOYA. Are you able to get proper financing for your
business?
Mr. WILLIAMS. This has been a difficulty. We are almost 100-per-
cent financed. We, as I said, we did this out of motivation rather than
financial backing, and we had to get our complete financial package
which is backed and guaranteed by the Small Business Administra-
tion. We were underfinanced, in our opinion, at this point partially
due to lack of experience on our part, not having that business experi-
ence, but we were not made aware of these factors in the process of
negotiating the loan.
PAGENO="0100"
94
Senator MOXTOYA. Do you have a small business loan now?
Mr. WTILLIA3Is. Yes, we do. All of our money, the bulk of our money,
approximately $76,000 is small business guaranteed. We have another
loan of about $12,000 which we secured on our own through the Bank
of America. That is our financing, basically. As I indicated, this has
been one of our problems. and this is particularly one of the issues
we raised relative to the way in which the 8 (a) program is carried out,
is that we are not permitted to include in our ProPosals for our separa-
tion of our proposals, interest expense or sales expense.
For us, of course, this is a tremendous expense, being 100-percent
financed, so even though we determine what our overhead is, exclusive
of these factors, we still have a major expense item that we are not
able to recover.
Senator MONTOYA. Are you current on your loan payments?
Mir. WILLIA~rs. Yes. As of now we are current on our loan payments.
Senator M0NTOYA. And interest, are you current on your interest
payments?
Mr. WILLIA~is. To my knowledge, we are; yes. This is one aspect
that I do not personally handle. My other partner handles is. I run
the print shop primarily, but this is a major expense item for us, has
been a major expense item for us, and consequently we, even though
when we put together a proposal, we build all of the other expense
factors in this, we still are not recouping the major part of our ex-
penses in doing business under the terms of the contract, and it is one
area we feel should be looked at very seriously as far as not putting
that kind of restriction on the preparation of an 8(a) proposal. Some
of the other problems that we have, if I can continue to allude to some
of these, and I will preface all of this, as I said, with the fact that we
realize that we would not still be in business, probably, had we not
had 8 (a) work, but there are some problems that are noteworthy and
need to be looked at.
Senator MONTOYA. And you probably would not be in business if
SBA had not provided the guarantee for the loans.
Mr. WILLIA~rs. That is probably true also.
Senator MOXTOYA. They probably helped you quite a bit?
Mr. WILLIAMS. Yes. We owe our existence at this point to the
Small Business Administration. There is no denying of that. We feel,
however, our existence could have been assisted much more positively.
Senator MONTOYA. If you had more 8 (a) contracts?
Mr. WILLIAMS. WTell, yes, possibly. We shy away from that, how-
ever, because, as I say, we are of the opinion that we should not get
locked into any one market or any one source.
Senator MONTOYA. What do you suggest that SBA do?
Mr. WTILLIAMS. Well, some of the things, as I said, that we would
suggest is that the restriction on inclusion of interest and sales ex-
penses in the proposals for 8(a) contracts be lifted.
We also would suggest, along, with, as I said, our understanding
is that this whole effort is designed to help the small businessman be-
come competitive in the labor market where he does not need this
assistance, so in order to do this one of the areas where there is such
helped needed is in the marketing area.
I think Mr. Rogan pointed out earlier, being an experienced man,
particularly in your craft area, you are not aware of the fact of the
PAGENO="0101"
95
tremendous marketing assistance and effort that is needed. It would
appear to me that one of the positive things that could be done is a
l~art of, say, all 8(a) contracts, or part of the financing package that
more or less is set-aside part of that package, should be directed strictly
at acquiring talented people or expertise in the marketing area so
that the business can acquire and maintain a positive sales effort on
its own at the same time that we are working on other production
problems.
We feel that the 8(a) program, similar to the matter being discussed
a few minutes ago, your suggestion of having a separate group of
people within the Small Business Administration with a specific
purpose of soliciting and/or finding work, which would qualify itself
for the 8(a) program, would be a tremendous help. There are many
Government organizations, for example-to be specific, the Govern-
ment Printing Office itself which, of course, we have a particular
interest in, and the Atomic Energy Commission, and we understand
the Department of the Army.
Some of these do not participate actively ol at all in the 8 (a)
program. We feel that this is not right, an effort should be made to
include them in the total package. The only way that can be done
is to have a group of people who are specifically responsible and
charged with this responsibility.
We feel that the Small Business Administration, under the 8(a)
program, can go a long way toward working with the small busi-
nessman and his customers, as far as working out problems that may
be encountered in the production and lending of technical expertise
in the sense of skill expertise, and management expertise.
As indicated, myself and my partners have business training and
background so that was not really our problem. Our problem was one
of getting assistance in solving some of the tangible production prob-
lems, scheduling and marketing problems and things of that sort
that require previous knowledge or skill in the particular discipline
we were working in.
But, for example, in working with the small businessman and the
Government customer to facilitate the implementation of new and
better, improved methods which are designed to make these small
businessmen more competitive in the marketplace, and also facilitate
cost reductions to the Government customer on his contracts, and this
is one of the areas.
We think that as part of the financing package, or in some way
incorporated in the proposal under the 8(a), that there should be
provision for a line of credit, revolving or otherwise. For example,
in the case of our woodshop we were faced with a very severe and
sincere problem which caused us some of our difficulties today.
When we were awarded our initial contract with household con-
tainers, it was awarded in July, and we, of course, had to proceed
with the preparations of the prototype on the basis of the specification
we had, which we did, and this was ready for inspection and approval
in August. At the same time the inspection was made, there was
determined to be a deviation, not on our part from the specification,
but there was a deviation in the specification. This required approval
and clarification, and correction from Washington, D.C., which took
2 months.
PAGENO="0102"
96
In the meantime, we had geared our operation up, staffed it, and were
prepared to go into production based on approval of a prototype back
in August, and here we sat in the middle in the meantime holding these
expenses of maintaining our plant. We also were not-
Senator M0NTOYA. Did you not have other contracts in the plant?
Mr. WILLTA~rs. This is the point I was going to make. \\Te were
ready and we were not able to adequately go out and market other
work because we knew we had a major contract coming in and we did
not know what time it was coming in, and we would not have been able
to carry on a substantial amount of other work and also perform on the
Government contract.
So. when the uncert~intv. eeii~ed iiv not knowing when we would
be given the go-ahead on the 8(a) contract, we were not able to main-
tain our commercial customers.
Senator MONTOYA. Well, as a matter of fact, you had not been
designated as the one to do the work yet.
Mr. WILLIAMS. This was part of the problem, we later understood.
Senator MONTOYA. So, therefore, you could not get any financing
from a private banking institution, much less from SBA?
Mr. WILLIAMS. We understood that. to be a part of the problem
later on. So, my point, here. in the meantime, of course, raw materials
in this case, particularly in the lumber industry, escalated approxi-
mately 40 perceiit during that. period of time. Of course, we were
locked into a bid we had submitted on the basis of other prices at. a.
lower rate. The contract., of course, was finally awarded under the
proposal that. we submitted. In the meantime, of course, as I said,
expenses increased, raw material costs had increased so we had to
absorb that within the framework of our existing proposal.
But, my point about. the line of credit. is this: That. in the case of a
small business, as we are, with limited working capital, very tight.
financing, it is very difficult for us to come. up with the required work-
ing capital to make the major purchases that are required to even
start a. contract of this nature.
So, consequently, we ended up entering a. trust agreement with a.
management consulting group that works with us in ordler that they
would make the money available, purchase the material, audi that was
the way we were able to even start. the contract. So, a. revolving line of
credit of some sort. which would permit the contractor or the small
businessman to get a loan, based on need or firm commitments, I think
would be a very positive kind of improvement in the total SBA con-
cept of packages.
Those are the naajor points that I had to make regarding some of
the improvements. There are obviously other small ones, but this has
been our experience, andi as I said, we feel that. it has been a. helpful
one and it was crucial to our existence. We are not. at this point, I
would sa.y, begging for or not really wanting more SBA work, as it
were, but we would want more assistance to solve some of the problenas
that we face that. we feel SBA could provide to us.
Senator MONTOYA. Thank you very much, Mr. Williams. That is a
very fine statement you have made.
Mr. WILLIAMS. Thank you.
Senator MoxToi-A. Mr. Tom.
PAGENO="0103"
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STATEMENT OF HENRY W. TOM, H. W. TOM AND S. F. TOM CO.,
SAN FRANCISCO, CALIF.
Mr. TOM. Thank you, Mr. Chairman.
When I was asked to appear before this hearing, this was my first
experience with this type of hearing. I do not. have a. prepared state-
ment as to what I can contribute to the hearing.
Senator MONTOYA. Well, sometimes when you do not have a pre-
pared statement you do better.
Mr. To~r. Well, I was told to tell it the way it is, so that is what I will
do.
Senator MONTOYA. Well, that is the way to do it.
Mr. To~i. Now, we have negotiated and completed several 8(a)
contracts.
Senator MONTOYA. What do you manufacture?
Mr. To~r. I am a general building contractor.
Senator MONTOYA. Have you had any trouble making bonds?
Mi. To~r. No, sir. Since I have no real comment to make, I just was
wondering what I could contribute. Maybe I can at this point com-
mend the people at SBA and the agencies that we have negotiated
obs with, that they are real helpful and have a pleasant way of doing
business.
Senator MONTOYA. Have you any 8(a) contracts?
Mr. To~r. Yes; I have. I have completed four 8(a) contracts and I
received one this morning, a contract for a $310,000 Social building.
Senator MONTOYA. Social Security what?
Mr. To~i. Administration building.
Senator MONTOYA. And you have a $13,000 construction job with
the Veterans' Administ.artion?
Mr. To~r. That was the first of the year. I have completed that.
Senator MONTOYA. You had one for $131,000 for a school addition
at HEW?
Mr. To~r. That is about 90 percent completed at. this moment.
Senator MONTOYA. And $~5,000 for tile floors?
Mr. TOM. That is going to be completed this Friday.
Senator MONTOYA. You are doing pretty good with the Government.
No wonder you do not have any complaints.
Mr. To~r. No, sir.
Senator MONTOYA. What about the financing for these jobs? Have
you encountered any difficulty?
Mr. TOM. No. I think there is a reason for that. We have been in
business for a;bout 11 years.
Senator MONTOYA. Are you a. corporation?
Mr. To~r. No, sir; we are a partnership. By being a partnership we
can esta:blish a line of credit with our bank on a personal basis.
Senator MONTOYA. Yes.
Mr. TOM. Of course, naturally they have a hand tied on it, but as-
signing persona.l indemnity we can get a lot more money than if we
were a corporation.
Senator MONTOYA. Yes; I understand that. But, that is because your
credit is good.
Mr. To~i. That is right, sir, and I think the bonding company works
on the same basis as far as we are concerned.
PAGENO="0104"
98
Senator MONTOYA. You do not go through SBA for your bonding?
Mr. To~r. No, sir.
Senator MONTOYA. What do you suggest by way of innovations to
improve the service that SBA offers to small business?
Mr. To~r. I really do not know, sir.
Senator MONTOYA. You are satisfied with their services?
Mr. To~r. I am. Yes, sir.
Senator M0NT0YA. Have you borrowed any money from SBA?
Mr. To~r. No, sir.
Senator MONTOYA. You have just par~ic.ipated in the 8 (a) contract-
ing?
Mr. To~r. That is right, sir.
Senator M0NT0YA. How many employees do you have?
Mr. To~r. Running between five and 10 on my own payroll.
Senator MONTOYA. What. is the ethnic breakdown of your eniployees,
sir?
Mr. To~r. Oh, about 75 percent. Chinese, several Japanese, and one
Caucasian.
Senator MOXTOYA. That is all. Thank you very much, gentlemen.
Mr. McLarnan, would you bring your people up, sir, and we might
give t.he Government 1 more day's work tomorrow. Woulcl you intro-
duce your panel sir?
STATEMENT OF DONALD E. MoLARNAN, REGIONAL DIRECTOR,
REGION IX, SMALL BUSINESS ADMINISTRATION; ACCOMPANIED
BY HARRY SWINKELS, ASSISTANT CHIEF, PROCUREMENT AND
MANAGEMENT ASSISTANCE DIVISION; CHARLES BLACKLEDGE,
COMMUNITY DEVELOPMENT PROGRAM; AND CARL WARREN,
ASSISTANT CHIEF, BUSINESS DEVELOPMENT PROGRAM
Mr. MCLARXAN. Yes, sir.
On my right is Mr. Harry Swinkels, the Assistant Chief of our
Procurement and Management. Assistance Division.
On my left is Charles Blacklecige, in charge of our Community
Development Program. On his left is Carl Warren, Assistant Chief,
Business Development Program.
Senator M0XT0YA. You may proceed, sir.
Do your have a statement?
Mr. MCLARXAX. Yes, sir.
I am Donald Mc.Larnan, regional director of region IX, Small
Business Administration, San Francisco, Calif. I am pleased to be
given the opport.unit~- to appear before this hearing on the important.
procurement program, commonly referred to as "8 (a) ," which h~s as
its goal, giving contract assistanc.e to disadvantaged existing or p0-
tential. businesmen.
The Small Business Administration has been working very dili-
gently with the various Federal procurement agencies and the record
of accomplishments to date within the boundaries of this region will
show that. it has had my complete backing as well as th1e concerted
effort of my procurement. and management assistance staff. As an
example, I cite the accomplishments of recently concluded fisca.l year
1971 wherein region IX placed 148 8(a) subcontracts, having a. value
PAGENO="0105"
99
in excess of $16.5 million. This dollar figure represents approximately
25 percent of the dollars contracted on this program nationwide tor
that period. We have in the past and we will continue to contract
for all types of procurement including supply, service, and construction
contracts.
Region IX includes the States of California, Arizona, Nevada, and
Hawaii and these States have experienced a tremendous increase in
population. A large segment of these peoples left their former homes
because of their dire financial condition and constitute a substantial
portion of our disadvantaged population. Accordingly, we recognize
our responsibility to assist these people so that they may obtain a part
of the ownership of this country's economic life.
Through the various programs of the Small Business Administra-
tion, we are able to help these firms secure contract by awarding them
some subcontracts; and, we are able to assist them in their financial
needs through our lending programs.
Of equal importance, we work with these disadvantaged firms to
develop aiid improve their management capabilities. While substantial
progress has been made in this activity during the past fiscal year, we
know of the tremendous needs in this area and of the work that must
be done and we expect to move further ahead both in dollars awarded
as well as number of contracts that will be made duriiig fiscal year
1972.
Again, I thank you for the opportunity to appear before this hear-
ing and present the Small Business Administration's message for this
program.
Senator MONTOYA. Thank you very much, Mr. McLarnan. The 25-
percent figure which you relate is indeed impressive when compared
with the accomplishments in the rest of the country.
Now, what special effort do you direct through your organization,
through the regional office here, in order to bring about this 25-percent
accomplishment?
Mr. MCLARNAN. Well, we have a good staff, we work hard, but we
are in a very fertile field. lATe only need to do more, and we recognize
that we have only scratched the surface, we must have more people to
do the work. In other words, there is a limit to what a man can do with
his two arms and his two legs.
Senator MONTOYA. How many people do you have doing 8(a) work?
What are their duties?
Mr. SWINKELS. May I answer that, Mr. Chairman?
Senator MONT0YA. Yes.
Mr. SWINKELS. We have in total in the region of region IX seven
people in what we call the business development program, doing 8(a)
work. Four of the seven are contract iiegotiators, two located in San
Francisco regional office, and two located in Los Angeles district
office.
The other three are what we can project development officers and
their responsibility is to try and obtain some of the work that the
various Government agencies have available. Two of these project
development officers are located in the San Francisco office, or, pardon
me, all three of them are located in the San Francisco office.
Senator MONTOYA. IDo you have any contact with the procurement
agencies here?
PAGENO="0106"
100
Mr. SWINKELS. Yes, sir.
Senator MONTOYA. And what have you accomplished through those
contacts by way of information that you can pass on to the small
business community?
Mr. SWINKELS. Well, the contact we do have with the various pro-
curement agencies located within our region are such that we have
five procurement center representatives that are assigned to the set-
aside program. They have additional responsibilities also to try and
obtain some of the 8(a) work that may be available from various
installations. Of the five procurement center representatives, and one
is permanently stationed at the McClellan Air Force Base at Sacra-
mento, Calif. Two are located as liaison procurement representatives
in San Francisco, the other two are located in the Los Angeles district
office.
Senator M0XTOYA. What kind of cooperation or information do you
receive from the different Government agencies in this area?
Mr. SWIXKELS. WTe have excellent working relationships with the
majority of the Government installations in this area.
Senator MOXTOTA. What about Defense Supply?
Mr. SWINKELS. WTe have no Defense Supply Agency here.
Senator MOXT0YA. Where is it located?
Mr. SwINKELs. Well, the Defense Supply Agencies are located back
east, we just have a subsistence center.
Senator MONTOYA. There is one in Kelly Field, is there not, a DSA?
You do not have any in California?
Mr. SWINKELS. No, sir.
Senator MONTOYA. What about the Department of Defense
branches?
What kind of cooperation do you receive from them?
Mr. SWIXKELS. Excellent cooperation, the Army, the Navy.
Senator M0xTOYA. In this area?
Mr. SWINKELS. Yes, sir.
Senator MONTOYA. Do you receive any information out of Washing-
ington with respect to procurement that might be serviced here?
Mr. SWINKELS. Yes, sir.
Senator MONTOYA. Who do you get it from?
Mr. SWIXKELS. We get it from the central office, the Office of Busi-
ness Development. I think Mr. Warren can answer that in a little
more detail.
Senator MONTOYA. Mr. Warren. go ahead.
Mr. WARREN. Yes, sir.
Thank you, Mr. Chairman.
We frequently get procurement opportunties represented to us that
our central office personnel has learned about through their local
efforts at that level. These are primarily national procurements. 1
meaii by that that the procurement opportunity is not formerly bought
at field level; therefore, the continuity and contact point is much better
realized at the Washington level, so our central offices help us fre-
quently with this kind of a procurement opportunity.
Conversely, we here in the region. if we happen to hear of some-
thing that is beyond our own known capabilities of minority com-
panies within our regional boundaries, we automatically refer that
to our central office for their perusal and possible award to a minority
PAGENO="0107"
101
firm in some other region. `We simply just tell the procuring activity
that we do not have the capability to handle it and we will refer that
immediately to our central office for screening throughout the other
nine regions of SBA.
Senator MONT0YA. Do you have a list of small business enterprises
that might be using the set-aside program or the 8(a) program?
Do you have a list in your office?
Mr. WARREN. Not a list as such?
Senator M0NTOYA. How do you contact them then?
Mr. `WARREN. Well, we have approved business plans alphabetically
filed.
Senator MONTOYA. You have what?
Mr. WARREN. Our business plans, business plans of the compames
that we are dealing with.
Senator MONTOYA. Now, what do you mean by that?
Mr. `WARREN. Well, these are business plans that have been pre-
sented to us which show projection of the company's planned business
operations over the next 3-year period, showing us the amount of
8(a) contract assistance they desire, and how much commercial busi-
ness they will expect to enjoy during that period of time.
Senator MONTOYA. And theii what do you do with the companies?
Mr. WARREN. `Well, once we have the approved business plan, we
attempt to find them a procurement opportunity. We admittedly can-
not do this in all cases.
Senator MONTOYA. I still do not follow. You say you have these
business plans on file?
Mr. WARREN. Yes, sir.
Senator MONT0YA. Do you have the names of small business con-
tractors in conjunction with these business plans? Do you have a cross
index system?
Mr. WARREN. Y~s, sir.
Senator MONTOYA. Now, give me an example of what you do, say,
for instance, if there is a demand for nuts and bolts? Now, what do
you do, what do you do in your filing system.?
Mr. `WARREN. Well, we go down through our list to see which com-
panies we have with that type of capability, and look through their
business plan file to. see if they have the necessary capability to do
that specific j~b opportunity.
Senator MONTOYA. And you have, a complete list?
Mr. SwINi~ELs. We have companies that are registered with us at the
present time that have submitted business plans that were approved
by our region.
Senator MONTOYA. Yes. You have a complete list?
Mr. `WARREN. Yes, that is correct.
Senator MONTOYA. Now, are these the companies who have satisfied
your criteria for a certificate of competency?
Mr. WARREN. No, sir.
Mr. SWINKELS. The certificate of competency is a separate program
in itself that was established at the time the agency was created. The
cem~tificate of competency program is eligible to all small businesses
when they are low bidder on a set-aside procurement or procurement
that is open competition. The certificate of competency has no bearing
on the 8 (a) program.
PAGENO="0108"
102
Mr. WARREN. As a matter of fact-
Senator MONTOYA. What about the certificate of eligibility?
Mr. WARREN. Yes, sir, the certificate of eligibility is what I am re-
ferring to here in the 8(a) program. The firms in our files are those
whom we have approved and consider eligible to participate in the
program.
Senator MONTOYA. Well, do you have a separate filing system for
those who have a certificate. of competency?
Mr. WARREN. Well, sir, I do not, myself, because my particular pro-
gram is not, as I said, involved with the COC program.
Senator M0NT0YA. There was some testimony introduced today indi-
cating that there is a vacuum and that there is no known listing of
small business enterprises and their capabilities.
Mr. WTARREN. Yes, sir, I recall the testimony. I think this was
Mr. Ga.y from North American Rockwell.
Senator M0NTOYA. And I am trying to find out what you have in
your office in this particular direction. and is it adequate, is it. complete,
or should we do something more to implement it?
Mr. SWINKELS. WTe11, Mr. Chairman, may I answer that? We have
in our office what we call a facilities inventory program, which is a
program wherein a small business firm can file a form with us, what we
call a 166 form, listing their capabilities. Now, this program is open
to all small businesses. It is not restricted to disadvantaged or any
other type of business. We do have a facilities inventory in our office,
but this is on a vohmtary basis with the great nunTher of small busi-
nesses, nationwide, some 41/2 million small businesses under the. criteria.
of the side standards of the small business.
WTe have no way of listing, nor do we have the staff or facilities to
enable us to liSt. everyone of these small businesses. We try and list as
many businesses that a.re located within our region, region IX, and
again, this is on a voluntary basis. In order to do that., we continuously
mail out these 166 forms. We use all kinds of association books, tele-
phone books if we have to, other public.ations t.ha.t are available, t.o try
and get these small firms to register with us in our facilities inventory
so that we do have the nucleus of small firms, not particularly for the
8 (a.) program, but to use as a source of supply for any Government
agency or any prime contractor, or anybody else that is seeking a small
business source of supply in a particular field.
Senator MOXTOYA. But., you do not have any catalog?
Mr. SWINKELS. They are cataloged alphabetically, under an SIC
code known as St.a.ndla.rd Indlustria.l Classification code.
This is a system set up by the Bureau of the Budget, and everyone
in tile system of the Government agencies and prime contractors has
a four-digit coding system that classifies it under a particular industry
so you do not have to look up alphabetically all tile time to see if the
man is producing an item or what-have-you.
It is broken into a. particula.r category.
Senator M0XTOYA. Give me an example.
Mr. SwINKELs. For example. machine shops are under a classifica.-
tion, let us say. of 3599. If we get a request from a procurement agency
or prime contractor, let us say, seeking small business sources in a
machine shop, the first thing we do is we have the cross index, we look
under this four-digit number, and under tha.t. four-digit number 1S
PAGENO="0109"
103
listed the various companies we have. Then we pull their file folder and
we review them to determine if this is the type of work they are inter-
ested in. It is a cross-index sy~tern.
Senator MONTOYA. Now, do you make this list available to procure~
ment agencies?
Mr. SWINKELS. We are in no position at the present time to catalog
it and make it available. It is available to them if they so desire.
Senator MONTOYA. Well, the point I am trying to make is I would
say that most of the time the procurement agencies will not tell you
what they want to buy, locally, and so you are not going to find out,
and some colonel in the purchasing office, some retired colonel in the
purchasing office might try to favor some one of his close friends.
Mr. SWINKELS. This is the responsibility of the procurement center
representative. As an example, the individual that is stationed at
McClellan Air Force Base in Sacramento is responsible as such that
he review every purchase request that goes through the procurement
section, and if there is a requirement that could be set aside for small
business and the procurement agency says, however, we do not have
sources of supply, it is the responsibility of our procurement center
representative to come to us through the facilities inventory or any
other known resource that is available to him to try and obtain names
of small businesses that may be interested in bidding on this procure-
ment.
Senator MONTOYA. Now, how does it come to you. D'oes he call you
every day?
Mr. SWINKELS. Through a form we use, what we call a source of
supply, which is the standard form which lists the item that is
involved. If there are some specifications or some nomenclature avail-
able, we require it as it gives us as much detail as possible so we can
marry the two together.
Senator MONT0YA. Supposing there are 100 procurement items that
go through in 1 day, through that procurement office, and your man
is there. How is lie going to send you 100 different memorandums?
Mr. SWINKELS. He had better; otherwise, lie is not doing his job.
Senator MONTOYA. How can he do it? Does he have some help there
to do it?
Mr. SwINIc~Ls. He has part-time hel.p, but he can always write it
down on the form. It is just a basic, simple form.
Senator M0NTOYA. Is that an unusual situation in a bid operation?
Mr. SWINKELS. Yes, sir. What you mentioned, 100 procurements
per day, we would not have all 100 of them coming to us. Out of 100,
we may have five which he will pick lip and perhaps call us and give
us the basic information on the phone, and follow up with the form.
Senator MONTOYA. Do all regions in the country use this system?
Mr. SWINKELS. Yes, sir. It is in all regions and cross indexed, also.
In other words, when we request the source of supply, we do not
request it only from our regional office, but it is requested also from
the other regional offices.
Senator MONTOYA. Now, how successful is it?
Mr. SWINKELS. It has been very successful. I can speak only for
my own region here, and it has been very successful as far as McClel-
lan Air Force Base is concerned. The statistics, if I may, just for the
last fiscal year-
PAGENO="0110"
104
Senator MONTOYA. What about-just a minute now. Let us say the
San Antonio area wants to purchase certain items. Now, how do you
get that information ?
Mr. SwIxI~ELs. The San Antonio office is under the Dallas region
and the Dallas region also has procurement center representatives
that do the same thing as our men do.
Senator M0NTOYA. What if they do not manufacture the particular
item in the Dallas region?
Mr. SWINKELS. That man should come to the other regions, includ-
ing us.
Senator MoxToyA. Does he?
Mr. SwINKEL5. Yes. sir.
Senator MoxToyA. He. does? How does he do that?
Mr. SWIXTiELS. The same way. but the use of this one form that we
use. and also by telephone. if necessary.
Senator MOXTOYA. How- many regions do you have in the whole
country?
Mr. SWINKELS. Te11 regions.
Senator MOXTOYA. You mean you circulate to 10 regions, then,
all 10.
Mr. SwIXKELS. Yes, sir; it circulates the 10 regions.
Senator MOXTOYA. WelL I have never heard of that before.
Mr. SwIx1u~Ls. As an example, if I may. Mr. Chairman, our pro-
curement center representative up at McClellan Air Force Base, last
fiscal year. furnished 1~013 small business sources. Out of that 1,013,
468 submitted a bid. Out of the 468 that did, 92 received awards.
These aw-ards w-ere in the total sum of $1,679,000. And this. again, is
through our source of supply.
Senator M0XTOYA. Out of how- much total, out of how- much pro-
curement expenditure?
Mr. SWIXKELS. I do not have that figure of the procurement ex-
penditure. The total procurement expenditure at McClellan Air Force
Base last year w-as something like $250 million.
Senator MOXT0YA. So, that is less than one-half percent?
Mr. SWINKELS. Yes, sir. However, we must exclude out of that $250
million at least $150 million that is customer directed, like the F-ill
aircraft and so forth.
Senator M0XT0YA. Do you think that we could do more through
SBA?
Mr. SWINKELS. yes, sir.
Senator M0NT0YA. What do you suggest?
Mr. SWINKELS. More people.
Senator M0NT0YA. More people in what?
Mr. SWINKELS. In all of our programs. As an example, you asked a
little bit earlier how- many people we have in the business develop-
inent program, and I mentioned seven. We have an excellent record
in region 9, as Mr. McLarna.n mentioned, but it is not totally clue to
just the seven people. We have had to use other competent people,
procurement center representatives and facilities inventory specialist,
C.O.C. specialists, and others to supplement the personnel for the 8(a)
program. Consequently, when we do that, the other programs suffer,
and in order for us to do a better job we must have more people.
Senator M0NTOYA. WTell, I think that the overall accomplishment in
the whole country is rather poor, do you not?
PAGENO="0111"
105
Mr. SwINKELs. Well, I do not care to comment for the rest of the
country. I am quite proud of what we are doing here in region 9.
Senator MONTOYA. There will not be any raise anyway so you can
answer that question.
Mr. SWINKELS. May I take the fifth amendment?
Mr. MCLARNAN. I think it would be helpful if we had a few extra
stenographers too. When Mr. Swinkels talks about McClellan Field,
there are a lot of centers that we do not have a man there, or we have
one there only part time. That is the thing we are talking about. We
say we' can do better, but if a man is in transit from one `place to
another, and it takes time to ge there, especially out here in the West
where we have big distances, it just means we cannot do as much as
we would like to do, and that is no criticism of anyone except if you
want us to do more, than we will do it, and we will be glad to do it,
but we just have to have people to do it.
Senator MONTOYA. Well, my point, the point I am trying to make is
that SBA is charged with this program, and if they do not have the
adequate manpower to do a fair job on it, and to run surveillance `and
monitor the purchasing made by these Govermaent agencies, then
we `are falling down on the job under the intent of the law. I a'm not
blaming SBA for it completely. I think we are all to blame, in the
Congress, the administration, and the SBA. I think we should all share
some of the blame in this thing. But, I think it is patently clear that
something has to be done because small contractors and small mann-
turers are not getting their share of the procurement pie. It is going
down percentagewise as it goes up dollarwise, so the pie is getting
bigger and the percentage gets smaller. I do not have the figures be-
cause we have not conducted the hearings this year as to what it was
last year, but it has `been going down, and this is why we are having
this hearing today.
Now, according to your figures you had, there was, I beilieve, $16
million for the whole country in the 8 (`a) contracting, $16.5?
Mr. MCLARNAN. No, that is in our region.
Senator MONTOYA. So, it is in your region and that is for 1971?
Mr. MCLARNAN. Yes, sir.
Mr. SWINKELS. The total dollar value in the entire country for 1971
was $66 million and $16.5 million was in our region.
Senator M0NT0YA. What about the contracting officers?
Mr. SwINKELs. Well, can you be more specific in what you mean
by what about the contracting officers, sir?
Senator MONTOYA. Do you have anybody from your agency trying
to induce these contractors to give subcontracts to small entrepre-
neurs?
Mr. SWINKELS. Through the 8(a) program?
Senator M0NTOYA. Well, either through the 8(a) or the set `aside?
Do you have that?
Mr. SWINKELS. Yes, sir. These are our project development special-
ists, and also procurement center representatives. However, we must
bear in mind that large installations, and again I refer to McClellan
Air Force Base because that is the `largest installation we have in our
region, you have a number `of contracting officers and buyers and th'e
representative deals with the small business specialist that is located
at the installation and works through the small business specialist.
PAGENO="0112"
106
Senator MGNT0YA. Who does the small business specialist work for,
the SBA?
Mr. SwIxicELs. He works for the Air Force, but that does not mean
that precludes our representative from going pa st the Small Busmess
specialist to cleat with the contracting officer or buyei~ if he has some
questions. He does have that autliorit to do that, sir.
Senator M0xT0YA. Well, at one time the SBA contracting officer
was placed under the Department of Defense, if you will recall, and
taken away from SBA, and we changed that, and brought him back to
SBA. And now you call him a procurement-
Mr. SwIxI~ELs. A procurement center representative.
Senator MoxTorA. Yes, so, well. is he accomplishing anything?
Mr. SwIxKELs. Yes, sir, lie is.
Senator MoxrorA. You say you hare five procurement center repre-
sentatives for this region?
Mr. SwIxI~ELs. Five procurement center representatives. The one at
McClellan Air Force Base is permanently stationed there, and the
other four are our liaison representatives, two in San Francisco, two
in Los Angeles, trying to cover liaison on some 48 to 52 installations
within the State of California, Arizona, and Nevada-
Senator MoxTorA. What. does the small business representative do?
Mr. SWIxKELs. Our small business representative or procuremeiit
center representative oii a liaison basis visits various installations as-
signed to him to review procuremeiit that were ilaced on open bid, not
the ones that have already been set-aside by that particular installa-
tioii, because that job had already been done. It is his responsibility
to review procurements that were iiot set-aside for that prime purpose,
and if it is the type of procurement, and if it is a repeat item and suit-
able for small business set-aside, then lie can request a joint set-aside
on those procurements.
Senator M0NTOYA. What do you mean by a joint set-aside?
Mr. SwIxKEr~s. An agreement between SBA and that particular
procuring agency. The two parties agree and sign an agreement form
that this will be set aside on a joint set-aside basis.
Senator MONTOTA. Do you have aiiy seminars in this region for
small business?
Mr. SWINKELS. Yes, sir.
Senator MoNT0YA. When did you have the last one?
Mr. SwINKEL5. Our 8 (a.) seminars, we just recently had four. Mr.
Warren can answer that.
Mr. WARREN. Yes. Actually the four that were recently held within
our region, Mr. Chairman. where the SBA was simply a participant
rather than an organizer of them. These were organized by GSA, and
by the Department of Commerce. The SBA, of course, was invited to
participate from the standpomt that they spoke of the 8(a) program
concept. One was held in Sacramento, oiie in Oakland, and one in San
Bernardino. and one in Phoenix, Ariz.
Senator MONT0YA. What kind of response did you have?
Mr. WARREN. Very bad, I will have to say. SBA took a lot of criti-
cism, possibly some of it w-e deserve, and I think, in my personal opin-
ion, probably most of it we did not. And I think the reason it was
leveled on us in the way it was, no doubt, was because the individuals
who felt the way they did are the oiies that expressed dissatisfaction
PAGENO="0113"
107
probably and did not really understand the entire picture. And you
cannot blame a man for at least expressing his views.
Senator MONTOYA. Did you have good attendance?
Mr. WARREN. On all but the Phoenix one. I think the Phoenix meet-
ing was very poor from the attendance standpoint. I would say there
were probably 30, maybe 40 people in total there.
Senator MOXTOYA. Well, I have conducted quite a few of those sern-
mars, and in quite a few places we have had very poor attendance, and
I am not going to blame SBA for not attracting more people. It is up
to the people to come as soon as t:hey read the notice in the paper.
Mr. WARREN. Yes, sir.
Senator MONTOYA. But, I think that is where the real fault lies,
that small business people do not realize what SBA can do for them
and SBA, naturally, with its small manpower cannot go out and seek
these business people who can possibly service procurement contracts.
Mr. WARREN. I think, too, another thing too, on these recent semi-
nars the Department-I am not trying to shove the blame on somebody
else or other agencies, this is not the point at all-but unfortunately I
think the SBA had nothing to do with the press releases on this. They
were all handled by GSA and the Department of Commerce. This was
a cooperative effort. However, there w-as no, as I say, no arrows bemg
pointed in any direction. But, these were, I would say, probably as well
attended that any that have been held, and I think these four were
about, oh, the 45th through probably the 49th meetings being held
nationally.
Senator MONTOYA. What has been the experience of SBA here with
respect to loans to minority enterprises? Can you give me the statistics
on this? How many loans have you made?
Mr. MCLARNAN. I was assured by these gentlemen here that you
were not going to ask me about the loan program, and I did not bring
any figures. But, we are not ashamed of our figures and we can bring
them to you.
Senator MONTOYA. If you will.
Mr. MOLARNAN. From my recollection, our minority figures are
about 45 percent in numbers, and somewhere in the 30 percent in dollar
amounts. But, it is certainly a tremendously larger percentage than
those people represent.
Senator MONTOYA. Can you give me a breakdown as to that, when
you submit these figures, as to how many loans you have made to
Spanish-surnamed Americans and black people, black business people?
Can you do that?
Mr. MOLARNAN. I do not believe that we keep track of them in that
manner. We keep track of them as to whether they are minority or not,
but whether we have the breakdown as far as loans are concerned about
ethnic background, I am not certain. I think we have it, but I will cer-
tainly give you every bit of information that you ask for.
Senator MONTOYA. Well, give me the numbers of loans that you have
made, and what your experience has been with respect to minority
enterprises.
Mr. MOLARNAN. Yes, sir, if we can do that, Mr. Chairman, on the
part of the minority enterprises.
I might say in general our record in minority delinquencies and col-
lections is two or two and a half, maybe three times more difficult than
70-654 0-72-8
PAGENO="0114"
108
our regular 7(a) program, our regular lending program, and this is
because we have gone out of our way, we have extended ourselves try-
ing to assist people and we took a greater risk and we knew it when we
did it.
Senator MONTOYA. Do you have 10 percent participation in all of
these loans, bank participation?
Mr. MOLARNAN. Yes, nearly all of ours. We did have a few 100 per-
cent, but. most of ours are 90 percent guarantees. Not in the minority,
of course. That. is strictly SBA money.
Senator MONTOYA. How many of minority have you made in dol-
lars, and how many loans have you made and what is the dollar
amount? Would you supply it for the record?
Mr. MCLA.RNAN. Yes, sir.
(The subsequent information was received and follows:)
PAGENO="0115"
SMALL BUSINESS ADMINISTRATION
LOANS APPROVED TO MINORITIES, NATIONWIDE, FISCAL YEAR 1971
Direct
Loan program Number Gross amount SBA
Im
mediate participation
Guarantee
Totals, by program
share Number
Gross amount
SBA share Number Gross amount SBA share Number Gross amount SBA share
Regular business loan 167 $8, 430, 000 $8, 430, 000 329 $17, 242, 300 $10, 499, 975 1, 627 $95, 820, 351 $84, 788, 190 2, 123 $121, 492, 651 $103, 718, 165
EEonomic opportunity loan 3, 818 51, 553, 080 51, 553, 080 49 828, 470 660, 663 1, 584 23, 301, 725 21, 859, 206 5, 451 75, 683, 275 74, 072, 949
Displaced business loan 27 1,540,566 1,540,566 3 118, 000 91, 500 1 6,500 5,850 31 1,665,066 1,637,916
Development company loan 154 11, 987, 820 11, 987, 820 4 1, 146, 716 785, 444 13 1, 767, 487 1, 565, 740 171 14, 902, 023 14, 339, 004
Subtotal 4, 166 73, 511, 466 73, 511, 466 385 19, 335, 486 12, 037, 582 3,225 120, 896, 063 108, 218, 986 7,776 213, 743, 015 193, 768, 034
Disaster 27,843 89,928,400 89,928,400 27,843 89,928,400 89,928,400
Total 32, 009 163, 439, 866 163, 439, 866 385 19, 335, 486 12, 037, 582 3,225 120, 896, 063 108, 218, 986 35, 619 303, 671, 415 283, 696,434
LOANS APPROVED TO MINORITIES IN THE STATE OF CALIFORNIA, FISCAL YEAR 1971
$2, 243, 700 2 $165, 000 $123, 750 247 $15, 838, 045 $14, 128, 211 274 $18, 246, 745
6,026,475 310 4,796,710 4,594,860 700 10,823, 185
529,000 6 529,000
713,400 7 713,400
9, 512, 575 2 165, 000 123, 750 557 20, 634, 755 18, 723, 071 987 30, 312, 330
2,423,200 620 2,423,200
11, 935, 775 2 165, 000 123, 750 557 20, 634, 755 18, 723, 071 1, 607 32, 735, 530
Note: The following are the lead guarantees to minorities, fiscal year 1971:
STATE OF CALIFORNIA, FISCAL YEAR 1971
Aggregate
Number amount of rent
Nationwide
80
$9,818,831.20
California
56
1,317,600.00
Regular business loan 25 $2, 243, 700
Economic opportunity loan 390 6,026,475
Displaced business loan 6 529,000
Development company loan 7 713, 400
Subtotal 428 9, 512, 575
Disaster 620 2,423,200
Total 1,048 11,935,775
$16,495,661
10,621,335 co
529, 000
713, 400
28, 359, 396
2, 423, 200
30, 782, 596
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FINANCINGS OF MINORITY SMALL BUSINESSES BV REGULAR SBICS AND MESBICS-FISCAL YEAR
ENDING MAR. 31, 1970'
[SBIC-A small business investment company, licensed by SBA, is privately owned and operated, and provides equity-type
capital and long-term loans to sma!l business concerns. MESBIC-A minority enterprise small business investment com-
pany that invests only in small business concerns with at least 50 percentof the ownership representing minority persons.]
NATIONWIDE MINORITY FINANCINGS BV SBICS AND MESBICS IN FISCAL YEAR ENDING MAR. 31, 1970
Financings reported by-
-- - Total financings by
331 regular SBICS 5 MESBICS SBICS and MESBICS 2
Minority groups (codes 0-5) Number Amount Number Amount Number Amount
0 Blacks 59 $2,317,217 50 $622,730 50 $772,110
1 Puerto Ricans 13 1,085 401 1 15, 000 1 15, 000
2Americanlndians
3 Mexican-Americans 2 105, 200 1 2, 000 1 2, 000
4Asians 10 433,962 2 135,000
5EskimosandAleuts
Total 84 3,941,780 52 639, 730 54 924,110
1 Reporting period based on fiscal year April through March. Closeout reporting period for fiscal year ending March 1971
is August 1971.
2 In California State.
Senator MONTOYA. What is your feeling about the 10-percent ba.nk
participation requirement? Is that not an impediment, an insurmount-
able obstacle?
Mr. MCLARXAN. Of course, it. is a mild detei-rent, but actually-
Senator M0NTOYA. What do you mean by mild deterrent? Usually
it is a very serious deterrent?
Mr. MCLARXAN. You know. I am a former bank president myself,
and. of course, a bank would like to have a 100 percent guarantee in-
stead of a 90 percent.
Senator M0NT0YA. 110 percent.
Mr. MGLARNAX. Yes. or more. But., actually whether it is minority
lending or any other kind of lending. it is disservice to a man if you
loan him the money where he does not even have a chance of making
it. So, the fact that we ask the bank to take a 10 percent piece of the
action, that does not stop them. The banks have been cooperative in
that regard. We do have instances where people become very incensed
because they do not get a. loan, but then you cannot explain to them
that it would be a greater hardship to them than a help.
Senator MoxToi-A. Well, here is what I am referring to, Mr.
McLarnan, that some member of a minority will go to a banker who
might be prejudiced, and we have People who are prejudiced in almost
any activity in this country. Now, this person may be capable of
running a. good business and he may be running a good business at the
time, but he needs a small business loan and SBA tells him you go to
the bank and get a letter from your banker for the 10-percent par-
ticipation. The banker is prejudiced, or may be it. is because there is not
because the banker is prejudiced, or maybe it is because there is not
enough interest in participating in an SBA loan. Now, this happens
many times. I know. So. what is the alternative? WTell, the alternative
is that if SBA thinks this man is good. why should they not be able
to make a 100-percent loan? I mean, give a. 100 percent guarantee on
the loan ? That is the point. I am trying to make.
Mr. MCLARNAN. That is a very good point, Senator. The only thing
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111
is that in most cases if we can get him where, as you said, he knows
how to run a business, we can usually talk a bank into making that
kind of a loan. Now, I do not say we do it in every instance, but we
have been very successful in that regard, and we have not had as much
prejudice for racial or ethnic cases as we have prejudices where the
bank just does not want to take a chance on a man who has a weak loan
situation when he knows that at tin'ies like this he can loan his money
to absolutely safe borrowers. So, it is not an ethnic thing so much as it
is just the case that he is going to make the loan to the man who is the
safest borrower.
Senator MONT0YA. I have no quarrel with the banker who refuses
to make a loan to somebody that patently shows an incapability for
repayment. I have no quarrel with the banker like that because he is
not supposed to throw the depositors money away. I am referring to
the case of pure prejudice.
Mr. MOLARNAN. In the case of prejudice, here in California we have
an overwhelming number of tremendously large chain banks, and the
management of those banks have seen the light as far as this prejudice
because of ethnic basis, and in most cases-now I know there are cases
of prejudices, and let us not be misled by that, I know there are cases-
but in most of the cases we have been able to go to the branch manager
and say if that is the reason you are holding out on this loan, you had
better get with it because the management, the head of this bank
wants to make these loans, as many as they can, if they can reasonably
get their money back simply because, for example, some of the banks
are going into this MESBICs program, and some because they have
seen their civic responsibility. So, with the exception of certain in-
stances where I am sure there are many cases like that, but it is not
nearly as widespread as some of the minority people feel, because it
does not make any difference whether you are a minority or a Caucasian
or what. If you are turned down by a loan you feel bad, you feel resent-
ful, you feel hurt, and as a result, they blame it on a number of things,
and, of course, the easiest one is to say I am, and they give their ethnic
background and they say they did not make it to me because of that,
when as a matter of fact, that might have been a factor in the case, but
it is also a factor that he might have had a reasonably weak loan
situation.
Senator MONTOYA. I can show you areas of this country where the
banks have not made a single loan to a black American, Spanish sur-
name American.
Mr. MOLARNAN. I am sure that is true, and I am sure that 10 to 15
years ago it was almost 100 percent true. But, there is quite program
among the bigger banks here to eliminate that sort of thing.
Senator M0NT0YA. Do you feel that there should be flexibility given
to the SBA administrators whereby if they encounter a situation like
this, which indicates a bank arbitrarily refuses and also there i~ a
capability on the part of the potential borrower to repay that particu-
lar loan, that SBA should be vested with the authority to make a 100
percent guarantee?
Mr. MCLARNAN. I believe that, and also-I do not want to speak
for the agency because I mean that is done by our central office, but I
personally feel that we ought to have direct funds so that when we run
into a situation just like the one you described, where the man can
PAGENO="0118"
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pay his loan back, and he does not have a bank of account, other than
the one where he has been dealing with somebody who is obviously
prejudiced, that we have sufficient direct funds in that instance to make
that man a loan, so if he cannot get a banker to do it, the SBA will go
on the loan.
Now, if we had that flexibility, it would eliminate that problem
that you are talking about 100 percent.
Se~iator MONTOYA. Yes, I think so, and that is the only quarrel I
have with the 10-percent requirement. That is the only quarrel I have
with it.
Mr. MCLARXAN. We like the 10 percent because it encourages the
bank to get into the act with us. You see, after all, they are using 100
percent of their money. Until the time comes when we have to buy
it back, and that gives us-we can spread our dollars many, many
times further than the way it is under that program.
Senator MONT0YA. What does this regional office provide by way of
managerial-counseling services to small businessmeii to whom loans
have been made?
Mr. MCLARNAX. Well, the minute that a loan is made one of our
SCORE representatives goes out, or a member of our management
assistance programs goes out and talks with the. borrower, and in many
cases lie also went out. before the borrower got the loan. We try to set
up a working arrangement with them, and through the SCORE, and
we also have a contact with the. society of Certified Public Accountants
and other business groups here who will give us people to give aid and
guidance to the small businessman, if lie will accept it. But., frequently
we find that after the man has got his loan lie does iiot want to have
anybody coming around advising him or telling him how to run his
business. So, this is oiie of the minor complications that you have in
this kind of a situation.
Senator M0NTOYA. Well, what do you think should be done under
those circumstances? Should we anticipate that a refusal might come
and counsel him before the loan is made as a requirement?
Mr. MOLARNAN. We not only do that., but we put it in our loan
agreement that he will accept this counseling and guidance. But,
whether they accept it or iiot, sometimes is a matter of practical appli-
cation, and some do and some do not..
Senator M0XTOYA. Do you have an arrangement whereby CPA's
can render a voluntary service
Mr. MCLARNAN. Yes, sir, and the head of the society in this area was
in my office last week working out further details a.nd they are
cooperative.
Senator MONTOYA. Do you have a pooi of business people here who
might volunteer?
Mr. MGLARNAN. Yes. We have how many in our SCORE program?
Mr. SWINKELS. We have something like 140.
Mr. MCLARNAN. 140 on our active SCORE roster, and we have names
of others that we can solicit, from time to time.
Senator M0NT0YA. Have you been using them?
Mr. McL~~RNAx. Definitely, we have. I would estimate anywhere
from 5 to 10 SCORE men are in our office everyday, and others are
out in the field, going out.
Senator M0NT0YA. They are volunteers, are they not?
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113
Mr. MCLARNAN. All of them, yes.
Senator MONTOYA. Do they pay their own expenses?
Mr. SWINKELS. Yes, sir.
Mr. MCLARNAN. If it is within 50 miles, and we have a tenuous
arrangement with them over 50 miles that we can give them 10 cents a
mile and per diem or something to that effect.
Senator, you asked about some of these courses, and I would like to,
if I may, state to you that in management training in the last fiscal
year we had 53 courses, eight conferences, 21 workshops, and 11 clinics
making a total of 93 courses, conferences, workshops and clinics, and
that is just our San Francisco office, just right here in San Francisco.
In management assistance for the entire region we had 15,350 inter-
views, 5,982 counseling cases, and we had a 1,616 management ability
evaluations, we had 496 management assistance plans. So, with a staff
like you have heard from Mr. Swinkels, you realize that somebody has
been working.
Senator MONTOYA. What is your total staffing in the regional office
here?
Mr. MOLARNAN. For the procurement?
Mr. SWINKELS. The regional office, the entire region?
Senator MONTOYA. The total staff for SBA?
Mr. SWINKELS. The total staff in SBA procurement and manage-
ment assistance is 28 professionals.
Senator MONTOYA. And the total staff?
Mr. MOLARNAN. 267, and I think we are sixth on the. list of 10
regions. In other words, there are five other regions who have sub-
stantially greater numbers than we have, which is no criticism of them,
but it just shows you we. are just working with a very limited staff
in an area where there is an awful lot of work to do.
Senator MONTOYA. Well, what about some of those regions? Do they
have minority problçms such as this region has?
Mr. MCLARNAN. I think yes. You see, some of the bigger offices like
Chicago and New York, and Atlanta, and Dallas, they have not only
minority problems but they have other problems.
Senator MONTOYA. Now, do you have aiiy 406 money for consultation
services?
Mr. SWINKELS. Yes, sir.
Senator MONTOYA. Do you use it?
Mr. SWINKELS. Yes, sir; very much so. We have one 406 contract
here. Well, we have a number of 406 grants but we. have one 406 con-
* tract with a minority firm down in Los Angeles known as Ultra
System.
Senator MONTOYA. Now, what do they do?
Mr. SwINIcELs. They offer management assistance to the minority
firms.
Senator MONTOYA. Do you make sure that they have the business
capability and experience to render this type of counseling?
* Mr. MCLARNAN. That determination is made in our central office,
and until this new Administrator, we did not have any voice in the
selection of the grantees. However, our new Administrator has indi-
cated that we will be consulted as to the capabilities and also as to
the past record of the grantees. We are very happy about that.
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114
Senator M0NT0YA. Well, I would hope that you would look into this
because some of these grants have beeii made to people who give coun-
seling when they have never been in business themselves, they have
never achieved any success in business. They have just set up an orga-
nization and applied for a grant, and they have been getting them, too.
I think that is a mistake, that is a waste of the taxpayers' money.
\~That about the surety bond legislation, what has been your exper-
ience here with respect. to that?
Mr. MCLARNAX. We were one of the two offices that carried the
pilot program on that, and Mr. Blackledge has been in charge of that..
He will answer any questions you would like.
Mr. BLACKLEDGE. Since the inception of the program on April 26,
1971, in Los Angeles as a pilot program, 45 bonds have been approved
in region 9. I have no statistics for the other parts of the country.
In August 2, 1971, the authority was delegated to our office to oper-
ate throughout our region, and we became the second to be regionwide
as a pilot, program. During the time since August 2, 1971, we have ap-
proved 24 additional bonds, which would be part of the 45 mentioned
earlier, for $1,712,195, averaging $71,341, as an average contract
size.
Now, of the 45 bonds that were approved, that. is, applications for
a guarantee that were. approved, 22 bonds have actually been issued
within our region for a total of $971,392.31. The reason for the lag is
twofold. First, all bidders are not low bidders and then secondly, there
is a lag. Many times a man is approved on an application to guarantee
his bond, but lie does not request if for another 15, 20 or 30 days. It
takes that long before lie needs the bond and actually has it. issued to
him. So, these two are reasons.
`We fomid one interesting case where after we approved the bond
the contracting agency, which happened to be a municipality decided
if someone is willing to boiid him they no longer require a bond. They
required it first, and then found out. lie could get. it. I do not. know
whether there was something else behind it or not. These were the facts
apparent to us. As we go down through our statistics we find that since
we have had the program, and we keep closer statistics than before
August 2, we have issued 12, actually issued 12 bonds for $517,676, and
the average size of the bonds that were issued was $43,140.
The breakdown as to size, I think, might be of interest. Since Aug-
ust 2, we have approved the following number of bonds up to $25,000,
five; from $26,000 to $50,000, eight; froni $51,000 to $75,000, two; from
$76,000 to $100,000, three; from $101,000 to $125,000, one; from $126,-
000 to $150,000, one. In excess of $150,000, four; making a total of 24
bonds that we have approved siiice we took control of the program.
Senator MONTOYA. Have you had any defaults?
Mr. BLAc.KLEDGE. `We have had no defaults yet, but we are too new
in the program. WTe do have some maintenance contracts that are
yearly, so it is to early for us to evaluate this. We do think that the
quality is good. They have beeii little people, bu they have been people
woh knew what. they were domg. aildi I am very pleased that. the ones
that are coming seem to be t.hie type of ~ for whom t.hie program
was pIOpOSedI.
Senator MONTOYA. Do you provide bonds for service contractors ~
Mr. BLACKLEDGE. Yes, sir; amid I think as I look down through my
data I believe that probably of the 24, 14 of them represent either serv-
PAGENO="0121"
115
ice or supply contracts which have only a performance bond in con-
nection with them, no labor and material payment bonds.
Senator MONTOYA. Do you think that the present law is adequate
for the needs in this particular area, or do you think that implementa-
tion is necessary-~-
Mr. BLACKLEDGE. The statute limits it to oniy performance, labor,
and materials. I do not know. There might be some place to include
fidelity and some other types, such as indemnity that many small
people might have to come up with.
Senator MONTOYA. Like what?
Mr. BLACKLEDGE. A fidelity bond, suppose a man was a contractor
to deliver mail, and he would be required to furnish bond for each of
his employees. The present legislation did not envision this. Certain
types of indemnity bonds, if you are going to have a contract in which
you must put up an indemnity bond agreeing to replace any damage
you might do in performing this contract, to other parties, and there
might be a place for these two in the program.
Senator MONTOYA. What else?
Mr. BLACKLEDGE. I think these would be the two major ones. So far
we have not had any. Maybe because our limit is very succinctly stated
to people, and we have not had any request in excess of the $500,000
for individual contract that is supplied and allowed in the legislation.
I do not know whether this means that there aie not any larger than
that that need it, whether it means they have received the information
and just never came to us. I do not know which is the reasoon.
Mr. MCLARNAN. But, we have not had any requests for over $200,-
000, so the inference you might think was that the $500,000 was ade-
quate at that time.
Senator MONTOYA. Do you have any questions?
Mr. JONES. Yes. Thank you, Mr. Chairman.
For the sake of the record I would like to illicit some further in-
formation, and perhaps Mr. Swinkels could provide this information.
First, how do minority businessmen find out about the 8 (a) program?
Do you have an outreach program to them or do they typically find
out by word of mouth and come into your office?
Mr. SWINKELS. The minority small businessman learns of the pro-
gram through various types of seminars that we have had recently,
through publicity in the newspapers, word of mouth, in contact with
some of their competitors or friends. Some of them contact the var-
ious installations, seeking government work and the small business
specialist at that installation also gives them the information that
this 8(a) program is available through the SBA. Quite frankly I do
not think we are reaching all that we should be reaching.
Mr. JONES. What further steps might you take?
Mr. MCLARNAN. May I say that many of us are giving little talks,
two or three times a week to a great many people in all stations
of life. One of the disappointing things about this is that we have
had meetings, I had over 250 at a meeting down the peninsula area,
4 or 5 months ago, all Spanish-speaking people, all very enthusiastic.
