STATEMENTS OF SENATORS SAM NUNN, J. BENNETT JOHNSTON, JR., JAMES ABOUREZK, AND FLOYD K. HASKELL Because I was unable to participate actively in the hearings covered by this report, I reserve judgment as to the conclusions and recommendations contained therein. STATEMENT OF SENATOR WILLIAM V. ROTH, JR. Because I was not a Member of the Committee at the time of the hearings covered by this report, and therefore did not actively participate in the hearings, I reserve judgment as to the conclusions and recommendations contained therein. (32) APPENDIXES APPENDIX A MEMORANDUM OF CONGRESSIONAL RESEARCH SERVICE, LIBRARY OF CONGRESS, "LEGISLATIVE HISTORY OF THE PHRASE 'FAIR PROPORTION' IN SMALL BUSINESS ACT," OCT. 1, 1973 THE LIBRARY OF CONGRESS, CONGRESSIONAL RESEARCH SERVICE, Washington, D.C., Oct. 1, 1973. To: Senate Select Committee on Small Business. Attention: Mr. Merson. From: American Law Division. Subject: Legislative History of the Phrase "Fair Proportion" in Small Business Act. This memorandum is in response to your letter of June 26, 1973, requesting research on the legislative background of the phrase "fair proportion" as it is used in the Small Business Act of 1958, 15 U.S. Code secs. 631-47 (1970). In addition to the legislative history of the 1958 Act, we have reviewed the House, Senate, and conference reports for those earlier statutes which also contained phrases such as "fair share" or "fair proportion." Before reviewing these materials, it should be pointed out that our research confirms the conclusion of the Comptroller General that the term "fair proportion" has not been defined by the Congress. 41 Comp. Gen. 649 (1962). A copy of this decision. is enclosed for reference. In that opinion, the Comptroller General dealt with an objection raised by a contractor who contended that set asides for small business were unnecessary in an industry in which more than 90 per cent of the dollar value of contracts had been awarded to small business concerns in the past year. The Comptroller General concluded that this was not an unfair proportion in the light of the fact that more than 99 per cent of all plants in the industry were small business concerns. 41 Comp. Gen. 649, 653 (1962). Language similar to that contained in the Small Business Act of 1968 appeared in the following earlier statutes: (1) The Armed Services Procurement Act of 1947, section 2(b), 62 Stat. 21. (2) The Selective Service Act of 1948, section 18 (a), 62 Stat. 625, 50 U.S. Code App. sec. 468 (a) (1970). (3) The Federal Property and Administrative Services Act of 1949, sec. 302(b), 63 Stat. 393, 41 U.S. Code sec. 252(b) (1970). (4) The Defense Production Act Amendments of 1951 to the Defense Production Act of 1950, sec. 714 (F) (2), 65 Stat. 143. (5) The Small Business Act of 1953, sec. 202, 67 Stat. 232. THE 1947 ACT Section 2(b) of the Armed Services Procurement Act of 1947 provided as follows: (b) It is the declared policy of the Congress that a fair proportion of the total purchases and contracts for supplies and services for the Government shall be placed with small business concerns. Whenever it is proposed to make a contract or purchase in excess of $10,000 by negotiation and without advertising, pursuant to the authority of paragraph (7) or (8) of section 2(c) of this Act, suitable advance publicity, as determined by the agency head with due regard to the type of supplies involved and other relevant considerations, shall be given for a period of at least fifteen days, wherever practicable, as determined by the agency head. [Emphasis added.] The Senate Report that accompanied the legislation indicated that the purpose of section 2(b) was "to continue in peacetime procurement the policy which prompted the enactment of the Small Business Mobilization Act (56 Stat. 351) and similar legislation. The Report continued: This section will aid in the development of a larger number of known and capable suppliers geographically spread over the entire country, thus affording added production security in the event of any emergency and assist in establishing insurance against production bottlenecks. (S. Report No. 571. 