I took my top SCORE people, I took my chief of procurement, fi-
nancial processmg, every chief I had, and there were about eight
of them sitting up there on the stage. I told in a 20 or 30 minute
talk what we could do, and then each chief stood up and was re-
PAGENO="0122"
116
sponsive to any questions that they might have. The audience was
very interested, asked a lot of questions, and I do not. think u peicei~t
from that group came in to the SBX office. Now, this is the discourag-
ing thing about working with the minorities. It is true that we get
a few that come in aiid scream and holler and want a lot of money,
and have not any assets, and have not any background in a thing, but
out in this greater bay area there must be 200,000 black and Spanish-
speaking people, and we do not get a half of 1 percent of those
people into our front door. In other words, w-e cannot help the
people until we can talk with them, and this is a dilemma that we
are in. The same thing is true of the blacks and of the Indians. We
have a lot of Indians in this region. and you can go and give your
talks, and we appear on radio and television, and we have done
these, and you just read off the various meetings that we held. and
yet there are people out there that are capable of being helped by
the programs that we preseiutly have, and yet we do not get them in
the frdnt door in the way that we would prefer.
Mr. JONES. WTell. once a. minority contractor or minority busi-
nessman hears about the program. and applies for this certificate
of eligibility, what criteria do you apply in acting upon that.
application?
Mr. \\TARREN. Well, there are a number of things, of course, that
we have to look at when we are dealing with a~ man's business plan.
I assume this is what. you are referring to, Mr. Jones. We look at
the length of time in business, his background of experience in the
area lie wishes to pursue. We look at. the financial structure of his
business, how much of it is commercial, what types of products does
lie produce, what are the possibilities based on our own experience,
of course, in the past, or t.he probability of getting him work in the
field he is interested in pursuing. There are any number of things like
that. There is no one thing. of course. that we say is a requirement.
It is sort of dependent a lot on the individlual circumstances that
he pi'eseiuts, andi the way he wants to go about pursuing this. If
he has a. reasonable approach. andi a realistic approc.h to his busi-
ness activities, there is really no reason at all why we would not ap-
prove his business plan and make him eligible for the 8(a) p~~-
gram. There is no criteria as such other than a percentage of owner-
ship in the case of corporations. We do require that the minority
owner have 51 percent control. Andi in the case of a partnership,
50 percent control.
Mr. JONES. Would it be possible t.o estimate the average number
of man-hours it takes to evaluate an application?
Mr. WARnEN. Oh. I really cannot answer that.. Mr. Jones. directly.
I think that in the general sense. probably, if youi want to relate it
to hours, man hours of effort, probably 8 to 40. This is quite a range
I realize, but there is really no way of telling. It. simply dependls on
what is presented.
Mr. JONES. What percentage of applicants are finally issued a
certificate? Do you have any way of telling that figure?
Mr. WARREN. By far the largest percentage are issued. At least 90
to 95 percent.
Mr. MULARNAN. It is not as imposing or difficult. as it sounds
when he recites it off. They have to tell you the story of their busi-
ness, and that is about as easy as anything can be. If the fellow
PAGENO="0123"
117
has been in business 2 or 3 years, he sets this information down, and
it is not complicated, and as I say, I doubt if we reject more than
5 percent of the plans, if that many.
Mr. JoNEs. What would be the average time between the appli-
cation and the issuance of the certificate?
Mr. WARREN. Well, again, this would depend on what is presented.
Normally anywhere from possibly 2 weeks to possibly 3 months.
Mr. ,JONES. And following the issuance of the certificate, approxi-
mately how long would it be in the average case before he received
an 8(a) award?
Mr. SWINKELS. We cannot guarantee that he receives an 8 (a)
award. We do not have a magic crystal baH that we can look il1to
and say that we have this plan and give him this job.
Mi'. JONES. What percentage of firms that receive certificates, ie-
ceive awards subsequently?
Mr. WARREN. 75 or 80 percent.
Mr. SWINKELS. About 75 or 80 percent.
Mr. WARREN. Excuse me, may I comment? This does not mean
these people who have not received awards may not receive one to-
morrow, or the next day. It simply means that they have not yet re-
ceived one.
Mr. JoN1~s. At the time that this certificate is issued, would it be
possible, as was suggested in testimony earlier today from Mr. An-
gello from the Bank of America, to have a meeting with the banker
and businessman and SBA representatives to determine financial
limits within which his 8(a) contract perhaps should be, and to ar-
range a line of credit with the bank against future 8(a) contracts?
Is that currently being done, and if not, would it be feasible?
Mr. MCLARNAN. Well, we have a revolving line of credit with
the Bank of America, and it is possible to set up a revolving line of
credit in Angello's bank, and so there is nothing to stop it. In fact,
it is being done.
Mi. JONES. One last question about the marketing problem of
some of the subcontractors mentioned. I)o you think that most of
the contracts are, in fact, located by the minority businessman or by
the SBA? I mean the 8(a) contract.
Mr. SWINKELS. By SBA.
Mr. JoN1~s. I see. Now, there was testimony from the NARTRANS
Corp. to the effect that their contracts had all been located by vir-
tue of their own efforts. I take it that is a very unusual case?
Mr. SWINKELS. Well, they have the staff and the ability to go out
and do so in the case of NARTRANS. As the gentleman mentioned
earlier, they have their own people that are talking with the pro-
curement agencies, which would not be true of the average small
business minority firm where the fellow is actually wearing four
hats, and he has not the time to go out there and look for work.
Mr. JONES. Thank you.
Senator MONTOYA. That will be all, gentlemen, unless you have
anything else to add.
Mr. MCLARNAN. Thank you for inviting us to attend.
Senator MONTOYA. Thank you, and we will be in recess until to-
morrow morning at 9 :30.
(Whereupon, at 5 :45 p.m., the hearing was recessed to reconvene
at 9 :30 a.m., Thursday, September 30, 1971.)
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119
SMALL BUSINESS ADMINISTRATION'S 8(a) SUBCON-
TRACTING PROGRAM-MINORITY ENTERPRISE
THURSDAY, SEPTEMBER 30, 1971
U.S. SENATE,
SUBCOMMITTEE ON GOVERNMENT PROCUREMENT OF TIlE
SELECT COMMITTEE ON SMALL BUSINESS,
San Francisco. Calif.
The subcommittee met, pursuant to recess, at 9 :30 a.m., in the Cere-
monial Courtroom, Federal Building, 450 Golden Gate Avenue., San
Francisco, Calif., Senator Joseph M. Montoya (chairman of the sub-
committee) presiding.
Present: Senator Montoya.
Also present: Joseph L. Ward, assistant. general counsel; and Keith
A. Jones, minority counsel.
Senator MONTOYA. The committee will come to order.
This morning we have scheduled hearings with the following
witnesses:
Mr. Emory C. Curtis, vice president, Plan of Action for Challenging
Times, from San Francisco;
Also, Dr. Anthony Malo, assistant regional vice president, National
Economic Development Association, otherwise known as NEDA;
Mr. Jerry Hutton, representing the Office of Minority Business En-
terprise, Department of Commerce, and Mr. Jay Leanse, Deputy
Director, Office of Minority Business Enterprise, from Washington,
D.C.
We will proceed with Dr. Malo and hear what lie has to say.
STATEMENT OF DR. ANTHONY MALO, ASSISTANT REGIONAL VICE
PRESIDENT, NATIONAL ECONOMIC DEVELOPMENT ASSOCIA-
TION, SAN ~rOSE, CALIF.
Senator MONTOYA. Dr. Malo, do you have a written statement?
Dr. MALO. No, just the one I sent to you, as a letter.
I would like, if I may, to give a little background on NEDA.
Senator MONTOYA. Well, will you first tell us for the record what
your occupation is and what your connection might be with respect to
your testimony.
Dr. MALO. Sir, my name is Dr. Anthony Louis Malo, and I am as-
sistant regional vice president of the National Economic Development
Association, and of the regional office which was established in San
Jose, March 1971. Our responsibility is as a firm, since we are con-
tractors both of the Small Business Administration and the Depart-
ment of Commerce, to help in several professional ways to obtain loans
(119)
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and to start small operations in the marketplace. Now, by this, I mean
the jobs that we perform primarily are the preparation of loan appli-
cations which is normally called loan packaging. In this process we
do some assisting in planning and in forecasting of sales.
Also our responsibility to these firms is to, wherever possible, use
available tools such as the 8(a) program to obtain profitable opera-
tions. This means that we are going to aid them in obtaining markets
for their Products and, hopefully, to get them into a profitable position
as rapidly as we can.
And in that area, we have come into contact with the 8(a) program.
Now, at the outset, we are working with two types of firms. Although
there are many ways to classify them, we simply classify them as start-
ill) firms, new firms, and existing firms, expanding firms.
Our responsibility, as an organization, is to help the Spanish speak-
ing. All of our members are Spanish-Americans. We are all bilingual,
and in some instances as much as quaclralingual. Whatever is neces-
sary, we take on at that level. So, we are able to talk with the people,
because we are members.
Now, the second thing that I would like to point out in de\-elopmg
the 8(a) program and our contact. with the 8(a) program is that when
get down to the process of putting before these sources of funds an
applicant who is a poteiitial profitable businessman, we are looking for
all of the help we can get.
Typically, our client, has either been refused by the bankers in terms
of his inability to have a bankable loan or present a bankable
performance.
Senator M0XT0YA. `Would you excuse me just a minute?
Off the record.
(Discussion was had outside the record.)
Dr. MALO. As I was saying, in putting our client before the banker
or the source of funds, one of the important documents that we pre-
pare with him is his business plan.
Now, an important aspect and an important part of that business
plan is a sales forecast.
Now, as you know-
Senator MOXTOYA. Do you have an economist in your organization?
Dr. MAL0. I am sorry?
Senator M0XT0YA. Do you have any economists; do you have any
businessmen?
Dr. MAL0. Yes, we are all businessmen. As a matter of fact, I, my-
self, hold a doctorate in business administration and I am currently
on the staff of the University of Santa Clara. My vice president,
Mr. Rudolph Traveno, has been in the real estate and development
business for some 20 years, and I think this in general is true of our
offices throughout the country. There are some 14 offices at present.
Senator MOXTOYA. That is the point I have been trying to empha-
size, that these organizations should have people who are knowledge-
able about business problems instead of knowledgeable about how to
get a. grant.
Dr. MAL0. Well, may I expand a little along that?
Our responsibility is to work with those entrepreneurs. And they are
really businessmen who are profit-oriented. There is no gift and there
is no grant here. Our job is to ferret out those people who have an
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opportunity of setting sail for themselves as soon as possible. We are
not talking about 3 years; we are talking about 3 months. That is
what we would like to do.
I was present at the hearing yesterday, and it seems to me as we went
along it became increasingly evident that some of this help is longer-
termed than what we consider a start. Our job here is to get them
profitable as soon as possible.
And how do we do this? Well, to put them before the source of the
funds, but they have to be profitable. Now, there are three things-
Senator MONTOYA. How long have you been in existence?
Dr. MALO. NEDA has been in existence 1 year.
Senator MONTOYA. I mean, in San Jose, your organization?
Dr. MALO. Since March 15.
Senator MONTOYA. And how many applications have you processed?
Dr. MALO. Something in the order of 83.
Senator MONTOYA. How many of these have beeii successful?
Dr. MALO. About 82.
Senator MONTOYA. That is very good.
Dr. MALO. And the total amount of money we pumped into the
economy is in the order of $3 million.
Senator MONTOYA. How much in loans have you been able to secure
for these people?
Dr. MALO. $3 million.
Senator MONTOYA. $3 million?
Dr. MALO. That is right.
Senator MONTOYA. What are the sources of these moneys?
Dr. MALO. Well, in general, they are the bankers. The banks have
been looking very much toward the 90-percent guarantee from the
Small Business Administration.
Senator M0NTOYA. Do all of these loans have a 90-percent guarantee?
Dr. MALO. They do not.
Senator MONTOYA. What percentage would you say, of the loans,
have the 90-percent guarantee?
Dr. MALO. I would say about in the order of 80 percent.
Senator MONTOYA. Are SBA guaranteed?
Dr. MALO. Are the Small Business Administration guarantees, that
is correct. That means to the banker that their exposure is 10 percent.
Senator MONTOYA. How much of these dollars represent new enter-
prises instead of going enterprises?
Dr. MALO. The new enterprises, I would say, are represented in
about a half a million, something in this order, and the remainder are
expanding enterprises, those who have gotten started and needed in-
creasing amounts of funds. That would be the mix.
Going back to the 8(a) and our relationship to the 8(a) contract. We
have used this, of course, since we are trying to present the applicant
to the source of funds in the best most realistic position that we can.
We have used the 8(a) as a potential market in the sales forecast.
Now, again, let inc underscore the fact that we are primarily direct-
ing our applicants toward the commercial market. This is our re-
sponsibility. These people have to be profit-oriented and market-
oriented.
Now, the 8 (a) `s then become an aid only, and at the present has
represented a relatively small percentage, not because it is not avail-
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able but because it is not yet required. ~\`\Te think as we develop in the
San ,Jose area, since it was only a fledgling operation here, I think we
will be using 8 (a) more.
Now, the point that I wanted to make is that. in these forecasts, where
there is a great deal of uncertainty, we attempt to reduce that uncer-
tainty by asking our applicant, wherever possible~ to come in with
signed contracts, or letters of intent. This is where. we depend in-
creasingly on the 8 (a.) program, where the 8 (a) looks like a good
possibility.
Now, what we have found recently, as changes in the program that
we think are going to be. helpful to us, is that we will be dealing with
the district, offices of Small Business and caii get a closer feel for the
availability of these contracts.
Now, let me say at the outset that our emphasis is primarily toward
commercial business, and the 8 (a.) comes in as an aid to get things
started, and beyond that we have used them a great deal in expansion.
Senator MoxToY~. What kind of businesses are these about which
you speak?
Dr. MAL0. Those that. we are talking about., well, they vary any-
where from a small one-man jewelry operation to electronics firms that
have. t.o do with computers. In fact., we found that this combination,
where some of the aid we can give them, the small computed companies
can do a job and pick up some of this additional volume. Of course, our
point of view is getting things into a profitable position and develop-
ing the volume further so that. profit increases. This is our point of
view.
Senator M0XT0YA. You are Mr. Leanse. and you are Mr. Hutton?
Mr. LEANSE. Yes.
Mr. Hu'rroN. Yes.
Sena.tor MONTOYA. Now, what kind of a grant does NEDA have
from the Federal Government?
Dr. MALO. It' is called a 406 grant., and, so far as we are concerned,
the moneys that we are using now, since it is a nonprofit organization,
are in starting off this, the loan packaging, and the second thing is
to develop our own sources of funds: that is, the Spanish-speaking
community. And in this area we have been particularly successful in
San Jose, as I said, and we have been in business since the middle of
March, and we have a legacy from the Los Angeles office. We have been
able to almost. complete a savings and loan. WTe have the charter. \~\Te
are now shopping around for the funds to establish our own source
of capital. In the process in San Jose, there are two banks of Spanish
speaking, andi they are a little less further along. They are getting
together the organizers, and they have successfully obtained some
funds already.
Senator M0NT0YA. Do they have a charter already?
Dr. MALO. No; no, not yet. The S. & L. does; the banks do not.
Senator MONTOTA. Does the S. & L. have a State charter or Federal
charter?
Dr. MALO. Federal charter, a. Federal S. & L., and t.hey will be
operable, hopefully, in November.
Senator M0XTOYA. That will be the first one in Calif ornia; right?
Dr. MALO. Well, no. There is the Banco del Pueblo, but that is a
bank, and the San Fernando S. & L.
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Senator M0NT0YA. The Banco del Pueblo is a bank, and it is in
Santa Ana.
Dr. iMIAT~o. So, we will be operable fully in November, hopefully, and,
as I say, because we can then begin doing the same sort of thmg that
we do like any other private enterprise, obtaining funds and search-
ing out the sources of funds, and then assisting wherever possible.
The third area, I am delighted to say, which is the area I am most
active in, we have established at the University of Santa Clara a course
which will be supported by industry not only for the entry of inmority
groups into the company at the lower levels but for the development
of managers for the middle and upper levels. And this is to be started
in January.
Senator MONTOYA. Is this a credit course?
Dr. MALO. Yes; it is a credit course, and it is at the graduate level
and will be taught by people in the university who have been in in-
dustry over a number of years.
Senator MONTOYA. Well, are you going to require any kind of
qualifications before a businessman can enroll in that course?
Dr. MALO. Yes; they have to be a minority-whatever "minority" is;
and I am not really sure what it is.
Senator MOXTOYA. And what about educational qualifications?
Dr. MALO. The educational qualifications are experience and the
potential for growth.
Senator MONTOYA. So, anybody can go in there if he has the capa-
bility to learn?
Dr. MALO. Exactly; that is right.
Senator MONT0YA. Now, have you had any experience with bank-
participation in these loans, with Spanish banks or banks that have
Spanish-speaking management and ownership?
Dr. MALO. Only to the extent that we have dealt with the branches,
the branch managers who, themselves, are Spanish speaking, and we
find that our applicants are attracted to this kind of manager, this
kind of environment as it were. We are not really sure why, except that
whenever we talk with them we like to deal through their bank, who-
ever they have been doing their banking w-ith, and invariably, you
know, they know- somebody personally, because as Latins we tend to
personalize a lot of our business, and this is a fact.
Senator MOXTOYA. That is correct.
Dr. MALO. And working with this, I think it is important that we
have sources of funds that are either managed or directed by people
of this same culture.
Senator MONTOYA. Does the university get involved in these minor-
ity problems?
Dr. MALO. Yes; they do. I think, as a small university, since Santa
Clara has an undergraduate population of some 3,200, there are a
lot of programs, especially in the law school, which are primarily for
minorities.
Senator MONTOYA. They are mostly legal-aid programs; are they
not?
Dr. MALO. No, sir; these are scholarships. In fact, at the minute,
at the law school, there are $40,000 worth of scholarships a year avail-
able for this. And beyond that, I think the area where we need addi-
tional help, where we are trying to shore things up for NEDA, is in
the graduate program because it is fine if you are a professional man
70-654 0-72-9
PAGENO="0130"
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and you are able to perform, and that is a certain level of security,
but as you go up the ladder in your organization, as it were, in business,
I think this is the area where we have not really been quite so strong
as we would have liked to have been, and we are looking for more
opportunities at the management level. And the best way to obtain
these, we feel, is to have the sponsoring organizations, at the outset
at least, get the business ~eop1e to send minorities who look like they
make some real sense, bring them in there, and help them develop; and,
then, I think that maybe in the future we will be able to expand some
of these programs.
But, more than this, more important than anything I think, we
want to get a track record, just as an applicant is evaluated at the
outset at least by the track record, and we are kind of proud of NEDA.
So, it is with our business people, and I think this is what we want
to do.
Senator MONTOYA. You mentioned a few minutes ago that you had
been trying to get some funding for your organization, donations from
business people and the community?
Dr. MALO. That is right.
Senator MOXTOYA. How successful have you been?
Dr. MALO. Not yet, we have not been successful at all yet.
Senator M0NT0YA. Have you tried?
Dr. MALO. I will be honest with you: Not so much as we would like,
because we are too busy doing the job in getting these people beforb
us. WTe have some indication of interest, and these people have beeii
the larger corporations in the area, and they are, quite frankly, the
people with whom we have talked, and their position is: "Well, we
are still not sure this is not a grant operation, a giveaway, and show us
a little more, a little performance."
But I think, in general, as we develop we have been able to turn
these people around, not because we jumped up and down but simply
by performance and results.
Senator MONTOYA. Well, that is the challenge you are facing, to
prove yourself; is that correct?
Dr. MALO. Yes, and we have found that they have, in general in
the San Jose area, quite an open mind, and, as we develop the amount
or~ number of people who are going in and being profitable-
Senator MONTOYA. That is why I am concerned about grants being
made to these overnight operations that are set up to get those grants
in the names of counseling business people of minorities, and they
have been making those grants for quite a few years and many of
those people do not have any knowledge of business, and still they
pretend to give advice to people who start in business. And that is my
greatest concern, because once we experience failures and lack of suc-
cess in those fundings and those programs, then we waste a lot of
taxpayers' money and the people in the community become very criti-
cal of all of these programs, and then they do not believe anybody.
Dr. MALO. That is right. We have found that, I think, Ben Hem-
andez, the originator of our organization, started off, and we are con-
tinuing, of course, with the idea that the best contacts for our people
in the community are made at a professional level by professionals.
We found that banks, for example, some of the banks who were re-
putedly hard nose-I guess you can use that word-have turned
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around very nicely because we were able to show them at a professional
level that we were not there to play games, that we were there to per-
form and that the people who were coming in for loans were, in fact,
profit oriented and had a record to prove it.
And they have come along, and we are able now-as a matter of
fact, the Bank of America has established seven branches who are pri-
marily directed to work with NEDA for the small business loans for
minorities.
Senator MONTOYA. Do you advise these people, when they do not
have the repayment capability, that they should not proceed with the
loan application?
Dr. MALO. Yes. And that is the most difficult part of our job.
Senator MONTOYA. Yes, but it should be a part of your job; should
it not?
Dr. MALO. It is; and we do. For example, we found `a very busy ma-
chine shop who is doing a land office business, but found that we was
running shorter and shorter of capital. So, we came into it; and h~
asked for a loan. We came in to evaluate it, and we found that his
capital was costing more than his return on sales, aiid it was in the
order of 31/2 percent per year, and the faster lie operated the worst
he was doing. I mean, the more rapidly he was going down hill. And,
yes, we do this. This is part of our responsibility, to say: "Well,
look, if you are iiot viable, there is no sense in proceeding, no sense in
getting up youi expectations or your dreams, or hocking grandfather
clocks. This is the end; there is iiothiiig we can do. Perhaps there are
other organizations that can provide seed capital; we do not have any
capital of our own." And in this area we have been helped by a number
of organizations, ESO, EPA. In San Jose, these do have seed capitaL
and those marginal ones, we are-
Senator MONTOYA. Who is ESO and who is EPA?
Dr. MALO. Economic and Social Opportunities, and the other is
Economic Progress for All, and they are located in San Jose, and they
have fuiids available for seed capital, equity capital.
Senator MONTOYA. How are they organized, under Federal pro-
grams?
Dr. MALO. Yes, they are.
Senator MONTOYA. Under what programs?
Dr. MALO. I am iiot sure. And, so, they have become an adjunct in
our efforts, because they have provided some seed capital, and with that
seed capital we can sometimes make up the equity requirements.
Senator MONTOYA. What has been your experience with the 8(a) pro-
gram and with the Small Business Administration?
Now, give us your experience on that.
Dr. MALO. Well, the Small Business Admiiiistratioii has been help-
ful in these areas. They have first of all-I have worked extremely
closely with them, and they with us, from our inceptioii in San Jose. We
were a shootoff of the Los Angeles office, and, as soon as we were estab-
lislied in San Jose, the local Small Business Administration man came
over to see us, and we sat down and exchanged ideas, and the way we
were curreiitly working is that the Small Business Administration is
sort of overseeing us in the sense that we have our applications, the
ones that we consider acceptable for the Small Business people to
obtain funds, and we discuss it with them on an informal basis. This
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saves a lot of time in formal proposals and refusals and in moving
back and forth, and they are very interested in this.
Now, the 8 (a) program which has recently been decentralized to the
district level is also extremely pleasing to us. From our point of view,
we can talk directly to the Small Businessman, for example, over in
Oakland who is operating in this area, and we can talk with him and
find out what is available, because, in the past, we have found that
while we were interested in this 8 (a) contract. it. took a while to even get
to it. There were a. large number of applications; there were a lesser
number of opportunities, and we were just simply adding to the pile
of applications.
So, with this decentralization, we are able to monitor it more
closely. So, I think that is the direction that makes some real sense, so
far as we are concerned.
Senator MoxToY~. Well, have any of your clients received any 8(a)
contracts?
Dr. MALO. Yes. So far, I know there are two, yes; and they are
relatively new, and I cannot give you any results. I wish I could.
Senator MOXT0YA. Have you encountered funding difficulties for
these. people that have received 8 (a) contracts?
Dr. MAL0. No. Everyone, so far, that we have dealt with, that is,
the financial sources, the bankers or sometimes even the private sector,
people who were willing to increase it., they look it as a support for the
profitability. Now, there is, however, a caution-and I think this has
been mentioned a couple of times-that when we have been seeking
financing, the 8 (a.) contract has a tendency to stiffen you Up-in other
words, to lose some flexibility and make you more dependent on Gov-
ernment business. I am not sure that this is necessarily so. I think
there could be a tendency because it is a contract, but our protest is,
at NEDA anyway, to mix the two with the emphasis on commerce-
in other words, at the marketplace on commercial business.
Senator M0XT0YA. This is the way it should be, instead of having
businesses become dependent on 8(a) contracts.
Dr. MALO. That is right.
Senator MONTOYA. That is a very dangerous thing.
Dr. MALe. Our people, when it has anything to do with Govern-
ment, you lrnow, they are always ready to get involved. Aside from
the paperwork, there is a feeling that maybe their independence is
somewhat constrained.
We have found that the 8(a) contract, at this point at least, can be
used as an adjunct in addition to the primary business which is to
get a market for your product or service.
Senator MONTOTA. How many people are in your organization?
Dr. MALO. In San Jose?
Senator M0NT0YA. Yes.
Dr. MAI~o. We have three.
Senator MONT0YA. Are you full time?
Dr. MALO. Yes.
Senator MONT0YA. All of you?
Dr. MAL0. No. We have three of us who are full time, and, then,
we have two graduate students from Stanford who are on scholarships
from the Morrow Foundation who have been working with us full
time in summer but who will be part-time assistants during the rest
of the year.
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Senator MONTOYA. And are you also teaching at the university?
Dr. MALO. Yes; I am teaching one course in management develop-
ment; the minority course I was talking about, we are trying to get
that going.
Senator MONTOYA. Do you have a textbook on that?
Dr. MALO. No; we use the regular management reading books, and
what we then do is bring in special speakers to develop certain areas
of interest to the businessman.
Senator MONTOYA. Do you do it in a bilingual way?
Dr. MAL0. Why, yes; I think we probably do more teaching outside
of class, just sitting around talking about the problems, than we do in
class. Lecturing is not particularly an efficient way, and we did not find
lecturers who were proficient to the point of getting down to the nitty-
gritty. At least, when you have 30 people in a class, it is a little diffi-
cult. So, we do this to stir up some more thinking and development.
Senator MONTOYA. Can you comment on the period of time for end-
ing8(a) aid?
Dr. MALO. Oh, yes. Now, I am going to look at it from the business-
man's point of view. I would say that 8(a), in developing a market-
oriented corporation or proprietorship, should be ended as rapidly as
feasible. We want to use the 8(a) contract as a startup, as a backup,
primarily, and not as the main business of the firm. We have found
that it is extremely effective in obtaining funds. We hope it will con-
tinue as such. We would like, however, to be able to bail out, as it w-ere,
though on oui' own, as rapidly as we could after we become profitable,
and I am sure that this is the case as we have been looking at a 3-
month period where the applicant is then able to pay back. This is not
always the case, and the institutions have stretched a little for us, but
these are the goals we are seeking. Hopefully, we can come in profitable
at the outset and continue, but that is-
Senator MONT0YA. That is almost impossible; is it not?
Dr. MALO. It almost is.
Senator MONTOYA. Usually. And I think 3 months is impractical;
is it not?
Dr. MALO. Well, we have found that the people who are coming
through our office in general are looking for that 3-month period, too.
Now, we have been able to hit that. I would not say always,
obviously.
Senator MONTOYA. Well, in many businesses you do not realize a
profit even the first year.
Dr. MALO. That is right. And in the small businesses, the ones we
have been talking about, at least to date, have been people who are
quite knowledgeable and are willing, at the outset, to start small but
profitably. I am talking about the proprietorship, the small partner-
ship, the service organizations, and that sort of thing, manufacturing,
wholesaling. Some of the larger groups, of course, may take a little
longer. But, again, to date, our experience there has been expansion.
Senator MONTOYA. What has been your experience in California
with respect to ownership of businesses, say, like gas stations and
garages by minorities?
Dr. MALO. I do not know, in California. I know this, that in the
institution-
Senator MONTOYA. Well, are they coming into their own here in that
particular field?
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Dr. MAio. In the gasoline stations, in the high-risk areas, we are
particularly emphasizing the restaurants; we have a. large number of
restaurants.
Senator MOXTOYA. You have a large number of Mexican restau-
rants; do you not?
Dr. MALO. That is correct, and in this area.
Senator M0NTOYA. What about the franchise a.re.a?
Dr. MALO. Starting. To my knowledge, there is no great percentage
of participation; no.
Senator MONTOYA. Wily not?
Dr. MALO. I do not know.
Senator M0NTOYA. Cannot NEDA do something about this, go to
the big companies?
Dr. MALO. Yes; I think we can, just. as we did to the financial sources.
Again, that might. be very well something we can do in the future.
Senator M0NT0YA. Why not go to the Union Oil and Standard Oil
of California, and all of those corporations, and see what they can do?
Now, that is tile way to start.
Dr. MALO. There is no reason in tile world. Now, we have found in
some of the smaller applicants are People who have come in wanting to
Start in tile oil business or gasoline business, gas stations, but they are
high-risk business, and the normal, standard sources of funds do not
want it; it is too risky. That is also true of restaurants and several
others.
Senator M0NT0YA. I do not. know why it is a high-risk business. I
know in New Mexico it is not.
Dr. Mxi~o. It is not.?
Senator M0NT0YA. No. In fact., in New Mexico, we had a lot of
Cubans come in there, a.ild they are miming quite a few stations
already.
Dr. MALO. It. might be an area for development here.
Senator M0NT0YA. And they are doing a very fine job. They are tak-
ing mechanics from the local vocat.ionai sc.llOols, aildi they have a me-
chamc shop right next to their station and they are doing very well.
Dr. MALO. Well, I am sure it is a potential here.
Senator MOXTOYA. The same is true back East w-ith the blacks. Now,
they are doing a very good job in the East, so why can you not do it
here?
Dr. MALo. I cannot think of any reason.
Senator MONTOYA. And, of c.ourse, the restaurants are fine, but there
could be too many restaurants, too.
Dr. MALO. Right.
Senator M0NT0YA. And that is the most dangerous business of all,
running a restaurant.
Dr. MALO. It certainly is. We have found this in Sail Jose especially,
where we have relatively, a large conceiltration of Spanish-Americans,
and there is a. turnover, and this is why, at least. at. this point-and
I am speaking for NEDA-I think that pa.rt of our job at the moment
-and we are certainly not staffed well, but I think t.hat part of our job
should be following up.
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Senator MONTOYA. I think NEDA could perform a good function,
because it is starting out with great dedication and great resolve, and
I think they have the competency.
Do you have anything else, Dr. Malo?
Dr. MALO. I cannot think of anything right at the moment.
Senator MONTOYA. Well, thank you very much. You made a very
good statement.
Now, we will now listen to Mr. Curtis and Mr. Hutton and Mr.
Leanse.
Now Mr. Curtis is the vice president of the Plan of Action for
Challenging Times, otherwise known as PACT, Inc., of San
Francisco.
Mr. Jerry Hutton is the representative of the Office of Minority
Business Enterprise, San Francisco, Calif., and Mr. Jay Leanse is
the Deputy Director of the Office of Minority Business Enterprise in
Washington, D.C.
So, let us hear from Mr. Curtis first., and then we will take on the
Government witnesses.
STATEMENT OP EMORY C. CURTIS, VICE PRESIDENT, PLAN OP
ACTION FOR CHALLENGING TIMES, SAI'I FRANCISCO, CALIF.
Mr. CURTIS. Thank you, Senator Montoya.
Senator MONTOYA. Do you have a statement?
Mr. CURTIS. Yes; I have a small written statement.?
Senator MONTOYA. Do you have copies of it?
Mr. CURTIS. Yes.
Senator MONTOYA. Well, if you will give us the copies we will make
them a part of the record, and then you can go ahead and hit the high-
lights of your statement, and we will ask you a few questions.
Mr. CURTIS. OK.
(The prepared statement submitted by Mr. Curtis reads in full as
follows:)
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130
PACT, Plan of Action for Challenging Times, the firm which I am
vice-president of, is a private non-profit organization that has been
assisting the minority busine~s coirarunity in the San Francisco Bay Area
for the past six years. During that period of time, we have been encouraged
by the steadily increasing concern that the government has shown for the
plight of the minority business conrnunity. Unfortunately, we have been
discouraged by the inability of the government and the private sector to
transform their concern into successful model programs that actually bring
about minority economic development on a significant scale.
The reason for the government s failure to effect significant change
is that it has been concentrating upon assistingindividual minority business-
nen~ The 8(a) program has been one of the programs operating in this manner.
While there is no question that individual successas are necessary to amass
a successful business coasiunity, there is the question of what is the best
way to actually assist these businessmen, by helping them individually or by
effectively altering the environment in which they all operate.
For the minority business consminity to develop, it mast gain a reasonable
share of the dollars that the P.S. government spends for goods arid services.
It is no secret that the minority coiniauhity does not receive a significant
share of these dollars now. It seems to us that the 8(a) program has the
* ingredients to be able to nay a erich larger role in changing thi.s situation
than it has to this day. To acconiplish more, however, those establishing
policy guidelines for the program mast carefully define the 8(a) program as
a tool to ~tchieve minority ceonemic development and not as a goal in itself,
to be measured 1*~y the statistics it produces.
We feel that the 8 ca) program should be geared to deliver a minijarLas
fixed percentage of the government's goads and services dollar to the minority
business corraaiity. 8 (a) should be thoi~ght of as a tool to assist govcri'irrent
PAGENO="0137"
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Page 2.
agencies and the cooperating private sector in providing at least their
fixed minimuni percentage of business to the minority co~runiinity. 8(a)
should be a tool just as the SBA Management and Technical Assistance Program,
the avlBF. effort and the efforts of organizations like PACT are employed
as tools.
In order to provide minority businessmen with the opportunity to supply
a minimum fixed percentage of the government's needs, the responsiblity
for successfully accomplishing this goal must he placed with the procurement
sections of the particular government agency or department that has the
contracts to be let. The responsiblity must not be placed upon those implementing
the 8(a) program.
At tho present tine, responsibility is divided. The agencies mist
produce a list of potential 8(a) contracts, the SBA attempts to match the
contracts With its list of qualified suppliers, and O?vfl3E is resppnsihi e for
coordinating and prodding both agencies into action. As a result, each one
of the principal actors can, and usually will, perform their role admirably- -
but the results are not forthcoming.
Under our proposal, all government installations that purcbnse more
than a fixed aifoumt of goods and services would be required to have personnel
responsible for ensuring that at least the fixed minimum percentage of govern
nent business is mode available to the minority business community. These
personnel would call upon all of the available resourcos and tools such as
SBA, CMBE and PACT to assist them in reaching their goal. The 8(a) program
would be just ~ne of these tools available to assist these government
installations.
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* Page 3.
This program would not be unique or revolutionary in any sense.
At the present time, all government installations that purchase more
than a fixed amount of goods and services must purchase some percentage
from small business enterprises, as opposed to large business establish-
ments. As a result, most of these firms have personnel assigned to their
* procurement operations to assure compliance with the requirements. All
that implementing the 8(a) program in this manner would do is make sure
that minority entrepreneurs get a piece of the procurement pie that is
now being split up pr~marily among older, more well established white
concerns. -
By placing the responsibility for minority contractors' involvement
in the hands of the individual -government procurement officer and by
defining the 8(a) program as only a tool to assist these officers in meeting
their responsiblity, the government would be ceasing to concentrate solely
upon assisting individual minority businessmen and beginning to implement
the type of easy to introduce program that can effectively change the
environment in which the minority entrepreneur operates, thus fostering
his development in a highly cost-effective manner..
PAGENO="0139"
133
Mr. CURTIS. Well, I will go through some of the points I made in
the statement.
PACT has been working in this game of assisting minority busi-
nesses in this area. for the past 6 years. During that period of time,
we have been both encouraged by the steadily increasing concern that
Government has shown for the plight of the minority business corn
munity as well as the private sector's concern. Unfortunately, we have
been discouraged by the inability of the Government and the private
sectors to transform their concern into successful model programs that
actually bring about minority economic development on a significant
scale.
Now, I will give a comment on a. general approach tha.t I think needs
to be thought out and needs to be applied. One possible reason we
believe for the Government's failure to effect a. significant change is
that the primary and central focus is upon assisting the individual
minority businessman. The 8(a) program has been one of the pro-
grams operated in that manner.
Now, while there is no question that individual successes are neces-
sary to amass a successful business community, there is the question
of what is the best way to actually assist these businessmen, by helping
them individually or by effectively altering the environment in which
they all operate.
For the minority business community to develop, it must gain a
reasonable share of the dollars that the U.S. Government spends for
goods and services. It is no secret that the minority community does
not receive a significant share of these dollars now. It seems to us that
the 8(a) program has the ingredients to be able. to play a much larger
role in changing this situation than it has to this day. To accomplish
more, however, those establishing policy guidelines for the program
must carefully define the 8(a) program as a tool to achieve minority
economic development and not as a goal in itself, to be measured by
the statistics it produces.
We feel that the 8(a) program should be geared to deliver a mini-
mum fixed percentage of the Government's goods-and-services dollar
to the minority business community. "8 (a.)" should be thought of as
a tool for assisting Government agencies and the cooperating private
sector in providing at least their fixed minimum percentage of busi-
ness to the minority community. "8 (a)" should be a tool just as the
SBA management and technical assistance program, the OMBE effort
and the efforts of organizations like PACT are employed as tools.
In order to provide minority businessmen with the opportunity to
supply a minimum fixed percentage of the Government's needs, the
responsibility for successfully accomplishing this goal must be placed
with the procurement sections of the particular Government agency
or department that has the contracts to let. The responsibility must
not be placed upon those implementing the 8(a) program.
Senator MONTOYA. Now tell me what has been your experience with
respect to management and technical assistance for 8(a) subcontrac-
tors.
Mr. CURTIS. We have been under contract to provide management
and technical assistance, and it is an absolutely necessary function. It is
one that really should be expanded in more communities in every way.
We find that the minority businessman, in walking that treacherous
PAGENO="0140"
134
path, that he needs assistance.. He needs assistance that he trusts, and
in this way-I mean, just like with us. over the years operating, our
programs really focus here in San Francisco; however, we get. clients
from all over the State-all over northern Califorma.
Senator MONTOYA. How much of a. cont.rac.t do you have?
Mr. CIJRTIS. Our SBA contract that just ran out is $100,000.
Senator M0XT0YA. And how much has-
Mr. CURTIS. Plus, we have a contract, too-we have an OMBE afflh-
a.te office, Office of Minority Business Enterprise, and all of these work
together to provide all of the various services.
Senator MONT0YA. How much of a contract do you have with
OMBE?
Mr. CURTIS. With OMBE, our cont.ract is $190,000.
Senator MONTOYA. So, you have approximately $300,000 ?
Mr. CURTIS. Right..
Senator MONTOYA. How many people do you have in your orgam-
zation?
Mr. CURTIS. Under the. contract. I think we have about-we have
between 15 and 20. And now that. includes secretaries, and so forth.
Senator M0NTOTA. How many businessmen do you have in your
organization?
Mr. CURTIS. Let me go through how the operation goes. We provide a
loan-packaging service, and w-e Provide a business-information service,
and we provide followup. and we provide what we call a business-
climate development program in trying to pron~ote financing oppor-
tunities and trying to promote business opportunities for clients. In
our loan-packaging service we have t.liree loan packagers who work
with the businessmen. Iii terms of loan packaging, I think that our
statistics are something like out of seven w-ho tried to get loans maybe
one of them would fit the bill that we would take to SBA or take to the
hank.
Senator MONTOYA. Do you counsel them in business?
Mr. Cuwr~s. Yes; we counsel them in all aspects. The first part of
what. we try to do for the businessman is-because once he comes there,
there is one thing in his favor, that he is trying t.o get. into business-
that we try to look at. his present position, to look at whether, you know,
the possibilities of success are there. and w-hat. the things are that lie
needs to put together so that. when lie finally gets, you know, through
the thing, get.s the. loaii packaged, that lie does have a high probability
of succeeding.
Seiiator MOXT0YA. Yes; but. do you have any follow-up counseling?
Mr. CURTIS. ~Tes
Senator MONTOYA. That. is the part of the duties connected with your
grant?
Mr. CURTIS. That is part of the duties connected with the grant.
And let me say that even before we had the grant., we had always
tried to raise extra money. because we know that. this followup is the
next and most necessary thing and that various other services are
needed.
Senator Mox'FoYA. Do you raise extra money?
Mr. CURTIS. We do.
Senator M0XT0YA. How much did you raise last year?
Mr. CURTIS. Last year, we were iiot very successful. We raised about
20 percent of our budget out.side.
PAGENO="0141"
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Senator MONTOYA. That is $100,000?
Mr. CURTIS. Maybe $60,000 or $70,000. We are trying this year-
we have done something else, too. During the past year we have no-
ticed the problem that Dr. Malo mentioned, the problem of financing,
and we have almost completed putting together a venture-capital fund
so that we can have some money that w-e are free to put into the busi-
ness in terms of equity.
Senator MONTOYA. How are you going to attract venture-capital
contracts?
Mr. CURTIS. How?
Senator MONTOYA. Yes.
Mr. CURTIS. How are we going to attract it?
~\Tell, so far, we have been successful. We have got about three
different sources, three different foundations, that have come in with
some moneys, and, then, we had a little bit, so we have about $250,000.
Senator MONT0YA. In venture capital?
Mr. CURTIS. Yes.
Senator MONTOYA. How- mttch have you loaned ?
Mr. CURTIS. We are just putting the pieces together now.
Senator MONTOYA. Is that specifically outlined for lending purposes,
or is there some administrative expenses to come out of it?
Mr. CURTIS. That is part of our problem. We are going to have to
raise some more money for administration. None of it can w-e use for
adirninistration and that is one of the problems.
Senator MONTOYA. So, you have approximately $300,000 from Gov-
ernment seed money and $200,000 from grants, and $80,000 or $60,000
or $70,000 from privately solicited capital?
Mr. CURTIS. Yes.
Senator MONTOYA. Is that it?
Mr. CURTIS. I am sorry, 1 did not quite get your last statement.
Senator MONTOYA. You indicated that you had gone out and raised
$80,000 or $70,000?
Mr. CURTIS. That is for operating. The $250,000 is more specifically
for venture capital.
Senator MONTOYA. Well, you have got quite a bit of capital there?
Mr. CURTIS. Yes.
Senator MONTOYA. Now, tell me what kind of business-oriented
capability do you have in your organization?
Do you have that?
Mr. CURTIS. We are a business-oriented operation; even though we
are a private, nonprofit organization, we still have-
Senator MONTOYA. Tell me about your qualifications and your back-
ground in business.
Mr. CURTIS. All right. In our organization, the President, Everet
Brandon, who is not here, has been running the organization since
1963. It was formed in 1963, and he has been running it since 1963.
His executive vice president-
Senator MONTOYA. What are his qualifications in business?
Mr. CURTIS. Business administration, UCLA.
Senator MONTOYA. But he has never been in business?
Mr. CURTIS. In addition to running this organization as a business,
Mr. Brandon was the first black stockholder in San Francisco.
Senator MONTOYA. OK.
PAGENO="0142"
136
Mr. CURTIS. Senator. I want to say that from running a nonprofit
organization, you have the payroll, you have that whole problem, the
normal business problems that a normal business guy would have, the
same problems like meeting the payroll, like today.
Louis Barnett, our executive vice president, is a business major out
of UCLA also.
* Senator MoxToYA. Has he even been in business?
Mr. CURTIS. Yes. In fact, he is one of the five organizers of the first
black bank that started-
Senator MONTOYA. Well, before that was he in business?
Mr. CURTIS. Before that he had been in business, in the insurance
business, in Oakland.
Senator MONTOYA. In Oakland? How long has he been working for
your organization?
Mr. CURTIS. Four or 5 years-S years.
Senator MONTOYA. How long was he in the insurance business?
Mr. CURTIS. I do not know exactly. I think it was maybe 2 or 3 years,
4 years, something like that.
Senator M0XTOYA. All right. Now, the point I was getting is: What
kind of followup do you have with these minority entrepreneurs by
way of giving them advice as to how to establish accounting proce-
dures and how to conduct inventories and how to establish goals, price-
wise and profitwise, within the inventories that they have and the
capital that the sales would generate?
Now, what kind of followup advice do you have and what kind of
monitoring do you give these minority entrepreneurs through your
organization?
Mr. CURTIS. Because we have been operating we have developed very
good contact in terms of assistance in tile business community in San
Francisco, and because we have been operating with the history we
have, we have good files 011 various margins that are required. In this
area the Bank of America small business service provides a lot of
information to us that we in turn use. We tell tile guy that tile margins
are going to have to be for him to make it in his business. And, in fact,
that, in turn, means that when tile businessman comes to us with his
idea of what he is going to achieve, we have to put it down in realistic
terms so that he can see, you know, because we do not want to put him
in something he cannot do.
Senator MONTOYA. All right. How many loan applications have
you prepared; how many have you processed, and how many have
been successful, and what is the dollar representation in the accepted
applications?
Mr. CURTIS. Right.. Let me do the last first. In the past year, we
have secured a little over $1 million ill loans. Tile numerics as to tile
number of applicants, I am not sure of that. And there i5 tile ratio.
But, you imow, requests for assistance in loans to us versus those
that we package and turn ill are something like 7 or 8 to 1.
Senator MONTOYA. You figure that you have been able to obtain
approximately $1 million in tile last year?
Mr. CURTIS. It is a little over $1 million; yes.
Senator MONTOYA. Well, that is a very poor return on a $300,000
overhead; is it not?
Mr. CURTIS. It is when you look at it in terms of just that. The
other part of it is keeping some of these clients in business.
PAGENO="0143"
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Let me tell you another thing we are doing with some of the same
money. We have seen that problems exist in getting minorities into
business, in a poor business climate, in a declining shopping area, in
an area where insurance is high, where everything is high. We are
trying to see if we cannot do something as a pilot program, do some-
thing about changing that attitude, changing that business climate
in which they exist. The street where we recently located our office
is a minority shopping street; and what we are trying to do is that we
are trying to develop what we call a business climate development on
the street getting merchants together, getting them to use their lever-
age to get the city to provide various services to uplift the area and
get the city to provide better lighting and police protection. Getting
1)eOPle into business in an area where it is very difficult to do busi-
ness is really kind of doing a disservice. However, when a person comes
to you for this loan, if he can qualify for it, I think we are obli-
gated to get him that so that lie has a business.
Well, it ends up that lie has a job that he is working 12 hours or
14 hours on and not making much money, but still lie has his pride
and he has his business, and what we are trying to do also is to change
that climate.
That is one thing that-well, maybe it is out of this committee's
concern, but-
Senator MONTOYA. Well, I think all cities are trying to do that, to
provide better lighting in areas where there is constant crime, and
I think Washington, D.C., pioneered this, and it is working very
successfully in Washington. A well-lighted area is a deterrent to
crime.
Mr. CURTIS. Well, we are trying to go much further, much further
than that, with the pilot programs we ai'e working on now. We are
trying to go much further thaii that, to improve not only the lighting
aspect but to get the business people together and get the property
owners together and get them to physically fix their facades up so
that they look better. We work with business people to improve their
displays-
Senator MONTOYA. Do you have a chamber of commerce in these
minority neighborhoods?
Mr. CURTIS. In this particular one, we picked just the smallest single
section we could handle, and we organized the business community
there.
Senator MONTOYA. Are they doing anything toward your objectives?
Mr. CURTIS. Yes, yes. We have, through this, just like one thing
that is a common thing with us, where a street is dirty with trash,
gone to the city to get more trash cans and they could not do it, and
the business people went and bought some pretty little trash cans and
put them there. That, in turn, triggered a reaction, and some of them
have more pride, and some of them are fixing up their places better,
and we are getting businesses to come back into an area that before had
been dying.
Senator MONTOYA. `Well, I notice in `Watts there are less businesses
now, in spite of the enormous expenditures which the Federal Gov-
ernment~ has made of approximately $3 to $4 million. There are less
businesses now in `Watts than before the riots.
Mr. CURTIS. That is a thing that you can see not just in `Watts but
in various other places, in our community where the climate for doing
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business is just very poor. If you look at that. boarded up place, that
one with shutters, looking almost like a jail, and some of the business-
men in some of these situations are operating where they keep their
front doors locked and what. have you, and just let customers in when
they come up, and things like that.
Senator MONT0YA. We have places in Washington, D.C., where the
business places are locked during the clay, and unless they know the
customer they will not open the door.
Mr. CFRTIS. That is right. Now, when you get someone a loan to
do business in that area, there is something else. You have an obliga-
tion to do more than that; you have an obligation to try to do some-
thing about that. situation he is in. the climate. It is more than just.
lighting; it is almost a change of attitude to get some hope built back
into the. property owners and into the business operations in the area.
Senator MOxTOY~. You have to establish community pride.
Mr. CURTIs. Now one of the things that. bothers us when w-e are try-
ing to get HFD or someone else to do something about this is that
FACE, the residential FACE program. ought. to be-and I think the
legislation allowed it. to be-used for a commercial area. I think it
should be possible to implement an official FACE program just on a
strip, just. on a business strip, because then economics can come into
play and help you. As it is now. we have to sell the property owners
in our area on the idea that if von fix yours. we will get the other
people to fix up. and so forth. and things will change.
Senator MOXTOVA. Well, you are going to have a hard time doing
that.
Mr. CURTIS. That is very difficult..
Senator M0XT0YA. That is the story of America, although it is his-
tory, and that is why we have some blight areas in the center of towns,
because the local real estate owners were putting the revenue in their
pockets and not improving the property, and they went along like
that, and that is what has happened to our cit.ies. That is what hap-
pened in New York, Cleveland, Chicago, and Los Angeles.
Mr. CURTIs. But there ought. to be, just. like in the residential area
with FACE, the low-interest rate money, with an incentive to the
property owners to take advantage of that low-interest -rate money.
There ought to be some similar one for these little commercial strips
in our areas. There ought to be a similar program like that, and from
our experience in working on this pilot program, that is the key. That
is the key. If we could turn that key, we could unlock something.
Senat.or MOXTOYA. Well, I would like to go into it a little more
thoroughly, but I think you have covered a vast landscape on this one.
I appreciate your testimony.
Mr. CURTIs. Thank you.
Mr. JoNEs. Mr. Curtis, I have just a few questions for you. What is
the experience of PACT with the 8(a) program?
Mr. CURTIS. We have not processed many 8(a) `s through our office.
One of the problems is that there is this matching. you know, of oppor-
tunities with clients. OK., I can get a. list of possible 8 (a) contracts
from the Office of Minority Business Enterprise, and Jerry Hutton has
done a very good job in providing these listings. Now, that is a poten-
tial there. To find them, we will spend a lot of time, and then if we are
going t.o pursue very, very diligently, we will be spending a lot of
time just trying to find a PoSSible match out there, and then they will
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say we are not really doing anything because we only found one match
or two matches that year, and this is why I think there is a divided
responsibility. Someone has to have some responsibility just following
on that.
Mr. JONES. One of your problems then is that your clients simply
do not do the kind of work that the Government ordinarily would be
purchasing?
Mr. CURTIS. That is correct; that is absolutely correct. You see, if
I had a number of clients that would be easy. Now, there is potential
out there to put the clients together, but that would take, you know,
some effort in doing that, just focusing on that and that alone.
Mr. JONES. Is there some agency that could help coordinate these
Government needs with the needs of youl clients, sir, or is this a
function that really has to be performed by PACT?
Mr. CURTIS. Frankly, I think the responsibility is for 8 (a) and the
Government procurement. They would best be put into the hands of the
procurement people at the particular agency, because, if you are work-
ing as a buyer in a particular agency, you really would not appreciate
someone else over here telling you how you have got to buy or who you
have got to use, because, after all, if you guys do not come in, then your
boss is looking down your neck, and lie is not looking over across at
another agency. The procurement people of the particular agency that
needs products or services should bear the responsibility to get things
done; and this is where I would like for them to feel that they can call
the SBA or the Office of Minority Business Enterprise or PACT and
say "I have got this thing; this guy looks possible, and could you help
him to come up to snuff to meet what I need ?"
Senator MONTOYA. Do you feel that perhaps OMBE and the SBA
could perform more of a formal coordinating function with the pri-
mary responsibility for seeing that minority enterprise has a certain
fixed share. of the Government's business, or should this responsibility
rest with the procuremeiit agencies themselves?
Mr. CURTIS. ,Just like small business. Just like the small business
procurement part of Government procurement. From working in
larger companies, I know that there is a requirement that 40 percent
of the Government contract dollar go to small business, and the large
companies do it, give that 40 percent to small businesses. We are going
to help find those businesses, you know, and nurture them; and then
the small businessman, if lie is contacting a particular agency to get a
contract, instead of going to SBA and OMBE, he goes somewhere
else to get business. He is learning the facts that lie is going to have to
know to run later on his own. He is at the particular agency where the
contract is being let and the goods are being bought.
Mr. JONES. Thank you.
Senator MONTOYA. Thank you very much.
Do you have an application for new funding; do you have funding
for this year?
Mr. CURTIS. We have an application in.
Senator MONT0YA. You have not been funded?
Mr. CURTIS. Our contract is up in October.
Senator M0NT0YA. What is your application for?
Mr. CURTIS. We have an application of the OMBE affiliate for new
funding, the OMBE affiliate for refunding at the same level for Octo-
ber 15. The contract ran out as of the first of July, and we carried the
70-654 0-72-10
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140
operation on our funds up until now, and I would think that SBA
was slow getting that money; so, we carried the operation.
Senator MONTOYA. The same level as last year?
Mr. CURTIS. The same level.
Senator MONTOYA. You may be excused.
Is Mr. Medina here in the audience?
Mr. Medina is the chairman of the Latin-American Chamber of
Commerce, of San Francisco.
STATEMENT OF GEORGE MEDINA, VICE PRESIDENT, LATIN-
AMERICAN CHAMBER OF COMMERCE, SAN FRANCISCO, CALIF.
Mr. MEDINA. Vice President, Mr. Chairman at the outset, I want
to say that I had occasion to talk to Mr. Ward a month ago, and at that
time I related to `him the only input I could see that I could give here
would be by virtue of the past experience and interest that I have
had in the SBA, as you well know, and I have traveled extensively
throughout the South as a representative of a Spanish-language news-
paper. And from this experience, the only thing I could relate to you
is in discussions I have had with people, business people, that I come in
contract with on a day-to-day basis, one of the common things that
keeps coming up is the lack of awareness of the existence of the 8(a)
program, and this is one of the points I might be able to make some
suggestions about how the knowledge of the existing program can be
brought to the Spanish-speaking community.
Senator MONTOYA. Fine. You may do so.
Mr. MEDINA. Well, being in the business; as I say, of representing the
interests of the Spanish language newspaper~-
Senator MONTOYA. Do you own a newspaper?
Mr. MEDINA. No; I do not. I have an agency that represents the
Spanish-language newspapers.
Senator MONTOYA. How many Spanish-language newspapers?
Mr. MEDINA. Eleven.
Senator MONTOYA. Are they all located in the San Francisco area?
Mr. MEDINA. No; they are all from here to Texas.
Senator MONTOYA. OK. Proceed.
Mr. MEDIXA. And, as I say; the newspapers themselves are willing
to cooperate in any way that they can to `bring the awareness of `the
existence of the 8 (a) program to the people, and anything we can do
in that regard-well, they are willing to do it., because every small
businessman that these people help in the potential areas are potential
customers for the newspapers themseJves.
Senator MONTOYA. Have you informed SBA about that?
Mr. MEDINA. Not recently. I brought the subject up `a couple of years
ago.
Senator MONTOYA. Well, would you inform SBA as to the attitude of
the newspapers which you represent toward disseminating infor-
mation?
Mr. MEDINA. Yes; I will do that. To my knowledge. the SBA has
relied on contracting the Association of Spanish-Speaking Busmess-
men. The only one really organized, to my knowledge, in the areas I
have worked in is the Mission Contractors Association, here in Saii
Francisco, which is made up of a couple of big contractors and four or
PAGENO="0147"
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five small ones, `and I think that they are going to have to expand their
effort.
Senator MONTOYA. What is `the Latin-American Chamber of Com-
merce?
Mr. MEDINA. It 1:S located here in San Francisco.
Senator MONTOYA. Is it very active?
Mr. MEDINA. It `has been more active in the past year than in the 2 or
3 years before that.
Senator MONTOYA. How maiiy members do you have in it?
Mr. MEDINA. We have about 49 members with the potential of about
125. But, in regard to the membership, with the exception of two or
three people, I do not kiiow that there would be any other potential
or prospective recipient of 8(a) contracts, and this is another area
that I want to bring up, and that is as to how do we qualify a potential
or prospective busiiiess for an 8(a) contract.
Senator M0NTOYA. Well, we had a hearing yesterday on that par-
ticular point, and if interested businessmen submit an acceptable busi-
ness plan to SBA, they will put them on a list which they keep in the
office and as soon as there is an 8(a) contract available or in the offing
they will match that contract with a suitable business firm.
Mr. MEDINA. Yes. This is a point, for example, where you can ex-
pand a little on, and, as I say, it would follow in essence the same sug-
gestion about making the information available to the communities
through your own media.
Senator MONTOYA. WTell, what about if SBA would print some of
this pertinent literature in Spanish and provide films in Spanish?
Mr. MEDINA. This would help.
Senator MONTOYA. But there is no language difficulty among most
of these people; is there?
Mr. MEDINA. Well, there is in some cases; yes.
You see, in San Francisco, for example, the majority of the Spanish-
speaking businessmen are other than Mexican-American--they are
Mexican-American businessmen, but this is a cosmopolitan Spanish-
speaking community, and by and large the merchants and business peo-
ple are people who have come with skills that are from South Amen-
can countries, you know.
For example, one of the biggest contractors we ever had was a build-
ing contractor, a gentleman that came here from El Salvador 20 years
ago, and he used to do some very sizable contracts. But other than him
and his brothers, there are only one or two other companies that I
know of that would have competency to take any projects of any
size.
But one point that I wanted to bring up was the fact that in addi-
tion to the lack of awareness of the existence of the 8(a) program at
large, there is also a problem `that the contracts that `are available or
the services that are in demand by the various governmental agencies-
how do we get this information to the prospective contract recipients?
Senator MONTOYA. Well, that is what we tried to uncover yesterday.
We want to see if we can provide a better method of informing the
small business community.
Mr. MEDINA. We will be glad to bring up some suggestions about
how this might be done. We can contact the SBA abou't it. Just from
my own experience in talking to people-
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142
Senator MOXTOYA. Yes, and if you care to prepare a suggestion in
writing, we will incorporate it in the record of this hearing if you send
it to us in Washington
Mr. MEDIXA. Two other points I wanted to bring up, Senator Mon-
toya. I do not know whether they would be feasible or practical or
even legal, but one of the problems of most businessmen that have been
recipients of SBA loans is coming up within the initial payment pe-
riods, and as I understand it, it. is 90 days, with the first payment.
Now, to undertake a contract of any significance, it is going to
require something to defray the initial payments for at least 6 months,
in order to give these people a headstart.
You see, a lot of these people have tooling up costs that prohibit
them, you know, from successfully carrying out a contract or even a
paying one if the projections they have made indicate they are not
capable of taking it. oii, you know.
Senator MOXTOYA. Well, that is another problem that we will have
to face.
But, usually, if a concern receives an 8(a) contract, they can go to
the bank and get some advance funding on that contract.
Mr. MEDIXA. Yes; but what money they get, the proceeds of the
loan are taken up generally by the costs involved in the starting up
of the project.
A lot of these small companies that enter a project of any size have
to take on additional people, and that ends up in a lot of money at the
outset.
Senator MOXTOTA. Well, if the firm has competency, capability, and
the prospect of some business, SBA will participate in a loan with
the bank. I think the funding can be arranged on that basis, but we
cannot prescribe any definite or arbitrary criteria here. Everything
has to be judged on the basis of the credit rating and capability of
the individual.
Mr. MEDINA. Yes. I know. I was in the consumer loan business for 5
years myself a long time ago, so I have some knowledge in that regard.
I want to bring up a couple of points, like I says and these are
points that have been raised by people I have taken an interest in
contacting, and some have been the recipients of 8(a) programs and
some of them have not. and, as I understand it, the SBA rendered
whatever management assistance they required, either prior to get-
ting the contract and/or during the life of the contract.
Now, some people have suggested the possibility that private busi-
ness people are in a common field, and successful type people that
would have no fear of this person being a competitor until at least
some distant time think this person would be a better persoii, in a
better position, to give the technical and management assistance that
they would require as opposed to the idea of getting the assistance
from the SBA.
Senator MOXTOYA. WelL the Office of Minority Enterprise has that.
capability if they will do it, and the previous witness indicated that
he had a very sizable grant for that purpose.
Mr. MEDINA. Well, you know, honestly, Senator, I do not really
know. I am aware of not. only PACT but other minority type agencies
that are in the business of what we are doing, and I really wonder if,
by virtue of longtime experience. in being in business themselves, if
they really have the level of competency that it takes.
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143
Senator MONTOYA. Well, that is my great concern, too.
Mr. MEDINA. And these are reservations that I not only have but the
business people that have applied for SBA loans-and some have been
recipients of SBA loans-also have. And you say that the Office of
Minority Business Enterprise has the expertise and the knowledge
and the competency to give the counseling, but I wonder if private
business people would not be able to do a more objective job?
Senator MONTOYA. Well, we have the program known as SCORE. I
do not know whether you know about that.
Mr. MEDINA. Well, I have been aware of it.
Senator Mox'roYA. In this program executives volunteer to give
advice, and I understand that the SBA has approximately 40 in the
San Francisco area who come in and do volunteer work with small
businesses.
Mr. MEDINA. Well, you can have 400, Senator, but I am wondering
about the sincerity and motivation there is to do the job required.
Senator MONTOYA. Maiiy of these people are very sincere and very
dedicated, and they work for nothing. They volunteer, and they want
to keep busy during their retirement, and they have been very suc-
cessful business people.
Mr. MEmNA. Well, in respect to Latin Americans-
Senator MONTOYA. But I agree with you, any advice imparted to the
minority entrepreneur should be advice that comes from an experi-
enced individual.
Mr. MEDINA. Well, people that are actively engaged in a comparable
business.
Senator MONTOYA. Right.
Mr. MEDINA. They could more realistically help these people make
projections, you see, because there is no point in a minority taking on
an 8(a) contract unless there is some assurance of a reasonable profit.
Senator MONTOYA. I have been talking about that for two days here.
I agree with you wholeheartedly.
Mr. MEDINA. You see, if there is no assurance of a possibility of
making a reasonable profit, there is really no point in giving these peo-
ple contracts. If you just want to whet their appetites, they might use
up the entire profits in getting the payroll that they had to undertake
to meet the requirements of the project, and, then, what happens? They
might go entirely out of business.
Senator MONTOYA. Well, thank you very much, Mr. Medina.
Mr. MEDINA. I would like to say that the Latin-American Chamber
of Commerce is going to expand its membership in the Greater Bay
Area for Latin-Amercan businessmen, and we would be glad to use
that as a platform or as a means for the SBA and the various depart-
ments of the Government that might have contracts available, 8(a)
contracts available, to kind of see what we can do to bring them
together.
Senator MONTOYA. I wish you good luck on that ventur:'
Mr. MEDINA. Thank you.
Senator MONTOYA. Thank you very much.
Now, we have Mr. Jerry Hutton and Mr. Jay Leanse from the Office
of Minority Business Enterprise, Department of Commerce.
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144
STATEMENT OF JAY I. LEANSE, DEPUTY DIRECTOR, OFFICE OF
MINORITY BUSINESS ENTERPRISE, U.S. DEPARTMENT OF COM-
MERCE, WASHINGTON, D.C.; ACCOMPANIED BY JERRY HUTTON,
REPRESENTATIVE, OFFICE OF MINORITY BUSINESS ENTERPRISE,
U.S. DEPARTMENT OF COMMERCE, SAN FRANCISCO, CALIF.
Senator MONTOYA. Who is going to testify?
Mr. LEANSE. Well, we will cooperate on the responses to your ques-
~iO115~ Senator Montoya.
Senator MONT0YA. Do von have any written statement?
Mr. LEANSE. We do. I have submitted copies to your office in Wash-
ington. Others are being xeioxed now.
(The prepared statement submitted by Mr. Leanse reads in full as
follows:)
PAGENO="0151"
145
Testimony of Jay I. Leanse
Deputy. Director, Office of Minority Business Enterprise
U. S. Department of Commerce
Before the
Government Procurement Subcommittee
Senate Small Business Committee
- San Francisco, California
September 30, 1971
I am Jay I. Leanse, Deputy Director of the Office of Minority
Business Enterprise in the Department of Commerce. I am
pleased to have this opportunity to testify on the efficiency
and effectiveness of the 8(a) program.
The United States purchases annually goods and services valued
in excess of $50 billion. Of this amount, approximately $7
billion, or 14%, is purchased from small businesses and only
$100 million has been identified as being purchased from
businesses own,ed byminorities. This is less than 1/20th
of one percent of the total Federal market.
PAGENO="0152"
146
In 1968, the Small Business Administration began an experiment
with its authority under Section 8(a) of the Small Business
Act to accept contracts from Federal agencies which have been
set aside for award on a negotiated basis to disadvantaged
businesses. In a memorandum dated December 5, 1969, to the
heads of all Federal departments and agencies, the President
endorsed SBA's program, and requested each head to support
OMBE, SBA and the Federal Task Force on Procurement to:
-- Provide procurement opportunities.
-- Supply management and technical experts.
-- Help to set goals to measure progress.
-- 1~ame a representative to pursue the program.
OMBE's role has been necessarily secondary to the roles of
SBA, which administers the 8(a) program, and the agencies
which provide the contract opportunities upon which the program
depends. We have acted as an advocate, a stimulator and, in
some instances, a critic.
Without apologizing in the least for our achievements, I can
attest that the effort has not been easy. Agencies are prop-
erly concerned about performance, quality control and delays.
Procurement officers are being asked to step from the known
to the unknown and to deal with criteria not directly related
PAGENO="0153"
147
to traditional procurement objectives. Businessmen seek to
preserve markets on which there has been a hold. Expertise
is sought from agencies for purposes not directly impacting
on the agencies' missions. These facts of life in the 8(a)
program have caused problems and delays. Yet we stand firm
in our commitment . The government's achievements on behalf
of disadvantaged businesses to date in this.. effort are:
-- In FY 1969, 30 contracts valued at $8.9 million
were a~warded.
-- In FY 1970, 197 contracts valued at $22 million
were awarded.
-- In FY 1971, 811 contracts valued at $66 million
were awarded.
-- The number of agencies which have awarded 8(a)
contracts has risen from t~o in 1969 to twenty-five
thus far in FY 1972.
-- 33 Agency 8(a) Managers have been appointed.
-- SBA's authorized staff for 8(a) activIties has been
raised from 34 to 61.
-- 30 regional procurement seminars were held in 1970.
-- 41 regional procurement seminars will be held in 1971.
PAGENO="0154"
148
-- An $8 million SBA fund f or 8(a) business development
expense has been provided.
-- Regulations have been promulgated by the General
Services Administration tO become effective October 18,
1971 --
a. to require prime government contractors to use
best efforts to give "maximum practical
opportunity consistent with efficient performance"
to minority owned companies to obtain sub-
contracts; and
b. in contracts in excess of $500,000, to require
* prime government contractors to implement an
"affirmative action" program to obtain minority
subcontractors and suppliers.
-- SBA has set a government-wide goal of $100 million in
8(a) contracts for FY 1972.
OMBE applauds these gains and the substantial efforts of SEA
and the Federal departments and agencies to continue and
expand their efforts. The program not only attempts to
correct an imbalance attributable in large measure to
historical circumstances, but should significantly preserve
and increase competition and market choices of the United
States and its people, consistent with the objectives of the
PAGENO="0155"
149
Small Business Act. In an expanding market, and given the
dollar amounts we are dealing with, there is no threat that
small business that is not minority-owned will suffer. In
fact, the thrust of the program is to expand the percentage
and amount of business done by small concerns generally by
(a) breaking down large contracts into components, (b) increas-
ing small business set asides, and (c) enhancing subcontracting
opportunities.
To build viable businesses, when all is said and done about
capitalization, planning, production, management
services, technical assistance, and the like, available and
profitable markets arethe key building blocks~ Without sales,
a business cannot succeed. The effort to see that market
opportunities are fairly made available to minority-owned
firms, and to make a market while disadvantaged businesses
get established and develop their own markets, then, is directed
at the very heart of the problem in fostering minority business
enterprise.
Clearly, there is a grave responsibility for the success of
this effort that must be borne by contractors who benefit from
8(a) awards. Their striving to capitalize on available oppor-
tunities, to build their competitive base, and to expand their
markets is at once the foundation and the justification of the
program.
PAGENO="0156"
150
In FY 1972, the Department of Commerce expects to apply
additional manpower and financial resources to furnish
technical and management assistance to new or expanding
businesses, and to bolster the Federal effort to strengthen
minority enterprise. We intend to support 8(a) contractors,
and in turn, we rely upon the use of 8(a) to supplement the
markets of developing disadvantaged firms on a timely and
helpful basis.
Here, then, is the core issue. How can the 8(a) awards he
made on an expeditious basis, with a minimum of cost (in
terms of man-hours, delays, frustrations and dollars) to
both the procuring agency and the minority businessman?
I am confident that the program is maturing and that as govern-
ment officials, businessmen and business development agents
come to know and use the program, efficiency will increase.
Expansion of 8(a) contracting to $100 million and beyond is
dependent upon the growing experience of each.
In two areas, we are seeking to overcome specific inefficien-
cies: (1) the Federal Task Force on Procurement, under the
Inter-Agency Committee on Minority Business Enterprise,is
currently developing a program to educate the field personnel
of all Federal departments and agencies about the purposes and
procedures of the 8(a) program; and (2) in the area of
contract negotiation, the SEA is considering implementing
PAGENO="0157"
151
a procedure where the procuring agencies would initially
approve the potential contractor, determine the extent
of his capability and negotiate the contract directly with
him, subject to SEA approval. We support both of these
efforts, as eliminating substantial delaying factors and
duplication.
A third requirement which is essentially an education
process -- is to improve means for identification
of potential 8(a) contracts by the various agencies. An
organized effort by each agency is essential to (a) increase
the number and value of contracts made available to SEA,
(b) break up larger contracts where feasible so small
companies may perform part, Cc) provide ample lead time so
a qualified contractor can take advantage of the opportunity
and (d) work with the SEA, contractors and business developers
to match suitable contracts and contractors, on a timely
basis.
Fourth, there is a real need for follow-up support of the
8(a) awards to maximize benefits. To state an example of
the ideal, consider a minority-owmed business which is
founded on the equity investment of its founders and several
large corporations, and the debt financing of a local bank
PAGENO="0158"
152
guaranteed by the SBA. Its market is underserved in its
locality and is growing. With its own efforts, together
with specific assistance as needed from the staff of its
corporate investors, or supplied by a local business
development organization funded by Commerce, the company
develops its production capability.to serve initial
markets available to it by reason of its start-up and
initial interest in the venture. At this point the
company's volume makes it uncompetitive, yet it has
capacity and ability to compete, provided its market
base can be expanded. Here, gentlemen, is the problem in
minority business enterprise -- difficulty in the expansion
of markets. Fledgling minority companies must prove, and reprove,
themselves in the marketplace. The 8(a) program, together
with the direct federal procurement program, is designed t~o
assist companies having such potential at the time of their
need. Follow up efforts to schedule Federal procurement to
facilitate a solid build-up of competitively serviced
business, both in the Federal and private markets, are required.
We are not trying to develop dependencies. The efforts of
all the procuring agencies are needed here, in such areas of
working to make contracts timely and helpful rather than
burdensome, and making known a contractor's capabilities to
other agencies and prime contractors. Commerce intends to
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153
support these efforts with a private procurement program
and marketing assistance available through business develop-.
ment organizations and alliances of businessmen committed to
the minority business enterprise program.
There is no benefit in diverting business from one small
business to the benefit of another: this would only defeat
the purposes of the Small Business Act. Also, there is no
denying that the best answer for market expansion for
disadvantaged firms, or any firm for that matter, is to
develop better products and give better service at competitive
prices. We believe that the 8(a) program is essential in
this development process. The habits of trade, now a restriction
to the disadvantaged, when broken down and developed anew,
as we hope the 8(a) program can induce1 will.greatly benefit
the Nation and the Nation's disadvantaged in expanding
commercial intercourse among people.
PAGENO="0160"
154
Senator MONTOYA. Mr. Leanse, you are the Deputy Director of the
Office of Minority Business Enterprise in the Department of
Commerce?
Mr. LEANSE. I am.
Senator MONTOYA. How long have you been with this particular
office?
Mr. LEANSE. Seventeen months, sir.
Senator MONTOYA. And how many employees do you have?
Mr. LEANSE. Presently, we have 71 staff authorized, professional
and secretarial.
We have authorizations for 46 people in the field.
Senator MONTOYA. In addition to the 71?
Mr. LEANSE. In addition to the 71. As to the field staff, they have
been affected by the current wage and hiring freeze.
Senator MONTOYA. How many do you have in the field?
Mr. LEANSE. We have five people who are in the process of being
brought on the rolls permanently, but they have been suspended tem-
porarily. We are carrying them as consultants presently.
Senator MONTOYA. You do not have anybody in the field now?
Mr. LEANSE. Yes; we have these five people. They are in the process
of becoming permanent, but they are working temporarily now.
Senator MONTOYA. Where are they located?
Mr. LEANSE. They are located in Los Angeles and in Chicago, and
in Atlanta, and Boston, and in San Antonio. In `addition-
Senator MONT0YA. Is this new authorization for new funding just
for this fiscal year?
Mr. LEANSE. Yes.
Senator MONT0YA. Did you have any last year?
Mr. LEANSE. No; this came as a supplemental in June of fiscal 1971,
and the process of recruiting began then, but it was delayed.
Senator MONTOYA. And you have 71 in Washington?
Mr. LEANSE. Seventy-one in Washington.
Senator MONTOYA. How many blacks do you have in this minority
enterprise section?
Mr. LEANSE. The figures as of the 1st of September, there were 18
black men and women as professionals, there were three Spanish-
speaking and one American Indian.
Senator MONTOYA. One what?
Mr. LEANSE. American Indian.
Senator M0NTOYA. Now, what do the three Spanish-speaking people
do?
Mr. LEANSE. Well, each of them are in operating divisions of the
Office, and although we are principally a staff operation, in the course
of the last 2 years we have developed more and more operational ac-
tivities as have been required by the demands of the community.
Ramon Romero, who is the Deputy Director of the Business Oppor-
tunity Development Division, is concerned with both policy and busi-
ness resource development within the section.
Moises Carrasco is on a newly created planning staff, having been a
member of the community services section during the first year of his
employment. He is now playing a role in the development of long-
range planning for the Office as it relates to the supplemental which
was just requested yesterday and on~ which hearings will be held
starting Tuesday before the House Appropriations Subcommittee.
PAGENO="0161"
155
The third person is a young woman, Elizabeth Sandor, who is my
personal assistant and overall program manager. She is a very creative
young lady and works as a-
Senator MONTOYA. These are the three that you have out of the
entire 71?
Mr. LEANSE. Out of the 71; yes.
Senator MONTOYA. Do you have anybody m the field here who
understands the problems of the Mexican-Americans here in the
West?
Mr. LEANSE. One of the five people that we have in the field is
Spanish-speaking.
Senator MONTOYA. Where is he located?
Mr. LEANSE. Just now lie is in San Antonio.
Senator MONTOYA. Do you send him to Los Angeles once in a while?
Mr. LEANSE. He has been in Lon Angeles. We do have another man
being recruited for Los Angeles, a gentleman by the name of Vasquez
who is being hired to be the link between the field and will have a
supervisory relationship between Washington and the Office-
Senator MONTOYA. Would you file for the record the contracts that
you have with minority consulting organizations?
Mr. LEANSE. At the present time, the Office of Minority Business
Enterprise does not have program funds. The only contractural re-
lationship that we have is as it affects the associate grant admini-
strator of those grants made by the Economic Development Admin-
istration within the Commerce Department to these business develop-
ment or business counseling organizations.
When these organizations become grantees of EDA for the purpose
of assisting minority businessmen, they are identified as affiliates of
the Office of the Minority Business Enterprise because of our program
responsibility.
Senator MONTOYA. And actually the funding comes out of EDA?
Mr. LEANSE. Comes out of EDA.
Senator MONTOYA. What about SBA 406?
Mr. LEAN5E. The same thing applies. The NEDA offices are affili-
ated with the Office of Minority Business Enterprise, even though
they have received their funds through section 406 of the Small Busi-
ness Administration.
So, we have a program design that includes organizations so they
may be funded by other Government agencies. We perform a coordina-
tive function, both in terms of program reporting and evaluation. The
other parts of the local community design, I would be very happy to
discuss with you, because I think it is relevant to the discussions you
have had this morning.
Senator MONTOYA. Well, you must have a list of these organiza-
tions-
Mr. LEANSE. Yes.
Senator MONTOYA (continuing). Since you are in a coordinating
capacity.
Mr. LEANSE. We do have. I can supply that for the record.
Senator MONTOYA. If you will, and the amounts that each receive.
And the ethnic complexion of each organization.
Mr. LEANSE. Yes.
Senator MONTOYA. All right.1
1 See information beginning at p. 249.
70-654 O-72------ii
PAGENO="0162"
156
Mr. LEANSE. Now, the supplemental request that went to the Hill this
last week is of a nature that it would provide very substantial funds
both for community based business development organizations of the
NEDA and the PACT variety.
It would make provision for organizations similar to the association
described by Mr. Curtis, that is, a businessman's association in a par-
ticular geographic area. It provides fuiids for organizations of the
type described by Mr. Medina as the Latin-American Businessmen's
Association that would provide money for administrative functions
that would allow these organizations to determine the degree of rele-
vancy to the community.
Senator MONTOYA. Are you doing anything with respect to these con-
tracts to insure that the grantee organizations will have the kind of
capability with which they can properly advise minority entre-
preneurs?
Mr. LEANSE. Yes; this is a two-pronged effort., Senator.
Well, first the ability of the minority community to identify within
itself those individuals who are qualified, who are qualifiable, who are
established, who can utilize the resources that are available from the
Federal Government, and, more importantly, those business organiza-
tions that could avail themselves and really rely in the long term on
the resources that are available in the larger business comnmnity: capi-
tal in its various forms, market opportunities, and, perhaps more im-
portant than any, the business lrnow-how. Now, this is commonly inter-
posed by saying "business know-how," and where you compensate for
the lack of business know-how, the lack of business heritage, is by pro-
viding management assistance, technical assistance and various types
of services.
Well, we have come to what we think is the common-sense approach
to what is a difficult problem, but without trying to complicate it
`and make it something that is inconsistent with normal business prac-
tic.e, we have sought out relationships with organizations like PACT
and NEDA and others to arrange with them the fimetion of informa.-
tion and outreach, some feasibility and financial planning and moth-
toring of the business and/or the client that makes himself known and
is sought out by this community-based organization.
Now, this community organization does not have the capacity to,
by itself, cause the banks to respond, to cause the Federal Government
to respond, to cause appropriate corporations to make contracts,
franchises and market opportunities available, or to necessarily com-
mit to a fixed amount of management assistance based on a dollar value
for accountants or an hourly commitment for a production manager
who might be needed by minority businessmen. So, the community
organization really provides the local interface with the minority
community.
Senator MONTOTA. But do they?
Mr. LEANSE. They are, sir.
Senator MONT0YA. At hearings I held in Watts last year we were
concerned with the fact that the Federal Government spends millions
of dollars with these consulting organizations, and they achieve few
results, and I asked for results at those hearings.
Mr. LEANSE. Well, the process is maturing; and this is not an
apology, but it takes time to develop the process and to get the word~
PAGENO="0163"
157
out and get initial results which then serve as a basis for validating the
processes that are sound and discarding the ones that are not.
Senator MONTOYA. Well, that is the only concern I have, that there
be meaningful advice given from a base of knowledge rather than a
base of theory.
Mr. LEANSE. Yes. The other part of this local design, the other
component and the one we feel is extremely important, is to coalesce
the private sector-the business community, the business know-how,
the market potential and its money both in terms of venture working
capital and other forms of credit-coalesce these interested people and
these necessary sources of involvement. We are moving to create what
we call "business resource centers" which would, in effect, function as a
wholesaler, and in the major population centers at this country where
there are minority populations of significance, where the established
business community, the business power structure is, if you will, com-
ing together to commit itself to make available these resources and,
in turn, to respond to the needs that have been demonstrated by the
community organizations.
Now, it is not intended that this business resource center would
supersede the community-based organization that is managed by
members of the ethnic group in which the organization is located but
rather would have a good working relationship so when a realistic
business opportunity was available that the wholesaler business re-
source center would let it be known to the community organizations,
just as we would expect at the Federal establishment level through
the presence in the community.
Now, the Minority Business Opportunity Committee, which is a
committee of the Federal executive board or Federal executive associa-
tion where they are located, is the peer group where the members of the
Federal Establishment should know what 8(a) contracts are available,
who should be able to program their needs over a period of time, who
should be able to make their needs known to the community orga-
nizations and minority businessmen and to SBA so that. there is a rea-
sonable chance that the goals that have been set will be attained.
And it is interesting-
Senator MONTOYA. What efforts have been made by your office to
try to get this resource pooling concept going?
Mr. LEANSE. Well, we have been in the process for the last 6 months
of auditing our services or inventorying the services and commitments
that are available in cities across the country. This is really-
Senator MONTOYA. It is usually the big corporations that offer help
of some kind, is it not?
Mr. LEANSE. Yes; but the national commitments that were guar-
anteed during the first year of the existence of the Office of Minority
Business Enterprise could not be utilized or localized in an effective
manner, and where there is great deal of interest-and there are a
number of outstanding cases where major corporations haves assisted
individual businesses, but these frequen~ly are businesses that are high
visibility and they do not necessarily offer applicability to numbers
of people in the community.
So, we are at a stage now where the coalescence of this effort in the
business community can be launched. We have one that has already
been funded and two others in the process.
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158
Senator MONTOYA. How have they been funded?
Mr. LEANSE. The first one is funded through the Economic Develop-
ment Administration.
Senator MONTOYA. And where does it exist?
Mr. LEANSE. In Los Angeles.
Senator M0NTOYA. And to what extent has it been funded?
Mr. LEANSE. It was funded on a preliminary 6-month grant which
commenced in March and will be renewed-actually will be reformed,
because we have improved on the concept in the 6-month period, and
we will insist that more services are made available out of this grant.
than were originally contemplated in the first grant.. This organiza-
tion will provide full-time aid, professional consultants to minority
businesses throughout community organizations through MESBICs
a.nd through banks.
Senator M0NT0YA. What is the name of this particular group?
Mr. LEANSE. The management assistance component is called
MECLA, Minority Enterprise Coalition of Los Angeles.
The principal grantee is the Management Council of Los Angeles
which is the business establishments' organization to insure the avail-
ability of capital, market opportunities, and management and tech-
nical assistance. They have subcontracted-in fact, all of the money
that was received by the Management Council goes through to
MECLA, the Minority Enterprise Coalition, because the coalition
group provides the technical assistance through its paid staff, but the
Management Council's role is one of-
Senator MONTOYA. Have you checked the composition of the person-
nel to determine whether they have the proper type of technical know-
how?
Mr. LEANSE. Yes. If I can recall correctly, there are 11 people. There
are five public accountants, one certified public accountant, an attorney
and the other men have business specialties, but I am not certain what
they exactly are or what exact specializations they have.
Senator M0NT0YA. Are they permanent employees?
Mr. LEANSE. They are permanent employees. Now, that is one part
of the system also. We must utilize volunteers.
Senator MONTOYA. What about SCORE?
Mr. LEANSE. SCORE is good in some cities; not so good in others.
Senator M0NT0TA. Are you correlating your work with what SBA
is trying to do?
Mr. LEANSE. Yes. SBA, Senator, is but one of the resources, and in
terms of its design we look upon SBA as beiiig a banker, we look upon
them as being a~ source of management assistance through the volun-
teer set-up.
The 406 funds are so limited that they really cannot buy too much
technical, full-time technical, staff; so, we recognize we have to leverage
the resources that are available.
Senator MONTOYA. How about the role of the university?
Mr. LEAXSE. That is an important component.
Senator M0NT0YA. Do they come into this picture at all?
Mr. LEANSE. Yes. One of the two communities in which we are nego-
tiating for a BRC presently in a city where there is an alumni club
made up of MBA's from Stanford, Harvard, and Wharton's School
in Pennsylvania. These people vohrnteer. They have a small paid
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staff, but both the professional people and the alumni cooperate
in assistance to minority businessmen.
Senator MONTOYA. That is a good way for them to get practical ex-
perience; is it not?
Mr. LEANSE. The alumni are all seasoned people. We have a require-
ment that people must be at least 30 years old and at least 3 years in
business before they are allowed to take a place.
Senator MONTOYA. Now, what are you doing through your office to
try to perform the role of catalyst with respect to 8(a) contracts for
minority small business enterprises?
Mr. LEANSE. It is through the Interagency Committee for Minority
Enterprise which was established pursuant to the Executive order of
March of 1969. That Interagency Committee was established shortly
thereafter. A task force on procurement was established in December
1969, headed by Administrator Kunzig of GSA.
The administration of the 8(a) relation was determined to be the
most valuable statute on the books, without looking for new legislative
authority.
From that time to this, the record of the improvements in 8(a)
placements is very substantial. For the first year, some $8 million in
funds and nine contracts were made available. In the past year, they
were $66 million-plus in contracts and over 811 individual contracts,
some 550 minority firms being the recipients of those contracts.
Senator MONTOYA. Do you think that is adequate?
Mr. LEANSE. Adequate? No; it is not.
Senator MONTOYA. What do think should be our goal?
Mr. LEANSE. Well, I would say as much business as the minority
community can absorb ought to be our goal. I am not qualified to say
what that should be at this point, because we do not know what the
capacity is. In fact, the census that was recently completed allows for
the first time a statistical base setting for the companies, their location,
the services and industries in which they operate, the ethnic mix, and
so on, and we are just at a point where we are utilizing that knowledge
coupled with the experience of the last 18 months or 2 years in develop-
ing it. There is a goal. I do not mean~
Senator MONTOYA. What you have now is a list of the existing
businesses?
Mr. LEANSE. Yes.
Senator MONTOYA. You have them categorized as to what they can
do?
Mr. LEANSE. We have two types of information. We have this mi-
nority census which was just completed-and I can supply that for
the record if you would like.
Senator MONTOYA. Are you in a position to provide a proper catalog
for these procurement agencies?
Mr. LEANSE. We are not, but in most of the cities in which there
are-
Senator MONTOYA. Why can't the Census Bureau do that?
They have already conducted an inventory of these businesses.
Mr. LEANSE. Well, the base period was 1969, Senator, and we are
operating now at a time when through normal attrition and through
business startups, the base market may not be adequate. We have to
update it now, and this is being done in the following manner: The
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minority business opportunities conimittees are developing catalogs
in their communities iii cooperation with the community organiza-
tions, and, finally, there are a couple of firms which are for profit
that are developing catalogs of information.
In addition to that, and as an overview, the General Services Admin-
istration is putting together lists of companies that have been compiled
as a result of procurement conferences.
Senator MONTOYA. Why cannot all of this work be integrated
Mr. LEANSE. It can.
Senator MONTOYA. Why isn't it?
Mr. LEANSE. Because the developmeut of the information is really
a loca.l requirement because of the range in it and the necessary
updating.
Senator M0N'roYA. WThy can there not be a central clearinghouse to
develop the catalog?
Mr. LEANSE. We are the clearinghouse, and they bring us the infor-
mation. Since we have not had program funds we have not been in a
position to request specific types of information be made available or a
particular form of data. collection be utilized, and we are finally at a
point where we can set down a standard method of data collection that
would allow for free interchange between field and central office.
Senator M0NTOYA. How about computerizing this effort?
Mr. LEANSE. Again, it is a question of funds.
Senator M0NTOYA. Well, you have a. lot of funds here; $40 million,
did you sa.y?
Mr. LEANSE. We are hoping to get $40 million.
Senator MONTOYA. That is a lot of money.
Mr. LEANSE. Yes.
Senator MONTOYA. In fact, the Senate just approved it yesterday,
I believe.
Mr. LEAN5E. Well, I would hope so. I know that Congressman
Rooney was going to hear it on Tuesday.
Senator MONTOYA. Now, what kind of groups, advisory organiza-
tions, do you have representative of the entire country under the Office
of Minority Business Enterprise?
Mr. LEANSE. Well, the commitments that. we have received during
the past couple of years have proven to be effective from the American
Institute of Certified Public Accountants.
Senator MONTOYA. You have a. na.tional board, do you not?
Mr. LEANSE. Are you referring to the National Advisory Council
on Minority Enterprise?
Senator MONTOYA. Yes.
Mr. LEANSE. Yes.
Senator MONTOTA. How many members do you have on that?
Mr. LEANSE. Eighty-five.
Senator MONT0YA. How many Spanish surnames do you have on
thatboard now?
Do you have a list?
Mr. LEANSE. I do not have a list with me, but I can supply that
for the record.
Senator MOXTOYA. Well, you had three, about two or three, at the
inception.
Mr. LEANSE. Two or three at the inception. And, originally, there
were 64 members, and 21 were added, and of the 21, I believe five or
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six were Spanish speaking and all of the 21 were minority-group
people.
Senator MONTOYA. Would you furnish a list?
Mr. LEANSE. Yes, I will.
Senator MONTOYA. Now, your statement has been made a part of
the record, and if you will please proceed and highlight parts of your
statement.
Mr. LEANSE. Yes. I would like to make note of the fact that $50
billion is spent annually for goods and services by the Federal Gov-
ernment. Approximately $7 billion of this amount or 14 percent is
purchased from small businesses, and this past year less than $100
million-actually $66 million has been identified as being purchased
from minority-owned businesses. This is less than one-twentieth of
1 percent of the total Federal market.
Senator MONTOYA. One-twentieth of 1 percent?
Mr. LEAN5E. Yes. In the past year, two major problems have been
identified as being a deterrent to effective utilization of the 8(a)
process, and attention is presently being given to these through the
Interagency Committee on Minority Business Enterprise.
The first is to communicate the policies and directives that are
necessary to implement the use of 8(a) at regional offices and district
offices of the SBA and of the participating agencies and departments.
There are some 25 agencies and departments that are currently par-
ticipating in this effort.
Senator MONTOYA. Is it your intention to try to get these field
representatives into the procurement agencies to see what they can
do on behalf of minority enterprise?
Mr. LEANSE. The field people of the Office of Minority Business
Enterprise?
Senator M0NTOYA. Yes.
Mr. LEANSE. Well, the role of OMBE-and in it Mr. Hutton plays
this role very effectively, and we should highlight the work being
done in San Francisco by him as the executive secretary of the Mi-
nority Opportunity Committee, the meeting place of all the Federal
executives in the various cities, and this is the place where local
information is disseminated, goals are set, and pressures are brought
to bear. Mr. Hutton is a national hero. Twenty-five percent of the
8(a) contracts that were awarded in fiscal year 1971 were awarded~
in region 9.
Senator MONTOYA. Right here?
Mr. LEANSE. Right here. And it has been because he has been both
salesman, cajoler, adherent to bring people to the awareness of the
opportunities that are here.
Senator MONTOYA. Well, you must have a very good working rela-
tionship with SBA then?
Mr. HUrrON. Indeed, we do.
Mr. LEANSE. We would hope, Senator, that two things be given at-
tention in the next few months.
Senator MONTOYA. Maybe he ought to move the Office of OMEE
from Washington to San Francisco.
Mr. LEANSE. I think we have learned a lot from w~hat has hap-
pened here, and we hope to generalize this experience. In fact, we
started a meeting on Monday where OMBE field representatives and
the chairmen of these business opportunity committees will be meeting
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162
to exchange ideas and learn from one another the experiences over the
last few years.
Senator MONTOTA. How many people do you have in the San Fran-
cisco region? Do you have a.ny, except for field representatives?
Mr. LEANSE. No. Mr. Hutton, he is only interim. He is a Commerce
field representative who was loaned to OMBE until our recruiting can
be completed.
Senator MONTOYA. Well, we will tear from him now.
Mr. Hu'rrox. Since sitting do~ n here this morning, Mr. Lea.nse
and I have worked out. a. joint arrangement. He has a formal statement
that. he will submit for the record, and I have some observations that
I would like to share with the committee.
Senator M0NTOYA. What is your background, sir?
Mr. Hurrox. I have been in t.he Federal civil service for 20 years.
I have a B.A. in economics and political science and an M.A. in public
administration.
Senator MONTOYA. What was the job you had before you caine to
OMBE?
Mr. HUTTON. I have been with the Commerce Department as a
business specialist for a year and a half. Prior to that, I was a person-
nel specialist for the Federal Aviat.ion Administration, and prior
to that I was a radar and computer technician for the Federal Avia-
tion Agency, and I got. out of school about 3 years ago.
Now-, since time is short, I would like to he blunt, brief, and to
the point.
I have a.bout three pages that I would like to read.
The analysis of the 8(a) program in terms of its administration by
the Small Business Administration implies that it is a program that
is routinely and easily implemented. Such is not the case. Every ac-
tion is fraught with value judgments, political considerations, pol-
icy issues, and other subjective factors. In addition to these variables,
there are the usual hardnosed business e'ements that. deal with the
structure, competency, solvency, and viability of the firm.
It will be assumed, in these comments, that the use of the 8 (a.)
mechanism can be a. powerful tool in bringing minority firms int.o the
mainstream of American business. WTith this stipulation in mind, I
shall proceed to an examination of those factors which inhibit pro-
gram implementation.
Before getting into program obstacles, it is important to note that
a significant and positive progress has been made in the program to
date. In fiscal 1970, 253 contracts for $22 million were awarded
to minority firms. In fiscal 1971 these figures had climbed to 811
contracts and $66 million.
Now, as to t.he program obstacles. As I see it, the biggest prob-
lem in expanding the 8(a) program is the failure of the Federal
agencies and departments at the local level to identify sufficient 8(a)
requirements to the Small Business Administration. If the agencies
fail to identify 8 (a.) candidates to SBA, then SBA has nothing to
administer.
Cooperation from the Post Office Department has been very sparse
in our region during fiscal 1971. Certain military installations have
been reluctant. to participate in the administration's program in a
meaningful way. Other civilian agencies have also been slow to respond.
PAGENO="0169"
163
Detailed data on our experiences with these agencies and installations
is readily available in our office.
Another problem area is the short leadtime that is frequently at-
tached to a contract that is being offered.
`With respect to the Small Business Administration itself, there are,
as viewed from the perspective of the minority entrepreneur, a num-
ber of problem areas. For example, what is the dividing line between
a disadvantaged firm and a firm that is competitive? At what stage
in a firm's development should 8(a) contracts be terminated? `What
size contract can a particular firm perform satisfactorily? Should
not SBA help to develop large, viable minority firms? Most minority
entrepreneurs feel that SBA takes a very conservative posture on
each of the above questions.
RECOMMENDATIONS
In our area, `Western United States, the SBA has many minority
firms with approved business plans on its rolls for which it can
find no contracts. This comes about, as alluded to before, because of
the unwillingness of the contracting officers to get involved with new
and unkown firms when he can continue to deal with known and
proven firms. The best way to change this situation is for the regional
director or the commanding officer to become an advocate of the
President's program on minority business enterprise. More specifically,
each agency head at the local level should be held directly respon-
sible for the success of the program with respect to what his agency
can contribute. This situation can come about when the Washing-
ton headquarters' offices provide clear and definitive guidelines to their
field personnel.
I might remark that in the past 3 or 4 months I have visited almost
every single agency in northern California, both military and civilian,
and even at this late date I find not only regional directors and com-
manding officers but contracting officers that are not familiar with the
provisions of the 8(a) program. Of course, it is not the duty or re-
sponsibility of the regional director to be familiar with the intimate
details of it, but there is still a lot of unfamiliarity with the program.
If maximum and orderly business development is to take place, con-
tracts must be identified with sufficient lead time so as to permit the
formation of corporate instruments which are capable of contract per-
formance. This will necessitate the identification of these requirements
at the programing of engineering level. Many contracts have been
turned down by the Small Business Administration because they have
been handed to them with just a few days lead time. Others have not
been offered because the offering agency feels that SBA cannot process
it in time. This is a problem area that needs special attention.
A frequent statement by Federal agencies is that they can find no
minority firms who can perform on the types of contracts that .they
have to offer. This problem-if it is a problem at all-can be allevi-
ated by the use of the knowledge and expertise to be found in com-
munity organizations such as the Urban League, NAACP, OMBE
affiliates, local development corporations, minority business and trade
associations, the National Business League and other groups involved
in minority economic development.
PAGENO="0170"
164
And what I am suggesting here is that if an agency has a particular
job and they do not know of anybody who can perform on it, they
might get in touch with the different community-based organizations
to see if they know of entrepreneurs who have this sort of productive
capacity.
Specific contracts for the 8(a) program are identified by SBA
and the offering agency coming to an agreement on a specific require-
ment that they think the minority business community can handle. It
is widely felt by the minority business community that neither the
Federal agency or the SBA has a good picture of the productive
capacity within this community. Consequently, ma.ny contract oppor-
tunities are never offered.
In my business, to many agencies the stereotype offerings are the
ones that are usually advance janitorial, ground maintenance, where-
as, in fact, they have a lot of productive capacity in other more
sophisticated areas. I might say that these are offerings made in good
faith but we do kiiow of other capabilities.
OTHER OBSERVATIONS
There has been a lot of publicity given to the 8(a) program by the
U.S. Department of Commerce and the General Services Administra-
tion. This has generated a great deal of interest in the minority busi-
ness community. At the same time, there is a widespread feeling that
local Federal officials have not gotten behind the program. The meas-
ure of this failure to support the President's program is the paucity
of 8 (a) requirements that these local officials have identified to the
SBA. Many agencies have no active 8 (a) contracts in force.
The net result of this failure of local officials to implement the pro-
visions of the Presidential memorandum of December 5, 1969, is to
undermine the efforts of the administration as it goes about the task
of making it possible for small disadvantaged firms to enter the main-
stream of American business.
My basic position is that. we can do a lot more with existing re-
sources if local Federal officials would give wholehearted support to
the program.
Senator MONTOYA. You have made a very fine statement.
Mr. Hurrox. Thank you.
Senator M0NTOYA. And I think you are a very dedicated public
servant. You have worked very hard, from what you tell us here.
Now, you mentioned that the Federal officials at the local level are
not cooperating.
I think it is patently clear they are not cooperating, to the extent
that they should, because the share of the procurement pie is very
small.
Now, the Department of Agriculture, in rural development, has a
task force and they call it "TAC," and they go out and take inventory
of the rural areas and the resources, and they come up with an economic
plan.
Now, why cannot. we have sort of a TAC approach in procurement,
whereby all of the procuring agencies have one representative on a
local TAC board to make sure that minority enterprise is getting a
share of the procurement pie in these agencies and try to alert the
PAGENO="0171"
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commanding officers of the military installation of the Presidential
memorandum and their responsibility in this field?
Now, this is the only way that we are going to get out of this business
of one-twentieth of 1 percent.
Now, we might consider this as a recommendation to the Congress
and to the administration, and I hope you can evaluate this and see if
we can come up with something.
Mr. LEANSE. This is a very good suggestion.
Senator MONTOYA. Have you encountered difficulties in ascertaining
the capabilities of minority enterprises in this particular region in
which you serve?
Mr. HUTTON. This was a slippery ball of wax for us a year ago. We
think we have pretty good handles on it now, and we would hope, as
Jay suggested a little while ago, the limiting factor in our acquisition
of contracts should be our productive capacity rather than what we
have got now.
But, in response to your question as to the identification of poten-
tial here, the Federal Executive Board, or the Minority Business Op-
portunity Committee of the Federal Executive Board, has just come
out with a directory of minority vendors. This is not retail-this
directory-but it is industrial aiid commercial firms, businesses who
do business with other firms, aiid we have some 220 or 230 entries there.
Each firm has a w-hole page devoted to itself. It lists the officers, legal
structure, when incorporated, productive capacities, and other data
that a contracting officer or purchasing agent w-ould need to know.
Senator MONTOYA. Is this for the Pacific coast?
Mr. HUTTON. Just for the San Francisco Bay area.
Senator MONTOYA. Are you doing that in other areas?
Mr. LEANSE. This is one of the efforts that has been completed.
Senator MONTOYA. Is this a pilot program?
Mr. LEANSE. Well, each of the minority business opportunity coin-
mittees wa.s given the charge to create such a directory. There are
only 10 or 12 of them out `of the 40 cities, but community organizations
are doing it in some places.
Senator MONTOYA. Have you furnished this to the SBA?
Mr. LEANSE. They just came off the press.
Mr. HUTTON. We are going to print 4,000 copies, and they will be
directed to every contracting officer in every public agency, to' all pur-
chasing agents in the privalte sector in addition to SBA.
Senator MONTOYA. Has any effort been made to get the contracting
officers into a meeting?
Mr. HUTTON. I belong to a number of group's where-one group in
particular-we have a contracting officer and small business special-
ists, and we meet monthly.
Senator MONTOYA. I mean the contracting officers in the particular
respective procurement agencies such as the different military installa-
tio'ns here.
Mr. HUUrON. Yes. And as a matter of fact we had a meeting just 3
days ago, but the problem is really bigger than the contracting officer.
This problem has to be shared by our management, regional director,
and a commanding officer and Washington counterpart. It is hard to
put `this responsibility on `the shoulders of the contracting officer. This
man is legally and technically narrowly trained, and his behavior is
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not going to be changed with a memo. However, if he gets support
from his superiors, this changes things and change comes about.
I would like to give you an example.
The National Park Service, in their fiscal 1972 offering gave SBA
their entire offering for eight, some 44 contracts at. $4.2 million and
gave this to SBA, and we had a lot of lead time on all of these contracts.
OK. This is an example of 100-percent participation, and if we could
get just 5 percent of this kind of cooperation from all of the other
agencies, the program would really be off and running.
Senator MONTOTA. You would be in tall cotton, then.
Mr. Hurrox. We sure would. But we have other agencies in the
bay area that do $50 million, $100 million worth of work locally from
whom we do not have ally contracts.
Senator M0NT0YA. WTell, thank you very much, gentlemen.
Mr. JONES. With your permission, Mr. Chairman, I would like Mr.
Hutton to elaborate just a bit further on his statement, if he would.
Mr. Hutton, you stated that the biggest problem in expanding the
8(a) program is the failure of the Federal agencies and departments
at the local level to identify sufficient 8(a) requirements to the Small
Business Administration.
A little bit earlier this mornnig, Mr. Curtis of PACT suggested that
perhaps if the procurement agencies were themselves made responsible
for insuring that fixed percentages of the procurement requirements
would be satisfied by minority business firms, that this problem might
be alleviated.
Do you have any comments on that?
Mr. HurroN. Yes. I would like to react to that. First of all, if we
had enough Federal contracts to fill the capability out there, probably
SBA would not be able to handle it with its present workload. The
SBA is working night and day in this program, and it is very appar-
ent that they have a very bold and imaginative and aggressive
program.
As I go about, from Federal agency to Federal agency the one
thing I hear-and I will not earn any "Brownie" points with SBA
by saying this-but many of the contracting offices will suggest that
if they had control over the program they could expedite it and do
their own selecting and they do think they could do a. much larger
volume of business. I am not so sure this is so.
Mr. Jom~s. What additional information would the procurement
agencies need if they internally set a goal?
Why could they not try to achieve it under the present circum-
stances?
Mr. Hurrox. Well, what the suggestion is that maybe at this time
this is not really the basic problem. The basic problem is just the un-
willingness to venture into this new area.
Mr. LEANSE. Mr. Jones, yes, I think that both of these statements
are correct. They are not mutually exclusive. The Federal agencies are
setting goals and the goals will be substantially increased this year
over the last. Many of the agencies are asking for the opportunity to
expedite their own processes by prior selection of minority vendors
and taking the initial steps in the procurement process, and then ask-
ing SBA to ratify it, especially if it involves the use of the premium
contract accounts.
PAGENO="0173"
167
Mr. JONES. I understand that, informally at least, the goal of $100
million for 8(a) contracts has been set for the current fiscal year?
Mr. LEANSE. That is correct.
Mr. JONES. Do you feel that establishing a goal of this kind is going
to be effective, or is there a possibility that contracts which might oth-
erwise have been let to minority firms anyway might simply be trans-
ferred into the 8(a) program?
Mr. LEANSE. You mean competitive contracts?
Well, I think it is possible~ but I really do not know that there is the
possibility now of really identifying minority contractors through the
normal bid process.
Mr. JONES. I see. I think one of the problems Mr. Curtis was ad-
dressing himself to was the general procurement requirements and not
just the 8 (a) procurement requirements, and I think he would be in
favor of setting a general goal for minority procurement and not just
8(a) goals. Has such a general goal been established?
Mr. LEANSE. No, there is no goal established, but the need for stimu-
lating minority businessman to bid, either through Small Business set-
asides or Government contracting opportunities in general, is one of
the items for discussion. It is soniething that we have not talked about
this morning, that under the $2,500 purchase category, this is an area
where some of the areas are beginning to use activity, especially at the
local level, opportunities for concessions on Government installations is
another initiative that is underway. The directory of minority consult-
ing firms which has just recently been published by our office and has
been distributed throughout the country provides another source of
information to possible contract opportunities.
Mr. HUTTON. I would like to make this observation while we are go-
ing along in this vein, and that is that I am in favor of establishing
goals, and those goals should be measured in terms of contracts
awarded.
Mr. JONES. How? In numbers of contracts or dollar value?
Mr. HUTTON. Well, dollar value. Let us put it that way. Right now,
a lot of our goals or efforts are measured in terms of seminars held,
brochures given out, and other general things.
This is a necessary and preliminary stage, but I think we are past
that now and we are ready to deliver.
Mr. JONES. Well, who is responsible for achieving this $100 million
goal?
Is the responsibility parceled out among the procurement agencies or
is it simply a responsibility of the SBA and OMBE?
Mr. LEANSE. The goal was established through the procurement
task force and the Interagency Committee, and various agencies have
obligated themselves to make offerings available, and SBA, in turn, has
agreed to staff up to be able to handle this workload.
One of the limitations-
Senator MONTOYA. Let me ask you this question: If the agencies got
together and collectively established a goal of $100 million, was there a
parceling out of percentage responsibility to each of the agencies repre-
sented there?
Mr. LEANSE. Well, if what you are asking, sir, is : Were some agencies
told they were not doing enough?
PAGENO="0174"
168
Senator MONTOYA. Yes. For example, now, what did the Department
of Defense commit?
Do you know what G-SA's commitment was, and so forth?
Did they commit anything?
Mr. LEANSE. Yes; yes.
Senator MONTOYA. Now, have you got a record of it?
Mr. LEANSE. I do not have a record of it.
Senator MONTOYA. Who has? That is the way to gage them next
year.
Mr. LEANSE. Yes. Of course, without measurements, the goal really
does not have any effect.
Senator MONTOYA. Will you furnish that?
Mr. LEANSE. I will attempt to get it, sir. I cannot promise. I have
never seen that.. All I have seen is the goal itself, but I will endeavor to
thud it.
I would like to mention, too, that there is another limitation. In the
last 2 years each of the agencies who made 8(a) opportunities avail-
able indicated a willingness to pay a. premium for those goods and
services-if it was necessary, that is, in SBA's judgment t.o do so.
This past year, with the congressional action on a $8 million fund to
allow SBA to pay the differential, the agencies are now absolved of
that responsibility, and, as a consequence, the $8 million nets, almost
nets, contracts in substantial excess of $100 million this year. In fact,
in the first 60 days compared with the first 60 days of fiscal of 1971,
there are more than twice the number of contracts in dollar value that
have been negotiated, so the process is working. It has been institu-
tionalized, and the momentum should carry it very substantially.
Mr. JONES. Mr. Hutton, you, in your statement, also mentioned that
the SBA has many minority firms with approved business plans on
its rolls for which it can find no contracts.
Yesterday, witnesses from SBA testified that they were able to find
contracts for approximately 80 percent of their certified firms.
Are you questioning the accuracy of that figure?
Mr. HurroN. Yes. I had certainly noticed that variance in our testi-
mony, and-w-ell, we will have to get together with SBA on that
amount of difference that we have.
But SBA is on our Minority Business Opportunity Committee here,
which is a Subcommittee of the Federal Executive Board and they are
very persistent, and their continuous complaint is that they have a
large number of qualified 8(a) firms on their list and not enough
contracts, and they have specifically and directly urged that the
MBOC exert its coordinative function and moral influence to induce
other agencies to participate in the program. So, maybe our differences
are just a matter of that, but I am under the impression they do have
a large number of 8 (a.) contractors who do not have contractors.
Mr. JONES. Mr. Chairman, could we ask Mr. Hutton to see if he
could supply more definite information on this for the record?
Senator MONTOYA. If you will.
Mr. Hurrox. I certainly will be happy to.
Senator M0NT0YA. Thank you, sir.
Mr. JONES. Thank you.
Senator MONTOYA. Thank you, gentlemen. You may be excused.
PAGENO="0175"
169
(The subsequent information was received and follows:)
U.S. DEPARTMENT OF COMMERCE,
OFFICE OF THE SECRETARY,
Washington, D.C., November 11, 1971.
Hon. JOSEPH M. MONTOYA,
U.S. Senate,
TT7ashington, D.C. 20515.
DEAR SENATOR MONTOYA: During the hearings held by the Select Committee on
Small Business in San Francisco on September 29th and 30th, you asked Mr.
Jerome 0. Hutton how many firms in Region IX had approved business plans
filed with the SBA, and how many of them have current contracts under the 8(a)
authority.
Mr. C. D. Ryan, Chief of the Procurement and Management Division, of the
San Francisco SBA Office, advises that 158 business plans have been approved
in Region IX and that 68 of the companies approved do not presently have a
current active contract under the 8(a) program.
Sincerely,
DAVID S. BROWN,
Chief Counsel,
Office of Minority Business Enterprise.
Senator MONTOYA. We have Mr. Hernandez, Mr. IRamirez, and Mr.
Taylor here.
You may proceed, and we will try to finish with you.
Let the record show that Mr. Hernandez is with the D. and H. Wood
Products Co. of San Jose, Calif. Mr. Ricardo D. Ramirez is with
R. D. Ramirez Construction in South San Francisco, Calif., and Mr.
John T. Taylor is with Tayko Industries of Sacramento, Calif.
Now, do you gentlemen have a written statement?
Let us start with you, Mr. Hernandez.
STATEMENT OF MIKE HERNANDEZ, D. & H. WOOD PRODUCTS,
SAN J~OSE, CALIF.
Senator MONTOYA. How long is your statement?
Mr. HERNANDEZ. Just one page.
Senator MONTOYA. All right. Your statement will be made a part
of the record, and you may proceed to highlight it.
Mr. HERNANDEZ. As an 8(a) contractor, I feel that the program has
been very effective in getting me started in business, but the sustaining
work needed to continue the business has been too difficult to obtain.
In other words, we started with an 8(a) contract, and our obj ect is to
keep working, but after finishing the first contract, we had to cut
back.
It is my considered opinion that 2 to 3 years of sustaining 8(a)
support is required to create a stable business, and while I have been
successful in obtaining private sector business on a competitive
basis, and have been awarded two other supply contracts resulting
from open advertised bids, the volume of business that is set aside for
8(a) is too small and too spotty to maintain a productive plant.
My business requires a minimum of $15,000 a month to support the
facility and any meaningful working force. This volume of private
sector work takes time to develop.
Our only 8(a) contract allowed us to employ a working force of 20
Mexican-Americans for approximately 5 months, and then we were
forced by lack of business to cut back to an average of less than six
employees. In the past 4 months, since completion of the 8(a) con-
PAGENO="0176"
170
tract we developed $51,000 in other sales which is 21 percent of our
volume. The 8(a) contract amounted to 79 percent of our work.
Our overall profit on the 8 (a) contract was much less than we an-
ticipated due to a sharp rise in lumber prices during the contract de-
livery period, so that we were not able to build any substantial profits
into the business. We need more work and have been constantly calling
our contact at SBA and at the same time pursuing both private sector
and Government bid work.
The fact that we have developed a substantial volume of work from
the private sector shows that we have become efficient and competitive.
We do have a small pending-contract proposal with SBA for 8,010
pallets, but this is too small to make our business stable; it is to be
spread out over 4 months and is less than 1 month's work for our shop.
The 8(a) program needs more work available to the contractors,
and at D. & H. where we have hired hard core labor, every layoff
means that our employees must fall back on some other Government
supported program such as welfare, where no productive work is ac-
complished for the money spent.
D. & H. has only been in operation since January 1971, and with
less than 9 months in business, it is of course not stable enough to be
considered a viable business, but we are making progress and are look-
ing forward to becoming a successful business in a few years.
I want to stress the help given to us by Mr. Ryan and his staff at
SBA, who made it. Possible for us to enter into this business w-hich we
feel will become very successful in a relatively short time.
Senator MONTOYA. Mr. Hernandez, what kind of work does your
firm do?
Mr. HERNANDEZ. We are in woodwork, and we have been mostly
producing pallets for the Government and for the private sector,
warehouse pallets and different types of wood pallets.
Senator MONTOYA. And what else do you produce?
Mr. HERNANDEZ. `We also produce some cabinetwork and some prefab
cabinet doors, special type doors.
Senator MOxTOYA. Are you performing any work for construction
firms?
Mr. HERNAXDEZ. Not. right now. `We have one contractor that we do
a little bit of work for but. riot substantial amounts. Very little.
Senator Mo~roYA. What kind of cabinetwork is it; is it high grade,
sophisticated cabinetwork?
Mr. HERNAXDEZ. We will take whatever comes along.
Senator MONTOYA. You have the capability to do it?
Mr. HERNAXDEZ. Yes. We will take anything, apartment buildings,
or whatever.
Senator MOXTOYA. How- long have you been in business?
Mr. HERNAXDEZ. We have only been in business a little over a year.
Senator MONTOYA. And during the course of the last year 79 percent
of your work was from 8(a) contracts?
Mr. HERNANDEZ. Yes; one 8(a) contract that we got from the Gen-
eral Services Administration.
Senator MOXTOYA. Do you have an SBA loan?
Mr. HERNANDEZ. No, sir.
Senator MONTOYA. You operate w-ith your ow-n capital?
Mr. HERNANDEZ. Yes, sir.
Senator M0NT0YA. Are you a corporation, partnership-
PAGENO="0177"
171
Mr. HERNANDEZ. There is a partnership of two of us.
Senator MONTOYA. `What is your capital structuring?
Mr. HERNANDEZ. You mean by that, the facilities?
Senator MONTOYA. Yes; what is the value of your equipment, and
so forth?
Mr. HERNANDEZ. `Well, we have a shop that is valued at about between
$45,000 and $50,000 with equipment and material.
Senator MONTOYA. And your automatic equipment is included?
Mr. HERNANDEZ. Yes, that is included, and the only automatic equip-
ment we have is actually just. the air guns and the rest of the machines
and saws and compressors.
Senator M0NTOYA. And you aie operating under an 8 (a) contract at
the present time?
Mr. HERNANDEZ. No, sir.
Senator MONTOYA. You have no contracts?
Mr. HERNANDEZ. No, sir.
Senator MONTOYA. Is it up in the air?
Mr. HERNANDEZ. One is in the process for 8,010 pallets but we have
not received it yet.
Senator MONTOYA. You have had to discharge 14 of your 20 em-
ployees?
Mr. HERNANDEZ. Yes.
Senator MONTOYA. Do you feel that GSA is in a position to give
you the work now so that. you can develop a continuity of operation?
Mr. HERNANDEZ. Yes; I believe we could obtain some more work
from GSA and that we could keep the rest of the crew busy.
Senator MONTOYA. Would you contact SBA, Mr. Hernandez, about
the problem and see what they can do, and I hope they will do some-
thing for you.
Mr. HERNANDEZ. Thank you, sir.
Senator MONTOYA. Now, you mentioned that 8(a) should be resorted
to for approximately a 3-year period. 1)o you feel that you can develop
the kind of stability under 8(a) contracting over a 3-year period and
then go on your own?
Mr. HERNANDEZ. I believe, 2 or 3 years. It depends on the size of
the contract. If we were to get another contract the same size as the
first one we got, which is $185,000, I am pretty sure we could go out
on our own, but if we get a small one, $8,000, we could produce that
in 1 month's time, and it is really not sufficient.
Senator MONTOYA. What else can they give you by way of an 8(a)
contract?
Mr. HERNANDEZ. We are constantly bidding on open contracts with
General Services Administration and other agencies, but since we are
not set up with the highly automatic equipment, we sometimes cannot
compete with the other companies.
We are just a little bit higher, always, than the rest of the pallet
manufacturers around the area.
Senator MONTOYA. Do we have a GSA man here?
Would you come forward, Mr. Ireland?
Mr. IRELAND. Yes, sir.
Senator MONTOYA. Are you acquainted with this contract?
Mr. IRELAND. I think Mr. Snodgrass is more acquainted than I am.
Senator MONTOYA. Bring up all the angels here. We want to talk
with them.
70-654 0-72-12
PAGENO="0178"
172
Is there any way that you can give this man a little continuity in
his operation and give him 8(a) breathing?
Mr. SNODGRASS. We have a problem with respect to woodworking
and palletmaking---woodworking in general and pafletmaking in
particular. We have the problem of three firms making pallets in the
bay area, Mr. Hernandez' firm being the third firm. And if my infor-
mation is correct, the business was started, initiated, oii the GSA
contract.
I had a personal reluctance, when we were dealing with SBA re-
garding the contract, because of the fact that we had two pallet
manufacturers in the area., and, in addition to that, we had two pallet
manufacturers in the Los Angeles area.
Now, at the time the 8 (a.) program started, quite a few firms started
out with woodmaking, shipping crates, boxes, and pallets. That was
3 or 4 years ago. We buy the pa.llets on demand from using agencies.
The majority of them use woodworking materials, and the pallets in
particular were used for shipping to Vietnam. Now, as our activities
in the Far East taper off, so do our requirements for materials to go
over there.
Senator MOXTOYA. Are you overstocked with pallets now?
Mr. SN0DGRA55. I would say there is no question about it.
Now, I do not know why Mr. Hernandez-you mentioned that you
are presently looking at 8,000 pallets out of our office?
Mr. HERNANDEZ. Yes.
Mr. SNo1x~RAss. I can find out what the status of that is.
Senator MONTOYA. But if he has assurances from your agency for
8,000 pallets, it is just a. problem of when lie produces them this year
and if it helps him immediately; and if your requirement over a year's
period is such that you need them, then perhaps you can have a meet-
ing of the minds.
Mr. SNoi~u~ss. I am sure of that. If the negotiation is already in
progress, it is a question of time, of when.
Mr. IRELAND. I think I can do something about that.
Senator MONTOYA. Yes.
Well, is there any other work that you can give to his firm which
would fit into his capability under 8 (a)?
Mr. IRELAND. Well, let us take a. look at it.
Senator MOXTOYA. Yes; I wish you would, and I w-oulcl sure appre-
ciate it if you would look at the other enterprises around here and see
if you can 8(a) more of your work.
Mr. IRELAND. We will certainly do that.
Senator MONTOYA. Thank you.
Mr. SNODGRASS. If I may interject a point? The pallets are offered to
SBA.
Senator M0NTOYA. What is that?
Mr. SNo~RAss. Our 8(a) contract requirements in most cases are
offered to SBA, and in most cases, with the exception of construction,
SBA determines who gets the contract.
Senator MONTOYA. Well, the SBA people are here, too, in the room,
and they are listening to this. I would sure hate to see a small minority
enterprise discharge its employees when the Government through
procurement can insure some kind of continuity and retention of those
employees, and that is all I am pleading for.
Thank you very much.
PAGENO="0179"
173
Mr. SNODGRASS. We can pay attention to Mr. Hernandez.
Senator MONTOYA. Yes. Thank you.
Will you be in touch with these gentlemen, Mr. Hernandez?
Mr. HERNANDEZ. Yes, sir; I certainly will.
We will keep in constant contact with them so we can see what the
progress is with the 8(a) contracts.
Senator MONTOYA. Yes. All right. Mr. Hernandez.
Mr. Ramirez?
STATEMENT OF RICARDO B. RAMIREZ, It. B. RAMIREZ
CONSTRUCTION, SOUTH SAN FRANCISCO, CALIF.
Mr. RAMIREZ. Well, I do not have a written statement.
Senator MONTOYA. You do not need a statement.
Just start telling us your story.
Mr. RAMIREZ. Well, I would like to say that I think the 8(a) program
in the construction industry, like I am engaged in, is very helpful, and
I think it is one of the best things I think that has happened to minority
contractors.
Senator MONTOYA. What kind of contractor are you?
Mr. RAMIREZ. Well, I am a general engineering contractor. We do
underground work, and earthwork, and concrete structures, anytJTlrng
to do like that-cuiverts, and so forth.
Senator MONTOYA. Well, you state here "electronic equipment re-
pair, overhaul calibration and testing service."
Mr. RAMIREZ. I beg your pardon?
Senator MONTOYA. I am reading the wrong statement.
Pardon me. It is "drainage, wood repair, grading." Is that what you
do?
Mr. RAMIREZ. Yes, sir.
Senator MONTOYA. In other words, heavy equipment work, construc-
tion work.
Mr. RAMIREZ. Yes, sir. I think that as far as procurement, it is an
area I think could be improved on in the 8(a) program. For example,
I have done three 8(a) projects.
When you talk about procurement, maybe you have to go back a
little bit further and talk about my work with the SBA. I have had,
I think, the people that I worked with and found very willing to work
with me, but I think that they are not really-
Senator M0NTOYA. Getting all the work that is available. Is that
what you are trying to say?
Mr. IRAMIREz. No, I do not think they are competent to understand
the construction industry enough to be able to procure the jobs from
individual contractors. For example, when you say "engineering con-
tractor," you could say "a road work contractor," and that is all he does
is road work-a drainage-type contractor, or he does pipelines, but he
does not do paving, for example.
Senator MONTOYA. In other words, they do not have any individuals
there who can discern what applicability or capability exists among
small business enterprises to do the work; is that right?
Mr. RAMIREZ. I will give you a good example. I have done three
8(a) projects. Now, in my firm, I have most of the people that work
for me Mexicans. We do pipelines, and I have done three 8(a) projects,
and for all of the three 8(a) projects I have done paving. This has
PAGENO="0180"
174
done several things for the company. No. 1, I have to employ other
people than what I have, and they do not become Mexicans, they
become whatever I can get to do the job. And the equipment I have
`snot fit for the job.
Senator M0NTOYA. So, you have to go out and rent it?
Mr. RAMIREZ. Therefore, I have a rental factor. The profit is not as
great or the equity in the equipment that I do have is not exercised,
nor do I obtain any more. I think this is one area that should be im-
proved, and I think the only way it can be improved is to get some-
body in the procurement end of it that is aware of what one company
specializes in or what he can do.
Senator MONTOYA. Well, do you feel that there is work that ca.n be
"8 (a) -ed" to you within your capability?
Mr. R.A~ri~z. There must be. I mean. I know of a few jobs.
Senator MONTOYA. How did you get these 8 (a.) contracts? Through
SBA?
Mr. RAMIREZ. Yes, sir.
Senator MONTOYA. And they are the ones that picked you out?
Mr. RAMIREz. Yes, sir; I met one fellow.
Senator MONT0YA. Have you contacted the procurement officers in
the Federal agencies?
Mr. RAMIREZ. Yes. I have ha.d one example or one case that did
a little bit of squawking, and I guess t.his is wha.t brought a.bout these
other jobs which I have not got as yet; I have not got the plans for
them yet, but I am supposed to get them in the near future. I had a
job that I did on myself for t.he Navy, and I was the subcontractor on
that job, and I had problems with the job, and I went to the base to
see what I could do to solve the problem. While I was there I met a
fellow by the name of Montoya-who was the procurement officer for
construction.
Senator M0NT0YA. What Montoya was it? What was his full name,
Larry Montoya?
Mr. RA~rIREz. Lieutenant Commander Montoya. I do not know the
first name. Anyway, he told me about a job. He asked me if I was a
8(a) contractor, and I told him "Yes," that I was, a.nd he told me about
a job t.hat was coming up that. could go 8(a).
Well, I asked him if I could get this job~ and lie told me that it
was too complicated for 8(a) contractors, which was not so. He got
this opinion from, I guess, various talks or associations with the SBA.
So, I think there could be a. little bit more of an improvement in the
procurement end of it, although I think, as a whole, the intent of the
8(a) program is really one of the best programs.
Senator MONTOYA. That is what we are trying to do and that is
why we are having these hearings, to try and develop a better coordi-
nated effort to insure 8(a) contracting to minority enterprises.
PAGENO="0181"
175
Mr. RAMIREZ. I might say one thing more, Senator. I guess every-
body is aware of this, at least contractors, that the volume of the work
that the contractor does pertains to his best livelihood, but 90 percent
of the minorities, whether they are Mexican or other, whatever they
are, there should be a little bit more effort into this.
In other words, if a minority firm has, for example, a $50,000 a
year from 1 year, and all of a sudden, because of an 8(a) program,
the volume of work that he has picked up and he has been able to
boost it up to $300,000, then the management, being able to efficiently
manage that volume of work and efficiently put it through an account-
ing system is very important.
For example, you can get a guy that does $50,000 worth of work
and he is barely making it, but maybe he can get $100,000, but then all
of a sudden he gets a few 8(a) jobs for $500,000, and he could go broke
because he had too much work and could not handle it. I think there
also should be a program set up for contractors or any businessman
that schools them in management and makes them aware of how im-
portant accounting is, and this SCORE is no good as far as I am con-
cerned. It may be in other areas, but not where I have had dealings
with them.
Senator M0NT0YA. How do you get your advice?
Mr. RAMIREZ. Well, I was very fortunate. I received through the
Merrill Foundation. It is a program that-I do not know, but it is a
Palo Alto, and I received a student from Stanford, which is from the
accounting department, from the business school, and he is in there
taking care of the books, and he handles it very well. But I have also
created a pretty good friendship with large contractors in the area
where I am at, so when I have management problems or questions,
I can go to them and they help me. But there is nobody-I would like
to say this-there is nobody that can answer those questions for me
at the SBA.
Senator MONTOYA. Well, I understand what you mean.
Mr. RAMIREZ. This is something where, if you give a fellow too much
work, he is going to go busted if he does not handle it right.
Senator MONTOYA. Thank you very much, Mr. Ramirez.
Mr. Taylor?
Mr. TAYLOR. I do not have a prepared statement, Mr. Chairman. I
do have a copy of a synopsis of the last 2 years work.
(The document follows:)
PAGENO="0182"
176
TAYKO IINDU~TRIIE~
(~o~)
o ELECTRONIC EQUIPMENT REHABILITATION
o FIELD ENGINEERING SERVICES 8604 ELDER CREEK ROAD
o INSTALLATION AND MAINTENANCE SERVICES SACRAMENTO: CA. 95828
TAYKO Industries, located at ~6O4 Elder Creek Road, Sacramento, CA, is a sole
proprietorship organization, specializing in electronic equipment repair,
overhaul, calibration and test services to either U.S. Government or commercial
customer acCounts. TATKO Industries is owned and operated by its founder and
proprietor, Mr. John (1. TAylor, of Mexican descent.
Operating from its base of specialized services to the electronics industry~
TAYKO is also capable of remote location, field engineeriz~g efforts, involving
installation, operation and maintenance at customer installations.
In addition to the above capabilities, TAYKO has the necessary skills to
administer and implement any Government contract containing strict requireS
ments in the auxiliary functions of quality control, property administration,
security, and contract administration. TAYNO has extensive experience along
these areas since their key personnel, together with the founder, were success~.
fully administering large dollar value Government contracts for a large defense
contractor prior to the ~tapin..offh1 to form TAYKO Industries. In this regard,
TAYKO Industries possesses a current Defense Department Facility Clearance
rating of SE~FT and has Government~approved Quality Assurance as well as
Property Control programs.
The following contracts have been performed by TAYKO Industries as a first~-.t1er
subcontractor for Unitec Industries, Inc.
Total
Go~t~4~nc Contract No. Pegovered Dolj~
SMAMA FQ4606~.6~D~0542 69SEPO5-7C~AYl4 $ 44,363.18
FO4606~6~..D~O607 69s~o5~69Nov2l $ 5,109.00
SMAMA F04606..68..D.'0623 69s~'a5..7c~AY18 $ 15,065.00
SMMIA F04606~'6~-.D..0626 69s~'05..70JAN2l $ 5,205.00
F046~.D-.06l7 69s~o5..690CT27 $ 3,470.00
PAGENO="0183"
177
Total
~~enc Contract No. Period Covered Dollar Amount
SMAMt F04606..68.D.0630 695EP05..70N0V27 $ 51,566.50
SMP~M!~ P04606..6&..D..0641 69S~'05.~7oNoV27 $ 23,733.25
SMA~L& F046o6..69..D-.0375 69sI~o5..7~R09 $ 16,240.00
The £olloaing contracts are being/have been performed by T~YK0 Industries as a
prime contractor.
Total
~Aenc Contract No. overed ~r~t
SNA!~Lk F04606-7o..M..0687 690C~)1..-69DEC17 $ 593.82
Lamp, Hi~..Intensity
SM!LMA P04606..70..D-.0103 70FE~39..71AUG11 $ 26,274.20
Repair of Relay
SWJAk F04606-70..~C...0690 70FEB13~.71APR14 $ 20,053.87
Mod Kit for FRT-~49
SMAM~ F04606..70..M..1870 70AR08...7C~AT14 $ 529.34
Lamp, Hi..Intensity
SM!~NA F606..70~.C..0863 70APR21..~71APR14 $ 79514.50
Thrget, Radar
SMAMA F04606..71..M..0480 70SEP23..700CT27 $ 724.86
Lamp, Hi-~Inteflsity
SMANA F04606..71...?~0694 700CT23...70N0V27 $ 108.64
Spring, Hel. Tension
SMAMA F04606..71...D..0OS0(8a) 730EC03. $ 393,393.88
Overhaul of Auxiliary
Power Plants (V32D..2)
1 year
Mather AFE FO4612-.71~.G.0252 71J1JN18..71SEF24 $ 14,948.00
Repair of Sewage
Treatment Plant
SNAMA F04606..72..D..0043 71S~14.. $ 936,259.52
Overhaul of Generator
Sets (MP~15, ~i6)
3 years
~NXKO feels their past experience qualifies them to participate in gas1 diesel
engines or aotcr-.drivon generator repair/overhaul contracts to include rigid
testing to contract specifications. Contract No. FO4606..71-.D-~0O80 is for the
overhaul of Auxiliary Power Plants used in aircraft and has been awarded for
PAGENO="0184"
178
one year with two one-year options for FY72 and FY73. The estimated dollar
values are $393,393.88 for FY71, $263,423.72 for FY72, and $260,562.68 for FY73.
TAYKO's facilities are located in a modern industrial complex and consist of a
i6oo sq. ft. office and a free-standing 12,000 sq. ft. shop building, featuring
all-steel constructions two high.~capacity overhead trolley cranes, 440 volt
400 ampere industrial wiring and an unobstructed, drive-through capability.
These prime units are located on approximately five acres of rock-surfaced
propert~y, allowing adequate room for future growth.
TAYKO currently has 32 employees, ranging in skills fran certified mechanics
and welders to electronic technicians, machinists, engineers, and packaging
specialists. Several of our employees are highly qualified in fields other
than their present position requires at this time.
PAGENO="0185"
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STATEMENT OF roIrN G. TAYLOR, OWNER AND PROPRIETOR,
TAYKO INDUSTRIES, SACRAMENTO, CALIF.
Mr. TAYLOR. I would like to start out by saying that I agree whole-
heartedly with Mr. Ramirez and his determination that perhaps there
are not enough sufficiently qualified personnel in SBA to deal specif-
ically with the type of firm that has a specialty.
Senator MONTOYA. SBA is a lending agency primarily, and they
have a very meager funding for entering into contracts with consult-
ing firms who, in turn, are supposed to give advice. I have been trying
to find out about the competency of some of these consulting firms
during hearings in this committee and the Subcommittee on Economic
Development and I are very much dismayed by the competency of
some of these consulting firms.
Mr. TAYLOR. Yes, sir. But to go just a step further, SBA in one re-
spect obtained the contracts for us, and this particular competency
begins at the very inception or stage of the negotiations for that par-
ticular award.
At that particular time the competency comes in, because there
is no other competition to determine a fair contract price. Most pro-
curing agencies will want to establish a so-called reasonable price for
that particular effort or that particular work. In order to establish
the reasonableness of this particular price, firms are usually sub-
jected to an audit from various governinenta~ agencies. On the other
hand, a lot of procurement people from the procuring agency or cus-
tomer misunderstand a reasonable price for the so-called lowest pos-
sible price. When you get down to the actual negotiations, sometimes
there is no actual basis for establishing this particular reasonable-
ness of price, and at this time SBA should be conversant enough with
the procurement regulations to at least provide some contingency for
either wage or material escalation or any other contiiigencies that may
arise during the course of the contract.
Senator MONTOYA. In other words, what you are trying to say is
when you go to the contracting officer to try to negotiate a price you
are strictly at their mercy because you want that contract so badly?
Mr. TAYLOR. In one respect, yes, sir; because I think they have
a tremendous amount of leverage they can apply. A firm may have
been waiting for this particular moment for months, and-
Senator MONTOYA. And you want the SBA to have the kind of com-
petency where they can stand in betw-een you and the contractor and
say what is reasonable and what will insure you a reasonable profit?
Mr. TAYLOR. That is correct. Although in our past experience we
had a very competent negotiator, the fact is that the groundwork prior
to our particular negotiation required an audit from three different
agencies. They came in and quite frankly stated that we were adver-
saries and they also regarded SBA as an adversary. They were about
to disapprove the determination of our shop overhead and other so-
called nonallowable costs, and when they got through with their red
pencils we, really, did not have much margin for profit when you
discount or allow for interest expenses. We pay just about 10 percent
for our business loans, and we are only allowed a so-called 10 percent
profit, and it does not leave much more for contingencies.
Senator MONTOYA. Do they now allow interest expense as a matter
of policy?
PAGENO="0186"
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Mr. TAYLOR. It is not an allowable cost, no; no way.
Senator MONTOYA. It is a. policy; is it not?
Mr. TAYLOR. Right., under Federal procurement regulations adver-
tising and other so-called expenses that other commercial businesses
normally incur, are prohibited.
Senator MONTOYA. The oniy place they allow it is in cost-plus con-
tracts?
Mr. TAYLOR. That is correct, but., again, SBA, it. seems to me, ought to
have some other a.uthority to determine the type of contract to be
negotiated.
The thing we are concerned with is the fact that a lot of times these
so-called allowable costs are not made available to the prospective sub-
contractor to put down when lie establishes his shop overhead. The big
boys have the experts on their staffs, and so on, in this particular field.
For instance, advertising is not an allowable cost, but. if you advertise
for job positions and so on, it is an allowable cost. These are not par-
ticularly loopholes except that. they do provide a more realistic picture
of the costs that you a.re going to incur during the length of the contract.
Senator MONTOYA. I think you have brought out a very important
point that has not come int.o the hearing up to now, and that is, that
SBA should be the advocate for you.
Mr. TAYLOR. I believe we did very well at the actual negotiation table,
for we had very staunch support.. In the meantime, though, we were
locked into a so-called fixed price in our partciular case for 3 years,
and we had to provide our own method to take care of any possible
material escalations, *and so on, and we had very little help from
SCORE or public accountants, or anything, because our business is so
specia.lized in this parL.icular field. We are overhauling auxiliary power
units to aircraft. specifications, and t.here are a lot of cha.nges, amend-
ments, and modifications t.hat result after the contract has been
awarded.
All we normally get. from SBA. after the award of a contract, if
a particular specification is being changed, is a form letter from SBA,
together with about 10 copies, saying in effect, "Read the actual
modification of the contract, if you find no error, sign it and return it
within 10 days." Nowhere in the form letter does it say "Read it and
if you think it is a disadvantage to you do not sign it; let us renegoti-
`ate." It is a very auspicious-looking document, and they give you 10
copies to sign in 10 days. Once you sign, you may have whittled away
your profits for the next 2 or 3 years.
Senator MONTOYA. You have been doing very well with the Govern-
ment agencies, have you not?
Mr. TAYLOR. Yes. We were fortunate enough to have had previous
experience as a subcontractor. Most of our staff, including myself, have
managed contracts of this type for larger businesses.
Senator M0NTOYA. What is your educational background, Mr.
Taylor.
PAGENO="0187"
181
Mr. TAYLOR. Mostly night school at college-I have been in elec-
tronics since I was 18, I was with RCA, and then with a larger firm in
middle management before finally going to this. It was primarily all
Government-oriented.
Senator MONTOYA. Well, thank you very much, gentlemen. We ap-
preciate your coming over.
We will now recess until 1 :30.
(Whereupon, at 12:25 p.m., a recess was taken until 1 :30 p.m., this
same day.)
AFTERNOON SESSION
Senator MONTOYA. The committee will come to order.
This afternoon we are going to hear from ~a panel of people in the
procurement agencies of the Government.
If you all will, come forward, gentlemen.
First is Col. Robert W. Cochran, Director, Procurement and Pro-
duction, Sacramento Air Material Area, McClellan Air Force Base,
Calif.; also Mr. Robert A. Allstead, Chief, Procurement Division,
Office of Deputy Chief of Staff for Logistics, 6th U.S. Army,
Presidio of San Francisco, Calif.; Capt. D. G. Aitken, Supply Corps,
U.S. Navy, Officer in Charge, Naval Regional Procurement Office,
Naval Supply Center, Oakland, Calif., and Mr. Robert J. Ireland,
Regional Director of Business Affairs, General Services Administra-
tion, San Francisco, Calif.
Have you designated any lead-off witness
You may lead off, if you will. And will you identify yourself for
the record?
STATEMENT OF CAPT. DOUGLAS G. AITKEN, SUPPLY CORPS, U.S.
NAVY, OFFICER IN CHARGE, NAVAL REGIONAL PROCUREMENT
OFFICE, NAVAL SUPPLY CENTER, OAKLAND, CALIF.; ACCOMPA-
NIED BY ROBERT M. GILBERTSON, SMALL BUSINESS SPECIALIST;
AND LT. COMDR. RAY N. BEEMAN, 1R., DIRECTOR, PURCHASE
DIVISION
Captain AITKEN. Yes, sir. I am Captain Aitken, Officer in Charge
of the Naval Regional Procurement Office at Oakland.
I believe you have my lengthy statement, Senator, and at your
discretion I will be pleased to either read it or incorporate it in the
record.
Senator MONTOYA. It will be made a part of the record at this time,
and you may proceed to highlight it2 sir.
(The prepared statement submitted by Captain Aitken reads in
full as follows:)
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182
Statement of
Captain Douglas G. Aitken, Supply Corps, USN
before the
Select Committee on Small Business
United States Senate
at
San Francisco, California, 30 September 1971
Mr. Chairman and Members of the Committee:
I am Captain Aitken, Officer-in-Charge, Naval Regional Procurement Office,
Oakland, California. I am pleased to have this opportunity to meet with you
and submit a statement concerning our efforts and accomplishments in behalf
of small business and the related matters in which you have indicated an
interest insofar as they are applicable to my office. While we note that the
emphasis and thrust of this hearing is directed toward the 8(a) program, we
feel that it would be of interest to the committee to know something of our
over-all small business effortS To this end, we have available certain sta-
tistics regarding our purchase volume and small business participation for
fiscal years 1970 and 1971. -
My responsibility includes carrying out the objectives of the Navy's
Small Business Program. I am assisted in this by my Small Business Specialist
Mr. Robert M. Gilbertson and by my Director of the Purchase Division,
Lieutenant Commander Ray N. Beeman, Jr., both of whom are with me today.
It has been our policy to increase the participation of small business
in our procurements by all available means. We will outline these efforts
and results for you and be pleased to discuss related matters at your discretion.
PAGENO="0189"
183
We provide purchase support over $2,500 for Pacific fleet ships and
overseas bases, and shore activities in the Twelfth Naval District~ Our
office generally is a quick-response type activity, buying materials, equip-
ment, and services of a wide range and nature for immediate and nonrepetitive
needs. We buy few items for stock and have infrequent research and develop-
ment requirements. Examples of our purchases include:
(1) Repair Parts for a generator on a Military Sealift Command
ship which sails tomorrow.
(2) Special Sand for sandblasting ships in drydock.
(3) Special Steel in small quantities for Mare Island Naval Shipyard
projects.
(4) Overhaul of 12 large winches of a Navy supply ship.
Our first chart today (Table I) is our total procurement picture in
millions of dollars for fiscal years 1970 and l97L
During FT 1971, our total procurement business dropped slightly, to
$28.4M. Our total awards to small business was virtually unchanged, thus
slightly increasing our percent of award dollars to small business. Our
small business set-aside awards decreased only $~lM, which is comparable to
the decrease in total awards, thus resulting in identical percentage of
set-asides for the past two years. We are proud to have more than achieved
our assigned goal of small business participation for both FY 1970 and 1971.
In the area of small business subcontracting, all of our prime contracts
over $5,000 contain the mandatory `~Utilization of Small Business Concerns'
clause. Our opportunities to participate through major contracting in the
Small Business Subcontracting Program including make-or-buy determinations
PAGENO="0190"
184
are virtually nonexistent due to the small size of our contracts.
Our next chart shows our awards by claimant program as applicable to
our office. These figures are available only for contracts over $10,000. As
you will note in all claimant programs but A-3 our percentage to small business
dropped. However, the drop in actual dollars to small business was virtually
offset by the large percent and dollar gain to small business in the A-3
program. There is a two percent overall difference.
We have an excellent working relationship with the San Francisco -
Regional Office of the Small Business Administration. I have personally
visited with many representatives at that office and Mr. Gilbertson, my Small
Business Specialist, has been there many more times. Mr. Walter Dorn, the
Procurement Center Representative (PCR) of the SBA visits our office at least
every two weeks for several hours~ All are most helpful in assisting with
our Small Business Program by providing sources and determining whether
sufficient small firms are available for a given commodity or procurement to
warrant class, joint, or unilateral set-aside actions, We have cooperated
fully in the Section 8(a) Program for subcontracting through SBA to minority-
owned firms.
PAGENO="0191"
185
Our present program for identifying a possible 8(a) purchase consists of
finding repetitive requirements that can be directed toward the goal of
developing and sustaining a business while it gains the skills and strength
to become fully competitive. To date, this has taken the course of annual
type contracts such as the printing of station newspapers, the construction
of special type wooden crates, and key punch services. We have awarded fixed
price contracts for reupholstery services and for machine shop work, but
we have not had the repeat type requirements for these services that would
give continuing support. The next chart shows our record in this regard.
Some of these contracts were initiated by us; but whatever the source, we have
had outstanding cooperation with the SBA. We are constantly working with
them to locate new opportunities for the Section 8(a) Program~
In cases where we have repetitive purchases of the same or similar
material or services, we consider making class set-asides~ For example,
packing and crating of household effects is a class set-aside and currently
we are getting sufficient small business competition in our geographic area
to warrant continuance. We also have a class set-aside for special boxing
and crating; f or repair and renovation of classroom electronics instruction
equipment; for care of remains; for work benches and minor steel construction;
for ships brows on rental basis; and for several others. Most class set-asides
are jointly made with SBA, but some are unilateral.
We can recall no cases in FY 1970 or 1971 of small business nonrespon- -
sibility determinations based upon lack of tenacity, perseverance, or integrity.
PAGENO="0192"
186
For your information, our Small Business Specialist devotes full time to
the program and reviews every proposed procurement fcr Section 8(a) possibility,
unilateral small business set-aside determination, or the addition of small
business firms to the solicitation.
We make full use of the Department of Commerce Business Daily to
publicize our solicitations and awards. We maintain a bid, room with a
display of current solicitations, Commerce Business Dailys, and abstracts of
previously opened bids~ Bids are opened here and the Small Business
Specialist has his office here.
Our buyers and Small Business Specialist visit small business and
Section 8(a) contractors to become better acquainted with available facilities.
We have participated in Small Business Symposiums and Conferences to make our
requirements and purchasing procedures known.
We believe we have an active and multi-faceted Small Business Program
but one always subject to improvement. We are ready for your questions,
comments and suggestions~
PAGENO="0193"
187
PROCUREMENT IN THE UNITED STATES BY THE
NAVAL REGIONAL PROCUREMENT OFFICE
OAKLAND, CALIFORNIA
FISCAL YEARS 1970 - 1971
(in millions of dollars)
1970 1971
Total Awards to All Firms $29.2 $28.4
Total Awards to Small Business $12.1 $12.0
Percent of Small Business to Total 41.4% 42.4%
Snail Business Set-Aside Awards $ 3.4 $ 3.3
Percent of Set-Asides to 11,6% 11.6%
Total Awards
Small Business Goal 31.5% 40.1%
Actual % Accomplished 41.4% 42.4%
NOTE: "Total Awards to All Firms" does not include intergovernmental
purchases, purchases from nonprofit institutions or contract
niodificationsless than $10,000
TABLE I
70-654 0-72-13
PAGENO="0194"
188
CLAIMANT PROGRAMS
FISCAL YEARS 1970 - 1971
(in thousands of dollars)
197
0
1971
Total to Percent Total to Percent
All Firms to SB All Firms to SB
A-3
Ships & EquipS $11,675 1L9 $10,945 24~8
A-7
Electronics &
Communications 1,016 62~7 1,998 33~8
S-l
Services 3,581 7l~7 2,768 59.1
C9E
Other Material 6,737 66.6 4,491 58.4
All Other
Programs 921 46.2 693 42.9
TABLE II
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189
SECTION 8A PROGRAM AWARDS TO
SMALL BUSINESS ADMINISTRATION
Fiscal Year
1969
1970
1971
Number of Contracts.*
1
5
H 7
Total Value
$ 18,305
$133,300
$201, 904*
Material or Service
Special Crates For Aviation Parts
Data Processing Key Punch Service
Special Crates For Supply Center Shipping
Station Newspaper for Shipyard
Bus Transportation
Machine Shop Services
Station Newspaper for Naval Station
$ 69,673
33,400
35,925
39,216
9,401
16,090
7,600
$201, 904*
TABLE III
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190
Captain AITKEN. Thank you, sir. As is evident from the procedure
and from the witnesses who have proceeded me, it is quite evident that
your emphasis is on the 8(a) program alone, so I would be pleased to
discuss certain portions of my statement which relate to the 8(a)
program.
We have charts here, which I will flip quickly to the 8(a) portion
thereof, showing our accomplishments at the Naval Regional Procure-
ment Office at Oakland.
As you can see, we have a number of 8(a) contracts during this past
fiscal year, 1971, and a few in 1970, and in 1969.
Senator MONT0YA. Would you state what the total procurement
under your jurisdiction was in 1969, 1970, and 1971?
Captain AITKEN. Senator, I do not have those figures on that chart,
but in 1971 we had $28 million, and our total for the 8(a) awards
during 1971-
Senator MONTOYA. Just a minute.
For the record, I want to state that the total awards to all firms for
1969 were $58.6 million; for 1970, $29.2 million, and 1971, $28.4
million.
Captain AITKEN. Yes, sir.
Senator M0NT0YA. Is that correct?
Captain AITKEN. Yes, sir; that is correct.
Shall I proceed, Senator?
Senator MONTOYA. Yes.
Captain AITKEN. Those figures that you just read from the chart are
the total awards to all firms by my office during those 3 fiscal years.
Senator MONTOYA. Yes.
Captain AITKEN. And the other chart which we have displayed on
the 8(a) program represents the total dollars awarded in the 8(a)
program.
Senator MONTOYA. Now, may I read that into the record?
In 1969 it was $18,305?
Captain AITKEN. Yes, sir. In 1970, the total was $133,000 and in
1971 it was $201,000.
Senator MONTOYA. That is quite a small percentage of that pie; is
it not?
Captain AIT1~N. Yes, sir. It represents about three-quarters of 1
percent of our total dollars during the year 1971, and I have not com-
puted it for the past 2 fiscal years.
Senator MONTOYA. Why is the sum so small?
Captain AITKEN. Well, we are getting started in the 8(a) program.
I think we have a good start, Senator, and we are proud of that record
as well as we are proud of the 42 percent that we awarded to small
business generally during this past fiscal year.
Senator MONTOYA. Well, in 1969, you took one step; in 1970, you
took five, and in 1971 you took seven. Is that what you call progress in
the Navy?
Captain AITKEN. That is progress; yes, sir. And we believe in the
coming fiscal year we will have many more of the 8(a) contracts.
Senator M0NT0YA. Well, I am disappointed at the progress you have
made. Have you had any seminars with your contracting officers?
You are the contracting officers; are you not?
Captain AITKEN. Yes, sir. We have contracting officers in our office.
I am one, and Commander Beeman, our director of the purchase divi-
PAGENO="0197"
191
sion, and Mr. Robert Giibertson also, from my office; we have a num-
ber of contracting officers in our office.
We do have meetings with industry, and Mr. Gilbertson, our small
business specialist, has taken part in some of these and has talked to
and interviewed many of both small business and 8 (a) personnel, and
while they are interested, we have not had a great deal of them calling
upon our office to look at our bid boards, however. We have encour-
aged-
Senator MONTOYA. Have you established any meaningful liaison
with the Small Business Administration?
Captain AITKEN. Yes, sir.
Senator MONTOYA. To apprise them of what 8(a) potential exists
in your contracting?
Captain ArrKEN. Yes, sir; we certainly do. We have regular meet-
ings with the Small Business Administration PCR man who comes to
our office frequently and reviews our requirements and, together with
our Small Business Specialist, selects certain of our contracts for 8(a)
performance.
Senator MONTOYA. Well, to what do you attribute the smallness of
the total number of contracts and the total of dollars in those con-
tracts?
Captain AITKEN. The nature of the business we have in our office,
Senator, I believe, is the best answer to this. We buy a wide variety
of materials and services of a one-time nature, mostly on a quick-
response-type request from shipyards, ships and overseas base, and
they are generally of a nonrepetitive nature. I believe it is the repeti-
tive business which is needed in the 8(a) contractor's field.
Senator MONTOYA. Do you have janitorial and building maintenance
services contracted out under 8(a)?
Captain AITKEN. We do not contract for that, Senator.
Senator MONTOYA. You use your own in-house personnel?
Captain AITKEN. No, sir. But those services are contracted for by
another office, not ours.
Senator MONTOYA. Well, do you have supervision over that type of
contract?
Captain AITKEN. No, sir.
Senator MONTOYA. Do any of you gentlemen?
Who is that contracted out by? GSA?
Captain AITKEN. No, sir. That is done by our construction facilities,
Navy personnel.
Senator MONTOYA. Well, then, they are probably letting that out
outside of the orbit of 8(a)?
Captain AITKEN. Actually, Senator, I do not know who gets those
contracts, and I do not know whether it is 8(a).
Senator MONTOYA. Well, if those contracts were 8(a) they would
be reflected here?
Captain AITKEN. No, sir; these are only from our office and would
not reflect there if they were 8(a) from another office.
Senator MONTOYA. What do those contracts reflect; what kind of
contracts are they?
Captain AITKEN. Well, on the lower part of the chart there, the
material and services, the seven that we had during 1971 are listed and
all of those, with one exception, are repetitive type requirements. For
example, they are all annual contracts existing for 1-year periods
PAGENO="0198"
192
except for the one-machine-shop service contract; like the special crates
for aviation parts, any special crates which are required during that
1-year period, are made by that 8(a) contractor. And the next we have
is data processing and keypunch services. Any keypunch service which
we have for that particular organization is done by that 8(a) con-
tractor during the 1 fiscal year.
Senator MONTOYA. Then, let me ask you: Do you have any other type
of repetitive needs in your organization that are not reflected here?
Captain AIT1ci~x. Yes, sir; we do.
Senator MoxTorA. How much would you say in terms of dollars?
Captain AITKEX. There are another-oh, two or three items that are
being analyzed and will have been discussed with the Small Busmess
Administration through this fiscal year as a potential increase to our
program. We have more of these annual requirements.
Senator MOXTOYA. How many of the requirements have you referred
to SBA which are not reflected here in these awards?
Captain AITKEN. I believe that all we have discussed and offered
to SEA and that we have worked out with them are reflected here with
one exception. They were unable to find an appropriate 8(a) con-
tractor to provide service, and it was not therefore contracted. But
most everything we have offered them have been reflected here.
Senator MoxTorA. Do you participate in any meetings, seminars or
other types of sessions with other Federal agencies with respect to
8(a) contracting?
Captain AITKEN. No.
Mr. GILBERTSOX. I will answer. I participated, just last month, in
one in the city of Sacramento and one in Oakland.
Senator M0XTOYA. Had you participated before?
Mr. GILBERTSON. I have participated in one before in San Francisco
about a year before.
Senator MONTOYA. And had you-
Mr. GILBERTSOX. My predecessor did several of these. I do not recall
just where they were.
Senator MOXTOYA. What was the nature of that meeting?
Mr. GILBERTSON. These were a seminar set up by, I think the last
one, I think-by General Services Administration, and all branches
of the Federal Government were participating and had people there
to answer questions and to get information out to those minority busi-
ness people that came to these meetings, answering their questions and
trying to guide and steer them into ways of getting 8(a) contracts or
in getting Government contracts, period.
Senator MONTOYA. Did you have any executive sessions among your-
selves to establish a plan of operation as to how you could best recog-
nize these people?
Mr. GILBERTSON. Well, at these particular meetings; no, sir.
Senator M0NT0YA. Have you at any time?
Mr. GILBERTSON. No, sir; I have not.
The Small Business Council meeting of northern California, we did
enter into this area and discuss problems generally that have to do
with small business and the 8 (a) program.
Senator MONTOYA. But within your organization, have you sat
down with your contracting officer, with your procurement people and
established any goals with respect to the 8(a) contracting or with
respect to letting small business have a share of the procurement pie?
PAGENO="0199"
193
COmmander BEEMAN. Yes, sir, Senator. Every requirement that
comes into our shop. And I might add that we are unable to predict
what is going to come in because we are regional, a big office, and every
requirement is screened by Mr. Gilbertson, and if he recommends that
it either be a small business setaside or a 8(a) contract, then he comes
to me and we all discuss it and determine whether or not it is applicable.
Senator M0NTOYA. Do I understand you to say that the ~201904
represented for the year 1971 constitutes the amount of recommenda-
tions made by this gentleman?
Commander BEEMAN. Yes, sir. I emphasize again that these are an-
nual contracts and all of them do not expire in the same month. As
they expire and are for renewal we look at them. We have some 25
categories listed that are going to expire in the next few months that
we will be referring in to the SBA.
Senator MONTOYA. Has he turned in any recommendations that you
did not accept?
Commander BEEMAN. No, sir.
Senator MONTOYA. This is the extent of his recommendations?
Commander BEEMAN. It takes the three-man review board to over-
ride his recommendation.
Senator MONTOYA. Has he ever been overruled?
Commander BEEMAN. No, sir.
Senator M0NT0YA. So, I take his total recommendations amounted
to $201,904?
Commander BEEMAN. For this preceding fiscal year; yes, sir.
Captain AITKEN. Plus one referred to SBA for which there was no
suitable contract.
Senator MONTOYA. Do you notify SBA of your prospective require-
ments in advance, or do they have to come to you after you announce,
perhaps, that you were going to put out for bids certain things by way
of procurement needs?
Captain AITKEN. No, sir. We announce to the SBA considerably in
advance of the time we go onto the street with our requirements. In
other words, before we go out for bids we consult with the SBA on
these requirements and those which we are generating in the annual
contract fields to determine if they can find a suitable contractor. I
might add that some of these 8(a) contracts have been at our own
instigation and some of them were on a cooperative basis with SBA.
We enjoy a very fine relationship with them.
Senator MONTOYA. What kind of technical instruction or education
do you make available to small contractors with respect to your re-
quirements?
Captain AITKEN. We have no means of informing the local popu-
lace directly of our total requirements. However, all of our require-
ments-
Senator MONTOYA. I do not mean that. I mean-first of all, let me
ask this question: Do you have a list of the small contractors in the
area?
Captain AITKEN. Yes, sir.
Senator MONTOYA. Do you have a list catalog by capability?
Captain AITKEN. By what they produce and what they can do? Yes,
sir; those who have indicated an interest in Government business.
Senator MONTOYA. All right.
PAGENO="0200"
194
Have you, in the course of outlining your procurement needs, ever
notified the particular individuals with specigc capabilities that they
can come in under section 8(a) and become involved in such a contract?
Captain AITKEN. Our bidders' list, as it is known, comprises of go-
ing firms who are already in business, and they are solicited for our
requirements as we generate them. We do not have a list of 8(a)
organizations who are potentially businessmen or who are attempting
to establish businesses.
Senator MONTOYA. Then, your answer is confined to a list of the
small business capabilities rather than those who might have 8(a)
eligibility?
Captain AITKEN. Yes, sir; that is right, in our office. However, we
do rely on the SBA to assist us in locating the SBA firms or, I mean,
the 8(a) firms.
Senator MONTOYA. But you testified a few minutes ago that the
only thing you have referred to SBA is the $201,904 in contracts and
the other one that they could not find any capability for.
Captain AITKEN. Yes, sir. But I should enlarge by saying that the
SBA representative who visits our office frequently reviews, at his
discretion, any and all of our procurements before they go to the
street for bids.
Senator MONTOYA. All right, now, let us be frank about this with-
out having this interpreted as being critical.
Now, you enter into many types of contracts and you have many
types of procurement needs. Now, does the SBA man know everything
there is to know with respect to his duties concerning every type of
procurement need that you service as a contracting officer?
Captain AITKEN. Yes, sir; in general, he does. We have many re-
quirements, of course, which we receive the request for today and
awards are made tomorrow, for the repair part of a ship to prevent
disruption of overhaul, or sailing date, and this sort of thing. `V\Te have
requirements for which we must purchase immediately, but these are
one-time requirements for parts for a particular generator, or some-
thing else for which an 8(a) contract is just not suitable.
For our ongoing annual type repetitive needs, such as these here
and the others which we mentioned as referring to SBA for this fiscal
year and in the process of doing now~ the SBA representative is aware
of; he knows of our requirements. He knows which ones these are.
Now, I do not know as he has seen everyone of them. I cannot state to
that. But he knows generally what our requirements are.
Senator M0NTOYA. Wrell, are you in a. position to determine with
complete candor and objectivity what kind of profit a small entre-
preneur can realize from a contract you are willing to award to him
under the. 8(a) program?
Captain AITKEN. Not precisely. We know approximately what
price contracts should be awarded normally, because of past history.
Most of these things we have bought before, for several years, and
we know about what the price should be.
Senator MONTOYA. Do you take into account the inflation that is
taking place
Captain AITKEN. Yes, sir. Generally, the price increases slightly
each year but not necessarily.
PAGENO="0201"
195
Senator MONTOYA. All right. In a construction contract, what kind
of a fluctuation do you allow, or what kind of inflation do you allow
for a construction contract, let us say?
Captain AITKEN. Well, let us take any kind of contract, because we
do not deal in construction contracts. Any one of these would serve
your purpose, I would assume.
These are awarded, except our 8(a), on an open bid basis, and on
invitation for bids normally advertised, and the low bidder being,
whoever he is, a qualified producer, and a recognized responsible busi-
ness contractor, will get the award-the low bidder will. But, of
course, in the 8(a) situation, the 8 (a) contractor gets the award.
Senator MONTOYA. But you did not answer my question.
Captain AITKEN. Maybe I did not understand it. I am sorry. Well,
I cannot say what price increase we would allow from year to year
in our normal course of business, because a great deal of it is by formal
advertising, and the low bidder gets the award even though it is a con-
siderable increase in price. If we had good competition and fair com-
petition and the price goes up, that is unfortunate.
Senator MONTOYA. Well, in other words, you do not tell the 8(a)
contractor: "We are going to let you have this contract for what we
allowed last year on similar contracts?"
Captain AITKEN. No, sir; we do not negotiate with the 8(a) con-
tractor. The SBA negotiates with the 8(a) contractor.
Senator MONTOYA. Yes; I know, but the SBA seeks your advice as
to what you might accept?
Captain AITKEN. Yes, sir. We tell them what the previous price
was, and then it is up to them to negotiate if they can.
Senator Moic UOYA. What I am getting at, Captain, is I want to find
out if there are some pitfalls here in which the small entrepreneur can
fall by placing complete reliance on your figures and the figures which
you, in turn, give to SBA, because there has been testimony adduced
here that when they get the final contract figure the small business
contractor has not been able to realize a profit.
Captain AITKEN. Well, I think that the price at which these con-
tracts, these 8(a) contracts listed here, have been awarded, has been,
to~ my knowledge, certainly not lower than the going contract price
for that service in the past several years and perhaps slightly higher.
Senator MONTOYA. Well, I know, and that is what I am speaking
about, about the inflationary impact that has taken place. You see?
Are you making allowances for that?
Captain AITKEN. I am sure there is an allowance for it. There is
no attempt to actually maintain those prices at last year's levels.
Senator MONTOYA. That is what you indicated. That is why I
wanted to clear the record. Do you revise your figures and allow for
inflation?
Captain AITKEN. I see your point, Senator. We do allow for some
inflation and some increases.
Senator MONTOYA. That is what I have been trying to elicit from
you.
Now, where a default appears imminent, what does the contracting
officer or the agency do to prevent it?
Captain AITKEN. We work with the inspector of the material,
whatever it is to be delivered, and with the Small Business Admin-
PAGENO="0202"
196
istration-assurning it is the Small Business Administration that is
involved-and try to correct it as much as we possibly can, the de-
ficiencies, either delivery, technical, financial, or whatever the problem
seems to be. We try as best we can to work with SBA and the Defense
Contract Administration service, if that is the organization that in-
spects the material, to try to get the contractor back on the right track,
because it is to our advantage t.o take delivery of the material or the
service from the contractor. It is never to our advantage to default
and go to someone else.
Senator M0XT0YA. WThat, about advance payments?
Captain AITKEN. WTe have not had any advance payments.
Senator MOXTOYA. You wait until lie finishes the contract?
Captain AITKEN. There are partial payments.
Senator MONTOYA. Progress payments?
Captain AITKEN. Well, they are not, technically-there are some
progress payments, but in most of these it amounts to partial pay-
ments as the service is completed on the month or week or whatever
period of time he provides the service.
Senator MOXTOYA. Do you allow the individual to use his entitle-
ment to the unpaid portion of the contract as a means of getting money
from the banks?
Captain AITKEN. Oh, that is up to him, Senator, between him and
the SBA; if they caii make such an arrangement with the bank, that
is fine.
Senator MONTOYA. But will you give him certification as to what
he is entitled to?
Captain AITKEN. If lie asks for it; yes, sir.
Senator MONTOYA. On which the bank can rely?
Capt.aiii AITKEN. We can do that.
Senator MONTOYA. Have you ever done it?
Commander BEEMAX. Not on an 8 (a). We have many contracts that
have been assigned to banks and we pay directly to banks, but not under
8(a). WTe have not. had that situation arise there.
Senator M0NTOYA. Can an assignment be made on an 8(a) subcon-
tract?
Commander BEEMAN. I am sure the statute provides it.
Senator MONTOYA. Have you ever advised any 8(a) contractor he
can do it?
Commander BEEMAN. I do not recall having direct contact with
anyone yet.
Senator M0NT0YA. Well, they do not know who to come to, or how to
come to you?
Mr. GILBERTSON. Yes; these people do, because we have gone out
and talked to them. They know who I am.
Senator M0NTOYA. Yes, but they do not know that you can assign.
Have you ever told them?
Mr. GILBERTSON. `Well, in these particular types of contracts here
for these amounts of money, like those crates which is $69,000, an esti-
mated cost for a total year, where the air station that orders these
special boxes may order 10 or 12 of them and lie delivers them in a
week and lie gets a. receipt. and he can take that down to the cashier
aiid get. his money right then and there.
Senator MONTOYA. For 10 crates?
PAGENO="0203"
197
Mr. GIIJBERTSON. Yes; but he cannot get the $69,000 until he per-
forms the work.
Commander BEEMAN. We cannot guarantee that much, because it is
just an estimate.
Senator MONTOYA. That is what I am trying to get at. The big con-
tractor has a fixed contract?
Mr. GILBERTSON. In the machine shop service where that is for $16,-
000, a fixed price contract for immediate delivery, say within 35 or 40
days, he could have taken that contract to a bank, and they would have
factored it for him, as the term goes, I believe.
Senator MONTOYA. There has been testimony here during the course
of these hearings where these people have been at a loss to get.funding
for their contracts, and they apparently did not know that they could
get a certificate from you indicating how much of the contract was un-
paid and that they could borrow against it. They are unaware of that.
Now, I understand the difficulty for contracts that are based on
requisitions as need arises. I do not think any bank would lend you
money on that basis.
Mr. GILBERTSON. This is one of the problems. If you are going to
have contracts that have continuity where we can do this year after
year and not just set a guy up in the area and then pull the rug out
from under him and tell him we do not have any more contracts to
award. This is one of the areas where we do have problems.
Senator MONTOYA. Unless, of course, you estimate your needs for the
year and tell him, "This we are sure of during the course of the year,
but we are not going to order everything right now."
Mr. GILBERTSON. That is precisely what we are doing now.
Senator MONTOYA. And here is another problem that arises. A busi-
ness has an 8(a) subcontract-and there was an example of this here at
the hearing, where they had 20 people under an 8(a) contract-and
the contract does not have enough continuity to justify the long-term
employment of its people. Is it not better, if you know your needs for
the year, to tell the small entrepreneur that you have already certified
for an 8(a), "All right, you have 23 people. We know that we are go-
ing to need x number of items this year so you can start producing
them and keep your work force engaged and can better make plans at
the end of your production for the continued employment of these
people."
Commander BEEMAN. That is a very desirable thing, Senator, if we
can get that type of grip on it. We frequently do not know how firm
these requirements are. It depends on how many ships operate out of
this port here.
Senator MONTOYA. Well, that is what I am trying to find out.
Commander BEEMAN. It is an unpredictable thing. I agree it is a
problem.
Senator MONTOYA. That is what I am trying to find out.
Can you do this in some instances?
Commander BEEMAN. Not on most of the things.
Senator MONTOYA. I can understand that on special crates, for
instance, you probably could not.
Commander BEEMAN. That is right?
Senator MONTOYA. Unless you gage that on what you have used as
an average through the years.
PAGENO="0204"
198
Commander BEEMAN. Historical data is just about what we rely on;
yes, sir.
Mr. GILBERTSON. One of the problems with these contracts is the
funding by the activity ordering these things. When they give us
this estimate we do not put any real money into that. Funding comes
out with the ordering document that tells this guy to go ahead and build
15 of these crates. Well, then, if the activity does not really need these
crates they are not going to put their money into it very quickly and
stack them up. S
Senator MONTOYA. Yes. I understand that. But can you do this in
other procurements?
Captain AITKEN. There are a few, as we may have mentioned be-
fore. We have several similar situations which we are now exploring
for additional 8(a) contracts but then these are not guaranteed for
continuancy for the year. We award the contract saying that "when-
ever we have this requirement we will order it from you for this year."
Senator Mo~roYA. Well, we are appearing here more or less as an
advocate for the small businessman. That is why we are trying to alert
you to the problems that they face and, hopefully, we hope to arouse
your sense of conscience and see if we can get some cooperation from
the procurement agencies to alleviate these problems for the small
business people. That is all we are trying to do.
Now, we have other witnesses.
Mr. JoNEs. Mr. Chairman, at this point I would like to ask Captain
Aitken just a few additional questions.
Senator MONTOYA. Let me finish with the others and we will ask ques-
tiol1s altogether because I have to go at three, and I will leave you here
to ask any questions.
Now, let us see what the Army has done.
Mr. Allstead.
STATEMENT OF ROBERT A. ALLSTEAD, CHIEF, PROCUREMENT
DIVISION, OFFICE OP DEPUTY CHIEF OF STAFF FOR LOGISTICS,
6TH U.S. ARMY, PRESIDIO OF SAN FRANCISCO, CALIF.
Mr. ALLSTEAD. Mr. Chairman, you have my statement, and, if it can
be accepted for the record, I will talk from the supplements I have
added.
Senator MONTOYA. It will be made a part of the record.
(The prepared statement submitted by Mr. Alistead reads in full
as follows :~
PAGENO="0205"
199
* STAT~IT 3Y
A. ALLSTE/'.D
r:OCL:~T OFFICEG., OFFICE OF ThE ~EPtiTY
CNIEF OF STIFF FOR LOGISTICS, IEP.UQUARTERS
SIXTh U.JTEO STATES ARY
PRESIDIO OF SM FRANCISCO, CA 0412C
SENATE SNALL BUSINESS COW~ITTEE
2D-33 SEPTEMBER 1971
CENTLE EN:
THE SIXTH UNITED STATES ARMY I PLEMENTATION OF THE PRESIDENT'S PROGRAM
FOR COWTRAC1ING WITH MINORITY BUSINESSES HAS DEEM ONE HUNDRED PERCENT
CONSISTENT WITH THE PROVISIONS OF SECTION I, PART 7, PARAGRAPH 1-705.5
OF THE ARMED SERVICES PROCUREMENT REGULATION~ THIS REGULATION CONTAINS
AUTHORITY, POLICY AND PROCEDURES FOR CONTRACTING WITH THE SMALL BUSINESS
ADINISTRATION FOR SUPPLIES AND SERVICES TO BE PROVIDED BY SMALL BUSINESS
MINORITY FIRMS.
SIXTH ARMY INSTALLATION CONTRACTING OFFICERS lIVE BEEN ACTIVELY ENCACED.
WITH REPRESENTATIVES OF THE SMALL NUSIRESS ADMINISTRATION IN I BENTIFYI:C
PROCUREMENTS. SUITABLE FOR NINORITY BUSINESS ENTERPRISES. RAPPORT WITH
TIlE SWILL BUSINESS ADNIUISTRATIQN 115 BEEN EXCELLENT.
PAGENO="0206"
200
REPRESENTATIVES OF TIlE .SNALL BUSINESS I;DNII!ISTRATIOU H/WE WORKED WITH
SIXTH ARNY COHTPJ~CTING OFFICERS. SINCE TUE INCEPTION OF THE PROGRAN.
THIS. CLOSE RELATIONSHIP HAS PROVEN VERY FRUITFUL. EVEN WITH LIMITED
RESOURCES, ADVANCES HAVE BEEN MADE BECAUSE OF. THE TENACITY AND PERSEVER-
ANCE OF THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVES MD THE
CONTRACTING OFFICERS TO ACCOMPLISH A RECOGNIZED ESSENTIAL PROGRAM.
SIXTH ARMY CONTRACTING OFFICERS HAVE BEEN ENJOINED TO EXPEND EVERY
EFFORT FOR INCREASED IMPROVEMENT IN THE PROGRAM IN THE *FUTURE. PROGRAM
PROGRESS AT SIXTH US ARMY INSTALLATIONS WILL BE MONITORED WITH THE
ASSISTANCE OF THE SIXTH ARMY SMALL BUSINESS *~J~ ECONOMIC. UTILIZATIOIU
ADVISOR TO INSURE A CONTINUANCE OF THE CLOSELY ESTABLISHED RELATIONSHIP
WITH SBA FOR OVERALL PROGRAM. INPROVENENT..
PAGENO="0207"
201
SUPPIB'ENT TO THE STATEVENT PI~VID~) BY
T'lR. F~JBERT A1 ALLSTEAD
PF~JCURENENT OFFICER, OFFICE OF THE DEPUTY
CHIEF OF STAFF FOR LOGISTICS, HEADQUARTERS
SIXTH WITED STATES APJ~i~'
PRESIDIO OF SAN FRANCISCO, CA 914129
SENATE SHALL BUSINESS OJ~IUEE
29 ~J SEPTE1~BER 1971
ATIACHED EATA SHEETS DEPICT THE 8(A) PRJGRAN EFFORT BY THE SI)(TH U. S.
AR~W DURING P( 1971 AND 72 TO EATE.
AN INFOi~4TION SHEET DISCLOSING A DECADE OF ALL SNALL BUSINESS DOLLAR
AWARDS BY FISCAL YEAR IS ALSO INCLUDED FOR YOUR INFORHATION. IT IS OPINED
THAT OUR EFFORT TO FOSTER THE DL\LOP~'Eff OF THE SHALL BUSINESS PFOGRAM
HAS BEEN SUBSTANTIAL EASED ON TOTAL DOLLAR AVAILABILITY. THE VALUE OF
LOCAL PURCHASE TRANSACTIONS ACCOIPLISHED IN SIXTH U. S. AR~D( IS CONSIDERED
RELATIVELY t~1INW.4L WHEN CQMPARED TO LARGE P~GR4M PROCUREI"ENTS ACCC~PLIS~ED
B? MILITARY CO1~T~JDITY MANAGEF~ WHICH RESULT 111 EXPENDITURES OF BILLIONS OF
DOLLAF~.
A1TACHED ARE:
SHEETS # 1. 8(A) AWARDS TO SEA FY 71
# 2. 8(A) ACTIC~S NOT AWARDED FY 71
# 3. 8(A) ACTIONS IDENTIFIED FOR S~A FY 72
# 4. VALUE OF SMALL BUSINESS AWARDS Fl ~/71.
PAGENO="0208"
SIXHI U. S. AP~?(
8(A) A~/ARPS TO SMN.L B~8!IJESS NT11iIISTPATIOU F? 1971
LW~~IOR WIFALU&~LR ~~HllhJ~L
NIDFE LNIITSCPP!NG 71-C-0228 EIIJSHH OT~TRJL
SPN FH8t~C!SW, CA
CAH3ER ELECTRIC (B., 71-C-Q~1 FLORESCENT LIGICE
OAKLAND, CA FIXUJFE NDIE[BW~(E
IXL NDNUF/\CWRING co. 71-C-ND71 CWThND3 ALTEPATICUS
OAXIJNTO, CA
LEE'S PATIOL 71-C-0300 SECURI1Y GUARD
SAN FRDNCISCO, CA SERVICE
PARr'S REREE 1)TBEOZ
SEASIEE, CA 71-C-A666 FERJSE ~OLLECTICU
IIJREON IJRPEERIES 71-C-A739 DRAPES
SAIL FRARCISCO, CA
TOTAL 5327,1112
YALIE CATEHEALAPI)
5110,0W 21 MAY 71
7,258 1MAY71
28,0)0 1JUL71
69,3711 22 JIri 71
CECffP1~~L~LEE
FFP
FFP
FEO'PIFS
FFP
t~D
88,l'il ~1.JUfl71 FFP
~9LG:EL~~ 11JW71 PEQ'PIFS
PAGENO="0209"
SIXTH U, S. Af~W
8(A) ACTICHS NOT PHARDED TO S~LL BUSINESS /HflINISTPATICO - FY 1971
PFOPOSAL NUSBER FEOUINEI~H{[ FEP.SC~i FOR REJECTTOII
71-R-CIJG7 3) MAR 71 1PAIR MATER SYED~I1 PFOPOSED PRICE TO HIGH SPA REJECTED
71-R-C1J81 26 MAY 71 PRINTING PRJFOSED PRICE TO HIGH SPA REJECTED
71-R-OO&) 1 JLH 71 TEED OTEFR)L SPA COUt]) NOT FIND C~ffPACTOR W/STAIE
ECOLOGY LICENSE
71-R-013) 20 lAY 71 JANITORIAL SERVICE COUlD ORDER OBTAINED BY PACIFIC COAST
CEEEC UTILITIES SERVICE RESTRAINING SPA FF011
AWARDING TO MINORITY CCHTRACTOR hIDER 8(A)
71-R-O131 20 MAY 71 JANITORIAL SERVICE COURT ORDER OBTAINED BY PACIFIC COAST
PRESIDIO OF ItRITEREY UTILITIES SERVICE RESTRAINING SPA FF131
AWARDING TO MINORIT( CCIITRACIOR INtER 8(A)
ESTIMATED VALUE $33QM57
2
PAGENO="0210"
204
SIXTH U1 S1 ARIY
8(A) ACTIONS IDENTIFIED FOR POTENTiAL AWARDS P( 1972
PEOL1IREPE~ff
INSTALLATION OF ELECTRICAL EQUIP(~'ENT
SENER P11? SERVICE
WINDOW WASH lUG SERVICE
RUG CLEPMNG SERVICE
IHOOFING
BOX LWCHES
PACKING a CRATING
REPLACEf~Bff OF TRAFFIC CONTPOL SIGNS a POSTS
REPLACE DOORS ON WAREHO1~ES
REPLACE EXTERIOR DOOR ADNINISTPATI\~ BLDGS a 1~SSHALLS
TOTAL $571i,369.CO
PAGENO="0211"
205
SI)cnl U. S. MI!
\$1UE OF SIXTH U. S. MI! MARTS TO 52RU BISITESS F1135 F! 62/71
EL~ E1i~ EL~ EL6~ EL91 ELOZ EL91 ELTH ELZO ~J1 IUTAL
*(9 ~fl~)5)
VALLE OF ABIARDS $18,591 $24,278 $28;275 $28,332 $28,778 $32,702 $110,756 $36,OJO $35,303 $39,028 $312,043
(IN THOISPNDS)
POTENTIAL LOLLNS $29,669 $54,990 $58,626 $60,151 $63,733 $74,638 $81,586 $73,190 $73,526 $84,968 $654,587
AVAILABLE TO TIE
PPOGRNT
PERCENTAOF OF 62.7 44.1 48,2 47.1 45.2 43,8 910 49.2 48.0 45.9 47.6
/\OIIEWIBfI
* STA[T OF 01 RtALL D8SIUESS AGIIE'.98Eff P1063/Ill "OPEPATICH E0)STER", OCTOPEP 1971.
PAGENO="0212"
206
Mr. ALLSTEAD. Thank you, Senator. I have attached data to the
statement as a supplement. We have awarded six contracts during fis-
cal year 1971-72 to date concerning the 8(a) program, and there is
a sheet with the supplement disclosing the percentage of all small
business dollars awarded by fiscal year which is included for your
information.
We have also provided a list of the total dollar availability and the
value of local-purchase transactions. This amount in the 6th U.S.
Army is considered relatively minimal compared to our program
procurement accomplished by military commodity managers which
result in expenditures of billions of dollars.
I refer you to sheet No. 1 which depicts the awards for 8(a) `s dur-
ing the past fiscal year 1971. This represents six firms, two in Oakland,
three in San Francisco, and one in Seaside, Calif., for a gross total of
a third of a million, to be exact, $327,412.
Senator MONToTA. How much? 120, 127?
Mr. ALLSTEAD. No, $327,412.
Senator MONTOYA. Yes. Out of how much procurement?
Mr. ALLSTEAD. Our gross procurement for the fiscal year was in the
neighborhood of $92.5 million. However, sir, you have to remember
that a good 60 percent of this we have absolutely no control over be-
cause we buy from Federal Supply Schedules which are provided to
its by the GSA. We also buy resale subsistence on purchase notice
agreements which are provided by another agency over which we have
no control, and we have utility procurement which, as you know, in the
State of California is pretty much Southern Oalifornia Edison and
Pacific Gas & Electric Co., big business.
Senator MONTOYA. Then, how much of a percentage of the procure-
ment pie has been placed into the 8(a) program?
Mr. ALLSTEAD. Relatively small, Senator; one-third of a million is a
very, very small amount in consideration of the other total dollars
that go into the small business program. That is depicted in the
attachment.
Senator MONTOYA. This is probably one-third of 1 percent of the
total?
Mr. ALLSTEAD. I would say so, the last fiscal year for small business.
Looking at the whole picture, we did 45.9 percent of the total dollar
availability of some $84.9 million for $39,028,000.
Now, for the entire decade since the Army program Operation
Booster started in October of 1971, out of $654.9 million, the 6th U.S.
Army was able to direct 47.6 percent of that, or $312,043,000 to small
business.
And I can assure you, sir, that in this total there were many
minority firms involved. So, although we cannot identify them, they
were involved, and that was before the 8(a) program.
Senator MONTOYA. So, you really have been going down since fiscal
year 1968?
Mr. ALLSTEAD. So very true. This, again, is charged to the dollar
mix we have and the availability of funds that are supplied to our
class 1 installations which buy. The Department of the Army, as you
know, has been on tight restrictions on funding of late, and this is
represented here.
PAGENO="0213"
207
Senator MONTOYA. Well, you had almost the same dollar allowance
for procurement over these years.
Mr. ALLSTEAD. Yes, sir.
Senator MONTOYA. Since 1963 you have been going up, and in fis-
cal 1971 you had your best year in procurement dollars, and still
you went down from 48 percent to 45.9 percent.
Mr. ALLSTEAD. That is correct.
Senator MONTOYA. To what do you attribute this?
Mr. ALLSTEAD. These dollars are generally windfall dollars that
come in the last quarter of the fiscal year. We cannot control them.
This is one of our big problems in procurement. We wish we could.
This is one of the cl1ronic problems I think of all of us in the procure-
ment field.
Senator MONTOYA. What do you mean by "windfall dollars at the
end of the fiscal year"? You have so much balance and you just hurry
to the store and get what you need?
Mr. ALLSTEAD. Not necessarily; not necessarily.
Senator MONTOYA. So that you will show a zero balance at the end
of the fiscal year?
Mr. ALLSTEAD. This stems from the top down and from the bottom
up, whoever might have a tight rein on the purse strings. The in-
stallation commander keeps a certain amount of money just in case,
and this goes right on up the line all the way to the Department
of Defense.
Senator MONTOYA. And, so, 8(a) gets left out and SBA gets left
out, and then-
Mr. ALLSTEAD. Not necessarily.
Senator MONTOTA. And you go to the big contractors?
Mr. ALLSTEAD. One of the big things at the end of the fiscal year,
of course, would be construction-type contracts. We have been directed
that all of our constructional repair, utility-type contracts would be
set aside for small business. This was done by regulation.
Senator MONTOYA. Well, did you know that the small business share
of the procurement pie has been going steadily down?
Mr. ALLSTEAD. I understood this; yes, sir.
Senator MONTOYA. And I mean across the vast spectrum of the Fed-
eral Government.
Mr. ALLSTEAD. Yes.
Senator MONTOYA. And we are trying to do something about it, to
reverse it. Now, we are also trying to get the attention of the pro-
curement officers with respect to 8(a) contracting.
Now, what kind of policy do you have with respect to 8(a)
contracting?
Mr. ALLSTEAD. Our policy emanates from the Department of Defense
right down to the Department of the Army and the Army Command
Headquarters, and it is defined in the armed services procurement reg-
ulations. We, of course, implement these policies through regulation
and command guidance as necessary and as permitted at this level.
Senator MONTOYA. Do you have a small business representative in
your agency?
Mr. ALLSTEAD. Yes, sir; Mr. Adam Mello. He happens to be back on
the east coast currently attending a conference at the Continental Army
Command Headquarters wherein they will address the 8(a) program.
PAGENO="0214"
208
Senator MONTOYA. Now, are you in constant touch with the SBA
people?
Mr. ALLSTEAD. Yes, sir.
Senator MONTOYA. And do you find any lack of cooperation from
SBA people?
Mr. ALLSTEAD. Definitely not. And, in fact, they overwhelmingly
give us their cooperation to such a point that it is very hard to receive
them at all times at the class 1 installations. The installations in Cali-
fornia and in other States have experienced the best of cooperation.
We realize that this program is just being generated here in the 6th
Army. If you will note on sheet 1 all of the awards were made in the
last quarter of the fiscal year. Currently, we have identified over a half
a million dollars worth of procurement in the 6th Army for 8(a).
There are others being identified as I am sitting here. These consist of
such things as installation of electrical equipment, sewer pipe service,
window washing, rug cleaning service, roofing, preparation of box
lunches, packing and crating which is a large item, replacing of traf-
fic control signs and posts~ replacement of doors on warehouses, re-
placement of exterior doors, administrative buildings and mess halls.
This is only a start, as far as I am concerned for this fiscal year. We
should be able to do much better this year over last. I am very confi-
dent we will. Granted we were slow starters in the Army, but out of
the Continental Army Command, and I am speaking of all of the
States, there were only 12 8(a) contracts awarded this last fiscal year.
We awarded six of them.
Senator M0NT0YA. You awarded six?
Mr. ALLSTEAD. Yes, sir.
Senator M0NT0YA. And what was their total?
Mr. ALLSTEAD. The total was $5.3 million, but there was one contract
that was well up into $3 million awarded at one installation. I am not
quite sure whether it was at Fort Rucker or at Fort Benning. That
was in the 3d Army.
Senator M0NT0YA. An 8(a) contract?
Mr. ALLSTEAD. Yes, sir; quite a substantial contract.
Senator MONTOYA. And this year you are only up to $327,000?
Mr. ALLSTEAD. No, sir. We are at a figure of $574,000, an estimate
as of this time.
Senator MONTOYA. No, but for 1971 you show here-
Mr. ALLSTEAD. That is the actual awards for fiscal year 1971.
Senator M0N'roYA. 8(a) awards, $327,412?
Mr. ALLSTEAD. That is correct. So, we have that one-third of a nil-
lion out of the one-half million dollars total.
Senator MONTOYA. Well, that is what. I am trying to get at.. I mis-
understood you. I thoug~ht that you `had $3 million in 8 (a) contracts.
PAGENO="0215"
209
Mr. ALLSTEAD. No, sir; only a third of that.
Senator MONTOYA. Only `a third of that?
Mr. ALLSTEAD. Only `a third of $1 million; yes, sir.
Senator MONTOYA. How can we improve this situation?
Mr. ALLSTEAD. We are striving to do so. We recently had an oc-
casion to talk with contracting officers in person or by phone con-
cerning their efforts to date, and we have implemented a letter, rather
an endorsement to a letter, of accolade that came down through than-
nels from the Small Business Administration to the Army, and hence
to the Continental Army Command and they have encouraged us to
do more, and we, in turn, have enjoined the contracting officers to in-
crease their activity in this `area. This is being `done currently, and we
will be pursuing this as often as it is necessary to get these going the
way we should get them going.
Senator MONTOYA. Thank you very much, sir.
Mr. ALLSTEAD. Thank you, sir.
Senator MONTOYA. Colonel Cochran.
STATEMENT `OF COL. ROBERT W. COCHRAN, DIRECTOR, PROCURE-
MENT AND PRODTJCTION, SACRAMENTO AIR MATERIAL AREA,
McCLELLAN AIR FORCE BASE, CALIF.; ACCOMPANIED BY MRS.
KATHRYN SCRELD, SMALL BUSINESS SPECIALIST
Colonel COCHRAN. Mr. Chairman, you have my prepared statement,
`and if you would care, we would be de'lighted to just `highlight it.
Senator MONTOYA. Your statement will `be made ~ part of the record,
sir, at this point, and you may proceed t'o tell us what the Air Force
has done.
(The prepared statement follows:)
PAGENO="0216"
210
STAT~NENT BY
COLONEL ROBERT W. COCHRAN, DIRECTOR, PROCUR~CENT AN]) PRODUCTION,
SACRAMENTO AIR MATERIEL AREA, MCCLELLAN AFB, CALIFORNIA
BEFORE SUBCOMMITTEE ON GOVERNMENT PROCUR~NENT
SENATE SMALL BUSINESS COMMITTEE
SEPT~BEN 30, 1971
Mr. Chairman:
It is a pleasure and an honor to be afforded this opportunity
to discuss the Sacramento Air Materiel Area's participation in the
President's Program for the Hardcore Unemployed pursuant to Section
8(a) of the Small Business Act. I have with me toda~y Mrs. Kathryn
Scheld fr~ our Small Business Office. It is our hope that this
discussion will provide a clear understanding of how Sacramento
Air Materiel Area in 1968 met the challenge of President Johnson's
new socio.economic program and moved forward with a unified
positive approach to fully support the program.
Our initial reaction to the President's proposal was one of
concern that we should consider supporting our nation's cc~plex
defense mission with hardcore labor and skills. However, recogniz-~
ing that c~plete understanding of a problem is the primary
PAGENO="0217"
211
~o ~ ~ ~ zirh(~d On a
~ project ;o learn eve jthi~ po~nibie about the pant~
ar~ futUr3 lor-~ mace pl.nnia~ for the pro~rc~n. We
with the Dcpa~ent of Con~'arcc who wan given overall rponni-
bil~~y for the pro~maa; the Dope eat of Labor who wan 5iven
the renpozinibility for training end cplo~r~cnt elancate; and the
Saul Busiacen .~~inintraticn (SBA) under whose authority we
wore direc;ed to contract with the hardcore entrepreneur.
We then met with Ivkjor General Veal, Conrander of the
Sacramento Air ~fat~riel Area, and top management personnel ~or the
purpose ~f updating them on the Hardcore program in general, its origin,
peculiarities, approach, what we hoped to accon~lish and how the pro-
cram related to our mission. General Veal directed uhat M~er:~i
Mann~ement and Procurement perso~inel work as a team in identffyiacc
potential candidate items and negotiating with the SBA and she minority
owned, or disadvantaged entrepreneurs, it proposed as subcontractors.
The Sacramento Air 1~hteriel Area Small Business Specialiss was
PAGENO="0218"
212
assigned as program coordinator.
It was with this top level management attention that in April
1968 we opened informal discussions with the SBA on a planning
requirement for the Inspection Repair As Necessary and modification
of T-.33 aircraft to be used in support of the United States Air
Force and Military Assistance Programs. The procedure in previous
years for processing this requirement had been competitive
negotiation with contractors having facilities to accommodate the
complex maintenance, repair and inspection of military aircraft.
However, since the incumbent contractor was a struggling minority
owned concern, it was decided that we would approach the SBA with
regard to the feasibility of writing an 8(a) contract to help this
firm become a viable small business concern.
As a result of numerous meetings with Mr. Cliff Ryan of the
San Francisco Small Business Administration Office, the SBA
approved the Company's business plan qualifying them for awards
under the Section 8(a) Program, and accepted the proposed
PAGENO="0219"
213
planning requirement for negotiation under that program.
Since we were pioneering this new concept of contracting, we
recognized that many "gray areas" existed and it would be necessary
for us to take the initiative and "cross bridges" as we came to
them at our working level if this contract was going to be awarded
in time to meet Air Force operational requirements. Therefore,
our next step was to conduct an informal two-part Informational
and Preproposal Conference with the president and general manager
of the coanpany (Aerospace Services, Inc., Oakland, California);
the Navy administrative activity personnel; the SEA representa-
tives and Sacramento Air Materiel Area Procurement personnel.
The first part of this meeting was devoted to explaining the
Hardcore Program to bring all potentially involved parties up to
date on available information to insure that no misunderstanding
existed. The contracting officer emphasized that if this program
was going to succeed in both mission and implementation, it would
take team work, cooperation and extra effort on the part of all
PAGENO="0220"
214
parties concerned.
The second part of the meeting was conducted along the lines
of a normal bidders conference coupled with a general explanation
of Air Force program and mission requirements.
We did not issue SBA a request for proposal, but instead,
provided them with an informational procurement forecast, price
history, specifications/technical data and the proposed contract
format to which the subcontractor was to structure and price his
proposal. The actual solicitation, pricing and negotiation aspects
of both the price and subcontract remained administratively a
Sacramento Air Materiel Area responsibility. The Air Force
contracting officer, coordinating with SBA, prepared the subcontract
solicitation, negotiated the requirement and prepared the con-.
tractu.al instruments including all related documentation.
Because of the hardcore newness and pressing Air Force mission
requirements to meet production schedules and State Department
commitments, following negotiations and contract signature at
PAGENO="0221"
215
the local ltvel, we handearried the documents to Washington to
assist in obtaining inter.agency signatures and answer any
questions which niight arise. We have a high feeling of acccmplish-
ment in that this requirement was processed and accepted without
change through the entire review cycle.
The total value of this requirement, including options, was
$758,b56.OO for a quantity of 51e aircraft. The program's implemen-
tation, continued agency cooperation and subcontractor performance
in meeting both mission and hardcore requirements were satisfactory
and quality standards consistently met or exceeded contractual
production schedules.
This was the first of fifteen Sacramento Air Materiel Area
contracts totaling $14,227,885.00, to be negotiated with the SEA
pursuant to Section 8(a) of the Small Business Act. We have
itemized these fifteen contracts on attachment one to this state-
ment. As you will note, the contracts cover critical requirements,
such as Airborne Integrated Monitoring System Modification Kits
PAGENO="0222"
216
for Sacramento Air Materiel Area supported aircraft and repair of
MB..18/19 Generators. We are proud to have been a leader in
furnishing support of the Hardcore Program and of our accomplish-
ments to date. As of 30 June 1971, we have eleven active contracts
which contribute 814% of the active contract dollars provided to
the program by the Air Force Logistics Command. The Air Force
Logistics Command contribution has amounted to 38% of the Air
Force total; so in effect, Sacramento Air Materiel Area's accom-
plisbnient as of 30 June 1971 is equal to 31% of the total Air Force
contribution.
Overall performance on all of the contracts has been satis-
factory. The Tayko Industries contract F014606-71-D-0080, for
example, is currently two months ahead of schedule with excellent
quality performance.
To assist in the identification of items suitable for 8(a)
contracting, our technical personnel have made n~erous facility
capability visits to potential Section 8(a) suppliers, such as,
PAGENO="0223"
217
New Watts Manufacturing Company, Los Angeles, California; Fort
Peck Tribal Industries, Poplar, Montana; Tayko Industries,
Sacramento, California; AVI Manufacturing Company, Gardens,
California; and Quantum Associates, Oakland, California. We
currently have four additional requirements under consideration
having a total estimated value of $153,386.00.
Many problems and deterrents to efficient and effective
support of the program were experienced. Through the unified
efforts of the SBA and the Department of Defense, with a great*
deal of credit due Mr. Cliff Ryan of the SHA, Headquarters, Air
Force Logistics Command and Headquarters, United States Air
Force, the majority of those problems have been reøolved. For
example: (1) Authority has been delegated to the field level for
approval of items to be considered for 8(a) as veil as approval
authority on both prime and subcontracta; (2) The requirement for
preaward survey on the prospective subcontractor has been waived;
(3) SM has been granted authority to fund price differentials
PAGENO="0224"
218
necessary to support the program; and (4) Statistically, 8(a)
contracts are now reported as small business awards and credited
to the total small business awards of the purchasing activity.
Our success in the 8(a) program was not easily achieved nor
does it stem from a unique or magic formula of identifying items
and matching 8(a) subcontractors. Rather, it is the result of
having a proper attitude; the expenditure of a large number of
hours of advance planning by our Materiel Management personnel
in identifying items; cooperative flexibility of our contracting
personnel in negotiating and finalizing the contracts; the
conscientious support of the SM; constant surveillance by
cognizant contract administering activities; an awareness of
contractor problems and being effectively responsive in assist-
ing as necessary in problem resolution; and top management
support at all levels of Headquarters, United States Air Force;
Headquarters, Air Force Logistics Coemand; and Headquarters,
Sacramento Air Materiel Area. These people have worked together
PAGENO="0225"
as a close knit team to achieve the President's goal of replacing
the waste and failure of unemployment with the productivity of
meaningful work.
1 Atch
List of Contracts
PAGENO="0226"
220
~W'A S~'cORr (F lIE Pc~S1rFNr'S HA~)CO~ PR~GRN1
(SECTION 8(A) OF liE ~%~J1 1~JSDFSS ~T)
______ QY1TR~T ~P r~it o~ ~
~~I~CES, INC F(YfIJ6-68-D-0673 IFWR4TOR ~PAIR $1~g3,OOO, 28 J1I~ 68
?L~ J~~IF FY4O6-69-C-1052 ~Q $ F~O8S, ]2 P~AY 69
~~~ICES~ INC F~R~7O-C-O13S T-33 IPP~I $519;778, ~ N~ 69
~~~IcEs. INC Ff~O6-7O-T~-(~l35 OEWRAThR I~PIMR $958,873. 28 NIW 69
1)8 H IIIJUSWIES FCY48IF-71-041)33 F-100 A(F~ DP~ $l'i2,173. 28 SEP 70
L(~ PIffLES, (XIF OIJTE CABLE ASSY
INC FCY~R]6-71-C-Oi2'1 F-ill) ~lI KITS S ~,O15, 26 SEP 70
INC. FY6-71-C-013 F-iOO MI) KITS $ 95,265. 26 OCr 70
F(YiffJ6-71-D-OO8O ~j~P1~1~JXTLLIATh' $393~3~i. 3 DEC 70
~CE~CES, INC F(Xi9J6-71-C-O33~i T-33 IPN~ $qiO,1EO. ~N 71
~~F~J~ON F~J6-7i-C-O&~ F-iO0 AI~ ~1I) KITS $2k9A34. 3 ~Y 71
PAGENO="0227"
221
~FR1PT (F 1W PIFSII)FPff'S W~X~mE P1~XR~1
_______ ci~r~cr rn~ ______
~A~ATES &-71-C-0856 1-39 PJ~ ?i1) KITS $iJ7,~O, 3) JJN 71
~E~IcES, INC FtYc6fl6-71-fl-0166 ~-1&'19 GEIERATOR I~PAIR $3]3,000, 23 APR 71
~TP~ O6-71-'~-C~O1 T-33 AIMS KITS s2m;367~ 30 JUN 71
F~599-71-C-08g7 T~~Aft $ 5~792, II MAY ~
F0q699-71-c-oggR ~ 0JI~ $ ~,863, II MAY 71
PAGENO="0228"
222
Colpnel COCHRAN. First of all, I would say it is a pleasure to be here
and to tell you of our accomplishments. I have with me Mrs. Kathryn
Scheld who is from our Small Business Office. Needless to say, our
initial reaction to the President's proposal was one of concern that
we should consider supporting our Nation's complex defense mission
with hard-core labor and skills.
After meeting with appropriate people we briefed the commander of
the Sacramento Air Materiel Area, General Veal, and all of the top
staff. The purpose, of course, was to outline the program, its origin,
its peculiarities and come up with a local approach. General Veal di-
rected that the Direct.orates of Materiel Management and Procure-
ment personnel to work as a team, to have team management from the
standpoint of assisting in selecting the candidate items. It wa.s with
this top-level management attention that in April 1968 we opened
informal discussions with the SBA on a planning requirement for the
inspection-repair of the T-33 aircraft.. We met with Mr. Ryan of the
San Francisco Small Business Administration Office, and he approved
Aerospace Services, Inc., who had a business plan qualifying them for
an 8(a) award. The total value of this requirement, with its option
was about $758,000 for a quantity of 54 aircraft.
The program implementation continued with agency cooperation
and subcontractor performance in meeting both missions of hard-core
requirement and satisfactory quality standards consistently meeting
or exceeding contractual production schedules. With all of the con-
tracts we have in being right now we do not have a poor contractor.
Senator MONTOYA. Have you encountered any problems because of
price differentials?
Colonel COCHRAN. Yes, sir; we have.
In fact, I have a procurement now that has been returned to me
by SBA. It is about a $50,000 procurement, and SBA has not been
able to get their contractor down to a fair and reasonable price.
Senator MONTOYA. Well, are you aware that under the new law there
is provision for a.bsorbing price differentials?
Colonel COCHRAN. Yes, sir; I am well aware there has been approx-
imately $8 million set aside for this. I am `also well aware that of the
procurements we have made in the past we have paid differentials of
10 to 14 percent. In this, as you should know, we take into considera-
tion, the inflationary increases. Also, we take into consideration that
the skills these people were required to hire wouid not give them the
productivity that you could expect out of a going contractor. But at
the present time, price differential other than the $50,000 procure-
ment mentioned previously, has not presented a problem. I am going
to, when we get back, take a Took to see whether the SBA could even be
given additional time to place this $50,000 procurement with some
other company.
Now, the reason it has been returned is because there can only be
a certain length of time that we can let SBA have for procurement.
We cannot let it go forever because it is a. firm requirement.
But, on the other hand, we may iiot be going too low on assets be-
cause 50 percent of this procurement we did set. aside for small business,
so we do have some assets coming in.
Senator MONTOYA. Now, who surveys a prospective 8(a) firm be-
fore an award?
Colonel COCHRAN. I am sorry, sir?
PAGENO="0229"
223
Senator MONTOYA. Who does the surveying of the capabilities of a
prospective small business entrepreneur?
Colonel Cocm~N. The SBA. However, Mr. Chairman, we will assist
them if they so request. We will assist them with technical people.
Senator MONTOYA. Do they usually request you to do so?
Colonel COCHRAN. No, sir.
Senator MONTOYA. You take their word?
Colonel COCHRAN. Yes, sir; unless I happen to know something
differently.
Senator MONTOYA. Do you trust SBA that far?
Colonel COCHRAN. I trust them if I know of nothing to the contrary
to support not trusting them.
Senator MONTOYA. What is your opinion as to determining when
an 8(a) firm is competitive and needs no further help?
Colonel COCHRAN. I cannot answer that.
Senator MONTOYA. You have never reached the judgment or evalua-
tion on that point?
Colonel COCHRAN. No, sir; because this is accomplished by the SBA,
sir.
Senator MONTOYA. What is the total procurement out of your estab-
lishment, McClellan Air Force Base?
Colonel COCHRAN. This fiscal year, we anticipate about $154 mil-
lion, and that would be excluding our overseas procurement and
intragovernmental.
Senator MONTOYA. And out of that $154 million, how much of it
will be under 8(a)?
Colonel COCHRAN. At this particular time, Mr. Chairman, I can-
not answer that other than I would say this, that we will give `the
maximum amount we possibly can to 8(a), commensurate with good
business practices.
Senator MONTOYA. Let us go to last year when you had an `actual
experience. How much was the total?
Colonel COCHRAN. Last year we did $2 million and our annual was
$191 million, which would be about 1 percent, a little over 1 per-
cent, sir.
Senator MONTOYA. A little over 1 percent?
Colonel COCHRAN. 1.1, sir.
Senator MONTOYA. Well, you are doing better than the other services
percentagewise, and dollarwise, I guess.
How many contracting officers do you have?
Colonel COCHRAN. I have it broken down by buyers and contracting
officers, Mr. Chairman; 150.
Senator MONTOYA. And how many do you have assigned to the 8(a)
contracts?
Colonel COCHRAN. We do not have any of them assigned specifically
to 8(a) as such other than when a contract is awarded by 8(a), then It
guess I could give you that number. It would be approximately 11.
Senator MONTOYA. Well, who makes the determination that certain
contracts are subject to being let under section 8(a)?
Colonel COCHRAN. This is pretty much a joint effort with the SBA
and ourselves. And let me clarify this, because, No. 1, any contract
that we award to 8(a) I must make sure that the procurement package
is a good one, and it does not require a company to have engineering
capability to any great extent. Also, we are interested in selecting those
PAGENO="0230"
224
items that have some continuity, that will run for some period of time
because if you are going to hire people ofF the streets that are unskilled
it takes time to bring them up to speed. So, the selection is one of keep-
ing that type of criteria in mind.
Mrs. SOHELD. May I say something?
Senator MONTOYA. You may testify.
Mrs. SOHELD. Mr. Chairman, I think perhaps you might be refer-
ring to who reviews the requirements to see if they are appropriate for
8(a). We have now, within procurement but organizationally assigned
to the commander, seven people in our Small Business Office. Three are
full-time small business specialists who review all of the requirements
over $2,500, and these are the three people, in conjunction with the full-
time procurement center representative from the SBA, that identify
and process the 8(a) potentials within procurement.
Senator MONTOYA. You have only one SBA representative attached
to McClellan; do you not?
Mrs. SCIIELD. Yes, sir.
Senator MONTOYA. How can lie go over $191 million of procurement?
Mrs. SOHELD. $191 million does not represent a tremendous num-
ber of purchase requests. For example, I believe we coordinated pro-
curement packages during fiscal 1971 of a little over 4,000. You might
be interested to know that out of $191 million small business was in-
vited to be bid on only $57 million and they were awarded $28 million
of that.
As you are aware, SMAMA supports the F-ill aircraft. During
fiscal 1971, $71.7 million was obligated against that program. The bal-
ance that was not offered to small business was awarded for such things
as aircraft modification; repairs as necessary to the T-39, and C-121
and other aircraft we support; and ground electronic systems. Small
business only gets in on a little bit of the replenishment spares for
ground electronics.
Senator M0NT0YA. What is your capacity in the Purchase Office?
Mrs. SCHELD. I am a small business specialist.
Senator M0NT0YA. And what do you suggest should be done to es-
tablish a more meaningful liaison between the contracting officers in
McClellan and the SBA people so as to bring about a better share for
8(a) contractors?
Mrs. SCHELD. I would like to think that we at McClellan are not
unique and that there are other installations like ours. I feel that we
have a very good relationship with the SBA, that our contracting of-
ficers have confidence in and a good working relationship with the
SBA. We have found no instances where there seemed to be person-
ality conflicts or lack of confidence.
Senator MONT0YA. Well, I am not speaking of that; I am speaking
of the fact that we are not getting enough dollars out of that procure-
ment pie for 8(a) contractors and whether there is a lack of emphasis
at McClellan on this program; or whether there is a lack of under-
standing of the President's directive.
Mrs. SCHELD. I do not believe there is. I know that we have imple-
mented even such things as display boards displaying the work that
is being done by the 8(a) companies; (for example, the work being
done on the 8 (a') contract. by Aerospace Services Inc. with photo-
graphs showing their capability) and also emphasizing the success of
PAGENO="0231"
225
the 8(a) contractors we have been dealing with. We do not find too
much reluctance----
Senator MONTOYA. Well, I think McClellan deserves two gold stars
because of that, but I want to give you more gold stars.
Mrs. SCHELD. Thank you. I would not like you to go away feeling
that we think we cannot do better, that we cannot increase our awards
under 8(a), because everybody can do better. There is no question
about that.
We are trying diligently everyday to brief our requirements people
who have their fingers on the real pu]se of what is available for the
8(a) program.
Senator MONTOYA. Well, I have been conducting these hearings with
respect to small business procurement since 1965, and I know that if
procurement officers dedicate themselves as they did 4 or 5 years ago
when we started these hearings and when the administration started
asking them to do better for small business, that they can do more.
Let me put it this way. There is a lack of warmup to 8(a), and that
is why we are conducting these hearings, to see if we can give 8(a) a
little more "charisma" and draw the procurement officers closer to the
8(a) program.
That is all we are tr~in~ to.
Mrs. SCHELD. Mr. Chairman, you might be interested in the break-
down of our 8(a) contracts as to when they were awarded, and we
have told you we awarded a total of 15. We awarded one contract in
fiscal 1968, which was the beginning of the program.
Senator MONTOYA. Yes, June 28.
Mrs. SCHELD. $493,000. In fiscal 1969 we awarded one contract,
$66,000.
Senator MONTOYA. That was a year later, wasn't it?
Mrs. SCHELD. Yes. It was during that time that everybody was try-
ing to get their feet on the ground and really work out some of the
problems, and we had many problems. I am sure you are aware of
all of the problems we had out in the field, that now have been
corrected.
At that time we were required to send every 8 (a) candidate up to
Washington for approval. Since then, approval authority has been
delegated to the field and we have overcome that one. There was also
a requirement that a preaward survey be performed on the 8(a) con-
tractor. We threw up our hands and said: "The SBA says they are
all right, and they must be all right unless we know something to the
contrary, so let us not waste that time." That requirement has been
waived.
Senator MONTOYA. Well, you had three contracts in 1969 and four
in 1970.
Mrs. SCHELD. Yes, for $1.3 million in fiscal 1970, and in fiscal 1971,
I do not have the number of actions here, but the dollars were $2.1
million.
Senator MONTOYA. Well, you had this for fiscal 1971, seven con-
tracts?
Mrs. SCHELD. Yes, but my point being that we had $1.5 million in
fiscal 1970, $2.1 million in fiscal 1971, and we hope to exceed that for
fiscal 1972, although our total dollar awards to U.S. industry is
estimated lower.
PAGENO="0232"
226
Senator MONTOYA. Percentagewise?
Mrs. SCHELD. Yes, for 1972, than we actually accomplished in 1971.
So, it may be a little bit harder to increase 8(a) awards this year.
Senator M0NTOYA. Do you think that discussions and seminars be-
tween contracting officers and other Federal agencies in this region
would be of some help?
Mrs. SCHELD. I think anything you do to motivate people, get the
word out, emphasize, make them think, is good.
Senator MONTOTA. I am afraid that many of the contracting offi-
cers are oriented toward doing it. the easiest way, giving it to some-
body with proven capability.
Mrs. SCHELD. That is a natural tendency, I guess. Maybe because it
is inherent in the responsibility of the contracting officer that he bears
a heavy burden since he answers not only to the 8(a) program and the
small business setaside program but he also answers to the GAO.
Senator MONT0YA. Well, there is another thing. There are some other
ingredients that contribute to this, and that is the desire of the pro-
curement officer to show good performance.
Mrs. SCHELD. Yes.
Senator MONTOYA. And savings, and so forth?
Mrs. SCHELD. I would like to point out, however, that some of our
lucrative 8(a) contrac.ts came right, from the contracting officer. Be-
cause of his rapport with the requirements people, he learned of the
requirement and came to us. This was on the AIMS modification kit,
the very first one, the F-100, which led to the T-33, the T-39 and the
other AIMS kits you see on the chart there. That potential came
right from a contracting officer.
Senator MONTOYA. What has been your experience with respect to
8(a) contractors? Has it been good?
Mrs. SCHELD. Very good; very good; excellent. We feel that we have
contributed in making some of them so successful that they are no
longer considered eligible for 8(a).
Colonel COCHRAN. In fact, Tayko, who testified here this morning,
is 2 months ahead of schedule.
Senator MONTOYA. Wefl, that speaks well for these people.
Mrs. SCHELD. WTe are very proud of the fact that they have suc-
ceeded and we like to think that maybe it is due to a. little extra effort
on our part and the part of our engineers who went out and really
held hands with these people in some instances.
PAGENO="0233"
227
Senator MONTOYA. Are you in the position to give these people some
help if they request it?
Colonel COCHRAN. Yes, sir.
Senator MONTOYA. Now, I know that I have asked the Post Office
Department and GSA to give some help to 8(a) contractors and they
have willingly done this, and I know of an instance where an Indian
Tribe had a contract under 8(a) and they were behind schedule and
they were starting to lose money on the contract, and I got the Post
Office Department and the GSA and the business community in Al-
buquerque to come in to their aid and they are back on pay dirt now.
Now, how important is DMM in this picture?
Colonel `COCHRAN. Extremely important, sir.
Senator MONTOYA. Well, do they enter into the coordinated effort
at all?
Colonel CoCHRAN. Yes, sir; in fact-
Senator MONTOYA. Could they do a better job?
Colonel COCHRAN. I am sorry?
Senator MONTOYA. Could they do a better job?
Colonel COCHRAN. Well, anytime we are not getting what we think
we should get, we always say we should do a better job. Yes, sir.
Senator MONTOYA. Maybe we ought to get them in and see how they
can better help you to give you advance notice of your needs, and so
forth, so you can get prepared.
Mrs. SCHELD. It never hurts to motivate.
Mr. JONES. Mr. Ireland from the General Services AdministratioD
was not able to testify earlier. Mr. Ireland's statement will be in-
cluded in full in the record as will the other two prepared statements
that were submitted today.
(The prepared statement and supplemental information submitted
by Robert J. Ireland reads in full as follows:)
PAGENO="0234"
228
STATEMENT OF ROBERT 3. IRELAND.
REGIONAL DIRECTOR OF BUSINESS AFFAIRS
GENERAL SERVICES ADMINISTRATION REGION 9
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT PROCUREMENT
SENATE SELECT COMMITTEE ON SMALL BUSINESS
Mr. Chairman and members of the Subcommittee, my name is Robert 3.
Ireland, and I am the Regional Director of Business Affairs for Region 9
oi the General Services Administration, located in San Francisco. It is a
pleasure to appear before you on behalf of Mr. Robert L. Kunzig, Administrator
of General Services, and Mr. Thomas E. Hannon, Region 9 Administratoi ta
te~tify concerning the effectiveness and efficiency of the section 8~a) program
being administered by the Small Business Administration.
The General Services Administration has contributed measurably to the
dramatic increase in section 8(a) contracts over the past few years.
* Government-wide, there were only 30 such awards in fiscal year 1969 for
a total of $8. 9 million. These increased to 196 awards for $22.2 million
in fiscal year 1970, and 811 awards for $66. 1 million in fiscal year 1971.
President Nixon's goalof $58 million for fiscal year 1971, announced to a
meeting of the "Black Caucus" or~ May 18, 1971, was exceeded by more than
$8 million.
GSA's performance during the same period shows an even higher rate of
increase--from two awards totaling $346, 676 in fiscal year 1969, to 53
awards for $3. 4 million in fiscal year 1970, and 236 awards for $15. 4
million in fiscal year 1971. Our awards in fiscal year 1971 constitute
PAGENO="0235"
229
about 29% of the Government's total, and about 23% in dollar amount. For
fiscal year 1972, the President's Federal Procurement Task Force on
Minority Business Enterprise, which is chaired by Mr. Kunzig, has es-
tablished a Government-wide goal of $100 million, of which GSA's share is
to be $22 million.
We are confident that our c~ontinuing and expanding' efforts will lead to
further growth in the section 8(a) program, and smoother operation.
Five 8(a) contractors have been placed on GSA's Quality Approved Manu-
faoturer Program, the first 8(a) firms to be so recognized for ex~ellent
quality control, timely deliveries, and meeting all specification require-
ments. At our suggestion, the Small Business Administration is. including
in its monthly status repa~ t of 8(a) ôontracts a listing of all minority firms
that have been approved by SBA as eligible and capable of participating in
the 8(a) program. `
Recognizing that the lack of ready cash is a serious problem for many -
minority firms, a simple but effective "fast pay' procuedure has been
established for minority firms having GSA 8(a) contracts. Through the
cooperation of the Office of Administration and various 8(a) policy managers
in GSA, invoices on these contracts are paid ahead of the ten-day discount
invoices, Immediately after an 8(a) award, a letter is sent to the firm
providing a single telephone contact point in GSA to call concerning any pay-
rnent problems that may arise,
PAGENO="0236"
230
In calendar year 1970, 30 Federal Procurement Seminars for Minority
Businessmen were held; 41 more are being conducted this calendar year
by GSA. Attendance has averaged about 125. We have extended the activities
of our Business Service Centers located in 12 major cities to emphasize
counseling of small businessmen on Federal contracting. Upward of
150, 000 businessmen were counseled at these Centers in fiscal year 1970.
In the last half of fiscal year 1971, "circuit i~iders" from our Business
Service Centers visited 69 cities to seek out minority and other small
businessmen as suppliers, and performed 839 significant counseling actions.
We have developed a GSA booklet entitled "Partners in Progress" `which
has had a wide distribution, and we have produced a 27-minute film under
the same title for showing to private groups and -during public se±vice
television time.
Two Minority Businessmen's Invitational Conferences for minority business-
men have been sponsored by GSA and the Federal Procurement Task Force on
Minority Business Enterprises. Attendance at these conferences included
leading entrepreneurs and consi4tants and top-level Federal officials involved
in the 8(a) contracting program. Forty-five minority business leaders attended
the Western conference at the Western White House; 75 attended the East
* and Midwest conference at Warrenton, Virginia.
Arthur F. Sampson, Commissioner of GSA's Public Buildings Service and
Chairman of the National Task Force on Minority Business Concessions,
PAGENO="0237"
231
recently was given the task of locating minority-owned concessions that could
operate in Federal buildings. Nine concessions have been established already.
Task Force members have indentified more than 100 cities nationwide which
may be suitable for the, placement of business concessions. This listing has
been distributed to OMBE and SBA so that prospective minority entrepreneurs
can be located and matchec~ with appropriate concession opportunity.
In addition to the activities of our Business Service Centers already mentioned,
as a result of the efforts of Administrator Kunzig and Berkeley G. Burrell,
Vice Chairman of President Nixon's Advisory Council for Minorit~r Business,
a counseling center has been opened in Seattle, Washington, desigi&ed to help
minority businessmen get Federal contracts. The center is operated by the
United Inter -City Development Foundation of Seattle, and is staffed by
volunteers. Four Federally-funded Texas organizations have agreed to es-
tablish voluntary Federal Procurement Counseling Centers and to assist GSA
in counseling businessmen from minority and other economically disadvantaged
groups in doing business with the Government, through arrangements made
by the Business Service Center in Region 7. Another voluntary counseling
center is scheduled to be opened in Pittsburgh, Pennsylvania, in October 1971.
These are examples of the type of activity which we believe justifies our con-
fidence that the future promises even more effective and efficient operation
of the section 8(a) program.
PAGENO="0238"
232
Virtually every stock item purchased by GSA through its Federal Supply
Service is available for 8(a) con~tracting. These items are listed in the
Federal Supply Catalogs, copies of which are .avajlable to the Small Business
Administration and to small businessmen.
The small businessman selects those items that he is capable of manufacturing
and notifies SBA. SBA advises GSA, which screens out the items obtained
from mandatory sources of supply such as Federal Prisons Industri~s, Blind
Made Products, and the Government Printing Office. We also check the
inventory position of the items and advise SBA of our findings or furnish them
with the estimated quantity available for procurement under section 8(a).
8(a) contracting operation for stock items are centralized under the Socio-
Economic Policy Staff of GSA's Federal Supply Service, located at the Crystal
Mall Building 4, Washington, D. C. Eaôh GSA regional offic~e performs the
8(a) functions on service contracts available for 8(a) contracting. When
required by SBA, GSA personnel join SBA in the negotiation of 8(a) contracts.
Our Public Buildings Service identifies potential construction contract work,
generally in the $2, 000 to $100, 000 price range, which might be performed
by small business contractors. Noncomplex projects, which are not critical
as to time for completion, are recommended to the Small Business
Administration, SEA, on the other hand, identifies firms with the capability
and experience to perform the work and through such additional experience
to become prospective competitive bidders on future contracts. Contract
PAGENO="0239"
233
administration procedures under section 8(a) are the same as for any
construction type contract with the exception that )id bonds are not required.
Follow-ups are made concerning employment wage rates, progress toward
completion, and compliance with specifications.
GSA's Public Buildings Service, Federal Supply Service, Property Management
and Disposal Service, and Transportation and Communications Service also
select service contracts for award to sthall business firms under the 8(a)
program. Such contracts include services for automated data processing;
office machine, automotive and other equipment repairs; ground n~iaintenance,
pest extermination, and concessions in Feleral Buildings. Opportunities for
such contracts are identified on the basis that the contractor selected by
.SBA can, with appropriate technical and other assistance, be expected to
perform satisfactorily. And experience gained upon completion of an 8(a) con-
tract should then enable the minority contractor to bid competitively on future
contracts.
Although we derive a certain satisfaction in GSA from accomplishments to
date in the section 8(a) contracting program, our methods and procedures are
under constant evaluation, and we are always receptive to new and imaginative
apporaches and means of further improvement.
This completes my genera]. statement. I will be happy to respond to any
question which the chairman or memers.of the Subcommittee wish to ask.
PAGENO="0240"
234
UNITED STATES OF AMERICA ~ a a
GENERAL SERVICES ADMINISTRATION *
Region 9 _______
49 Fourth Street
October 4, 1971 San Francisco, California 94103
Mr. Keith A. Jones
Minority Counsel
Select Committee on Small Business
United States Senate
Room 424 - Senate Office Building
Washington, D. C. 20510
Dear Mr. Jones:
Attached is the statistical breakdown on 8(a) activity for GSA
Region 9 as requested at the hearing (Subcommittee on Government
Procurement) in San Francisco on Thursday, September 30, 1971.
Sincerely,
Regional Director of
Business Affairs
Attachment
Keep Freedom in Tour Future With U.S. Savings Bonds
PAGENO="0241"
GENERAL SERVICES ADMINISTRATION
REGION 9
8(a) PERFORMANCE - FE 1971
TOTAL PROCUREMENT
8(a) CONTRACTS
TOTAL AMOUNT
PROM SMALL BUSINESS
-~
AMOUNT PERCENT
NUMBER
AMOUNT
PERCENT OF
TOTAL
PROCUREMENT
PERCENT OF
SMALL
BUSINESS
PROCUREMENT
5115,393,000
$56,863,000
49.37.
40
$3,429,000
3.0267.
6.1417.
PAGENO="0242"
236
Mr. JONES. It is not necessary for you to read your statement or go
through it at this time, Mr. Ireland. If you have any additional in-
formation which you would like to add to it, please feel free to do so.
STATEMENT OF ROBERT F. IRELAND, REGIONAL DIRECTOR OP
BUSINESS AFFAIRS, GENERAL SERVICES ADMINISTRATION
REGION 9, SAN FRANCISCO, CALIF.; ACCOMPANIED BY MR.
SNODGRASS
Mr. IRELAND. All right; fine. I think I will lead off by saying that
since we participated in this program, GSA and region 9-region 9
encompassing the States of California, Nevada, Hawaii and, just
recently, we acquired Arizona-we have awarded 56 contracts totaling
$5,623,000. In 1970, that is, fiscal 1970, we awarded 53 contracts total-
ing $3.4 million. I am speaking for the Nation now. The region 9
share of that $3.4 million was $1.305 million. So, we did 38 percent
of the total GSA 8(a) activity here-and actually, it was all in Cali-
fornia with the exception of, I think, of one small contract in Hawaii.
Last year, fiscal year 1971, nationally, there were 236 contracts let by
GSA that totaled $15.4 million. Our share of the $15.4 was $3.492 mil-
lion, and that comes to about 22 percent. So, percentagewise we have
come down but dollarwise we have more than doubled.
Mr. JoNEs. Do you have a chart or schedule illustrating this that
you could submit for the record, Mr. Ireland?
Mr. IRELAND. I can, and I will; yes.
Mr. JONES. Just for the sake of an easier format.
Mr. IRELAND. Right; fine. In fiscal year 1971 more than 6 percent
of GSA's Region 9 small business dollar went to the 8(a) program.
$56,863,000 were awarded to small business. This represented 49.3
percent of the total which was $115 million for fiscal year 1971.
Mr. JONES. Six percent of your total small business purchases were
through the 8(a) program?
Mr. IRELAND. Yes; that is correct.
Well, I have a lot of statistics here, but maybe time would be better
served if I just skip over most of them and tell you a little bit about our
concessions' program.
Very recently, our Public Buildings Service was directed to set up
minority business concessions in Federal buildings throughout the
country. And in this building, you have a travel agency on the first
floor-you may have noticed it on the way up-and a flower shop on
the second floor. We have scheduled for opening in other regional
Federal buildings 14 additional concessions before the end of the fiscal
year.
This is kind of a. departure from 8(a), but it is something new and
innovative with us. IVe are opening one in Sacramento on Friday. A
week from tomorrow, we are opening one in Los Angeles. We are mov-
ing along pretty fast.
WTould you care to ask inc some questions at this point?
Mr. JONES. I do have one question, Mr. Ireland.
From the figures you have submitted, approximately 3 percent of
the total GSA requirements in this region have been purchased through
the 8(a) program, which is somewhat higher than the like percentage
for the military procurement agencies who have just testified.
Would you ascribe this difference to any particular reason?
PAGENO="0243"
237
For example, are your requirements of such a different nature that
the 8 (a'~ program is easier for you to participate in?
Mr. IRELAND. I would say that the requirements have something to
do with it. By the same token, the Defense Supply Agency buys similar
items. I guess they are not here today, and I do not know what their
record is, but if you wish to ask me why we have done a better job
than some, I think it is pretty simple. We have pretty forceful and
strong direction from Washington. Mr. Kunzig, our Administrator,
is determined that this program is going to work.
Mr. Snodgrass, on my right here, was hired within the past year to
help out in this program and he spends his full time as a minority
busmess counselor. He has counterparts in five of our other regions
where there are high minorit.y concentrations. Mr. Snodgrass is a very
dedicated individual. And I am not saying that because lie is sitting
here, but because he is. He works late. He has an extremely good rap-
port with the minority community. He is on the phone with the SBA
four and five times a day, and this is the kind of dedicatioii that it
takes.
But the dedication, of course, is one thing and getting the direction
from Washington is something else. I am sure there are a lot of dedi-
cated people here in this room that would do better if they were told
to do so. They all have certain rules and regulations they have to fol-
low. By the same token, if they get direction from Washington and
the wherewithal to do it, I think you are going to see a tremendous
improvement in the program.
Mr. JONES. Thank you, Mr. Ireland.
I do not wish to prolong the hearing very much longer, nor do I
want at this point to ask many more questions.
I would observe that the record which Mr. Cochran's statement re-
veals about the Sacramento area is quite commendable. It seems they
have done quite an excellent job so far. They have done better both
in percentage terms and dollar volume than the Army and Navy pro-
curement agencies here in this area., and I think there may be a number
of different reasons for this.
It could simply be that the Air Force has a headstart on this program
and that the Army and Navy would soon catch up. On the other hand,
it could be significant differences in the nature of the requirements or
perhaps in the information that is provided to the different procure-
ment agencies, information about the source of possible 8(a) contrac-
tors or in the comprehensiveness of the information in regard to the
minority contractors in the region.
There could be different. criteria in the selection of the contractors
which were available for 8(a) programs.
Also, as suggested by Mr. Ireland, there could be differences in direc-
tion from Washington in the different agencies, or perhaps staffing and
organizational procedures would dictate the difference in the amount
of 8 (a') procurement each agency would have.
As the chairman mentioned earlier, we are having hearings on the
national level going into the minority enterprise programs of the SBA
in Washington on October 20. I think it would be very helpful for the
committee if we could have statements submitted by the representa-
tives of the Army and the Navy here today describing which features
of these possible differences between their programs and the Air Force
PAGENO="0244"
238
program would cause the difference in performance over the past 3
years.
This is simply so that in judging the efforts of the SBA and the
Office of Minority Business Enterprise, we will be able to make helpful
suggestions to those organizations as to what they can do in interacting
with the procurement agencies to improve this program.
Mr. ALLSTEAD. I think it is obvious to the Army and Navy here that
the reason the Air Force has shown such an excellent picture is that we
are in the housekeeping business and they are in the materiel procure-
ment business. WTe do not do this.
Mr. JONES. So, you think basically it is a difference in requirements?
Mr. ALLSTEAD. Yes, sir; directly.
Mr. JONES. Well, perhaps you could expand on that. I do not. under-
stand.
Mr. ALLSTEAD. Well, suppose a procurement is similar, as I say, to
housekeeping. WTe buy the supplies necessary to maintain the installa-
tion, maintain the ships, perha~s in the Navy which is a case perhaps
the captain can speak for, but ours is painting the buildings as op-
posed to big electronic components in aircraft, spare parts, and things
of that nature which go into many, many more hundreds of thousands
of dollars than our small programs.
Mr. JONES. That would perhaps explain the difference in the total
dollar volume per contract, but why would that indicate a difference
in the availability of 8 (a) cont.racts generally?
Mr. ALLSTEAD. MTell, only because this type of procurement that the
Air Force has lends more toward 8(a) than ours does. We have custo-
dial type, ground maintenance, erosion control. We are getting into
construction, and, as far as buying subsistence, medical items, weapons
perhaps, or repair parts, things of that nature-and this is very, very
menial. This is about the scope of our operation, and we do not get into
the supply business from the standpoint of supplying great numbers
of spare parts to large units. We are in that at the installation level on
a supply requisition basis. The Army Materiel Command is. The large
program managers are. The Department of Defense Supply Agency
gets direcfly involved in this. The Army Materiel Command on the
west coast is located right across the bay in Oakland. It is unfortunate
that they could not have been here. I believe that this would have been
quite clear.
Mr. JoNEs. Well, I guess I still do not understand why the type of
housekeeping contracts which you have would not be appropriate to
some of the minority business contractors.
Mr. ALLSTEAD. Well, they very definitely, very definitely are, and we
are developing these, but they are not as readily "developable," shall
we say, as the large type of spare parts and requirements that the Air
Force might require of these minority contractors. We just do not
have that type of procurement.
Mr. JONES. Well, let me ask it this way:
Are there any other factors which might lead to a difference in per-
formance in this area?
Mr. ALLSTEAD. There are.
Mr. JoNns. For example?
PAGENO="0245"
239
Mr. ALLSTEAD. Subsistence for resale, troop issue. Large costs for
installations such as Fort Lewis, Fort Ord, which maintains the troop
training activities. The subsistence account is quite substantial: de-
pendents on base are dependent upon the commissary store for their
subsistence requirements, resale, and this goes into the hundreds of
thousands of dollars every month. The total I believe in San Francisco
alone at the Presidio is in the neighborhood of $1 million a month, and
project this to Fort Lewis and Fort Ord and add troop issue on top
of that, that is a substantial amount of money at fiscal year end that
runs up into millions of dollars.
Mr. JONES. Captain Aitken, do you have anything further to add
to that?
Captain AITKEN. Well, I have been listening closely to the Army's
statement on this, and I would have to agree generally. I believe that
it is the nature of the requirements in our case which would keep us
from attaining, say 1.1 percent as the Air Force has versus our
three-quarters of 1 percent as we have. It. is the nature of the re-
quirements that we buy-and I probably am repeating, but of a
sporadic, undetermined nature. For example, when we had our nuclear
cruiser Long Beach at Mare Island Shipyard for overhaul, it was
determined necessary t.o have a certain group of machinery repair
parts or machinery overhaul which was not anticipated earlier. It was
necessary for us to contract immediately-and there is only one. firm
in the United States who can do this particular job, and that was the
firm that built the ship, and this is approximately a $1 million contract.
This is one contract which was executed very quickly and must be done
now. There is no small business, no 8(a) contract possible for this type
of work. It is not one which is anticipated, which we knew about. We
did not know about it even a week before, nor did the ship. We have
other contracts of that nature where we must overhaul winches for a
supply ship at sea or it comes into port and must have a dozen winches
overhauled on a crash basis. There are only a few companies up and
down the west coast which have the very heavy machinery necessary
to do this type of a job. This is the nature of our work, and that would
be in the neighborhood of half a million dollars a job.
Mr. JONES. `What percentage of your total procurement is of that
nature?
Captain AITKEN. A great percent of them a.re. Those two alone, for
example, account for about $1.5 million of our $28 million total yearly
procurement. There is one chart here which I might show you just
to illustrate the up-and-down i~ature of the small business versus large
business awards.
If you will refer to the top chart, Mr. Jones, the blue line or the
red line, either one, represents the monthly variance in our small
business versus our harge business awards. As the line goes up our per-
centage of dollars for small busines increased for that month, and there
are many dips in that line which indicate a single contract which was
awarded during that month.
Mr. GILBERTSON. One contract.
Captain AITKEN. Which we could do nothing about.
PAGENO="0246"
240
Mr. GILBERTSON. But this, you see, is the accumulative averages
here that balance this thing out.
Now, this is awards to small business, and this would include minor-
ity businesses as well, and the 8(a) contracts that we have awarded
also are in there. But it will average out, but we really do not have
any handle on this thing. We would not have made our goal if it
had not been for $1.5 million in contracts that went to small business
in the month of June.
Mr. JONES. Do you have these charts in your statement?
Mr. G-ILBERTSON. They are part of the package, but that chart. is not.
Mr. JONES. If you have this chart in a convenient form, would you
submit it for the record, please ?
Captain AITKEN. Yes, sir; we will do that.
(The subsequent information was received and follows:)
PAGENO="0247"
241
NAVAL REGIONAL PROCUREMENT OFFICE
NAVAL SUPPLY CENTER
OAKLAND, CALIFORNIA 94625 IN REPLY REFERTO:
AS:ew
1 Oct 1971
Honorable Joseph M. Montoya
United States Senate
Chairman, Subcommittee on Government Procurement
Select Committee on Small Business
424 Old Senate Office Bldg.
Washington, D. C. 20510
Dear Senator Montoya:
As requested, the enclosures are forwarded for entry into the record
of the proceedings held on 30 September 1971 at San Francisco
concerning the Small Business 8(a) Program.
Sincerely yours,
aptain, Supply Corps, USN
Officer in Charge
End:
(1) Graph of Monthly Small Business
(2) Graph of Year-to-Date Small Business
PAGENO="0248"
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PAGENO="0249"
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PAGENO="0250"
244
Mr. ALLSTEAD. Mr. Jones, one other thing I failed to point out: We
get statistical data fed back from the Department of the Army pre-
pared by the data processing center in Washington, and, as I said,
housekeeping is our job, and under 10 U.S.C. 230483 of the 17 sections
that permit procurement people to negotiate, this is the small purchase
area. Last fiscal year there were some 143,185 actions totaling $27,-
560,000, actions less than $2,500.
Now, SBA is not too much interested in these very small actions.
They look at stuff in the area of $10,000 or more. Here is one of the
clues-
Mr. Jo~ns. Earlier today, we had testimony from a gentleman from
an organization called PACT who suggested that the 8(a) program
or the minority business procurement program might be improved by
giving more responsibility to the procurement agencies themselves for
fulfilling certain fixed goals, expressed in a percentage amount or a
fixed dollar manner. Would any of you gentlemen care to comment
on that suggestion?
Mr. SNo~n~&ss. I would like to, if I may. I think it is a very good
idea for one reason and one reason alone, that it would require the
Washington level official at the head of an agency to designate or to
give the authority to the local purchasing activity to carry out the
program.
Now, the question of what the goal would be is another question.
For instance, our total goal-and these figures have been kicked around
during the past 2 days, and I do not like to play the numbers thing,
but you almost have to when you are talking about goals-is a $100
million commitment. Of that commitment-and the question arose
earlier as to who set goals and what agency determines what the goal
would be-well, Robert Kunzig set the GSA goal at $22 million or 22
percent of the total procurement for 8(a). Our region set a goal for
itself at $5 million. At present, we have awarded over a half a million
dollars worth of 8(a) contracts. We have $1.2 million scheduled for
negotiation and another $3.6 million in the planning stage.
Mr. JONES. You are speaking of fiscal 1972?
Mr. SNODGRASS. Fiscal 1972. So, at present, our region has $5 million
of the total agency share of $22 million, and we have, at present, identi-
fied in excess of that $5 million goal.
Mr. JONES. You feel this is helpful in spurring you on?
Mr. SNODGRASS. Of course, and I think if every agency, let us say-
let us say we all have a goal. Somewhere along the line a goal has to be
committed, either to the task force by someone in Washington, SBA
or other Federal agencies at the Washington level. The question is
designating, accepting, or offering goals at the `procurement level
from the base installations, or regions, that have the `ability to identify
the requirements; and ascertaining the capability or the businessman
in the community to perform that work. And finally, developing the
capability of SBA to tie the whole thing together in the form of a
contract.
Now, I think that these goals could be boosted and extended if the
program gets the thrust that it needs.
Well, we know what it takes. That is why you are here. So, I think
we will-you know what the hearing recommendations' will be. It is
quite obvious that we need both the commitment at the `Washington
PAGENO="0251"
245
level to get this thing done and get it down to the region and then the
commi'tment of the original contracting officer or the procurement of-
ficer; it is very simple.
Mr. JONES. One of the crucial points in the 8(a) process is the deter-
mination by the procurement agency of the contracts which will be
forwarded to the SBA for consideration for the 8(a) program. Would
it be helpful for representatives from OMBE and SBA to participate
with the procurement agencies at a somewhat earlier time, during the
time in which the requirements are, in fact, being reviewed, in case
there are certain minority business firms which would be capable of
satisfying a requirement that might be overlooked otherwise?
Mr. SNODGRASS. If I could `address myself to that? Prior to the Oak-
land Federal Procurement Seminar on September 3, there was a meet-
ing held between various Government agencies and minority repre-
sentatives of the bay area economic development coalition compris-
ing approximately 22 different organizations, both minority and non-
minority that are involved in the total bay area economic picture
This was with regard to minority enterprise. For instance, PACT was
there, and Jerry Hutton of OMBE was there. Also the Department of
Justice, Community Relations Service; Department of Commerce,
Washington; HEW from Washington; and Mr. Ireland, and Mr.
Mathias from our Social Economic Policy Staff, GSA, Washington.
Now, the purpose of having this meeting-those were the Federal
people `and the local people were PACT, the San Francisco Local De-
velopment Corporation, a group from Oakland called the Men of To-
morrow, etc.
Mr. JONES. No military procui'emeiit agencies represented?
Mr. SNODGRASS. No-which may speak for itself.
Commander BEEMAN. I did not know it was there.
Mr. SNODGRASS. I will address myself-
Mr. JONES. Were they invited?
Mr. SNODGRASS. Right, they were not invited. But they have been in-
vited in the program.
The purpose of the meeting was to forestall the possible picketir~g
or disruption of the seminar; hence, the Washington representation.
Now, the concern of the coalition was that we were having another
procurement seminar to talk about the 8(a) program and the seminar
would be over and the minority business community would be faced
with the same situation that we basically have now, which has improved
but it is still not going to satisfy the requirements of the program. So,
it was agreed by Don Mathias from the Socio-Economic Policy staff,
representing Administrator Kunzig, the chairman of the task force,
that a proposal would be developed by the coalition and the Federal
agencies who have had the most involvement in the 8 (`a) program, to
try to resolve some issues. One was to establish a goal, either dollars
or percentagewise, based on the total small business procurement.
There were a number of other questions that came up, but primarily
everyone agreed that a proposal would be developed and submitted
through channels to Washington and that the proposal would be that
GSA, in the Bay area, would become the pilot agency to set up the
mechanism to identify a minimum of 5 percent of the Federal small
business dollar procurement to be referred to SAB, a minimum of 5
percent.
PAGENO="0252"
246
Mr. JoNEs. You mean just for the GSA procurement?
Mr. SNODGRAS5. As a pilot to see if it is, in effect, possible, which, of
course, everybody knows it is. So that was the first proposal, the 5
percent identification.
The second was that a monitoring system be established to determine
whether or not agencies had fulfilled that commitment.
Now, no demands were made. It is sketchy at this point as to how
the proposals would be implemented *and it was recommended that
the OMBE affiliate who was attempting to assist. SBA in identifica-
tion of 8(a) requirements would be the monitoring factor.
We have got a number of other proposals, but, basically, the two
problems of identifying and attempting to insure that these procure-
ments would be offered would, in fact, be offered after identification,
were the proposals. Those are the two basic problems.
Then, if that mechanism works, you could see what effect it would
have in raising everybody's participation where possible, to a minimum
5 percent.
Now, of course, other agencies, some agencies. can do better because
of the procurement activity that they have. This report will probably
leave here in draft form to Administrator Kunzig's office the middle of
next week. So, possibly, it will then be made an agenda item of the
Federal Procurement Task Force for the next meeting.
Mr. JONES. Could this information be furnished to the committee
whenever appropriate?
Mr. SNODGRASS. Yes, it could.
Mr. JONES. Thank you.
(The subsequent information was received and follows:)
SAN FRANcIsco LOCAL DEVELOPMENT Conp.,
November 24, 1971.
SENATE SELECT COMMITTEE ON SMALL BusINEss,
Old senate Office Bvilding, Washington, D.C.
(Attn: Mr. Joseph L. Ward).
DEAR MR. WARD: Attached is the proposal referred to by Mike Snodgrass during
the hearings conducted by the Committee in San Francisco, in September, 1971.
If additional information is required, don't hesitate to call me.
Sincerely,
GEORGE KELSEY, President.
PROPOSALS FROM BAY AREA EcoNoMIc DEVELOPMENT COALITION
On Wednesday, September 1, 1971, a meeting of San Francisco Bay Area
minority organizations/businessmen (representing the Bay Area Economic De-
velopment Coalition) was held with high-level federal officials from Washington,
D.C., and local regional federal officials.
The purpose of the meeting was to arrive at specific ways and means of imple-
menting the various federal programs (specifically the SBA. 8(a) program)
designed to assist disadvantaged and minority businessmen.
The immediate stimulus for the meeting w-as the announcement of a Federal
Procurement Seminar in Oakland on Friday, September 3rd. More specifically,
the local minority business infrastructure wanted to communicate to the sponsors
of this seminar that what was needed was genuine and equitable access to pro-
curement opportunities-not just more brochures, pamphlets, forms and talk.
Stated another way, it was (and still is) the hope that these federal officials
would not merely hold the seminar and then return to their respective agencies
and not follow-up with an affirmative action plan.
The timeliness of this meeting is self-evident when it is pointed out that the
federal government spends ten billion dollars annually in the State of California
PAGENO="0253"
247
in the procurement of goods and services from the private sector and only one
tenth (1/10) of one percent of this business is done with minority entrepreneurs.
So-our intentions, as representatives from various segments of the minority
business community, were not to just complain but to offer positive suggestions so
that all of us might better carry out the various programs that were discussed
during the Procurement Seminar held in Oakland, and the many more that were
held throughout the country.
The original transcript of this meeting was about fifty pages long. In this short
letter I shall highlight some of the major issues raised. They include:
1. The failure of many agencies (especially DOD) here at the local level
to get involved in the 8(a) program.
2. The great difficulty of getting business plans approved by SBA in order
to qualify for participating in the 8(a) process.
3. Use of the Facility Lease Clause of Section 700 of ASPER by minority
entrepreneurs.
4. The method of assignment of 8(a) contracts to entrepreneurs by SBA.
5. A major agenda item (not covered in the meeting because time ran
out, but included in this synopsis because of its importance) is the need of
more affirmative leadership and more substantial performance by the local
Chairman of the San Francisco Minority Business Opportunity Committee.
At the local level, many agencies have little or only token input into the 8(a)
program. For example, the Corps of Engineers spends many millions in the West-
ern Regions and the Pacific. Yet, they can find no 8(a) requirements "suitable"
for minority entrepreneurs. This same response can he said for many DOD
agencies.
Our recommendations are that agencies and departments, at the regional level,
designate their Deputy Administrator (or other similar high-level officials) as
the individual who is to be held responsible for the implemeiftation of this pro-
gram within his own agency. His functions wou1d be to work closely with his
own procurement staff, his own regional director or CO, minority entrepreneurs,
the Minority Business Opportunity Committee of the FEB and all others involved
in minority economic development. The goal would be a minimum of 5% of the
total small business procurement requirement offered to SBA for 8(a)
consideration.
It is specifically recommended that the above efforts be coordinated, moni-
tored and given a sense of direction by the local OMBE Representative, Mr.
Jerome 0. Hutton. Further, it is recommended that he make detaPed periodic
reports on the progress of the above program to the Chairman of the San Fran-
cisco FEB, the Secretary of Commerce, Director of OMBE, Washington and local
MBOC members.
It is our understanding that the implementation plans for the above are now
in their final stages.
It was strong'y felt by minority participants that SBA and other lending
institutions should establish by industry some minimum criteria for business
plans. It is felt that many are being rejected for subjective and capricious reasons.
This is especially true with regard to three year projections.
It is specifically suggested that the Inter-Agency Task Force at the Washington
level officially authorize and encourage the use of the Facility Lease Clause of
Section 700 of the ASPER for minority contractors.
The assignment of contracts to entrepreneurs by SBA was a lively topic because
SBA has many more approved business plans than it has 8(a) contracts. The
particular issue was that SBA should devise some impartial way of assigning
these contracts. (This problem could be minimized, however, if we got more
meaningful particiation by local agencies).
The MBOC of the San Francisco FEB has an initial function in the imple-
mentation of the Administration program in minority enterprise. While the
leadership of the FEB has been affirmative, supportive and goal-oriented, much
improvement is needed in the performance of the Chairman of the local San
Francisco MBOC. We have tried to deal with this problem over an extended
period of time for the past eighteen months by personal conferences with the
Chairman and with specific recommendation. However, it seems as if minority
business development is not one of his priorities. We have raised this issue else-
where and perhaps steps are now being taken to resolve this problem.
PAGENO="0254"
248
An interesting observation that I feel compelled to comment on is the senti-
ment expressed by one of the `~Vashington level officials who felt that he had no
real authority that he could exert on their contracting personnel. Rather, he felt
that he could only "romance" their program and buying people into letting
minority entrepreneurs have a fair crack at some of the procurement oppor-
tunities. The point that I am trying to establish is that top management, both
at the Washington level and the regional level, must become prime movers if
the procurement program is to be a success. It cannot be left to the complete
discretion of lower level technicians-namely the buying people.
In conclusion, let me say that we met in good faith and with good will with the
aforementioned federal officials. We shall continue to work with them in an effort
to bring forth concrete results in terms of contracts aw-arded. The contractural
opportunities are there and we have the productive capacity to perform. The
program will be very effective here if local Regional Directors and Command-
ing Officers decide to become involved in a meaningful way, that is, deliver con-
tract opportunities for minority businessmen.
As a member of the San Francisco i\IBOC, the Bay Area Economic Develop-
ment Coalition plans to issue periodic progress reports on the status of minority
economic development in our area.
Senator MONTOYA. I certainly want to thank you, gentlemen, for
coming up and giving us your time and elucidating us on your new de-
termination and your new mission, which is as infant as 8(a). But
we are going to have some hearings in Washington to try to get those
in the national picture into the testimony so that we can find out wheth-
er there is going to be a national coordinated effort in 8(a) contract-
ing.
And I want to say to all of the people here that I certainly enjoyed
these hearings, and we come here in the spirit of cooperation, trying
to help other people, not to badger witnesses or hurt anybody's feel-
ings. And if I have done that, I apologize, but I did not intend to
do so. The hearing is now adjourned.
(Whereupon, at 3:45 p.m., the hearing was adjourned.)
PAGENO="0255"
249
APPENDIXES
APPENDIX I
ExHIBITs PROVIDED BY THE OFFICE OF MINORITY BUSINESS ENTERPRISE,
U.S. DEPARTMENT OF COMMERCE
PAGENO="0256"
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PAGENO="0257"
3 - 3 100 -
5 5 100-
3 3 100-
3 3 100
6 4 66 1 17 1 17
3 3 100
8 7 87 1 13
8 5 63 37
5 1 20 1 20 1 20 2 40
12 3 25 6 50 3 25
19 17 89 2 11
3 3 100
14 11 79 3 21
6 5 83 1 17
3 3 100
6 6 100
4 3 75 1 25
3 3 100
5 5 100
4 4 100
7 7 100
7 0 0 7 100
6 3 50 3 50
10 10 100
3 3 100
14 14 100
5 5 100
6 5 83 1 17
5 5 100
4 4 100
10 9 90 1 10
12 9 75 3 25
5 4 80 1 20
6 4 66 2 34
4 4 100
227 149 66 52 23 3 1.0 23 10
-I
C
C
©
`F
-I
Prnfes-
Affiliate sienals Black
Spanish
speakingf
Percent nr brnwn Percent Indian Percent Other Percent
Albuqeerqse, NEOA
Atlanta, NBL
Baltimnre, Mnrgan State
Bnstnn, SBOC
Chicagn, CEOC
Chicagn, NEOA
Cincinnati, OYM
Cleveland, Greater Cleveland Grnwth
Oallas, OAME
Oenver, CEOA
Oetrnit, ICBIF
El Pasn, NEOA
Indianapnils, urban League
Kansas City, BEU
Kansas City, NEOA
Lns Angeles, IMPAC
Lns Angeles, TELACU
LnsAngeles.NEOA
Memphis,NBL
Miami.NEOA
Newark,MEOIC
NewYnrk, P.R. Fnrun
New Ynrk, Capt. Fnrmatinn
New Ynrk, BLEOCO
NewYnrk,NEOA
Philadelphia, EOTC
Phnenis.NEOA
Pittsburgh. BJO
Richmnnd, NBL
San Antnnin, NEOA
San Franciscn. PACT
Seattle, United Inner City Oevelnpwent Fnundatinn
Washingtnn. O.C., MEOCO
Washingtnn, O.C., S000C
New Haven.GNHB-PMA
Tstal affiliate prntessinnal staffing
0-'
PAGENO="0258"
OFFICIAL LIST-NATIONAL ADVISORY COUNCIL ON MINORITY BUSINESS ENTERPRISE
Name Title and business Address Phone
Allison, Julius L Executive director, National Legal Aid & Defenders Associa~ion American Bar Center, 1155 East 60th St., Chicago, Ill 312-HY3--0533
Arnaz, Desi President, Desi Arnxz Productions 1040 North Las Palmas Ave., Los Angeles, Calif 714-755-1523
Barr, John A Dean, Graduate School of Management, Northwestern University 339 East Chicago Ave., Chicago, Ill 312-649-8388
Beindo, John National Indian Leadership Training 227 1 ruman NE., Albuquerque, N. Mex 505-265-7957
Bevis, Herman W (Retired senior partner) Price, Waterhouse & Co 60 Broad St., New York, N.Y 212-422-6000
Beyer, Robert Managing partner, Touche Ross & Co 1345 Avenue of the Americas, New York, N.Y 212-425-5300
Bolden, Darwin W Executive director, Interracial Council for Business Opportunity(ICBO)... 470 Park Ave. S., Suite 300, New York, N.Y 212-889-0880
Brinkley, Rawn Executive director, Notional Assaciation of Accountants 505 Park Ave., New Yark, N.Y 212-PL9-3444
Brooks, Robert A President, Harbridge House 12 Arlington St., Boston, Mass 617-267-6410
Burcham, Lestur A Chairmaii of the board, F. W. Woolworth Co 233 Broadway, New York, N.Y 212-277-1000
Burrell, Berkeley G President, National Business League 4324 Georgia Ave. NW., Washington, D.C 202-7266200
Carrion, Rafael, Jr President, Bunco Popular de Puerto Rico GPO Box 2708, San Juan, P.R 839-765-98)0
Cantu, Vidal Executive vice president, City Service Furniture Corp 1502 Hidalgo St., Laredo, Tex 512-722-6331
Cardenas, John Secretary-treasurer, Loue's Specialties Work, Inc 330 Dakota, San Antonio, Tex 512-533-5166
Casiano, Manuel National executive director, Migration division, Department of Labor, 322 West 45th SL, New York, N.Y 212-245-0700
Commonwealth of Puerto Rico.
Clay, John H Businessmen's Development Corp 325 Chestnut St., Suite 910, Philadelphia, Pa 215-MA7-1995
Dehlendorf, Robert 0., II President, Arcata National Corp 2750 Sand Hill Rd., Menlo Park,Calif 415-854-5222
Dellums, C. L International president, Brotherhood of Sleeping Car Porters 1717 Seventh St., Oakland, Calif 415-893-0894
Fernandez, Ben President and general manager. Research, Inc 19913 Blackhawk St., Chatswortti, Calif 213-360-2268 ~
Fluor, J. Robert Chairman of the beard and chief executive officer, Floor Corp 2500 South Atlantic Blvd., Los Angeles, Calif 213 -AN2-6111
Friedman, Bayard Senior vice president, Fort Worth National Bank Post Office Box 2050, Fort Worth, lox 817-334-8111
Goodlne, Joseph W President, North Carolina Mutual Life Insurance Co Mutual Plaza, Durham, N.C 919-682-92'il
Gomez, Jose CarIes President, Publisher of El Informador 1510 West 18th St., Chicago, Ill 312-421-7701
Gonzalez, Richard Manager, Industrial Relations Department, Assembly Division, Ford 8900 East Washington Blvd., Pico Rivera, Calif 213-692-6911
Motor Co.
Grady, Paul D Chairman of the board, National Life Insurance Co Columbus,Ohio,addresstobe used: Post Office Box 35, Kenly,N.C 614-228-4711
Guice, Garland Director, Chicago Economic Development Corp 162 North State St., Suite 600, Chicago, III 312, 368-0011
Graham, Donald M Chairmanoftheboard,Continenfal IllinoisNational Bank &TrustCo... 231 South LaSalle St., Chicago, Ill 312-828-2335
Gullander, W. P President, National Association of Manufacturers 277 Park Ave., New York, N. Y 212-826-2100
Haas, Walter A., Jr President, Levi Strauss & Co 98 Battery St., San Francisco, Calif 415-421-6200
Hertz, David B. (Dr.) Director, MeKinsey & Co., Inc 245 Park Ave., New York, N.Y 212-MU7-360
Hurley, Francis T., bishop (the Most Auxiliary bishop of Juneau Post Office Box 1307, Juneau, Alaska 206-583-0150
Reverend). 907-586-1513
Johnson, John H President and publisher, Johnson Publications, Inc 1820 South Michigan Ave., Chicago, III 312-CA5-1000
Johnson, Samuel C Chairman of the board and president, S. C. Johnson & Son, Inc 1525 Howe St., Racine Wix 414-632-1611
Johnston, Paul A President, Glen Alden Corp 1740 Broadway, New York, N.Y 212-JU6-1900
Jones, Jenkin Lloyd Editor and publisher, Tulsa Tribune Post Office Box 1770, Tulsa, OkIa - 917-582-1101
Keim, Robert P President, the Advertising Council 825 Third Ave., New York, N.Y 212-758-0400
Keys, Brady President, All Pro-Chicken 3021 Banksville Rd., Pittsburgh, Pa 412-341-7470
Kiewit, Peter Chairman, Peter Kiewit Sons', Inc 1000 Kiewit Plaza, Omaha, Nebr 402-342-2052
Kirven, Joe W President, ABCO Building Maintenance Co 2828 Forest Ave., Dallas, Ten 214-428-8388
Lafontant, Jewel Stratford (Mrs.) Stratford Lafontant, Gibson, Fisher & Cousins 69 West Washington St., Chicago, Ill 312-AN3-4882
Lawler, John Administrative vice president, American Institute of Certified Public 666 Fifth Ave., New York, N.Y 212-LT1-8440
Accountants.
PAGENO="0259"
Marriott,J. Willard, Jr President, Marriott Corp 5161 River Rd., Washington, D.C. 2020L62700
MacNaughton, Donald S President, Prudential Insurance Co. of America Prudential Plaza, Newark, N.J 201-336-4401
Marshall, Rev. Arthur, Jr Metropolitan A.M.E. Zion Church 3008 Lucas P1., St. Louis, Mo 314-JE3-0316
McClellan, H. C. (Chad) Chairman of the board, The Management Council for Merit Employ- 404 South Bixel St., Los Angeles, Calif 213-481-7246
ment, training and research.
McKersie, Robert Bruce Professor of industrial relations, University of Chicago University of Chicago, Graduate School of Business, 5836 South Green- 312-MI3-0800
wood Ave., Chicago, Ill.
Mercure, Alex State program director or executive director, home education liveli- 933 San Pedro Dr., SE., Albuquerque, N. Mex 505-265-7951
hood program, HELP Inc.
Meyer, Albert C Senior vice president, Bank of America 650 South Spring St., Los Angeles, Calif 213-683-3875
Miller, G. William President, Textron, Inc 10 Dorrance St., Providence, R.I 401-521-3500
Morrison, Clinton Chairman of the trust committee and director, First National Bank of 120 S. Sixth St., Minneapolis, Minn 612-334-4141
Minneapolis.
Nielsen, A. C., Jr President, A. C. Nielsen Co 140 Broadway, New York, N.Y 212-RE2-2100
Palmer, H. Bruce President, National Industrial Conference Board 845 Third Ave., New York, N.Y 212-PL9-0900
Pappas, Thomas A President, C. Pappas Co., Inc 450 Summer St., Boston, Mass 617-542-4210
Parker, H. Lawrence Partner, Morgan Stanley & Co 140 Broadway, New York, N.Y 212-RE2-2100
Phillips, Lawrence 5 President, Phillips-Van Heusen Corp 417 5th Ave., New York, N.Y 212-689-3700
Pierce, Samuel R., Jr Partner, Battle, Fowler, Stokes & Kheel 280 Park Ave., New York, N.Y 212-YU6-8330
Roche, James M Chairman of the board, General Motors Corp 3044 Grand Blvd. West, Detroit, Mich 313-556-3521
Rockefeller, Rodman President, IBEC 30 Rockefeller Plaza, New York, N.Y 212-C17-3000
Rodman, Charles G President, Grand Union Co 100 Broadway, East Paterson, N.J 201-796-4800
Rodriguez de Jesus, Juan Administrator, Economic Development Administration P.O. Box 2350, Son Juan, P.R 106-809-765-1303
765-2900 ~
Rust, Edward B President, State Farm Insurance Co 112 East Washington St., Bloomington, Ill 309-967-6123 c.r~
Salgo, Nicolas M Chairman of the board, Bangor Punta Corp 405 Park Ave., New York, N.Y 212-758-6900 c~
Sandoval, George President, Sandoval Distributing Co 651 West Rillito, P.O. Box 50465, Tuscon, Ariz 602-622-2831
Scontsas, John Vice-President, Colonial Trust Co 295 Main St., Nashua, N.H 603-889-1141
Silverman, Herbert R Chairman of the board, James Talcott, Inc 1290 Avenue of the Americas, New York, N.Y 212-956-3000
Simon, John Gerald President, Taconic Foundation 745 Fifth Ave., New York, N.Y 212-758-8763
Slaiman, Donald S Director, Civil Rights Department, AFL-CIO 81516th St. NW., Washington, D.C 202-293-5270
Sneed, Donald E., Jr President and chairman of the board, Unity Bank & Trust Co 416 Warren St., Roxbury, Mass 617-445-0300
Stone, W. Clement President, Combined Insurance Co. of America 5050 Broadway, Chicago, Ill 312-275-8000
Stuart, Robert D., Jr - President, Quaker Oats Co 345 Merchandise Mart, Chicago, Ill 312-222-7111
Sviridoff, Mitchell Vice president. Division of National Affairs,the Ford Foundation 320 East43d St., New York, N.Y 212-573-5000
Sullivan, Leon H. (Rev. Dr.) Pastor, Zion Baptist Church Northwest corner Broad and Venango St., Philadelphia, Pa 215-BA3-5460
Terry, Jesse President, Terry Manufacturing Co Post Office Box 648, Roanoke, Ala 205-863-2171
Thompson, William S Associate judge, District of Columbia Court of General Sesssions 451 Indiana Ave. NW., Washington, D.C.
Thorpe, Otis President, Thorpe & Associates, Inc 866 Hunter St. SW., Atlanta, Ga 404-524-5816
Tullis, Richard President, Harris Intertype Co 55 Public Sq., Cleveland, Ohio 212-861-7900
Vasquez, Hector Executive director, Puerto Rican Forum, Inc 156 5th Ave., New York, N.Y 212-691-4150
Veiga, Frank Veiga-Robinson Mortuary 3601 East lstSt., Los Angeles, Calif 213-728-0534
Weingarten, Robert Senior vice president, Scheinman-Hochxtin & Trotta, Inc 111 Broadway, New York, N.Y 212-964-6630
White, Wilford, L., Dr Director, Small Business Guidance and Development Center, Howard Post Office Box 553, Washington, D.C 202-387-1369
U niversity. .
Wilson, Kendrick R.,Jr Chairman of the board, AVCO Corp 1275 King St., Greenwich, Cone 212-552-1800
Wood, Arthur M President, Sears, Roebuck & Co 925 South Homan Ave., Chicago, Ill 312-265-2500
Wyly, Sam Chairman of the board, University Computing Co 1300 Frito-Lay Tower, Dallas, Tex 214-350-1211
PAGENO="0260"
PAGENO="0261"
255
M ~NORDTY-OWNED
BUS~NESSES: 1969
MB-i
Issued August
1971
U.S. DEPARTMENT
CF COMMERCE
Bureau of
the Census
ir
PAGENO="0262"
4t~'1
4 4
I
Ce
"4t~s o~ ~
U.S. DEPARTMENT OF COMMERCE
Maurice H. Stans,
Secretary
James T. Lynn,
Under Secretary
Harold C. Passer,
Assistant Secretary for Economic Affairs
BUREAU OF THE CENSUS
George Hay Brown, Director
Joseph R. Wright, Jr., Deputy Director
Walter F. Ryan, Associate Director
Milton Eisen, Deputy Associate Director
GENERAL ECONOMIC STATISTICS DIVISION
Shirley Kallek, Chief
Library of Congress Card No. 78-176278
SUGGESTED CITATION
U.S. Bureau of the Census, Minority-Owned Businesses:
1969, MB-i, U.S. Government Printing Office,
Washington, D.C. 1971
256
ACKNOWLEDGMENTS
The 1969 report on minority-owned business enterprises
was preparea unoer the direction of Shirley Kallek, Chief Os
the General Economics Statistics Division. in this Division,
Lawrence Lyons, Acting Chief of the Special Proiects Branch,
supervised all phases of publication planning, development of
~iecifications, data editing, and final table review and was
assisted by Mary Marton and Johnny Monaco. General staff
guidance was provided by Roger Bugenhagen, Assistant Chief
of the Division.
The project represents the fulfillment of program objec-
tives of both the Census Bureau and the Office of Minority
Business. William Rock, Chief, Minority Enterprise Infor-
mation Center of the latter office was the major liaison and
contributed materially to the solution of the many con-
ceptual problems. The multipurpose needs for factual infor-
mation on minority-owned businesses were recognized by a
number of agencies which underwrote the cost of the proiect
These included the Small Business Administration, Depart-
ment of Housing and Urban Development, Office of Eco-
nomic Opportunity, the Department of Labor, aed the
Economic Development Administration. Charles H.
Alexander, Frederick Mohrman, and Mason Nottingham of
the Department of Commerce's Office of Budget and
Program Analysis are due special acknowledgment for their
helpful assistance in this phase of the endeavor.
Within the Census Bureau, the successful completion of this
project was due to the cooperative staff work of many
individuals. The Systems Division, under the direction of Sol
Dolleck, prepared the necessary systems and procedures.
Special mention should be made of the fine efforts of
Andrew Grieco, assisted by Robert Willner, who developed
and supervised the electronic computer programs and
Maxwell Jeans, assisted by Sandra Katis, who designed the
quality control plans and procedures. Overall systems guid-
ance was supplied by Samuel Schweid and Eugene Wendt.
Processing of the reports was performed in the Jeffersonville
Census Operations Division, Jeseph P. Arbena, Chief, and
Reese Hellmer, Assistant Division Chief, assisted by Bernard
Kinney, Chief, General Operation Branch. Clerical processing
was supervised by Harold Garwood, Chief, Special Projects,
assisted by Hazel McCartin.
Preparation of the manuscript for typing and editorial
assistance was provided by Frances Bresnahan of the Admin-
istrative and Publication Services Division.
This project depended upon the helpful cooperation of
the staffs of the Internal Revenue Service and the Social
Security Administration. Thanks are due to William J. Smith,
Jr., and AlexSintetos of the Internal RevenueService and to
Herman Pasteaa of the Census Bureau who coordinated these
activities. Special acknowledgment is also due to the many
businesses whose cooperation has contributed to the publica-
tion of these data.
For sale by the Superintendent of Documents, US. Govern-
ment Printing Office, Washington D.C., 20402, or any
Department of Commerce field office. Price $1.50.
Stack Number 03o1-229e
PAGENO="0263"
257
M~NORffY~OWNED
BUSiNESSES: 1969
MB-i
Contents
Page
Introduction 1
Summary of Survey Results 2
Definition of Terms 6
STATISTICAL FINDINGS
TABLES
1 Selected Statistics for Minority-Owned Firms by Industry: 1969 7
2 Selected Statistics for Minority-Owned Firms by Geographic Areas: 1969. 68
3 Selected Statistics for Minority-Owned Firms, by Industry Division and
Geographic Division: 1969 75
4 Selected Statistics for States With 500 or More Minority-Owned Firms by
Industry Division: 1969 83
5 Selected Statistics for Minority-Owned Firms by Selected Standard
Metropolitan Statistical Areas: 1969 108
6 Selected Statistics for Standard Metropolitan Statistical Areas With 500
or More Minority-Owned Firms: 1969 114
7 Selected Statistics for Minority-Owned Firms With Paid Employees, by
Industry Division and Employment Size of Firm: 1969 142
8 Selected Statistics for Minority-Owned Firms, by Industry Division and
Receipts Size of Firm: 1969 152
9 Selected Statistics for Minority-Owned Firms, by Industry Division and
Legal Form of Organization: 1969 167
APPENDIX.
A Survey Methodology 175
B Report Form 177
PAGENO="0264"
INTRODUCTION
In 1969 approximately 322,000 business enterprises
having total receipts of $10.6 billion were
minority-owned. One-half of these were black-
ownisd-163,000 with total receipts of $4.5 billion-
and 100,000 with receipts of $3.3 billion were
Spanish-speaking minority-owned firms. The Spanish-
speaking groups included firms whose owners were of
Mexican-American, Puerto Rican, Cuban, and Latin
American ancestry. The remaining 59,000 firms, with
receipts of $2.8 billion, were owned by other minor-
ities including American Indians and Orientals.
258
Of the total minority-owned firms operating in
1969, 90,000 were employer firms (i.e., having one
paid employee or more). These employer firms account-
ed for 82 percent of total receipts of all black-owned
firms, 84 percent of the total receipts of Spanish-
speaking minority-owned firms and 88 percent of the
receipts of firms owned by other minority groups.
Consequently, annual business receipts of minority.
owned enterprises averaged $99,000 for employer
firms in 1969 compared to an average of $7,000 for
firms without paid employees. Table A shows compar-
able averages for each of the minority groups.
TABLE A. Comparison of Average Receipts for Minority.Owned Firms With and Without Paid Employees
Item
Total
Negro
m~~?t~y
All minority-owned f irms:
.
Number 1,000..
322
163
100
59
Receipts million dollars..
10,639
4,474
3,360
2,805
Firms with paid employees:
Number 1,000..
90
38
33
19
Receipts million dollars..
Receipts per firm $1,000..
8,934
99
3,653
95
2,814
86
2,467
131
Firms with no paid employees:
Number 1,000..
232
125
67
40
Receipts million dollars..
Receipts per firm $1,000..
1,705
7
821
7
546
8
338
8
The volume of business conducted by minority-
owned business enterprises in 1969 represented a small
fraction of total business activity. Receipts for this seg-
ment of the business community, totaling $10.6
billion, accounted for 0.7 percent of the 1967 receipts
of $1,498 billion reported by all firms.' The 322,000
minority-owned businesses represented 4 percent of
the total number of enterprises. The relationship of the
tAlthough a direct comparison of receipts of minority-owned
businesses in i~e~ to total business receipts can only be made for 1907
(the last year for which total business receipts dana are available), it is
believed thst approximately the same relationship between minority-
owned firms and total firms ecisted in 1989.
number of firms and receipts of each minority-owned
enterprise group to all firms is shown in table B.
This study presents the first comprehensive statisti-
cal data compiled in this area. It focuses on the
economic characteristics of the principal minority
groups, Negro, Spanish-speaking, and other racial
minorities. Wherever possible, the Spanish-speaking
group has been classified in terms of ownership by
those of Mexican-American, Puerto Rican, Cuban, and
Latin American ancestry. The report covers the in-
dustrial activity, geographic location, employment,
receipts, and legal form of organization of minority-
owned enterprises in total and of each principal
minority group. Measurement of these characteristics is
shown in detail in the Statistical Findings, tables 1 to
9.
PAGENO="0265"
259
TABLE B. Comparison of Number of Firms and Business Receipts of Minority-Owned Firms to Total Business Activity
Industry division
Firms (1,000)
Number
of all
firms1
All minorities
Negro
Spanish speaking
Number Percent
of of all
firms firms
Other minorities
-~
Number
of
firms
Percent
of all
firms
Number
of
firms
Percent
of all
firms
Number
of
firms
Percent
of all
firms
ALL INDUSTRIES, TOTAL.
Contract construction
Manufactures
Transportation and other
public utilities
Wholesale trade
Retail trade
Finance, insurance, and
real estate
Selected services
Other industries and not
classified
7,489
856
401
359
434
2,046
1,223
1,803
367
322
30
8
24
5
97
22
101
35
4.3
3.5
2.0
6.7
1.2
4.7
1.8
5.6
9.5
163
16
3
17
1
45
8
56
17
2.2
1.9
.8
4.7
.2
2.2
.6
3.1
4.5
100
10
4
5
2
33
8
29
9
1.3
1.2
1.0
1.4
.5
1.6
.7
1.6
2.5
59
4
1
2
2
19
6
16
9
.8
.4
.2
.6
.5
.9
.5
.9
2.5
Industry division
Receipts (m
illion dol
lars)
Receipts
of all
firms1
All minorities
Percent
Receipts of all
receipts
Negr
o
Spanish
speaking
Percent
of all
receipts
Other m
Receipts
norities
Receipts
Percent
of all
receipts
Receipts
Percent
of all
eceipts
ALL INDUSTRIES, TOTAL.
Contract construction
Manufactures
Transportation and other
public utilities
Wholesale trade
Retail trade
Finance, insurance, and
real estate
Selected services
Other industries and not
classified
1,497,969
92,291
588,682
106,040
213,196
320,751
86,670
61,858
28,481
0,639
947
650
395
939
5,178
539
1,464
527
.7
1.0
.1
.4
.4
1.6
.6
2.4
1.8
4,474
464
303
211
385
1,932
288
663
228
.3
.5
.1
.2
.2
.6
.3
1.1
.8
3,360
300
212
115
275
1,689
109
507
153
.2
.3
(z)
.1
.1
.5
.1
.8
.5
2,805
183
135
69
279
1,557
142
294
146
.2
.2
(z)
.1
.1
.5
.2
.5
.5
(z) Less than .05 percent.
1Based on data from IRS statistics of income for 1967.
SUMMARY OF SURVEY RESULTS
Industry Characteristics
Minority-owned business firms were heavily con-
centrated in retail trade and service activities. As
shown in table B (and in greater detail in table 1 of
the Statistical Findings), there were 97,000 minority-
owned retail-trade firms with gross receipts of $5,178
million and 100,800 minority-owned firms in selected
services with gross receipts of $1,464 million. These
two types of business activity accounted for 61
percent of all minority-owned firms and 62 percent of
their receipts. Data presented in table C indicate that
the business activities of each minority group also
reflect a similar pattern. Black-owned firms obtained
PAGENO="0266"
260
TABLE C. Comparison of Industry Distribution of Business Receipts for All Firms with Minority-Owned Firms
Industry division
Business
rec~ir~s
~
rms
Business receipts of minority-owned
firms
Total
minority-
owned
firms
Black-
owneu
firms
Spanish-
speaking
owned
firms
Other
minority-
owned
firms
ALL INDUSTRIES
Contract construction
Manufactures
Transportation and other public utilities
Wholesale trade
Retail trade
Finance, insurance, and real estate
Selected services
Other industries and not classified
100.0
6.1
39.3
7.1
14.2
21.4
5.8
4.1
2.0
100.0
8.9
6.1
3.7
8.8
48.7
5.1
13.8
4.9
100.0
10.4
6.8
4.7
8.6
43.2
6.4
14.8
5.1
100.0
8.9
6.3
3.4
8.2
50.3
3.3
15.1
4.5
100.0
6.5
4.8
2.5
10.0
555
5.0
10.5
5.2
5Based on business receipts data from IRS statistics of income series for 1967.
58 percent of their receipts from retail and selected
service trades. Firms owned by Spanish-speaking
minorities received 65 percent of their total receipts
from these two activities while other minority groups
reported 66 percent of their total receipts from the
same sources.
The 10 industry groups accounting for the largest
dollar volume cf receipts are m.immarized for each
minority group in table D.
Geographic Location
California with 64,200 minority-owned firms having
gross receipts of $2,451 million recorded the largest
number of minority-owned businesses in any State.
(See tables 2 and 4.) This number included 14,700
black-owned firms with receipts of $388 million;
25,600 firms with receipts of $878 million owned by
Spanish-speaking minorities; and 23,900 firms having
receipts of $1,185 million owned by other minorities.
The location pattern of minority-owned businesses
by States differed for each minority ~roup. Table 2
indicates that 34 percent of the Negro-owned firms
with 34 percent of the receipts (56,000 firms with
$1,537 million in receipts) were concentrated in Cali-
fornia, Texas, Illinois, New York, and Ohio. Spanish-
speaking minority-owned firms were located
principally in California, Texas, New York, Florida,
and New Mexico. These five States, with 62,000 firms
and $2,025 million in receipts, accounted for 62 per-
cent of the total number of Spanish-speaking
minority-owned firms and 60 percent of receipts.
As indicated in table 2, the largest number of
minority-owned firms were located in the Pacific
Division but this is not true for every minority-
ownership group. For example, table 2 shows that the
largest number of black-owned firms were in the South
Atlantic Division-47.000 firms with receipts of
$1,051 million. The preponderance of black-owned
firms in this division was reflected in all types of
activity as shown in table 3. Spanish-speaking
minority-owned enterprises presented a different
pattern in that over 56 percent of the firms and 58
percent of the receipts were located in two divisions-
the West South Central and Pacific. The two divisions
combined accounted for the largest proportion of
activity in almost all industry divisions.
With few exceptions, average receipts for firms with
paid employees, while differing significantly by in-
dustry division, did not show extreme variations by
geographic division within the industry group. Similar
data by industry categories are also shown in table 4
for States with 500 minority- owned firms or more.
Selected data ard shown in tables 5 and 6 for
Standard Metropolitan Statistical Areas (SMSA's). In
the East and Midwest, most minority-owned businesses
were heavily concentrated within the largest SMSA in a
State. The New York SMSA, for example, recorded 88
percent of the number of minority-owned firms in
New York State and 89 percent of the minority-owned
business receipts. In the Southwest and West, on the
PAGENO="0267"
4
261
TABLE 0. Ten Most Important Industry Groups of Minority-Owned Firms Ranked by Receipts: 1969
- Not applicable.
other hand, there was far less concentration of Size of Firm
minority-owned business in any single SMSA. The Los
Angeles SMSA included only 46 percent of the total
number of minority-owned businesses in California and The distribution of minority-owned firms by employ-
40 percent of the receipts. A comparison of SMSA's ment-size class, shown in table 7 indicates that over 71
containing the largest number of minority-owned percent of minority-owned employer firms have fewer
businesses with the total of minority-owned businesses than five employees but account for only 40 percent
located in the respective States is shown in table E. of total receipts.
code
SIC
Industry group
Rank
Firms
(number)
Receipts
(million
dollars)
Rank
I
I Firms
[(number)
Receipts
(million
dollars)
All minority-owned firms
Black
22,492
1,493
2
11,268
438
12,086 1,181
27,318 953
5,479 939
13,527 584
22,890 549
53,252 532
1
4
3
7
6
5
6,380
14,125
1,660
6,412
13,477
33,906
631
360
385
278
284
288
9,113
18,589
15,118
159
125
96
-
-
-
4,296
13,548
9,469
74
55
50
4,164
10,988
13,140
-
282
229
222
-
8
9
-
10
2,359
7,252
-
104
140
134
-
133
speaking
Other minority
54
55
58
50
59
17
72
721
723
724
15
42
65pt.
63
07
54
55
58
50
59
17
72
721
723
724
15
42
65pt.
63
07
Food stores
Automotive dealers and gasoline
filling stations
Eating and drinking places
Wholesale trade
Miscellaneous retail stores
Special trade contractors
Personal services
Laundry and dryclesning plants.
Beauty shops
Barber shops
General building contractors
Trucking and warehousing
Real estate
Insurance carrier
Agricultural services
Food stores
Automotive dealers and gasoline
filling stations
Eating and drinking places
Wholesale trade
Miscellaneous retail stores
Special trade contractors
Personal services
Laundry and drycleaning plants.
Beauty shops
Barber shops
General building contractors
Trucking and warehousing
Real estate
Insurance carrier
Agricultural services
1
2
4
3
6
5
7
8
10
9
6,378
4,087
7,518
2,300
3,800
6,683
10,701
1,122
3,312
4,079
1,164
2,933
3,900
373
315
265
274
125
172
123
21
45
33
68
61
65
1
4
2
3
5
7
6
9
8
10
4,846
1,619
5,675
1,519
3,315
2,730
8,645
3,695
1,729
1,570
641
3,716
3,219
682
235
328
279
181
94
121
64
25
13
74
79
54
PAGENO="0268"
262
TABLE E. Relationship of Minority-Owned Firms in Selected Standard Metropolitan Statistical Areas to tOe State: 1969
5
Standard metropolitan statistical area
All_minority-owned_firms
Percent SMSA to
State
SMSA
State
~
Number
Receipts
($1,000)
Number
Receipts
($1,000)
Firms
Receipts
Los Angeles-Long Beach, Calif..
San Francisco-Oakland, Calif...
New York, N.Y
Chicago, Ill
Detroit, Mich
Houston, Tars
Philadelphia, Pa.1
San Antonio, Tex
Miami, Fla
Washington, D.C. -Md. -Va
San Jose, Calif
Sacramento, Calif
New Orleans, La
Cleveland, Ohio
St. Louis, Mo.2
29,404
12,722
15,598
11,927
6,140
7,392
7,062
5,030
4,760
8,690
3,108
2,046
3,218
3,478
3,241
989,550
506,252
453,457
430,369
256,705
202,919
174,773
160,504
155,681
146,332
117,392
111,801
109,086
101,550
100,295
64,165
64,165
17,677
13,844
8,112
37,284
8,815
37,284
12,557
-
64,165
64,165
7,898
10,117
4,481
2,451,229
2,451,229
511,345
504,257
319,765
1,079,629
233,735
1,079,629
365,826
-
2,451,229
2,451,229
263,220
257,518
117,560
45.8
19.8
88.2
86.2
75.7
19.8
80.1
13.5
37.9
-
4.8
3.2
40.7
34.4
72.3
40.4
20.7
88.7
85.3
80.3
18.8
74.8
14.9
42.6
-
4.8
4.6
41.4
39.4
85.3
- Not applicable.
`Includes Burlington, Caixien, arid Gloucester counties in New Jersey.
2lncludes Madison and St. Clair counties in Illinois.
While the receipts per minority-owned employer
firm averaged $99,000, receipts per firm increased
significantly with the number of employees engaged.
For example, minority-owned firms with 100 employ-
ees or more had average receipts of $5,383,000 as
compared to $55,000 for firms with less than five
employees.
Although the number of minority-owned firms with
groun receipts of $500,000 or more represented lean
than 1 percent of the minority-owned businesses, their
receipts accounted for 24 percent of the total. (See
table 8.) In manufacturing, the receipts of 211 minor-
ity-owned firms having $500,000 or more in receipts
amounted to $301 million or about 46 percent of the
total manufacturing receipts for minority-owned firms.
Approximately two out of every three of these larger
manufacturing firms were Negro-owned.
Legal Form of Organization
Mont minority-owned firms operate as sole propri-
etorships. Table 9 shows that 264,000 or 82 percent of
minority-owned firms were sole proprietorships. In
total, this group accounted for 54 percent of gross
receipts. Sole proprietorships were heavily concen-
trated in the retail trade, selected services, and trans-
portation industries, representing 60 percent of retail
trade receipts, 64 percent of service receipts, and 67
percent of transportation receipts. In manufactures,
on the other hand, where about one out of every 10
firms was organized as a corporation, this form of legal
organization accounted for over 50 percent of the
gross receipts.
The corporate structure was also used extensively as
a legal form of organization by larger firms. The
average receipts per employer firm for all
PAGENO="0269"
6
263
minority-owned corporations was $446,000 as com-
pared to partnership receipts of $132,000 and sole pro-
prietorship receipts of $67,000. This pattern is
consistent among the various industry groups.
DEFINITION OF TERMS
Firm-A "firm," as the term is used in this report, is
a sole proprietorship, partnership, or corporation
organized to perform an economic activity and was in
operation during any part of 1969. The activity may
be the only occupation of the participants or may be a
secondary activity for an individual who holds a full-
time job working for someone else. A single firm may
operate one place of business or more, such as a chain
of laundries; or have no fixed business location, such as
an independent electrician.
Receipts-Receipts include the gross value of all
products sold, services rendered, or other receipts from
customers during the year, less returns and allowances.
Value for sales and services are given whether or not
payment was actually received during the year and,
therefore, receipts do not indicate a cash flow. No ad-
justment has been made for the costs involved in
operation of the business and all figures are at a gross
value, before deductions, other than for returns and
discounts.
Employment, -Employment data presented in all
tables are for paid employees, full-time or part-time.
Employment figures do not include proprietors,
partners, or owners who work in the business but are
not paid a regular salary. Also excluded are family
members or others who work full-time or part-time but
are not subject to withholding taxes. See the survey
methodology section of this report for a full explana-
tion of the source of the employment figures for this
study.
Industry Classification-The Standard Industrial
Classification (SIC) System, prepared by the Office of
Management and Budget was used to classify firms for
this report Data are presented at various industry
levels, one, two, three, or four digits. This study covers
all industries listed in the SIC system with the ex-
ception of the following: 01, agricultural production;
40, railroad transportation; 801, offices of physicians
and surgeons; 802, offices of dentists, dental surgeons;
803, offices of osteopathic physicians; 804, offices of
chiropracters; 8099, health and allied services, n.e.c.;
81, legal services; 86, nonprofit organizations; 89,
miscellaneous services; 91, Federal Government; 92,
State government; 93, local government; and 94,
international government
PAGENO="0270"
264
7
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969
PART A. All Minority-Owned Firms
-
~!o~2~
~)
!~2~L
2-'!!122a'
`~
L~1
(fl~2~
c~~l b~lldi:g:t:,3 4,164282,474 8,116 253,27851562,537 29,196 12
Pl00010g, 528616g, 417 000d1510016g. -. 2,022 91,775 2,853 80,00441211,35011,771 9
2,41: 31,::: `780 22,871 2 58 2,13: 15:932 7
01488277 gl00iog 7075 29 4,301 1234,2665171 4 35 9
202 18127 p90d06t8. 14 11,414 (0) `(1) (0) (1) (n) (1)
204 07415 7111 pl600 .. 21 3,758 (0) (n) (0) (1) 1 (o) (1)
~ :: :~::: } 1,2209:23818138 ~ : } 179 45
PAGENO="0271"
265
8
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART A. All Minority-Owned Firms
(obo)
($1,000)
(obo,)
(obo)
($1,000)
(boo ($1,000)
(ob) ($1,000)
($1,000)
0Ar0~A~00S--~ot1ood
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
`(0)
(0)
(n)
`(0)
(0)
`(0)
(0)
(D(
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(o)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(o)
(0)
(o(
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
PAGENO="0272"
266
9
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART A. All Minority-Owned Firms
(~=s~-)
(01,000)
(o~bo~)
(00500)
(01,000)
00000'
0i,ooo'
`,oob~y)
(01,000)
(01,000)
C010001j10111y1000010001.
~ 1,0 o,ugu 00~ 72,9:3
471 r,-oigb: f:~-~o,d00g 13,3ne 35 (o( ):( ID) (o) (0) (o)
478 1(0 5011100270$ 31lOlpOI't 1117011001011. 003 19 n) ` . D) (1) CD) (DI (DI
071111201100 by Oodooloy... 22,818 6 (n) CD) (D) (1) (D( (DC
PAGENO="0273"
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a ~*aaaa2~ ~a~Ua~aa : ~: : : aa~: ~: : a a a a a:
a :a~a:aa~ haa:'~aa~ :~ : :aaa: : *
a : 22: a : a : ~: : :
a a a a
a
a~
--~-~-
a
(.*
~.*
(*
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UU
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C,
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PAGENO="0274"
-
~ ~
:~~::~ ~ ~~::
~
*~
-~
~_~! *~ ~ *~ ~ !±
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~
*~1~
~_!i_
-~
I ~
-~ i ~i_ ii~-~ -~
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PAGENO="0275"
269
12
TABLE 1. Selected Statistics for MinorityOwned Firms by Industry: 1969-Continued
PART A. All MinorityOwned Firms
(,o~,,w,)
($1,000)
(~o~b~)
(~o~th~)
($1,000)
($1,000)
(o,,,w,)
($1,000)
($1,000)
653 Ag~~~t$, ~ ~d ~g~3 92 6,670
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PAGENO="0276"
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3 Cl)
a.
(0
(0
a a a a aaaaaaaa a aa a aa
aaaaaaa_aaaaa~aaaaaaa aaaaaaaaaaaaaaa~~
a a 1 a
a a a a
a *a~~ ~aa.~a~aaa~a3a ~ a~.~aa
a a a
a aa~ a.aaa: a: aaa a aa: ~aaa: a: a: : a: a a
a a a a a a
a: : a: a~a~a: : : a: a: : a a: a aa a a : a a a
a a I
:aa~aa~a ~aa:~aa::aa: a:aaaa: : aa:~: ~ :aa::aaa ~ ::~: a
a: a : : : ~: : aaa~: : a: : a : a : : a: a a a
a a r
a aaaaaaaa a aaaaa a aa a aaaaaaaa a~aaa a a aa aaa aa a a a a
a 1
a a
~
a
a
~
a
a
..
~
a
a
a
a
a
a ~aaaa a~a a a aaaaaaaaaaaa ~aa a a aaa aa a a a a
(.-
-~
-
~
~.
a
a ~aa~~a ~~aaa ~ a~ U
8
a a
(C)
PAGENO="0277"
271
14
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART A. AU Minority-Owned Firms
C0d8
I0d~t7y
(58-)
($1,ooo)
(~s7-)
(857)
($1,000)
(7857-) ($i,000(
(o~o~5o~) ($1,000) ($1,000)
(1)
(1)
(1)
(8)
83
3
(0)
(o)
(1)
(u)
1
38
(1)
~:
(8)
~::~
7
::
(8)
(0)
(Dl
(8)
(1)
F 562
(1)
(8)
(8)
(u)
1,148
(1)
(8)
(8)
(8)
(o)
(8)
(8)
(u)
(8)
(8)
PAGENO="0278"
272
15
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: l969-Continued
PART A. All Minority-Owned Firms
k
(00003?)
($1,000)
~m
(000500) (o~b8,)
($1,000)
)000b8,)
,~
($1,000) (o~bo,)
if
($1,000)
($1,000)
$059918, 200 joolo, 09118g88.
215,417
5805,288161,0581612
9
8
07
Agoloolso,s $830108 *00 0005199
5,8
59118,950
1,107
4,061
87,
5744794,752
31,376
7
07-
Agl10910911102,0008$, 000 011902980..
61
2,736
19
53
2,515
3
128
42
` 430
6
PAGENO="0279"
273
16
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969
PART B. Black-Owned Firms
(ooobso)
($1,000)
(oosbso)
(608109))
($1,000)
(60010,,)
($1,000)
)ooobs,)
($1,000)
)$i,000)
Tso,~s,0, tils, ss~b1s, ,,o,,io so,~k 453,026 44 (0) `)s) )o) )o) 1 (0) )D)
1,743 20,318 175 (5) )s) )D) )o) 1,568 )o) (o)
tt,-36t88621 ,tsol s,,otioo. 14 1,118 10 )o) `(86) (1) )s) ` 4 `(10) (o)
0,-ososotli 2,11150866 4 285 3 )o) )s) )D) )o) 1 )s) )o)
G1s~~ sod g1~s1sg so,-), 11 1,575 9 )s) )s) )s) )s) I )s) )o)
W,sokisg sod dsoollt101 50,6 19 `823 13 )o) `)D) )o) )s) 6 )s) (0)
203 Csoo,d, 8000-sd, sod 8670500 fOodo..:..: 6,721 ~
205 5,k,,y psodoo 12 `865 10 )o) `(0) )o) (0) 2 (0) (0)
208 B,os~~gss. 19 12,367 16 )o) `)o) )o) (0) 3 )D) (0)
232 M,o'~ sod boy,' 70~ot~htog~. 11 0,534 10 )o) (10) )o) )o) 1 (0) (0)
2 )o) 1 )o) )o) )o) )o) - - -
2339 Wo,,s'~ sods)~~s,' oot,861,~86, o.s.â, 9 )D) 9 (0) `(o) (1) )o) - - -
p,odo,ot, 121 14,239 56 )o) )D) (0) )o) 65 sI (0)
242 S,so111~ sod ylsolog s111~ 89 19:741 82 )o) sI )D) )o) 7 )o) )s)
2421 Sgootll, sod plsoiog 0111,, gss,o1 83 17,273 76 )o) sI Is) Is) 7 Is) sI
PAGENO="0280"
274
17
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART B. B)ackOwned Firms
(5u)
`So,ooo)
(~bu)
(ubu,)
($1,000)
(.0511)
(01,000)
(,,0bu.)
($1,000)
($1,000)
011boo,k, ply.ood, 162 o~l.tud p,odoot. (e) (D) Cs) (D) (D) i (D) (u)
Soodoo ooot~1oo1~ (DC (D) (D) Ce) nC - - -
1.0110.11,60000 eood p.odoo 10,265 (e) (D) )u) CD) 526 (DC (DC
Doo,,50ld folIo,, 5,560 (DC CD) (e) )D) 2 Ce) CD)
1.'phol,to.od hoooobold foloitooD::.: 1,609 (DC `(DC Cu) (u) x (e) (u)
lloooo,hold 76601161,, o,~.k 401 (DC (o) (DC (DC 1 (DC (u)
07810, to,olto,o (D) (e) (e) (u( (DC - - -
PoSh. boShOing 000015690. 0) - - - - u
(o( u( (u) (e) (DC - - -
Poolpoihi. (e( 18 166 5 42 2 )u) (u)
P~pD1 Dod ,211,d p.odootl, 0.0.0 ` (u) - ` - - - n )e)
1h,okbook., ,ood bookbthdioog. 652 Ce) `)e( CD) Ce) 4 (DC Ce)
F,b,io,ted ,t,0,oto,il ,teDl p2oth0t~. 6,144 (DC (0) (eC (DC 2 )e) )e)
4,369 (0) (DC CD) CD) 2 (DC Ce)
Soon, 0100100 poodoot~, bolt,, coo... )e( (DC Ce) Ce) Ce) - - -
ODt,l ~te~iog 5,090 C~) (DC (DC (e) 1 (DC (DC
Mot,1 1D00i0D~, 5.0.0 3,610 (0) )e) (DC Cs) 2 (e) (D(
pDOthlOt1 (oC 29 883 6 177 1 (DC Ce)
PAGENO="0281"
275
18
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART B. BlackOwned Firms
(704b07)
($1,000)
(767b~)
($1,000)
(o~boo)
(oo~tho~)
($1,000)
(6,8767,)
($1,000)
($1,000)
5
718
4
(0)
`(8)
(u(
(8)
13
591
11
(0)
(8)
(0)
(0)
17
15
35
1,006
06
3
2
33
(u)
(u(
(8)
(u)
(0)
(o)
)n(
(0)
(u)
(u)
(8)
(D)
18
10
5,030
48
10
1
(8)
)u(
`(8)
(u(
(8)
(D)
(D)
(u(
7
25
`236
387
5
s
(8)
(8)
(u)
(8)
(8)
(1,)
(8)
(0)
4
10
8
4
23
33
4,404
15,652
4,670
1,037
2118,4352
14,125
9,
3
9
7
3
0
22
25131
(u(
(8)
(u)
(o(
(u(
(8)
(8)
(u)
(u)
(8)
(8)
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(8)
(u(
(u(
(0)
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(8)
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(8)
(8)
`(D)
(u(
(u(
(8)
(u)
(u(
(8)
(7)
(u)
`(0)
(8)
(8)
(8)
(u(
(u)
(u(
(u)
(7)
(8)
(8)
(8)
(7)
(8)
(u)
(8)
(8)
(8)
(7)
(0)
(8)
(8)
(u(
(8)
PAGENO="0282"
~H~H J Ufl Ii ~JH
w
L 8 a 3a~8
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:3:::::.. : :::: :.?:
C)
0
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a.
C
(0
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C-)
a
3 3 3 8 8
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a ~ a~ a 88
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8 888
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PAGENO="0283"
0
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PAGENO="0284"
V ~
a: a : : :
a
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a a
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CD
0.
Cl)
hr
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U
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PAGENO="0285"
U)
CD
CD
C,
CD
0.
U)
C)
0
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CD
0.
0~
0.
(0
a)
(P
C-)
U
a aaaa
h aa:aa
~
a
n~
a a aaaa a aa a a aaaaaaa a a a aaaaa
a a aa~i aTa ~ 1F
**-
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!
a a. ~ a a~ I h~I
a
a a aa~a h,aa a a a a a~a~a~ a a~
!
PAGENO="0286"
280
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART B. Black-Owned Firms
23
(o~bso)
(05,000)
(7~b00)
(o~bs)
(01,000)
(900590)
(01,000)
(o59,)
(01,000)
(01,000)
8Opt.
Eo2pit&12,s93l0&1,&03d7l~l
809pt.
9~o~to,i~, ooo~100o2ot, 00d 5o95~
591
28,425
207
3,301
25,090
19
121
384
3,335
9
823
~o5oo1!, ~od j001o~ 001100s~.
1.15,001,! 100 19070529907 0,01205....
12
1
ID)
(u)
2
-
(1)
-
)s)
~
(19)
-
(n)
-
10
1
(n)
)o)
(D)
)o)
829
SoOsol, &34 60002910715 gg11~1o22, 9.2,0,
15
`(0)
8
(o)
`)u)
(o)
(9)
7
(n)
01)
07
Ag?Ioslts05 221-6102 god 007919g.
1,377
30,001
3801,071
24,601
4
65
907
6,300
6
074
07-
Osotlog, t,&pplsg, ~222 p8060gltIOS..
Ag,Ioslts,sl 2,071005, s.,.k
8
30
69
1,348
1
9
(u)
(9)
(u)
(is)
)o)
(o)
(o)
(o)
7
21
(is)
(u)
)o)
(u)
- 92p00010t1 "is. (is) Yltth,90 to 10000 d1~o1o~1og 11,9105 108 1001910421 007p2OI05.
PAGENO="0287"
87 87 7 87 27 87 97 927 9
9 8
7 7 9 8 2
9 9
~ ~ %::::~ n:::
79::: 8 29: : 7 :
:7: 7 :7: 7 :7::::7 :2::::~ :7::::~ :7::: :7: 7
:9: 9 :9: 7 :9::::2 :9:.::2 :9::::7 :9:.::7 :9::. - :9: . * : 3
:2: 92::::9:7::: :2::: :2:::: :7::: 2 :7::
788888 2827~ 2882 287
93
7- 7
8c~
n7
r~
~
782729888 ~- 78 ~~-2$ ~~82 222778 772 222
-~
~2
7-
22 88 2728 888
-i;.~
r~
~
828898 792272 7~~28 2~~~82 879292 98
~3
7-
L~
$8228~ 8229h 7888d 8899.~7- 2 8
cn
CD
CD
0.
C,,
-~ C,
> UC
~
2 0
o~ CD
0
9
0~
(0
0,
(0
PAGENO="0288"
282
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. SpanishSpeaking Owned Firms
25
=u~)
(Oi,O~o)
(~~)
(51,000) (000500-)
(01,000) (0=500)
(51,000)
(51,000)
(0)
(0)
(e)
(0)
(0)
(0)
(0)
(0)
(o)
(0)
(0)
(e)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(e)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
PAGENO="0289"
283
26
TABLE 1. Selected Statistics for Minority.Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(n~b07)
)$i,00n)
(021)
(o~~blp)
($1,000)
(o~b1!)
($1,000)
(6050)
($1,000)
($1,000)
00909212 nook, 191*1 Opsol*h 395 25,441 207 (0) (0) (1) )o) 178 (n) (n)
P0*1-to 816*0 2 `)o) - ` - ` - - - 2 (0) (0)
OthIl C*oto~1 0 Sooth 09211026., 3 (o) 3 )o) )o) )n) )o) - - -
00111i8g, tot&1 Sp&ol7, - - 19 `316 3 (D) (1,) )o) )o) 16 )n) )D)
6*910*9 18 (1) 3 )o) (n) )o) )n) 15 (o) (0)
P02,89 810*9 1 )n) - - - - - 1 )o) )D)
} 188 1 8 188 3 63 - - -
Spsoislo 10 388 9 (0) (o) (o) (o) 1 (o( )o)
~ (2) ~ )D) ~ (n)
Spsol*h 14 1,496 12 (o) (o) (o) )o) 2 )o) )o)
61816*0 14 1,496 12 (o) (0) (o) (0) 2 )o) )D)
totnl Spsol*h 30 (o) 22 )o) (o) )n) )n) 8 )u( (o)
6o9o&o 26 1,200 18 (o) (D) )n) )o) 8 (n) (D)
1-08289 RIono 1 )o) 1 (1) (0) (o( (1) - - -
Opnoish 2 (0) 2 (0) )o) (0) (ro) - - -
62910*9 2 (0) - 2 )D) (1) (ro) (0) - - -
totnl SpSoI!1, 1,592 38,314318 (n) )o) (0) (1) 1,274 )o) )D)
Oth*o O*oto&1 91 Sooth 091210*9.. 33 406 6 )o) `(6) (1) )o) or
boll00,*, 099*1 Ipsoish 36 808 5 )o) (0) (o) (o) 31 )o( (ro)
011, Opsoish 5 (ro) 1 (16) (o) (0) (o) 4 (o) )o)
Pood sod kiod,sd p~odoot*, 891*1 ~&8i09 217 37,400 196 1,842 37,035 9 189 21 365 17
2.18 poo00ot., 199*1 8p&ol*h....... 22 11,552 21 (o) (o) (n( (o) i (D) (2)
70-654 0-72-19
PAGENO="0290"
284
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
27
(o~boo)
(01,000)
(00-)
(00,-)
(01,000)
(oo~beo)
(01,000)
(00000,-)
(01,000)
(01,000)
CD)
(DC
CD)
(n)
CD)
)D)
Ce)
(DC
Ce)
CD)
CD)
Ce)
Ce)
CD)
Ce)
CD)
(DC
Ce)
CD)
Ce)
CD)
CD)
(DC
CD)
Ce)
CD)
Ce)
(DC
(DC
CD)
(DC
CD)
(DC
Ce)
Ce)
CD)
CD)
CD)
CD)
(DC
CD)
(0)
CD)
(D)
)o)
CD)
Ce)
(DC
(0)
CD)
CD)
(DC
CD)
CD)
CD)
(0)
CD)
(DC
CD)
(DC
(DC
CD)
(DC
CD)
(DC
(0)
CD)
(DC
(0)
(DC
Ce)
(DC
(DC
CD)
(DC
CD)
(DC
CD)
CD)
(DC
CD)
CD)
CD)
CD)
CD)
(DC
CD)
(DC
CD)
CD)
Ce)
PAGENO="0291"
285
28
TABLE 1. Setected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(,~sobo,)
($1,000)
(bobs,-)
(,oo~bo,-)
($1,000)
(sooobo,-)
($i,000)
(ooobo,-)
($1,000)
($1,000)
10111 spIt ish.................... 11 1,195 9 (8) (6) (0) (u) 2 (6)
Mooiooo.... 7 428 165 99521124 2 (u) (0)
0719110 sot opoolflod............ 1 767 , 1 (D) )o) (6) (6) - - -
6.0.0.~ tolll 0710110 10 (6) 17 4072,03824167 1 (6) (u)
Oplolob 681 opootflod 7 381 6 . 1 (o) (Di
p70d2881, 19111 6716116 162 0,501 95 (0) (6) (6) (6) 67 (6) (6)
Spooilh sot ~pos611od 27 1,300 16 (6) (6) (6) (6) 12 (6) (1)
0277..::::: 19 575 3 82 2 193 32
10611 tp591lh 10 1,326 - 8 (6) (6) (6) (0) 2 (u) (1)
01811816. 2 2 (8) (6) (6) (6) - - -
Poosto RIsos. 1 - 1 (D) (6) (6) (8) - - -
Othop 6061711 27 SoOth 26771616.. 3 163 2 (2) (D) (Di (8) 2 (Di (8)
~ ~ 927 11 ~ 927 4 :
Sp&oi;h..,.......................... 9 ~ 9 ~ ~ ~ : ~
Moololt. 44 (6) 402715,2877132 4 (6) (8)
Poooto 01615. 2 (8) 2 (8) (8) (8) (D) - - -
S71911h lot oposiflod 3 365 2 (0) (8) (8) (0) 1 (0) (0)
PAGENO="0292"
286
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
29
1
0 ondnno1~onos__
0000 plOd ninyons
(nOD-)
(01,000)
(,n.bn,-)
(nnOD,-)
(01,000)
(o00bn,-) (01,000)
(ODnbnn)
(01,000)
(01,000)
p00000D1,1D11DS~1h
(0)
(0)
(DI
(DI
ID)
(D(
(DI
(DI
(D)
)D)
0)
Cu)
In)
In)
(DI
(n)
to)
)n)
(0)
0)
In)
(n)
(DI
(DI
(DI
(DI
In)
In)
(DI
(n)
(DI
(a)
(n)
In)
ID)
(DI
(DI
(DI
ID)
(DI
(n)
ID)
ID)
ID)
(DI
(0)
In)
(DI
(DI
In)
ID)
ID)
ID)
In)
In)
(DI
ID)
(n)
ID)
ID)
ID)
nI
ID)
(DI
(DI
uI
ID)
In)
In)
(DI
(DI
In)
ID)
ID)
(DI
ID)
ID)
ID)
(DI
ID)
ID)
ID)
ID)
ID)
ID)
ID)
(DI
ID)
ID)
ID)
ID)
ID)
ID)
ID)
ID)
ID)
PAGENO="0293"
287
30
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(o0ob~,)
($1,000)
(,o,ob.~-)
(oobo-)
($1,000) (o~b~)
($1,000) (o~bo~)
($1,000)
($1,000)
Poiotiog &od p~b11~h1og..Co~tio~d
Cooo~0,i11 polotiog, ~o,~pt litho-
totti Sptoish
(0)
(0)
(D(
(0)
(0)
(0)
(0)
(0)
(0)
(o(
(o(
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(D)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(o(
(0)
(0)
(0)
)o)
(0)
(0)
(0)
(0)
(0)
(D)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(o(
(0)
(0)
(0
(0
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
)D)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(D(
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
)o)
(o)
(0)
PAGENO="0294"
288
31
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. SpanishSpeaking Owned Firms
(239b97)
($1,000)
(700200-)
(200200-)
($1,007)
(200b00-)
($1,000)
)200b00-)
($1,000)
($1,000)
58 28 [ }
995 14 2) (2) (2) (2) 24 226 9
c,b*o. 336 1 (2) (2) (2) 2) 2
Sp*ol*0 ,`.09*p*Olflsd 0) 1 (2) (2) (2) (2) 3 39 13
~ ~ 900 6 100 1 } 66 8
94*t*2 0*0*, 909*1 Sp*oI*h (2) - - - - - 1 `o) (e)
6*910*0. (0) - - - - - 1 (2) (D)
p?OthlOt*,90t*lSp*01*h 2,763 30 (n) (8) (2) (2) 4 (2) (D)
} `886 { 2 (2) `(2) (0) (0) - - -
99901*0 096 *p*olfi*d 5 21 433487 1 (2) (2)
600299*9*1*082, 969*1 Sp*~1*h 2) 12 (0) (2) )e) (2) 2 (D) (2)
6*91010 599 )o) (2) (2) (2) 2 (2) )e)
P4*999 21o*o (2) 1 2) (2) (2) (8) - - -
Op*ols" (2) 9 (2) 2) (2) (2) - - -
Po*pto Rio*o (2) 1 to) (2) (0) (6)
69901*0 oot *79017123 (2) 1 (2) (2) (2) (2) - - -
p,-o30ot*, 0.9.6., 669*1 Sp40100... 939 9 to) (2) (2) (6) 2 (2) )o)
6*910*0 2) 8 39 675 5 84 1 (8) )o)
Sp*ol*h 091 *p*7291*d (2) 6 (2) (2) (2) (2) 1 (2) (0)
6*912*0. `(2) 3 (2) `(2) (2) )o) - - -
Sp*ol*h 769*790191*2 (2) 2 (2) (0) (2) (2) - - -
8*9*1 *9*lplog, 909*167171*2 (2) 2 (2) (2) (2) (2) - - -
69910*0. (0) 2 (2) (8) (o) (2) - - -
~:: ~ 654 2,069567 1
p007106*, 996*1 Sp*oi!'o 0) 4 (0) (0) (2) (2) - - -
9.951240 2) 4 (0) (2) (2) (0) - - -
p99d106*, 609*16797100 2) 6436287103 1 (2) (2)
553 5 (0) (0) (2) (2) - - -
6790190 296 *79017196 2) 1 (0) (0) (0) (2) 1 (0) (0)
P4.poo 812*7. , } { 1 (0) (0) )o) (2) 1 (0) (2)
Cob*o. - - - - - 1 (2) (0)
Sp*oI*h 096 *790191*2 179 3 (0) (0) (0) (0) 4 (0) (2)
PAGENO="0295"
289
32
TABLE 1. Selected Statistics for Minority.Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(totbD,)
($1,000)
(oo,.bo,-)
(Dotbo,-)
($1,000)
(toobo7)
((1,000)
(totto,)
($1,000)
($1,000)
`:: a'::: :: 30 2::
M8toltookIDg ,toohi,,8!y, totol Spoolth CD) 8 34 527 4 68 3 (0) (0)
(o) 2 Ct) Cs) CD) (0) I (o) (o)
Coboo. 323 a (0) CD) CD) (n) 2 (D)
SpoSIsh tot IpDCI618d CD) 3 (0) (0) (t) )o) - - -
CD) 9 (0) (0) (0) (0) - - -
Pos,to ROost. (0) 1 (o) (0) (0) (o) - - -
Sp261sh tot sploifIld (8) 1 (0) (5) (t) (o) - - -
1180t71011, totol SpotiCo 3,65154 CD) (Di CD) (0) 45 (0) CD)
701,80 61026. ) 1 (~) (o) (0) (s) 2 (0) Cu)
robot. - - - - - a (0) (0)
- 831 { 2 37 817 9 204 ~
80611 Sp6918h (8) (o) (0) (o) CD) - - -
8831629. (D) 4 Co) Cu) (o) (0) - - -
63611 Spooloh (0) - - - - - 1 (0) CD)
8831061. (6) - - - - - 1 (0) (0)
60601 Spotlsh (0) 3 CD) (DC (1) (t) - - -
8801026. CD) 1 Cu) CD) (0) CD) - - -
tlooo. (o) t (o) (0) (0) (0) - - -
Otto CItt,-oi o. Oooth doo,-iooo.. (0) , (t) (0) (D) (2) - - -
oo,d 83ppil88~ totol Sp061th 1,192 8 (D) CD) (0) (5) 10 (D) (0)
Coboo 2 (DC (0) (0) (0) - - -
Dths,- Cott,ol os Sooth 208,1926. . 616 - - - - - 1 (o( CD)
Spotith oot 878618189 _J - - - - - 2 (0) (D)
81831629. 4,736 17 (0) `(8) (0) (0) o
P68710 Rjooo, (D) 1 CD) Ct) (0) (D) - - -
Cobol 276 o CD) (8) (0) (0) t (8) CD)
9tto~ Cott~o1 Os- Sooth 908,1629. CD) I (~) CD) CD) Ct) 1 CD) CD)
Spoolsh 1,363 8 Ct) CD) (Di (0) 2 CD) CD)
Stooioot. 662 4 (D) CD) (2) CD) 1 CD) (0)
Cobot. °( 1 Ct) CD) (0) CD) - - -
Othst CDttsoi 07 Sooth 2o~sioot. J 701 1 CD) (0) (0) Ct) 1 (0) (8)
Spotish tot sploltiod - 2 Ct) (5) Ct) CD) - - -
totol tpotlsh 537 6 CD) CD) (0) (0) 1 (5) CD)
~ C )t) CD) 1 it) CD)
PAGENO="0296"
290
33
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
)sssss)
)Ss,ms)
)ssws~)
)ssw)
Osess)
)~sssl
(Oases)
(ssswaa-)
(Os,500)
(teens)
55555 - - - - -
~ } ens { } as a { a ee
1,457 (5) (5) (5) 7 (5)
e) 587355 1 (5) 15)
(5) - - - 5 (e)
555155 1775 Snssslses.. (5) - - - 5 5) Is)
Spss1~ 5) 5) 5) (e)
. (5) )~) (5) - `L
Ceslnjsslsyssdsselnss,
551718's 554 `5) (5) fl' 5 (5) (5)
575 (5) 5) (5) 5 (5) 5)
(5) Is) 5) - - -
5517515575855517584 (5) (5) (5) - - -
~ } { E
~ { }
PAGENO="0297"
21 21 21 21 1 1
2
2222 121 21
2 1 2 1
2 2~:: 2~: :2 2::22~::2 : 2 2 :~ 2~: ::~ ~ :2 2 2 22
U~H 2 :-~ 2::~2~:: 2W:: 2 : :~ 1~: : I :2
I HI~IH :I1~I 1~ 1 ~ 1~
1I~
I
`
.
~2
~28
~-~J
L~J
.~
2
LI
,~.
`
~-J
.~
Cl)
CD
CD
C,
CD
Cl)
-~ C)
a 0
a
CD CD
0
~
0~
(0
C,
(0
C)
PAGENO="0298"
292
35
TABLE 1. Selected Statistics for Minority~Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(52057,-)
(01,000)
(666.01,-)
(06661,-)
(06,000)
(00051,-)
(01,000)
(020b00-)
(01,000)
(01,000)
t0521 Ip060sh (o) 41 334755 ID) (D)
booboo. (0) 41 333756 (0) (o)
101,1 Sposlsh (0) (0) (0) (0) (0) , (6) (0)
001110 016,6. `313 (0) (0) (0) (0) `(0) (o)
Cobos. oos (0) (D) (o) (0) (0) (0)
F 423 ~ ~ ~ ~
Cobos - (0) (0) (D) (0) 1
sot ,pooIloo3 166 (0) (0) (0) (0)
61111111,005 ollosItod by lodo,tsy,
101,1 Iposlsh (o) (0) (o) (o) (0) (0)
0th,, 10051,0 (0) (0) (DI (0) (o) (0)
po,,to 010,6. 121 (0) `(0) (0) (0) ID) )D)
0500s Costsol os Sooth 20050026.. 445 (o) (0) (0) (D)
lot~1 Sposlsh (0) (o) (o) (D) (0) (o) )o)
552 D) (0) (0) (0) (0) (DI
0,005. (0) (0) (0) (1) (0) - -
Sposish sot 130601013 1,400 (0) `(0) (1) (0) (0) (D)
TOss, `53 to61,, 10521 Sp2so~h (D) (D) ID) (D) (D) - -
booboo. (0) ID) (0) ID) )o) - -
Po,,1, Risos. (0) (0) (0) ID) ID)
Cobos. (DI (DI (0) (D) (0) - -
ohbslo,, s.s.k., 105,1 Sposlsh 0) 17 1,855 3 373 (0) 1)
booboos. 2,702 )o) (o) (o) (o) 22 (0) (D)
boost, 010,6. ID) - - - - 0 (0) (0)
Cobos 430 (0) (0) (0) ID) 3 09 6
Othoo CDOtO21 ot Sooth Aoosio,o.. (0) - - - - 2 )o( ID)
Sp051sh 501100021173 344 (0) (DI (DI )o) 3 0) )o)
PAGENO="0299"
36
293
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Span)uh-Spenk)ng Owned Firmu
`"Inn)
101,000)
)n"Inn)
)nllnn)
101,000) (0,1")
))n,uuu) )o~unn)
(01,000)
01,020)
ci
o `enu 4 In) `In) In) In) 4 In) In)
o n In) In) In) In) - - -
2 In) In) In) In) - - -
3 11, 2 In) In) In) In) n In) In)
n,non `In) `In) In) In) n `In) In)
n;nnn In) `In) In) )n) 3 In)
lIon In) `)n) In) In) I )n) In)
1,031 In) In) In) In) 1 In) In)
nnun )n) `In) )n) In) n )n) In)
In) In) )n) )n) In) - - -
In) - - - - n In) In)
In) In) In) In) In) - - -
In) In) In) In) In) - - -
n,nnn In) In) In) In) n In) In)
In) In) In) In) In) - - -
In) - - - - n In) In)
`In) In) `In) In) In) - - -
In) In) In) In) In) - - -
n,non In) In) In) In) n In) In)
In) 23 1, 4Th 4241 n In) In)
In) In) In) In) In) - - -
2,010 In) In) In) In) n In) In)
In) - - - - n In) In)
nI In) In) In) In) - - -
In) In) In) In) In) - - -
)n) - - - - n In) )n)
11,111 nI In) uI In) 2 In) 2)
1,211 In) In) ID) In) n In) In)
1,471 uI nI In) In) n In) In)
40,213 In) nI In) In) 1 In) In)
31,131 In) In) In) In) n In) In)
In) nI In) In) In) - - -
In) In) In) In) In) - - -
`In) In) `)n) 1) In) n no 3
In) In) In) nI In) - -
PAGENO="0300"
294
37
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(a,a1~)
(01,000)
(,~ba,-(
~s~-)
(01,000) (aOl,-)
(01,000) (~b,-)
(01,000)
(01,000)
(I)
(a)
(a)
(a)
a)
:a
(a)
(a)
(a)
(1)
(e)
a)
(a)
(1)
(a)
(a)
`(a)
(a)
(Dl
(a)
a)
(a)
(a)
(0)
(a)
(a)
(a)
a)
(a)
(a)
(0)
(a)
(a)
(0)
(a)
a)
a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
a)
(a)
(a)
(a)
)e)
(e)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
a)
(a)
(a)
(0)
(a)
(a)
PAGENO="0301"
38
295
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. SpanishSpeaking Owned Firmn
(o~obo1)
)$o,ooo)
(oo~b~,~)
(,oo,bo,)
($1,00Q) (,o~bo,~)
($1,000) (o~,obo,)
($1,000)
($1,000)
(Dl
(0)
(0)
(0)
(0)
(D)
(0)
(Dl
1,105
(D)
`(D)
(0)
(0)
`(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
`(0)
)D)
(0)
(o)
(0)
(0)
(0)
(0)
(0)
(0)
(o)
(o)
(0)
(0)
(0)
(0)
(0)
(0)
(Dl
(0)
(0)
(0)
(0)
(0)
(o)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
)o)
(Dl
(0)
(Di
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(Di
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
`(0)
(0)
(0)
(0)
ID)
(0)
(0)
(0)
(0)
(0)
(D)
(0)
(0)
(o)
(0)
(0)
(0)
(0)
ID)
(Di
`(0)
(0)
(0)
(0)
(0)
(0)
(DI
(D)
(0)
(Di
(Di
(0)
(0)
)D)
(o)
(Di
~1
(0)
(0)
)o(
(0)
(0)
(D~
(0)
(0)
(Di
(0)
(0)
(DI
(0)
(0)
(0)
(0)
(o)
(0)
)D)
(Di
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
PAGENO="0302"
296
39
TABLE 1. Selected Statistics for Minority.Owned Finns by Industry: 1969-Continued
PART C. SpanishSpeaking Owned Firms
)9b07)
)Os,ooo)
)D8914,)
)D10b8,)
(01,000)
(9=107)
(01,000)
)D=b07)
(01,000)
(01,000)
1,177 (D) Cs) (2) (n) 1 (D) CD)
8.92,1000 CD) CD) (DC CD) CD) - - -
00149 CD) - - - - 1 CD) CD)
Sp8ol8h Dot 8p8oDf18d (DC )D) CD) CD) CD) - - -
9891089 452 )D) (0) (DC Cu) 2 Cu) CD)
Oth07 C89t,81 9,. Doo~th Oo.,.Do00.. CD) )D) CD) CD) CD) - - -
DPDDD81O Dot 878016123 CD) CD) CD) (DC CD) 2 (0) CD)
tDtD2 Dpoo1~l, 1,247 CD) CD) CD) CD) 3 CD) CD)
0831020 926 CD) CD) CD) CD) 1 CD) Cu)
02082 321 CD) CD) CD) CD) 2 CD) CD)
9281081 4,651 )D) CD) CD) CD) Dl CD) CD)
P18,00 01013 - - - - 1 CD) CD)
CobDo CD) CD) CD) CD) CD) CD)
Dp~oD3h DOt 872016130 715 CD) CD) CD) CD) 3 CD) CD)
000128118 1,108, DOt 61DDDot80 by
Dodost,y, Dot61 Dp~09!b 73,813 1,329 96,920 4 207 301 6,893 22
929316 t,~d8, t,D.D Dp8D81 1,689,443 91,999 1,481,081 4 91 16,946 204,350 12
60161 Dp201!10,, D2,147 122 20,886 3 100 126 1,261 DO
99141 Dp20030 8,957 295 8,539412749 421 9
38112,9, tDt8l Sp820181 CD) 38 1,203 2 71 1 CD) CD)
P13,99 01690 CD) CD) CD) CD) CD) - - -
Dp2llD3h Dot 872611123 CD) CD) CD) CD) CD) 1 CD) CD)
PIlot, g1D93~ 800 8811p9p89' 869888,
9960031 2,701 )D) (0) CD) CD) 3 CD) CD)
I92oiooo CD) 59 2,282 0 86 2 CD) CD)
Dp6018h Ott 37201,020 CD) CD) (DC CD) CD) 1 CD) (DC
Dp8013h CD) CD) CD) CD) CD) 1 CD) CD)
CD) - - - - 9 CD) CD)
Dpo_0o16h Dot 472611180 CD) CD) CD) (DC CD) - - -
PAGENO="0303"
40
297
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(o,o~bol-)
($1,000)
)0o15o1(
(o~obo1-)
($1,000) (oo~bo,)
($1,ooo( (lob,)
($1,000)
($1,000)
(0)
(0)
(0)
)o)
(1)
(u)
(0)
(0)
(1)
(0)
Cu)
(0)
(0)
(0)
(0)
Cu)
`(0)
Cu)
(0)
(DC
(0)
(0)
(0)
(0)
(0)
(0)
(0)
Cu)
Cu)
)u)
0)
)D)
)u)
0)
)o)
)u)
)u)
)D)
(0)
0)
)D)
0)
(0)
0)
0)
(0)
)u)
)u)
0)
)D)
)u)
0)
(0)
)u)
)D)
)u)
PAGENO="0304"
3$ ____________________
32$ 22 22 22 ~ 22~~ 22 ~ 22 322 22~ 2
~
3 2 $ 2
3: : : 2 3::: 3~: : 3 3~: : : : : : : 3:: 3 3
3 8 8
8 8 8 -~ 8
3 ~ 3 3
0
3
U)
CD
CD
C)
CD
a"
U)
Er
0
0
0
CD
0~
"Ti
0"
a"
(0
to
PAGENO="0305"
r*%)
Cl)
CD
CD
C,
CD
a-
Cl)
C,
0
0
a
CD
0~
~11
2
a.
a-
(0
C)
(0
`
hh
..~--
r~
~
`~
~
.
0
3
PAGENO="0306"
300
43
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. SpanishSpeaking Owned Firms
(000)
(01,000)
)sotb00)
)b~,.)
($1,000)
)sotb00)
($1,000)
(s~b07)
(2~67~)
($s,ow)
tot.1 Spsol*', 169 (~) Cs) Cs) Cs) 3 Cs) Cs)
*t~t1o*o 120 4 )s) (5) Cs) sC 2 Cs) Cs)
Sp*ol*h Sot *p~o12140 48 2 )s) Cs) 5) )s) 1 )D) )D)
~ : s'::: : u: ~ : ::
Po07to ROo,o 5) 3 4 `173 1 58 1 sC )s)
0th,~ C,ot,,1 o~ Sooth Ao,,lo,o,. Cs) - - - - - 1 )s) Cs)
Sp*ol*h lot *p~oi8i*d Cs) 9361,0794520 1 )s) )s)
Co*tot !t000!, tot*1 Sp*oI*h 880 26 51 70922713171 13
Fo,,1,,* *~d 7o~ *hop*,totsl Sp*ol*h, )D) - - - - - 4 )D) Cs)
l,tlo*o 5) - - - - - 5 5) )D)
0th,~ 0,0t001 o~ tooth 408610*0.. 5) - - - - - 5 5) )s)
Sp*ol*h sot *55516124 )s) - - - - - 2 5) )s)
t0t,1 97*01*0 7,673 781274,7322612752001 11
999,1 05*01*0 )s) 2 )S) )D) Cs) )s) )s) )s)
M,ols,o (5) - - - - - 2 Cs) Cs)
Po,,to Rls,o Cs) 1 Cs) Cs) Cs) CD) - - -
cob*o Cs) - - - - - 1 Cs) Cs)
Sp*ol*h Sot *pSoIfl,d Cs) 1 Cs) Cs) Cs) Cs) 1 Cs) Cs)
PAGENO="0307"
U)
cD
CD
C,
CD
Cl)
0
0
0) CD
o 0.
~~T1
0<
0.
0<
(0
(P
C)
I.
,,~
~ ~ ~ ~ ~ ~
00'
~
000
~ ~
§~
0~00
~
0
g
~:
:
g~
:
~H
~::
g:~::
:~:~::
:
.~:~::::0:~::,::~
:::::~:::::~
:~::
g
000~
0*
0000 00
0000
0
000000~
0
00
r~m
0
:
~
-
00 0' 0
0000 0000 00 0000
~
0~0
0000
00 00
00
00~~-00'-~
0000000000
0~~1'~
0'
~
`
*`
:~
~
PAGENO="0308"
302
TABLE 1. Selected Statistics for Minority.Owned Finns by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
45
(o~*,-)
)Os,ooo)
(o~b~-)
(0001,-)
(01,000) (9000°)
(01,000) (0000°)
(01,000)
(01,000)
Cob&o. 223
20,1,27
(2)
(2)
(0)
} 59
} a:
(o)
(0)
)o)
(0)
ui
(2)
(2)
(2)
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L 21
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(n)
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(2)
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(2)
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(2)
(2)
(o(
(2)
(2)
(o)
(1)
(o)
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(2)
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PAGENO="0309"
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PAGENO="0310"
304
47
TABLE 1. Selected Statistics for Minority-Owned Finns by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
)s~bD,-)
(01,000)
(00589-)
(=729-)
(01,000)
)D7bD,-)
(21,000)
)obD,-)
(01,000)
(01,000)
totli ~p8tD8h ` 7,86S 109,767 1,114 2,399 60,279 2 CD) 6,751 20,408 CD)
4781940 5,998 63,856 740 2,42940,6152(0)5,248 23,341 CD)
0952,- Sp&ol8h 1,87745,811374 970 39,664 3 (D) 1,503 6,147 0)
D&Dklog, t,t41 Sp&015h 1,240 6 CD) (D) )D) CD) 12 (D) Cu)
P029-to 61040 62 { - - - - - CD) CD)
00589 1 CD) (0) CD) CD) 2 CD) CD)
09-2.9185108 8920S2DD4 514 2 (0) (DC CD) CD) 1 (DC CD)
4801040 2,17149 CD) CD) )D) )u) 33 )~) C~)
P02990 0008.9 109 - - - - - S Cu) CD)
19-85320 tot sp~o171sd - 1 CD) CD) )u( )o) 7 04 5
1980645 1,61339 CD) CD) CD) CD) 5 CD) CD)
1,49438 CD) (DC CD) )u) 2 Cu) CD)
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7085625 534 4 2) (0) (DC CD) 3 )D) CD)
8811040 134 4 (0) CD) CD) CD) o CD) )u)
M2IID,o 549 . 7 CD) CD) )o) CD) 26 CD) )o)
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1920P&002D8P9-62PS, 90981 09-49120 220 2 CD) CD) CD) (u( 48 CD) CD)
D~uDo&o 126 2 (0) CD) (DC (5) 9 CD) (5)
PAGENO="0311"
48
305
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(,o,,th~,-)
($1,000)
(ooobo,-)
(oob~,)
($1,000) (o,l,~~)
($1,000) (o~b~-)
($1,000)
($1,000)
b10k~0,1!~d ~ tot~1
0p1,&t1~1 bolld@o,, tot&1 Sp&o1~h. - -
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(0)
(0)
PAGENO="0312"
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308
TABLE 1. Selected-Statistics for Minority-Owned Finns by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
51
)~bo,-)
(Si,07o)
(o~~bo,-)
(o~otho,-)
($1,000) (00000-)
)$s,ooo) (o~~bo~-)
($1,000)
($1,000)
007
JO 33
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PAGENO="0315"
52
309
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry; 1969-Continued
PART C. SpanishSpeaking Owned Firms
(o0b~l)
($1,000)
(,o~boo)
(o~oth~o)
($1,000) (o~bo0)
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($1,000)
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PAGENO="0319"
313
56
TABLE 1. Selected Statistics for Minority*Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(~oo~b~)
(01,000)
(oo,~b1,-)
(,oo~b~)
($1,000) (ooth~)
($1,000) (o,,~b1,)
(01,000)
(01,000)
(0)
(0)
(0)
(D)
(0)
(0)
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(0)
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(0)
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(0)
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(0)
(0)
(0)
(0)
232
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(0)
(1)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
PAGENO="0320"
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PAGENO="0321"
315
58
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(0085o,)
($1,000)
(ooobo,~)
(ooobo,-)
($1,000)
(ooobo,)
($1,000)
(ooobo,)
($1,000)
($1,000)
10111 Spooi~h 31 714 )~) )~( (u) (9) )~) (Dl
8,01010. 15 338 (0) (u) (u) (0) (u) (u)
Sp101~h 001 ~poo1f1sd 11 178 (1) )u) (0) (u) (u) (8)
Sp1oi~h 1 (8) - - - - - 1 (Di (0)
8801980 1 )u) - - . - - 1 (Di (0)
totol 88091810 3 )e) - - - - - 3 (u( (0)
81781080. 1 (e) - - - - - 1 (D) (e)
Co5&t~. 1 (D) - - - - - 1 (u) (u)
Sp800810 808 880007117 1 (to) - - - - - 1 (to) (0)
totol Sp195lto 10 425 9 (u( (u) (0) (to) u (u) (to)
88tlooo 5 231 4 (0) (Io( (D( (to) 1 (to) (to)
P0o~to Ditooo 4 (to) 4 32 189 8 42 - - -
COoS,,, S (to) 1 (to) (to) (io( (0) - - -
too., 10th 8p&tol~h 10 (u( 9 )D( )to( (to) (to) 1 (u( (u(
8891080 2 (0) 2 (u( (to) (to) to) - - -
Coboo 2 (to) 2 (to) (u( (1) to) - - -
09080 Coottool op Sooth Asoplto,,o.,. a (o( 2 (to) )u( (to) (u( - - -
Spooloh 8001 hp1Cif183 4 131 3 )to( )u) )e) (to) 1 )D( (u(
P008710 RICo,,. 29 `212 1 0) (101 )o) (o( 28 `)u) (o)
SpotoIsOo toot spo008lod 93 461 2 to) )to( )e( (to) 91 )D) )e(
Sp&oI~h 606 8p601flhd 2 1 1
totol SpI0185 0,900 169,200 1,800 7,900 135,800 5,100 29,400
70-654 0-72-21
PAGENO="0322"
316
59
TABLE 1. Selected Statistics for Minority*Owned Firms by Industry: 1969-Continued
PART C. SpanishSpeaking Owned Firms
(ts,00o)
)~~o~)
(05,000)
(50050)
(01,000)
(50050,)
(Oi,ooo)
COleus)
Aolusl huoboedoy ooeuieuo, toSol
(0) - (n) Cs)
090,, C,oty&5 S0hA~s1e4t.. D) - (D) (s)
Sp09100 topotiOlod (o) - (0) (D)
5509000 (i) 495 (D) )D)
spoolob ~s oposiflod (o) - (o) )o)
PAGENO="0323"
317
60
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART D. Other MinorityOwned Firms
(012001')
($1,000)
(sooblo)
(s'oboo')
($1,000)
(o,o~bo~)
($1,000)
(slobs,)
($1,000)
(00,000)
(u)
(0)
(s)
(D)
54
(0)
(5)
(D)
20
(s)
`(D)
Cs)
::
2,790
3
5
(5)
3,581
24
44313,148
4
2
(s)
(s)
(s)
28
2
Is)
(5)
(5)
)s)
(5)
(0)
(5)
(5)
(D)
8
(s)
(5)
(5)
49
(5)
(s)
(s)
21
(5)
(5)
)s)
18
5
(s(
(s)
(5)
Is)
(5)
(5)
2
is
(0)
(5)
`Is)
Cs)
(5)
(5)
(5)
(0)
(D)
(5)
(s)
(5)
(5)
)s)
(5)
(5)
(5)
(5)
F 1,170
412
6,516
(s)
(5)
(5)
(5)
(s)
(5)
(5)
(5)
(5)
(s)
(5)
(s)
Cs)
(s)
(5)
(5)
(s)
(5)
(s(
(5)
(5)
PAGENO="0324"
318
61
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART D. Other MinorityOwned Firms
(b~~)
(01,000)
(ooob,s)
(00000!.)
(01,000)
)oooboo)
(01,000)
(00005!.)
(01,000)
(01,000)
251 0o,s,hold foool 9,006 13 (2) (1) (2) (2) 1 ~1) (1)
2515 0211 8988 sod bld!poiog,. (0) 3451,612 15537 1 (D) (0)
251- Ooosshold foooitooo, o.s.k (D) 2 (D) (1) (0) (D) - - -
259 O15OB11BO200B psotit ioos sod 01660028 1,273 11 (0) CD) (1) (1) 19 (D) (I)
273 Book! (2) 2 (2) (2) (o) (D) 9 (1) (1)
274 Book pobllshthg (2) 1 (1) (1) (2) (1) - - -
go~phio 3,191 10 (D) (2) (2) (1) (1) (~)
2752 C~,oo1s1 poioliog, lilhogosphio.. (2) 12 105 2,594 9 216 2 (2) (1)
275. Coo~2o,1s1 p0101109, o,s,k (2) 1 1) (2) (2) (D) - -
278 Bl2okbook5 sod bookbiodiog (2) 2 (2) (1) (2) (D) 1 (I) (0)
341 0,6si 0208. (2) 2 (2) (0) (2) (2) 1 (2) (0)
345 Sosoo 030h102 pooth,ots, tolls, 210... (2) 3 (2) (1) (2) (2) - - -
346 0,611 $bsopiog5. (2) 4 (2) (2) 2) (2) - - -
347 01681 82001088, 9,2,0 3,004 10 (0) (2) (2) (2) 1 (2) CD)
poo01ots, (2) 1 (2) (2) (2) (2) 1 (2) (2)
pood~o~s (2) 1209354100 1 (1) (2)
34- 00boio40od os1s1 ptodo,1~ o.s.k 718 7 (2) (2) (2) (2) 12 (1) (2)
Lo02 4010 2
41. Loosl sod iotl700b$7 6080911, 0.8k.. (2) (1) (1) I (1) )u) (1)
PAGENO="0325"
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PAGENO="0326"
9 9999
9 9
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PAGENO="0327"
321
64
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART D. All MinorityOwned Firms
(o,obs,)
($1,000)
(ooobso)
(o~ob3,)
($1,000)
(ouobso)
($1,000)
)O20b71)
(01,000)
(01,000)
R2t511 t75d60.000tt768d
57 ?~ottuo* sod 00s.foooi.htog..too~... 428 44,727 220 1,000 42,098 4 184 199 2,829 13
971 urotsus. sod hossfursishlogs. 126 18,435 93 591 17,993 6 193 33 442 13
5712 rurottuos 88 11,000 59 372 11,239 6 189 29 421 15
5713 Floor ,oo.riog 5090ss 21 1,754 20 Ce) (o) (0) (0) 1 Cl) sC
8714 Oospsry sod ,ph~lstsry store.. 7 713 7 26 713 4 102 - - -
5713 Chios, 919.90608, sod setsloosoe
store.. 5 4,216 3 (0) (0) (0) (0) 2 (0) (0)
5719 MisosIlsosous hoosfuroishioge
$tOrss. 5 192 4 (0) (0) (0) (0) 1 (0) (0)
572 Household spplisoOsstOr2s 82 7,601 41 124 8,818 3 166 41 783 19
573 Radio, 0915019160, 206 781516 stOrse.. 138 16,772 79 252 15,968 3 202 59 804 14
5732 Radio sod tsleois106storse 62 13,858 36 04 13,838 3 247 6 120 20
5733 #Susto store. 11 1,244 9 2
573- 02db, tslsoi.boo, sod ousio 58 2,130 0 93 684 13
57- Furoiturs sod hoo8forolshbsgs store.,
58 Estiog sod drbokbog plsoe.. 5,873 327,722 3,778 22,304 302,675 6 60 1,897 25,047 13
59 Riso.llsoeou.rstsil st6oes. 3,315 181,131 1,407 4,818 159,236 3 113 1,908 21,895 11
501 Orugstorss. sod proprietsey stors,,., 283 39,716 234 1,308 38,695 6 165 49 1,021 21
892 Liquor store. 350 41,656 271 812 38,484 3 142 88 3,172 38
593 kotique store. sod seooodhsod stores. 92 2,287 18 64 1,817 4 101 74 470 6
594 360k sod .tstioosry *torss. 23 1,856 16 63 1,651 4 103 7 205 29
5942 509k stOres. 11 (0) 9 46 1,111 3 123 2 Cs) Cs)
5943 Otsttoosry 58685.. 10 644 7 19 540 3 77 3 104 35
894- Sook sod sostbooery .too.s, o.k.. 2 Cs) - - - - - 2 (0) (0)
393 Sportbss good . stores sod kioyole
shop. 104 7,587 49 172 7,013 4 143 ss 574 10
596 Fsro sod gsrd.s supply etoo.e 133 18,280 118 495 16,072 4 139 17 208 12
3962 Osy, grsio, sod fssd .toru. 34 4,838 33 1
5969 Tsos sod gsrdeo supply stores,
388- Furs sod gsrdeo supply .tooes,
sib 48 3,603 32 14
597 Oeoolry stores. 234 7,58177184 5,577 72 2,004 13
398 Fuel sod Los deslsr.. 24 1,127 12 22 083 82 142 15
599 Rstsil stores, 0.8.9 2~041 60,272 601 1,603 48,267 77 14,003 10
5992 Florists. 368 13,886 147 457 11,029 70 2,268 10
5993 Cipr .tore, sod stood. 29 813 10 27 306 31 307 16
5994 Neos desl.r sod ores itsods 9 474 7
3995 Hobby, toy, sod gsos shop.. 8 470 5
3996 Cssers sod photogrsphio supply
storss. 7 2,370 7 33 5,370 330 -
5997 Gift, ooo.lty, sod souosoir .hop... 134 9 366 107 362 9038 84 330 20
5999 6b.s.llsoeousrsts 11 storss, 0.5.0, 1,486 32,683 316 688 21,820 68 10,803 9
59- Rstsil .torss, o.s.k 22 2,780 13 113 2,873 206 04 10
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814 ?sr.oosl orsdit isstitutioos. 10 3,206 7 139 3,190 23 456 3 16 3
815 Suits... sr.dit institutions. 8 3 3 10 3
818 Loss oorr. spoodsots sod brokers. 1 ` - -
61- Credit s~eroiss, o.k 16 6,978 8 138 6,919 28 1,384 1$ 39 3
82 esourity, crssodity, broksr, sod
.sroic.s. 835 5,198 30 162 4,048 5 135 825 1,130 2
822 8.cruity broker. sod d.sl.rs. 378 4,747 24 151 3,841 6 160 354 906 2
62- Cos~odity brokers sod ..rvio.s. 77 451 8 11 207 2 35 71 244 3
83 Xosursooeosrrisrs. 54 2,236 3 sC Cs) Cs) Cs) ss Cs) (SC
64 To.ursso.s~ssts, broker.,ssd ssroio*s. 5,519 2,9,997 11,844 2 84 1,333 8,153 8
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323
TABLE 1. Selected Statistics for Minority-Owned Firms by Industry: 1969-Continued
PART D. Other MinorityOwned Firms
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TABLE 1. Selected Statistics for Minority~Owned Firms by Industry: 1969-Continued
PART D. Other MinorityOwned Firms
67
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71
TABLE 2. Selected Statistics for Minority.Owned Firms by Geographic Areas: 1969-Conhnued
PART C. Spanish-Speaking Owned Firms
o~b~o)
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(oo~b.,-)
(11,000)
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(51,000)
(o00bo,-)
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Cob 23 587 3 6 480 2 183 20 87 5
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6;snlsb !ot spIcIfisO 002 8,216 87 355 8,812 4 78 163 1,312 7
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91489651, 72 1,888 18 83 1,424 3 75 53 851 11
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tOo 6111065189 by 5858!, 10751 Ipsols'o 3,000 67,200 2,200 3,600 60,100 2 67 1,800 7,100 4
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Wotl,so.,,.,,.,,.....,,....,.,.,,.,.,,.. 1,403 41,337 830 1,406 35,016 2 53 773 8,375 8
0tb~o 8750186 121 3,318 32 214 2,685 7 84 74 633 7
Miooostt., tot.1 8psot.h.....,.,...,........,. 124 2,842 27 68 2,032 4 78 97 720 8
sos, tttsl 8psolsh........................... 107 1,770 31 84 1,324 2 43 78 448 6
StilsoutI, totsl 8pso186 271 8,035 72 355 8,527 3 85 182 1,528 8
Othso 8786156 11 803 3 106 787 33 272 8 26 3
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72
TABLE 2. Selected Statistics for Minority~Owned Firms by Geographic Areas: 1969-Continued
PART C. SpanishSpealoing Owned Firms
(o.o.04,)
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(oo~b6,)
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($1,000)
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Id8bo, totol Sp8o1~h 111 2,152 24 so 1,580 2 85 87 582
105 2,084 23 sI (I) (0) (5) 82 (5) (5)
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0th~ 6p,61.h 36 986 12 37 779 3 68 24 187 8
Ms810.o. 188 3,865 49 (5) (5) (5) Is) inn (ii (ii
08080 Sp.oi.h 5 70 2 (s) (5) (5) (ii 3 (5) (5)
M.s19~o. 176 7,780 61 Is) (Di (1) (ii 118 (5) (5)
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M.s1o.~o. 2,600 29,400 400 1,000 17,400 3 44 2,200 12,000 8
8.81028. 27,840 1,030,900 9,448 43,500 687,918 8 94 18,095 142,928 8
82,0109896, tot.1 6p~61.h 392 11,131 88 348 9,063 4 107 307 2,068 7
18 `268 4 `168 1 56 12 `87 9
018996, tOtsi 8p.ti~h 188 3,687 49 114 2,788 2 89 137 899 7
8.912.6. 176 3,822 46 (s) (Di (0 (5) 130 (5 (0
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330
TABLE 2. Selected Statistics for Minority.Owned Firms by Geographic Areas: l969-Contjnued
PART C. SpanishSpea~ing Owned Firms
73
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97
TABLE 4. Selected Statistics for States With 500 or More Minority-Owned Firms by
Industry Division: 1969-Continued
PART C. Spanish-Speaking Owned Firms
1 ~
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With ptid a'pioy,t,
)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Cttia,o, 5 Os (a) (a) (a) 2 (a) (a)
tp.ot.h tot spaaitiad 65 2,204 (a) (a) (a) 44 (a) (a)
ttioodiatoo,s. 65 2,041 (a) (a) (a) 07 (a) (a)
2 (a) (a) (a) (a) a (a) (a)
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t,oiaao 1 (a) - - - 1 (a) (a)
Poatta Ria..~ 21 277 (a) (D) (a) ao (D) (a)
Otha,- Catitti at Sooth Aaatiaat (5) : - . : S (a) (a)
thoi,t,ia toad, 21 3,694 (a) (a) (a) 8 (a) (a)
Costa 4 1,316 (a) a) (a) a (a) (a)
Spati.h tat .paaifiad .::::::: ii 1,703 (a) (a) (a) 3 (a) (a)
Othat itdo,ts-i.. . 17 779 (a) (a) (a) aa (a) (a)
Itdo,toi.. tat aiassifi,d 131 2,S5t (a) (a) (a) 102 (a) (a)
Mtaiaao 2 (a) - - - 2 (a) (a)
Oth.o Cattail at Sooth A=,oia,o e (2) - - - (a) (a)
tp.ol.h tot .p.aifl.d 51 641 (a) (a) (a) 42 (a) (a)
PAGENO="0361"
355
98
TABLE 4. Selected Statistics for States With 500 or More Minority-Owned Firms by
Industry Division: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(owb~-)
($1,000)
(~~~s~-)
(,,~s~)
($1,000)
(,,o1b~o)
($1,000)
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($1,000)
($1,000)
M1o0f&1t11~l. 14 (0) (0) )j~( (o) )°( °)
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Fi1~oo~, ~ ~.od ~l&1 1st~t9 48 )o) (0) (1) (1) )o) (I)
Iod9~t~1~ 001 0188S 18184 4~ (o) (0) )o) )o) (o( )n)
PAGENO="0362"
356
99
TABLE 4. Selected Statistics for States With 500 or More Minority*Owned Firms by
Industry Division: l969-Continued
PART C. SpanishSpeaking Owned Firms
181143 { } ~
6 `121 { J 69
889108,, 370 (n) (s) CD) (o) (0) (DC
Otb~ C89t~*1 Sooth AoDtj089 334 CD) (D) (DC (t) CD) CD)
M8It0*t 189 (D) `(D) (D) (D) (DC (D)
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101
TABLE 4. Selected Statistics for States With 500 or More Minority.Owned Firms by
Industry Division: l969-Continued
PART C. SpanishSpeaking Owned Firms
(o~b~)
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(o~b00.)
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T,&o8p07t89100 008 00000 pobllo otilitl00..... 872 18,091 1,201 8,881
} 338 7800 ~ } 3417
} 840 9:423 .( 406 } 2,898
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2,225 26 } 782
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PAGENO="0365"
102
359
TABLE 4. Selected Statistics for States With 500 or More Mlnority*Owned Firms by
Industry Division: 1969-Continued
PART C. SpanishSpeaking Owned Firms
(sober)
(~i,o00)
(sober)
(oob.r)
($1,000)
(toobor)
(sinus)
(,oob.r)
($1,000)
($1,000)
cosorado--cootitoed
Piscine, theoreooe, cod neal .etate. 84
Oilcan. 90
Other Speoieh 4
Selected eervioee. 825
Mecicco. 910
Other iodoetriee. 53
Mexican, 51
other Spa,,ieb 2
Iodoetriee Rot claeeifie5 186
Other Bpaoieh
Men Metico, tctal epeoieh 3,985
Meoitao. 3,949
Other Spanish 36
Contract ccnetroctico. 456
Other Spe.oish.
.eoufactoree, 83
Metitan. 63
Traneportatioo and ether poblic utilities,..,. 237
Mexican, 235
Other Spanish 2
Wholeecle trade 79
Other Spati.h
Retail trade 1,597
M~tican. 1,578
Other Spe.oieh 19
Finance, Insurance, and real *eta 196
13
13
108
16
18
27
1,298
1,288
12
158
157
29
29
39
39
27
27
705
695
10
1,803
6,951
115
1,055
1,055
2,210
2,192
117,034
116,088
966
13,912
55~912
3,380
3,390
4,897
4,957
6,553
8,553
88,480
87,876
804
1,060
39
1,483
3
114
39
1,485
3
114
318
3,924
3
36
318
3,924
3
36
42
868
3
54
42
868
3
54
49
1,628
2
60
49
1,628
2
60
4,357
98,925
3
75
4,320
37
96,048
779
3
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75
65
690
12,162
4
77
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12,162
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200
3,144
7
108
200
3,144
7
109
228
3,401
6
87
228
3,401
6
87
151
5,409
6
200
2,112
59,811
3
85
2,112
59,611
3
85
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(0)
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515
502
13
37
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139
139
2,687
2,663
24
258
258
34
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198
198
52
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167
167
318
290
3,027
3,027
185
165
584
556
20,209
20,022
187
1,750
1,750
236
236
1,296
1,296
1,144
1,144
8,869
8,869
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22
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10
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PAGENO="0366"
360
103
TABLE 4. Selected Statistics for States With 500 or More Minority*Owned Firms by
Industry Division: l969-Continued
PART C. Spanish-Speaking Owned Firms
St&t. ..~d 1~d.~t~y Ci~tsi~ ~ f; ~
PAGENO="0367"
104
361
TABLE 4. Selected Statistics for States With 500 or More Minority*Owned Firms by
Industry Division: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(t~tbtt)
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(oto~btt)
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367
110
TABLE ~. Selected Statistics for Minority-Owned Firms by Selected Standard Metropolitan
Statistical Areas: 1969-Continued
PART C. Spuninh-Speuking Owned Firmu
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368
111
TABLE 5. Selected Statistics for Minority*Owned Firms by Selected Standard Metropolitan
Statistical Areas: 1969-Continued
PART C. Spanish-Speaking Owned Firms
~=~-i t~,oooi c~~a~i c~=~~i aloud (s~~-) 155,0031 (o~bss) 55,0301 (*1,0001
~io~ 945 5~,433 335 (a) (0) (a) (a) eon (a) (a)
0500, Sp&ol.h 5 ecu a (a) (a) (01 (a) 3 (a) Cal
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MubIls, A0~., tud&1 epsulsb 07 1,091 10 (a) (a) (Dl (a) 17 01 (a)
N7!fllk-05,58705th, Id., 07551 SpsIlSb 19 454 1 (a) (a) (a) (Dl 18 (Dl (a)
eluhuoud, Vs., Ootsl Sp~o1sh 9 87 1 (a) `(a) (a) (a) 6 (Dl (a)
PAGENO="0375"
112
369
TABLE 5. Selected Statistics for Minority-Owned Firms by Selected Standard Metropolitan
Statistical Areas: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(,,oobo,) ($1,000) (o,bo) (ooobo~) ($1,000) (oOobOO( ($1,000) (ooob~,) ($1,000) ($1,000)
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126
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(00,167,)
($1,000)
(lo3~b7,-)
(,088b8,-)
($1,000)
(lobo,-)
($1,000)
(,02th2,-)
($1,000)
($1,000)
Mlootlotol-81, totIl IplolIb 25 2,3~1 (0) )o) (o( (o) )o) (0)
6811029. 25 2,361 )o) (o) )o) (o) (o) (2)
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t,oio,o. 24 (o) (2) (o) (2) (2) 336 21
6261010. 351 `(o) 346 3,140332 )o) (0)
011627 Sp~oi~h 3 (o) - - - - (o( )o)
01h~p lodottpl,s, oo0~1Sp~o1~h 17 )o) 10 175 3 58 )o) (o)
Oth,plp,oish 1 )o( - - - - (o) (0)
0,01026. 58 )s) 24 1,032 2 66 (o) (2)
01h,p 12701116 1 )s) - - - - )o( (o)
0,61029. )o( °° 3,443 3 us (o) (o)
0oh~p Sp,oish 1 (0) - - - - )o( (o)
M3941806opls, 16111 Splollh 5 696 (o) (2) (o) (D( (0) (0)
5890026. 5 195 (o) )o) (1) (1) (o) (2)
6111027. 60 )o) (o) )o) (0) (2) 376 8
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9071239, 46 )o) 9 342 2 68 (o) (0)
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0201589. `9 °) l~ )o) ~ (2) 60 6
Olh,p Sp~oi~h 2 . )o) (2) )D( (0) (D( - -
9,oio&o. 32 (1) 13 676 2 97 (o( (D(
Ooh,p Sp~o1~h 1 (2) - - - - )o) (o(
PAGENO="0390"
384
127
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Continued
PART C. SpanishSpeaking Owned Firms
(o~b07)
(01,060)
(o07b~)
)o100)
($1,000)
(6b00)
(0l,ooo(
(6=100)
(01,070)
(01,076)
c7t12 90161, 69681 Sp&oi8h 116 1,074 (o) (o) (2) (0) 69 (6) (9)
6291986. 115 (n) 122 1,459332 69 (o) (s)
Oth,o Sp&718h 1 (1) (o( (9) (o) (6) -
M,of,6t1076, tot.1 9p~o121 13 (o( (o) (o) (2) (o( 9 (D) (n)
6861981 93 (o( (1) (o( (9) (1) 9 (I) (1)
69681 Sp*o190 641,181 (9) (9) (9) (9) 59 (1) (0)
618791989 641,181 (9) (1) (o( (1) 50 (o) (9)
~ 6080,, 6968167861,' 29 (1) (s( (o) (o( (o) 13 42733
6861121 29 (1) (9) (o) (6) (9) 13 427 33
51 946 (9) (9) (o) (o) 29 (9) (9)
97827986. 51 946 (9) (9) (1) (0) 29 (o( (1)
6261687. 71 (9) (2) (o( (1) (o( 46 186 4
Oshso Sp&oI.h 3 (1) (9) (1) (DI (2) . . -
C~b&6. 2 (o) (o) (2) (2) (o( - - -
Oth,o C2620&1 90 So~2h 902971087. 1 )o) (o) (0) (0) (o) - . -
6251186. 8 (0) (9) (2) (0) (1) 7 64 9
Po2~to 61126. 6 (0) (9) (o( (1) (9) 3 30 10
Cob&o. 1 (9) (DI (9) (0) (0) - - -
0.12062 01126 2 (0) ID) (0) (2) (o) nI (DI
020:, 95020,1 06 So~1h 0o8~1o.&'~ 1 (1) (9) (2) (2) (9) . -
Sp,oI,h tot ~p~oif1~d 14 412 (o( (9) (o( (DI (0) ID)
PAGENO="0391"
385
128
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Continued
PART C. SpaninhSpealoing Owned Firmo
)u~one)
(01,000)
(too)
(oboe)
($1,000)
(too:)
(01,000)
(otto)
(01,000)
(00,000)
esoloso 03 itS (n) )e) (1) Ce) (e) (0)
Cueto Ron..' ii )n) (n) (e) (1) Ce) 10 1
etheeneutesluelluthklee1050 1 )n) - - - - Ce) (n)
Cobsu 3n 331 (1) (n) (0) Ce) (e) Ce)
oth.e nonneol so South Aeniuso 14 one )n) (0) (0) )n) (e) Ce)
eonie.u (0) )e( )e) )e) )e) ~ (0)
I'ueetn Rin*o~ 2 (0) - - - - Cu) (0)
tesolob not .peniti.4 121 )e) (0) (0) (0) )u) Ce)
Pueto nuns,, 1 110 )e) Ce) ` (e) )e) )e) (0)
Cubst' 7 65 )e) Ce) Ce) Cu) (1) (1)
on 04 () I ))
SlIce ~e~e~1 2 Ce) - - - - Ce) Ce)
Sinutontiess, tutol tesoish in in) (1) Ce) Cu) Ce) 23t 20
MenSes', 17 Ce) 0) Ce) Ce) Ce) 230 in
MotORs,, 107 Ce) Ce) )e) )n) Ce) Ce) In)
SlIce Sesoish n )n) (0) )n) Ce) )e) )n) )e)
eeeinso 02 `in) )e) )e) Ce) Ce) ~ 30
othse Ses.oiCu 1 )e) (0) )e) Cu) )e) - -
notiCe, 406 13,001 Ce) In) )n) Ce) (1) (0)
otuet tesoiot 12 780 (5) Ce) In) )e) (0) In)
so C)
Sthse Insoish 1 )e) - - - - )u) (0)
Rtbeo innustnies, toRsO Sesoish 31 327 )u) )e) In) (0) )e) Ce)
Itetleso 31 327 nC (0) Ce) (0) Ce) )e)
Intusinlee not elossitist, totsi teonish 03 (e) Ce) (0) )e) )e) )e( Ce)
Metins', 03 (0) (0) 101 )e( Ce) )e) Ce)
Metinso lot 4,205 (0) )e( 10) Ce) "C 6
ORIon ies.oisb o 212 (e) )u) Ce) Ce) Cu) 12
PAGENO="0392"
386
129
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority*Owned Firms: 1969-Continued
PART C. SpanishSpeaking Owned Firms
L-~" 1100! 10th ~
With
p!td
(100500.)
($s,000)
(000500.) (o~~b00)
($1,000)
(,0~1t~)
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(000511)
($1,000)
($1,000)
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(0)
(0)
(1)
(0)
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(1)
(1)
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(0)
(0)
(0)
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(1)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
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(1)
(0)
(1)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
PAGENO="0393"
130
387
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Continued
PART C. Spunish-Speuking Owned Firms
(1~l511-)
(tiunu)
(nn5~I-)
(n=b~-)
(01,000) )1~:n)
(01,000) (,,o,bo,-)
($1,000)
($1,000)
(1)
nI
(n)
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in)
ni
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(n)
ni
In)
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loins. 17 (n)
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1,sin&u. 11 (1)
mOo,- sp'ui*h 1 (1)
e,oin*o. 113 (1)
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In)
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In) In) In)
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PAGENO="0394"
388
131
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Conhnued
PART C. Spanish-Speaking Owned Firms
~b~)
(Piano)
)~~ban)
(%n=b8i-)
)Si,00o) )sanban)
(Sims) )sanbsn) (SimOn)
(Sloan)
38 (a)
1 (D)
141 (a)
2 (a)
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3m (a)
211 (a)
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14 (a)
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PAGENO="0395"
a a a a a
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PAGENO="0396"
390
133
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: l969-Continued
PART C. Spanish-Speaking Owned Firms
)o=no,-)
teens)
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PAGENO="0398"
392
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority~Owned Firms: 1969-Continued
PART C. Spanish-Speaking Owned Firms
135
(o*,)
(*1,000)
(003103)
(~s.,)
(*1,000) (103b03) (*1,000)
(603103) (*1,000)
(*1,000)
tot*1 Sp*oish 69 1,580
009182*18 to&d*, t,t*1 Sp*oi*h 20 1,972
020*11 to&d6, tot*1 Sp*ois', 292 11,462
02411*9 97 (0)
Oth*o Sp&oish ~ (0)
Iodo*toi**o,t,1&,sifi*~, tot&1 8p&oi*'~ 92 2,320
S&oo*o2ot,, C*lLf., 0,1*1 lp&oi*h 925 19,936
02119*0 4 (1)
00026 Sp&oi*', 1 (2)
tot*1 Sp*ois'~ 44 1,458
0*01940 47 (1)
Olh*o Sp&oi*'~ 1 (0)
0*t&i1 16&d4, 6,0*1 1041120 184 9,991
72 (1)
Oth*o Sp&oish 1 (2)
S*1*ot*d *2,01,2., tot*1 Sp&oi.h 177 4,298
00022 Sp&oi*h 4 177
1020*06122 ooo ol&,s 11122, 0,041 Sp&01.h 53 803
0211903 51
00082 Sp*oj.'~ 2 (2)
C9ot:8otooo.ooootioo,to1215p27.j.5,....,.~ 565~ 15,9
(2)
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(0)
(1)
(2)
(1)
(0)
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(1)
(0)
(2)
(2)
(D)
(2)
(2)
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PAGENO="0399"
393
136
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority*Owned Firms: 1969-Continued
PART C. SpaniohSpeuking Owned Firms
)oo7b~)
101,0001
)o~b~)
(0%7.b77)
$1,000)
(o~:o)
)$s,00o)
)o,,.bo,)
101,000)
101,000)
`10) 0) 10) 16) 10) uI Il
0th~, 0p~o1sl, 10) (0) (0) (0) (0) (0) (0)
Moo1o~0. `(0) (0) `(0) (0) (0) (0) (0)
010., lp.oIsh (0) uI (0) (0) (0) (0) (0)
6..1o.o. 29,469 (0) `(0) (0) (0) (0) (0)
090., 97.ol.h 241 (0) (0) (0) (0) (0) (o)
2,072 (0) uI uI (0) (2) uI
0th., tp.ulsh 44 (0) uI 0) (0) (0) Is)
tOstI,,o. (0) 19 277 3 40 uI (1)
0th.~ 0p~t1sh ui - - - - (0) (0)
Mstlo.o. 2,261 (0) `(2) (2) (o) (0) (0)
0t0s~ 0p291.h 72 (0) (0) uI (0) uI (0)
Mstlo.o. 108 5,644 43 (0) uI (2) 0) 65 (2) (0)
0th.~ tp.ol.h 3 626 2 (0) (0) (0) (0) 1 (0) (0)
lotthot, 88 (1) 19 (0) `(1) (1) Is) 69 (0) (0)
080., 1p.ol.h 2 0) 1 (0) (0) (1) (0) 1 (0) (o)
M~t1o~o. 24 (0) 10 44 2,360 4 217 13 (0) (0)
0t0.~ 0p.ol.h 1 0) - - - - - 1 uI (0)
8.,,1,,o. 374 7,480 101 (0) (0) (2) (0) 273 (0) uI
0th.~ Op.ol.h 13 82 2 (0) (0) (0) (0) 11 (0) (0)
8s.1~~t. 65 (0) 16 66 1,743 4 109 49 (o) 1)
0t0o~1p.t1.0 1 (0) - - - - - 1 (2) 0)
6o,,1o~s. 93 (1) 22 42 1,865 2 85 71 (1) 10)
080.' tp.sIsh 1 0) - - - - - 1 (0) (2)
PAGENO="0400"
394
137
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority.Owned Firms: 1969-Continued
PART C. Spanish-Speaking Owned Firms
00SA ~d io0~~toy di~i.i~ H~' ~ 71~ 00p1~:~ ~
(o~bo,) 101,000) Io~b~s) I~o~b.o) 101,0001 )1bos) 101,000)
Io00s~7) 101,0001 101,00°)
28o10&o .:::::: 114 5,481 101 `DI ID) ID) ID)
0th27 lpsoi.h 8 135 III (1) ID) III ID)
Oooio&o 28 `ID) (0) `)D) ID) ID ID)
0th10 Sp201.h 2 (2) (1) DI ID) DI ID)
O2oio&o 22 ID) ID) ID) ID) ID) 343
Othoo Sp&oi.h 2. ID) ID) ID) ID) ID) -
Cthoo todo!t712,, tot&1 SpDoi&h 15 1,432 12 1,232 4 .103 200
0201010 33 ID) DI 111 ID) ID) ID)
Oth2o Sp3018h 2 ID) ID ID) 111 ID) 101
100031018! Dot 01333101.0, t0t21 Sp*oith,.,,.. 94 2,293 60 1,933 3 81 325
Oth.o Sp&olsh 3 4 - - -
Oth2o C86t021 ot Sooth 30201020 3,248 247 3,907471 1,341 8
706, lto..o ~ ID) `ID) ID) 11) 10) ID)
011,80 Cooto~1 Sooth 03opio.o 273 ID) ID) ID) ID) ID) ID)
702010 ~ ID) ID) `ID) ID) (DI ID) ID)
Cob*o ID) - - - - ID DI
0t01o C~tto&D oo Sooth 208o1o&, 391 ID) III ID) 101 ID) ID)
70801, 10020 ID) ID) ID) ID) ID) - -
Co01o ID) - - - - (1) ID)
01080 C80t021 07 Sooth Ao801020 ID) ID) ID) ID) ID) ID) ID)
002000 61020 ID) - ` - ID) ID)
Oth.o C201021 oo Sooth 03801040 ID) - - (DI ID)
PAGENO="0401"
395
138
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(t,~h~t)
($1,000)
(to~sbat)
(tothao)
($1,000)
(sob,)
($1,000)
(t,,tto,-)
($1,000)
($1,000)
Pototo 01025 8 (to) 2 (to) (to) (1) (to) 6 `(to) (to)
Colas 8 (to) to (to) (to) (to) (to) 7 31 4
OtO,.o Cattoal so tooth Attooioaot 28 380 2 (to) (to) (to) (to) 20 (to) (to)
Ottott toodostPto~8, total Sptooto$h 55 790 6 (to) (to) (to) (to) 4t (to) (to)
Poasto 019ao 3 (to) - - - - - 3 (to) (to)
Othtp Catla-ato ot- Sooth A,tootooao. a (to) 1 (s) (to) (to) (to) I (to) (to)
Itdooatoto,, tot otoa~, 17184, total tpoo1~h 256 4,230 43 (to) (to) (to) (to) 213 (to) (to)
Ottoto Ct,otoal 0a- Sooth A,toloat. 14 231 a (to) )o( (to) (to) na (to) (to)
M~ttooat. 133 0,071 49 (to) `(5) (to) (to) 84 `(5) (to)
Sthm Sp&olah 5 197 2 (to) (5) (to) )D) 3 (to) (to)
0O,oSoat. So `(to) 20 28 921 1 46 30 (to) (to)
tIlt, Spatto!h to (to) - - - - - to . (to) (20)
it `(to) 7 (to) `(to) (to) (D) 12 291 24
0th,, tpaslth 1 (to) 1 (to) (to) (to) (to) - - -
8,619*5. 103 2,130 19 (to) `(5) (to) (to) 104 (to) (to)
OSh,o tp,olth 13 159 2 (to) (to) (to) (to) toto (to) (to)
0061010 33 (1) 6 (to) (to) (to) (to) 27 154 6
Othtp Opaoiah 2 (to) 2 )D) (to) (to) (to) - - -
70-654 0-72-26
PAGENO="0402"
396
139
TABLE 6. Selected Statistics for Standard Metropolitan Statistical Areas With 500 or More
Minority-Owned Firms: 1969-Continued
PART C. SpanishSpeaking Owned Firms
S~A ~ed 1ede,t~ ~91!1D0 ~ HH ~
ee~u,et, 90911 171.21,5 06 475 CD) CD) CD) Ce) CD) CD)
`95,, ~.;;~::::::::.:::::`.:::::::::`.:::: 1 (DC CD) D) (D) CD) . CD)
tot,l S~.o11h 19 CD) I) )) (D) (D) 114
19 1) CD) (D) (1) Cu) 114 B
Wh0DDB~1B t9129, tot,l Spool,5 15 1,151 (1) ID) (D) Cs) CD) Cs)
B1.61D,e 55 1,151 CD) CD) )D) CD) )D) (1)
1,91Db 175 )D) )D) ID) CD) CD)
DOSDI Dpeoi~h 2 ID) )D) CD) )D) )D) )D) )D)
1912,895 CD) `CD) CD) )D) CD) CD)
DOS,, Sp,olsh 4 40 CD) CD) CD) CD) CD) 1)
096,7 1,DO,9~1,,, 90911 Spo0I~h 12 (DC )D) )D) )D) )D) )D)
M,,Dooo 11 197 CD) )D) )D) ),) 1) )D)
0th,, Spoo1~h 1 CD) . - - - (s) CD)
Coo9,DD9 60912069194, 92911 Sp,o1~h 32 1,624 CD) CD) (DC CD) CD) 1)
90111 Sp~e1~5 29 274 CD) CD) (DC 1) (D) ),)
1501,,,1, 12,7,, 9,911 Dpool60 2 CD) - - - - CD) )D)
12,1Db 7. 292 CD) `(1) CD) CD) (DC CD)
Po~~t, 616,, 5 261 t CD) (DC CD) (1) CD) CD)
Cob,, 5 509 CD) (DC (DC (1) (1) CD)
55 163 CD) CD )`) CD) CD) C')
Cobs,.,.. 14 103 (DC 1) CD) CD) CD) CD)
D95~~ 1e2o~9~1,~, 969~1 971,11h 2 CD) CD) (1) CD) 1) CD) 1)
PAGENO="0403"
~SHU~ ~!V~1D ~ ~8
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5 5 5 555555 55 55 528
2 8 8 8 8s8828s5s 8 3 ~
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8 Ss2828, 88 8 8 2 28288252 S ~-
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82882882 8 588888 5~8582~ 8
5 -5555 555 CD
S 8882528-8-5 8
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8 5 5 88 2 rn
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PAGENO="0404"
8 C
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PAGENO="0405"
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PAGENO="0406"
143
TABLE 7. Selected Statistics for Minority-Owned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: 1969-Contnued
PART A. All Minority-Owned Firms
F1~-~
(=s~?)
°m'~n~~.
(~~b~)
($s,000)
($s,000)
400
PAGENO="0407"
g)
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C)
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8 8
PAGENO="0408"
402
145
TABLE 7. Selected Statistics for Minority-Owned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: 1969-Continued
PART B. BlackOwned Firms
I020ot~ d1:~&~d ~p1~oo5~
578
650
20 ~ :2~6Y~..:::: :::::::::.:::
~ ~:::::.:::.:::::::::::::::::
11,048 356
6,087 127
PAGENO="0409"
403
146
TABLE 7. Selected Statistics for Minority-Owned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: 1969-Confinued
PART C. SpanishSpeaking Owned Firms
(~b~)
(,b~)
($1,000)
($1,000)
PO~O1O liooo. 107 680 16,792 156
1 to 4 oop1oy~o~. 1,831 3,244 00,606 48
0,oi,&o. 38 (5) (0) (0)
1p&si~h ootspooifiod 4 (0) `(D) (0)
70-654 0-72-27
PAGENO="0410"
404
147
TABLE 7. Selected Statistics for Minority-Owned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: l969-Conhnued
PART C. Spanish-Speaking Owned Firms
lodostoy dioi:ioo*opl,,t-*o**ol&ss
Fi~
(o~b00)
Eploy***
(o~b~)
($1,000)
($1,000)
7 (0) (0) (0)
1 (0) (0) (0)
Po*o0o 01o*~, 7 (0) (0) (0)
Cob&o. 10 (0) )
00h*o C*o0o&1 00 Sooth 40*000*9 4 (0) (0) (0)
Sp*oi*h 0008729 0009d 9 (0) - (0) (0)
50 to 99 ~p0oy**s 13 (0) (D) (0)
Po8oOo Oi,&o 1 (0) (0) (0)
Cob*o. 5 (0) (0) (0)
000*o C*oto*1 09 Sooth 40271989 1 (0) (0) (0)
000 *oploy*** 90 9008. 8 (0) (0) (0)
Sp*oish too sp200012d 2 (0) (0) (0)
002700 Oto*o. 1 (0) (0) (0)
Oth*o C800081 90 Sooth Ao2oio&o. 5 (0) (0) (0)
Po*oto Oio&o 1 (9) `(0)
Cot&o. 1 (0) (0) (0)
Sp*oish tot sp20001sd: 4 (0) (0) (0)
PAGENO="0411"
405
148
TABLE 7. Selected Statistics for Minority.Owned Firms With Paid Employees, by lnduétry Division and
Employment Size of Firm: 1969-Con~nued
PART C. SpanishSpeaking Owned Firms
(toobso)
(oooh27)
(~1,0O0)
(51,000)
Po2~to tio&o. 1 (I) (0) (0)
Sp&oi!h sot sp801ft2d 2 (0) (0) (0)
50 to 99 2=7107008. 8 (0) (0) (0)
Posoto tio.o 5 (0) (0) (0)
100 2=7197228 ossoo~ 1 ~) o~ (0)
Cob2o. 1 (0) (0) (0)
6bo128218 t02d8, too&1 953 4,223 240,078 207
Spsoish sot sp202ft2d 16 111 8,838 552
10 to 19 267107828. 50 652 33,431 688
Osototo 34 (0) (0) (0)
Cobto 5 (0) (0) (0)
Oth8o C866021 so Sooth 8=882026. 1 (0) (0) (0)
S7261.h sot 8780 iftod 4 47 2,699 674
20 to 49 26ploy22s.. . 23 (0) (0) (0)
OSoioSs. 19 004 20,896 1,099
Cobs. 2 (0) (0) (0)
06225 Csoto&1 Cs Sooth 82201,26. 2 (0) (0) (1)
SO to 99 262p18y288. 2 (1) (0) (0)
6291026. 2 (5) (5) (5)
081211 t~2d2, tot&1 16,315 61,991 1,485,081 91
1 to 4 28pI0y228. 0,917 17,366 820,149 62
PAGENO="0412"
406
149
TABLE 7. Selected Statistics for Minority.Owned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: l969-Continued
PART C. Spanish-Speaking Owned Firms
31&~$
(~b.~)
(~n~)
($i,000)
~i,ooo)
R.1~11 T~~d.-~21~d
132 (s) (a) (s)
Splli!h ~t ~p~11f1.d 9 (s) (D) (D)
3 (5) (a) (5)
Sp&ai.h at *p.slfI.d 1 (a) (a)
tat .1l~.t.2 .1... 4,300 aa,aoo 449,000 104
500.90 R1~oo 17 (a) `(a) (a)
0th.. C.ot,a5 a, tooth ~ 20 (a) (a) (a)
00.t-to Rtaao 2 `(a) `(a) (a)
005., Coot.al st tooth A~50aao 10 (a) `(a) (a)
PAGENO="0413"
407
150
TABLE 7. Selected Statistics for Minority0wned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: 1969-Continued
PART C. Spanish.Speaking Owned Firms
Thd90toy 4171.100, .301 tt-.12. 91888
sod .p.otfio Spsoish 5009~
V1os~ slth ...ld ,spIoy..~
?Io,o
(s~bs~)
E,,p18y2..
o~o.tpts
($1,000)
A00o2g2
~
($1,000)
9231900. 41 (0) (3) (0)
Otitso C.st~&1 to 000th Aosoio2t. 2
Spstish ttt.p.o101sd 5
3331020 6 (n) (u) (D)
soot 11906. 1 (~) (0) (3)
Oth.o C.otosl 000th Assoitso. 1 (3) (0) (s)
Sp201.h ttt spOt ifi.d 2 )s) (0) (u)
Ott &lloo*t.d by .122. 1,800 7,900 135,900 75
031.6 Spsoish 1,800 8,200 114,600 72
Oth.o Sp.oi.h 87 248 5,715 66
296 485 16:114
00914001 00
~ :: ::::: ::
03879001620. 2
37201.1 609 sp.tifi.d 4
Hooit8o. 18 (u) `(0) (o)
Ctb&t. 1 (0) (s) (0)
37251.1 tOt .p20181.d 1 (5) (s( (o)
- 8.7798206. s.oo. (o) 81611.14 36 86614 dlst14sisg fiio°.s foo loditldtll 965p200185.
PAGENO="0414"
408
151
TABLE 7. Selected Statistics for Minority-Owned Firms With Paid Employees, by Industry Division and
Employment Size of Firm: 1969-Continued
PART D. Other MinorityOwned Firms
21299 E~19y.60 ,;;~;;, 601pt9
________________________________________ (o~b60) (st5~o) ($1,000) ~$1,O00)
ALL I9SUSTRIES, TOTAL 18,875 91,772 2,496,901 131
50 t~ 99 873197508... 8 572 19,133 1,891
5~999~9~;10759 } 60
`~ ~ ~ 6,052
~ ~ .24 } 840 47,319 1,752
to 4 ~ 7,336 14,184 558,592 no
50 4 £5PI9Y22!. 682 998 36,275 53
} 889 31,947 2,866
100 997197828 97 9950....... } 46: 660
10 tO 19 28p19y222... 16 212 1,656 103
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928 8 8 8 2~ 552 8 8295 8 585 2 258852582 8 25888555 9 5
2 22.2 . 8 __
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PAGENO="0420"
414
157
TABLE 8. Selected ~t~tistics for Minority-Owned Firms, by Industry Division and Receipts
Size of Firm: l969-Continued
PART C. Spanish-Speaking Owned Firms
)o~28bl,)
($s,000)
(638925-)
(280*,-)
($o,mo)
)~28b20-)
(o38os,-)
($1,000)
$5,000 to $9,995 1,493 10,720 74 152 568 2 1,419 10,152
$so,ooo so $24,999 1,711 27,772 354 932 6,249 3 1,357 21,523
$25,035 So $59,9s~ 1,007 35,632 000 1,067 31,856 2 107 3,776
928750 010&s 12 824 12 ID) `ID) )D) I )D)
Oths, 35ot,sl S, Sooth 43881026. 14 `928 13 ID) )D) ID) 1 (DI
Sp2olsh sot IplolfIld 72 4,066 07 )D) ID) ID) 5 (1)
$100,000 to $199,959 293 40,281 283 )D) (DI DI fo ID)
8p261s1o Dot 8psolflsd 26 3,605 23 (5) (DI (DI 3 ID)
$200,000 to $499,999. 151 45,533 150 )D) (0) (DI S )D)
9881029. 122 ID) 121 ID) (0) (0) 5 ID)
Po,s,to D2o&o. 2 ($5 2 )s) (DI (0) - -
$500,000 So $O1S,ogg 28 19,489 28 641 19,489 23 - -
lsolo.o..- 26 (2) 26 ID) ID) ID) - -
Oths,- 2368,-si 08 Sooth d*sti~oo 1 )D) 1 (1) ID) (I) ` -
5259583 095 5p595755d 1 ($5 1 (DI )D) )D) -
$1,000,000 05 8978.. 13 21,371 13 40921,371 06 - -
25985 2 (I) 2 0) )D) )D) - -
Spsslsh sot spsolfisd 3 )D) 3 ID) )D) ID) - -
0*25 th*o $5,000 544 1,026 15 33 si 2 529 075
9*,-to 05029 30 80 5 )D) (DI (DI 29 (0)
0th:, 0,655*1 os Sooth 42071589 24 54 1 ID) ID) 0) 23 0)
35*61*1 sot 82*010184 74 161 2 (DI ID) (0) 72 )D)
$0000 to $9,099 271 1,846 27 62 204 2 243 1,742
PAGENO="0421"
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PAGENO="0424"
418
TABLE 8. Selected Statistics for Minority-Owned Firms, by Industry Division and Receipts
Size of Firm: l969-Continued
PART C. SpanishSpeaking Owned Firms
161
(0009.6.)
(*1,000)
(000000)
(ooob.,)
($1,000)
$100,000 to *199,999.
$200,000 to $499,909.
$1,000,000 0t.~~~.~
L~. th&o $4,000
*10,000 to $24,999.
$25,000 o~ $49,999
2 (0)
1 )o)
0 (0)
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(0) (o)
(0) ,)D)
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(0) (0)
`(0) `(0)
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96
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(0)
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(0)
(0)
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2
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4,422
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)D~
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(0)
PAGENO="0425"
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PAGENO="0426"
420
163
TABLE 8. Selected Statistics for Minority-Owned Firms, by Industry Division and Receipts
Size of Firm: 1969-Continued
PART C. Spanish-Speaking Owned Firms
(ooobo,-)
($1,000)
(ooob~,-)
(ooobs,-)
($1,000) (osob.,-)
(~~oob~,-)
$900,900 to $999,999 17 10,774 17 513 10,774 30 - -
$1,000,000 OP 9999 12 25,192 122,32025,192 193 - -
P~~,So 910*0 2 (0) 2 (0) (0) (D) - -
19*9191, 6099990*1182 2 $5) 2 )D) )o) ($5 - -
Not *lloo*9,d by ,1,s. 6,900 165,200 1,800 7,900 135,800 4 5,100 29,400
L80* 00*9 $s,000 905 1,925 10 27 23 3 895 1,902
$s,ooo to $9,999 456 3,180 16 39 118 o 440 3,004
*8810*8 391 2,739 14 (0) (0) (0) 377 (0)
198196 6109.9 1 (0) (0 )o) 7 $5)
090.,- C8otp&1 op Sooth *29110*9 4 24 1 (0) 0) (0) 3 0)
$10,000 So $24,990 oTt 5,890 0* o) o) - o) 309 (o)
9999190 691 89*9171.4 47 757 3 (0) (0) (0) 44 (D)
$25,000 to $49,999. 182 (0) 181 399 6,353 2 i )o)
*8oio*o 136 0) 135 318 4,772 2 1 (0)
$50,070 to $99,909. 105 7,235 104 o) (0) (0) 1
908680610*9 2 (0) 1 (9) ($5 (0) 1 )o)
8992190 ~ot *p.olfi.d 13 (0) 13 (0) (DO (0) - -
37
PAGENO="0427"
164
421
TABLE 8. Selected Statistics for Minority*Owned Firms, by Industry Division and Receipts
Size of Firm: 1969-Continued
PART C: Spanish-Speaking Owned Firms
(000187)
($1,000)
(~A4bo,-)
(908027)
($1,000)
(o~obst)
(168187)
($1,000)
8.81080.
2,118
3,217
15
(0)
(0)
(1)
2,103
- (n)
Sp161!h sot 887611184
548
848
2
(0)
(0)
(0)
546
(0)
$5,000 to $9,999
817
5,792
31
69
229
2
786
5,566
Cobs,,.
ss
386
3
(n)
(0)
(o)
52
(u)
Sp.olsh sot .p.oIfi.d
122
872
5
(0)
(0)
(0)
117
(0)
$10,000 to $24,999
904
14,905
95
194
1,580
2
829
13,321
$25,000 to $49,909.
8101610.
400
oss
(6)
(0)
489
354
(0)
(u)
)o)
)o(
(0)
)o)
-1
1
(0)
(0)
5079181 980 lp.C1fl1d
68
)n)
68
(0)
(6)
)o)
-
$50,000 t~ $99,999
8.61619.
241
157
16,514
10,811
247
150
(o)
(0)
(o)
(o(
(0)
(0)
1
1
(6)
(0)
$100,000 to $199,999
104
14,286
10-8
207
14,286
3
-
-
$200,000 to $499,909.
8.31010.
0th., Clotoll ot Sooth A.oo881t
so
~
2
(to)
($4
(0)
tO
45
2
(0)
($4
(0)
(to)
($4
(0)
(0)
(to)
(0)
-
-
-
-
-
-
tot 111o6*ttd by 8188.
1,600
9,600
-
1,600
9,600
- ttpt28.o 98 ~ (I) Withh,ld to soold d1~o1o~8tg flgAo.8 tot Itdioldoo&1 8o.p&oit~.
PAGENO="0428"
g)
a
C,,
Cn~
:!1'~
U
a.
0
0
a.
I
I-'
a,
C,'
PAGENO="0429"
C,
C,
U)
S
a
U)
a,
U)~
`C
So
PAGENO="0430"
424
TABLE 9. Selected Statistics for Minority-Owned Firms, by Industry Division and Legal Form of
Organization: 1969
PART A. All Minority-Owned Firms
Ildlltly dili,100 *od lIgli
167
(1~~b1l)
(*1,000)
(100500)
(000000.)
(*1,000)
(l~b~,-) (*1,000)
(,o~b~,-)
(*1,000)
(*1,000)
lot &lloo&t.d by 1.gol foog
6,900
165,200
1,100
7,900
2O,716~
251,09:
PAGENO="0431"
425
168
TABLE 9. Selected Statistics for MinorityOwned Firms, by Industry Division and Legal Form of
Organization: 1969-Continued
PART B. BlackOwned Firms
(o%~b~o)
($1,000)
(~00b00)
(o,~b00)
($5,000)
(,o~b~s)
($1,000)
(o~b00)
($1,000)
($1,000)
PAGENO="0432"
426
169
TABLE 9. Selected Statistics for Minority-Owned Firms, by Industry Division and Legal Form of
Organization: l969-Contrnued
PART C. Spanish-Speaking Owned Firms
(59,000)
(,00b~,-)
(,~b~,-) (Si,ooo)
(oso,-)
(5i,ooo (obo,-) (Sins)
(Snow)
a (o)
9 (o)
4 (o)
1 (o)
(0)
)n)
(0)
(n)
`Cs)
)n)
(0)
(n)
(0)
ao,n4:~
(o)
(0)
)n)
)D)
(0)
(0)
(1)
(0)
PAGENO="0433"
427
170
TABLE 9. Selected Statistics for Minority-Owned Firms, by Industry Division and Legal Form of
Organization: 1969-Continued
PART C. SpanishSpeaking Owned Firms
(toolbtl')
($1,000)
(so7h~t)
),,o,tbs~)
($1,000)
),,,,oh8,)
($1,000)
(Sothtt)
($1,000)
($1,ooo)
708~50 oi~o. 19 (u) 17 `283 4,004 17 239 2 )u( (8)
0th,~ Ctot~~1 07 SOOth 43,71610. 1 `(5) - - ` - - - 1 (to) (to)
P&~t~,8,hip 218 13,846 134 (to) (to) (to) (o( 84 (D( to)
88,1680. 169 11,394 108 (to) (o( (to) (to) 61 (to) 0)
0th,, C,St811 67 Sooth 40870680. 3 160 2 (to) (o( (to) (o) 1 (to) (to)
Co8po78tSo6t 44 23,194 42 (to) (to) (to) (to) 2 (1) (to)
8871686. 20 3,318 19 (to) (to) (to) (to) (to) (to)
0tht~ CtoStl81 Ol SOOth 07,11686. 4 220 3 (to) `(to) (to) `(to) 1 (to) (5)
Po~1to 516,8, 84 6,605 23 (to) (u) (to) (1) 61 (to) (to)
Oths, C,tt~11 01 Sooth 438,1689, 40 2,616 9 (to) `(to) (to) (to) 31 (to) (to)
Cohlo, 15 3,385 13 (o) `(to) (to) (0) 2 (5) (to)
0th,, Ctott,,1 o, Sooth 4o,~1u1t, 5 252 4 (to) (to) (to) (to) i (to) (to)
816,9. 3,005 8 (to) `to( (to) (to) 2 (to) (to)
4040,,, 9710,15916 (to) (0) (s) (to) 1 (to) (to)
PAGENO="0434"
428
171
TABLE 9. Selected Statistics for Minority*Owned Firms, by Industry Division and Legal Form of
Organization: 1969-Continued
PART C. Spanish-Speaking Owned Firms
~:, l~b6)~(30bs) (o~ (30)
($1,000)
tot ~11oy8ttd by 18g91 70,-s 6,700 481,600 4,300 23,300
p8yt00000t. 53 (0) 4 )D)
DOS:, Csoots~1 0, Sooth AODt-lylo. 61 (D) 11 (D)
R1y~o. 2 (0) 1 (1)
030s, byots-*1 Sooth .8o~,-1o&o 3 (D) a (DI
Not ~11oy~ttd by log&1 foss 0,100 20,800 300 400
(Di
(0)
(DI
` 49
ID)
(DI
(DI
50
ID)
(DI
(DI
1
(DI
(DI
ID)
1
i
F 2,373
} 71
`It)
(DI
(DI
(DI
(DI
(0)
(DI
(DI
PAGENO="0435"
429
TABLE 9. Selected Statistics for Minority-Owned Firms, by Industry Division and Legal Form of
Organization: 1969-Continued
PART C. SpnnishSpenking Owned Firms
~n,bn~)
)$i,nnn)
),nnbn~)
(,~5nn)
)$s,nnn)
)n~:~l
)$s,nnn)
)n=bnn)
)$s,nnn)
)$i,nnn)
sn,nnn n4n,4n0 4,040
n `In)
5 In) 0
4 )n) 0
1 `)o) -
5 )s) 0
o )n) 1
~
In)
1)
)n)
0)
)n)
)n)
)n)
)n)
06
)n)
)n)
)n)
1)
)s)
0)
)n)
)n)
0)
)n)
)n)
0)
0)
)n)
)n)
in)
)n)
0)
)n)
)n)
ni
)n)
)s)
)n)
)0)
)n)
)n)
ni
)n)
)n)
)n)
0)
0)
)n)
)n)
)n)
)n)
In)
)n)
in)
PAGENO="0436"
430
TABLE 9. Selected Statistics for MinorityOwned Firms, by Industry Division and Legal Form of
Organization: l969-Continued
PART C. Spanish-Speaking Owned Firms
173
(~b00)
($1,000)
(~00b~,-(
(9~~b~y)
($1,000) )o~~b~,-)
)$i,00o) )a~ba,-)
($1,000)
($1,000)
Not s11oo&t~d by 12921 9,79
`CD)
(a)
(a)
(D)
179 CD) (a)
6 (a) `(a)
20 (a) (a)
10 (a) (a)
17 (a) (a)
1 (a) (a)
a (a) (a)
a (a) (a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a) 931 (a)
(a) 41 `(a)
(a) 45 292
(a) a, (a)
(a) 22 (a)
(a) a (a)
(a) - -
(DC 1 (a)
(a) witaa.aa to ~o,ia diSoDa2iag 91go~-.s 9,,- lodb,ldo*D 00*720100,
(a)
(a)
(a)
(a)
(a)
(a)
PAGENO="0437"
431
174
TABLE 9. Selected Statistics for Minority.Owned Firms, by Industry Division and Legal Form of
Organization: 1969-Continued
PART D. Other MinorityOwned Firms
(o,500)
($1,000)
(obss)
(=510)
($1,000)
(680527)
($1,000)
(10=120)
($1,000)
($1,000)
To*ospo~tstioo 294 oths~ pobiio otiiiti66,
Sols pOopoi2loO8hip 1,058 88,362 282 904 74,869 13,493 17
R,t&ii 19632, toi&1 18,486 1,556,561 10,297 10,703 1,431,724 124,837 15
727t1.O2hip 2,726 370,746 2,020 12,275 350,531 20,215 29
0th~o ildo2tOiS., Oot*i 4,74872,137965 1,981 47,414 24,723
S812 plOpOi8tOOShip 4,575 59,024 512 1,461 35,080 23,944 6
Co~po~2tioos. 37 2409 21 401 13,268 1,793
PAGENO="0438"
432
Appendix A
SURVEY METHODOLOGY
The information in the 1969 report of minority-
owned business was developed from a number of
sources, including administrative records of govern-
ment agencies, information obtained from respondents
in a direct mail canvass, various published and unpub-
lished source listings, and personal contacts with
community and government representatives knowledge-
able in this area. Safeguards were provided to insure
the confidentiality of the data reported to the various
agencies and organizations furnishing information to
the Census Bureau. Information reported directly to
the Census Bureau is confidential by law and individual
reports can be seen only by sworn Census employees.
The same restriction also applies to individual data
obtained from other government agencies and unpub-
lished sources,
Under the Internal Revenue Service (IRS) system,
the tax return for sole proprietorships (form 1040,
schedule C) lists the names of individual owners. Tax
returns for partnerships (form 1065) list the names of
partners. Similarly, the tax return for small business
corporations (form 1120S) lists the names of the
individual shareholders. (Small business corporations
using form 1120S are legally incorporated businesses
with 10 or less shareholders who elect to be taxed as
shareholders rather than as corporations.)
Minority ownership was measured directly for the
above three segments of the business population. Data
about that segment of the business population filing
tax returns on other than forms 1040C, 1065, and
1 120S were assembled as a result of a systematic
review of files of government agencies, known public
sources, and contacts with representatives of minority
development programs.
The Internal Revenue Service made available to the
Census Bureau selected items included on the 1969 tax
returns for the three groups of sole proprietorships,
partnerships, and small business corporations. For each
-business, the file included the name, address, employer
identification number of the firm; social security
number of the owners, partners, or shareholders;
principal industrial activity code; dollar receipts; and
legal form of organization,
The Social Security Administration made certain
data available to Census, under provisions of law and
regulation, to be held confidential and used only for
summary tabulations. The statistical code "White,"
"Negro," or "Other" obtained from these files identi-
fied firms which were owned by Negroes or other
minorities, (The latter category includes Chinese,
American Indian, Filipinos,- etc.) For example, a firm
was considered to be Negro-owned if the sole owner or
half or more of the partners were Negro, Small
business corporations were classified as Negro-owned if
50 percent or more of the stock was owned by
Negroes.
It was recognized that the approach used to identify
"Negro" and "Other" racial minorities would not
provide identification of firms owned by Spanish-
speaking groups. In a second phase of this project, the
surnames of owners or shareholders of firms that were
not classified as Negro-owned were matched against a
list of Spanish surnames developed ax the Census
Bureau for work associated with the census of popula-
tion, Firms having one or more owners, partners, or
shareholders whose surname was included in the
Spanish surname list were included in a mail canvass to
determine the specific ancestry of all owners. The
specific groups identified on the airvey form were
Mexican, Cuban, Puerto Rican, and Latin American.
Classification of firms in terms of their ownership by
members of these Spanish-speaking minority groups
followed the same system used to identify the owner-
ship of firms with black partners or owners.
Use of the Spanish surname list in connection with
other projects had shown that all Spanish-speaking
Americans could not be identified through the use of a
Spanish surname list, Such lists are not necessarily
complete and some Spanish-speaking Americans have
surnames that are not normally associated with
Spanish ancestry. Therefore, a national sample was
selected from the universe of all firms in order to
provide an estimate of the number of firms owned by
Spanish-speaking Americans with surnames not usually
associated with Spanish ancestry.
A mail canvass was conducted for both the Spanish
surname group and the national sample to determine
the specific Spanish origin of the owner, partner, or
shareholder; Le., Mexican-American, Cuban, Puerto
Rican, or Latin American. The form used for this
purpose is shown in appendix B. An additional sample
of firms, selected from those businesses that were
identified in the Social Security records as being
owned by neither whites nor blacks, was surveyed to
175
PAGENO="0439"
176
determine the number of businesses owned by Amer-
icans of Japanese, Chinese, Filipino, Hawaiian, Korean,
and American Indian ancestry.
Firms having paid employees are included in files
obtained by the Census Bureau from the Social
Security Administration for use in the preparation of
the statistical report, "County Business Patterns"
(CBP). The Social Security Administration authorized
the use of these tapes in the minority-owned business
project. By abstracting selected information from the
1969 CBP file, it was possible to assign to each
business the Standard Industrial Classification Code
433
(SIC), a geographic code, and the number of em-
ployees reported during the mid-March 1969 pay
period. Business firms not included in the CBP list
were then matched to 1967 economic census files of
firms with no paid employees to obtain the geographic
and industry code for such companies. Businesses not
found on either list were generally companies which
had no paid employees in 1969 and were not in
business in 1967 or were classified in an industry in
1967 that was not within the scope of the 1967
economic censuses. Such firms were geographically
coded based on the name and address included in the
IRS file. The Principal Industrial Activity codeused by
IRS was converted to a comparable SIC code.
PAGENO="0440"
434
Appendix B
1969 Survey of Business Ownership Report Form
COMPLETE AND RETURN THIS REPORT WITHIN 15 DAYS
NOTICE-Youere poet to the Census Bueeao is confidential by Ian (Title 13 U.S. Cede). It
maybe seen onlyby swo nC 500esployresund maybe used only fnestotlstical puepnseo.
The Ian also pencides that copies eetained in ynue files are encoRe leone legal
Item 1 - NAME AND ADDRESS OF BUSINESS
1969 SURVEY OF
In cones rdence peetalnlng Is IbIs report relee Is IbIs
Census FIle Number
BUSINESS OWNERSHIP
Bureau BrIbe Census
1201 EaslTereth StresS
.Isllers.omnllle, Indlera 41130
EMPLOYER IDENTIFICATION NO.
business identified in item 1 Ole a
Foete 941, Employee's Federal Too
any quoetee io 1969.
E Yes - Ente, the c,aetently
aooi~tedEI onoethee (9 dgito~,,
I I I 11
(Pleaneeooect anty esrnen in nanee and uddeeno, ieeolading ZIP node)
OF BUSINESS ACTIVITY IN 1969
Item 4 - APPROXIMATE Li
DOLLAR VOLUME
.
Major unlovely of Ibis business
List in nedre ot ispnetoene the peincipal
products nude, lines if nercbsndise
OF BUSINESS IN 1969
Mark (X) one
snld,
types ot semi ceo tendered, on eons teuntius
actiiity peefoecved
Murk (X) one
t E Less lhun S5,000
E Finance, Reel Eslule,
Insuranne
Trade [] Olher - Denceibe ._,,
WltotnsaleTrade .
2 [J$ 5,000 In S 9.999
n El 10,000 to 24,999
El 25,000 In 99,999
sEJ 100,000 or more
OWNERSHIP OF BUSINESS - Mark (X) nne box and follow accompanying insorucoions.
El Individual proprietor. . "1,, Complele one line below for each owner or pantone. Do not enter the
El Partnership J percenlage of ownnnship.
LI Corporation
El Other - Specify ~.. ~, Pop~townerncI~ng
I or patl.owners, complele lines 1 lhrough 10 for the len having the
,) greatesl pencnnl of ownership.
REPORT ON A SEPARATE LINE FOR EACH OWNER, PARTNER, SHAREHOLOER
What Is thIs
White °Z
person's race or colul
Anescan*
Mob one WItal Is lIds pessor's
Olher..5 ,~ubun ~
desceel
or orIgIn? Mob one
£~o~;hLhem~s_r
Ceesos~ 3~ ~ T ~TH 4 ~
TP~1 4 14
* Includes Chinese, Japanese, Filipino. Enmean °~ tnnludes Chicano and Meoicono
Remarks . -
Item 6 - PERSON TO CONTACT REGARDING THIS REPORT
None Addeess `-JVsanhee, otneet, city, State. ZIP code ~ Telephone
Area code Nunbee Ext.
Signatine it authoriaed official Title Date
17~
PAGENO="0441"