80th Cong., 1st Sess. (1947).) The House Report stated that the bill would provide small business concerns with an opportunity "to secure a fair proportion of the total value of all purchases and contracts by requiring the Services to procure supplies and services in reasonably small lots when not of manifest disadvantage and to give suitable advance publicity of their intention to negotiate contracts for certain supplies and services." The House Committee also noted that the provision would acquaint the agencies with the wide talents and capabilities of small producers and, conversely, would acquaint small producers with governmental procurement procedures. The Report also indicated that the bill was intended to carry forward the basic policy which led the Congress to afford small business the legislative protection provided in the Contract Settlement Act of 1944 (58 Stat. 649), the Surplus Property Act of 1944 (58 Stat. 765), and the War Mobilization and Reconversion Act of 1944 (58 Stat. 785). See House Report No. 109, 80th Cong., 1st Sess. (1947). Neither of the Reports contains any definition of the phrase "fair proportion." THE 1948 ACT Section 18(a) of the Selective Service Act of 1948, as codified in Title 50, Appendix, section 468 (a) of the United States Code. provides as follows: § 468. Utilization of Industry. (a) Placement of Orders; Definition of "Small Business". Whenever the President after consultation with and receiving advice from the National Security Resources Board determines that it is in the interest of the national security for the Government to obtain prompt delivery of any articles or materials the procurement of which has been authorized by the Congress exclusively for the use of the armed forces of the United States, or for the use of the Atomic Energy Commission, he is authorized, through the head of any Government agency, to place with any person operating a plant, mine, or other facility capable of producing such articles or materials an order for such quantity of such articles or materials as the President deems appropriate. Any person with whom an order is placed pursuant to the provisions of this section shall be advised that such order is placed pursuant to the provisions of this section. Under any such program of national procurement, the President shall recognize the valid claim of American small business to participate in such contracts, in such manufactures, and in such distribution of materials, and small business shall be granted a fair share of the orders placed, exclusively for the use of the armed forces or for other Federal agencies now or hereafter designated in this section. For the purposes of this section, a business enterprise shall be determined to be "small business" if (1) its position in the trade or industry of which it is a part is not dominant, (2) the number of its employees does not exceed 500, and (3) is independently owned and operated. [Emphasis added.] There appears to be discussion of the "fair share" provision of section 18(a) in the reports accompanying the Act through its passage by Congress. See House Report No. 1881, Senate Report No. 1268, and House Conference Report] No. 2438, 80th Cong., 2d Sess. (1948). THE 1949 ACT Section 302 (b) of the Federal Property and Administrative Services Act of 1949, 41 U.S. Code sec. 252 (b), provides as follows: (b) Small Business Concerns; Share of Business; Ad- It is the declared policy of the Congress that a fair propor- Both the House and Senate Reports contained identical language describing section 302(b): This subsection states the policy that a fair proportion of the total purchases and contracts shall be placed with small business concerns and further provides that notice of intent to negotiate shall be published in certain cases. See H.R. Report No. 670, 81st Cong., 1st Sess. 21 (1949) and Sen. Report No. 475, 81st Cong., 1st Sess. 23 (1949). Again, there was no formal definition of "fair proportion" in either report. THE 1951 ACT Section 714(f) (2) of the Defense Production Act Amendments of 1951 provided as follows: (2) The Congress has as its policy that a fair proportion of the total purchases and contracts for supplies and services for the Government shall be placed with small-business concerns. To effectuate such policy, small-business concerns within the meaning of this section shall receive any award or contract or any part thereof as to which it is determined by the Administration and the contracting procurement agencies (A) to be in the interest of mobilizing the Nation's full productive capacity, or (B) to be in the interest of the national defense program, to make such award or let such contract to a small-business concern. [Emphasis added.] The Act reflected Congressional concern over the problems of small business during the mobilization period after the outbreak of the Korean Conflict. The House Report stated that the critical problems revealed in testimony before the Committee "will not be met until the Congress establishes an agency specifically designed to give small business an even break during the mobilization period." H.R. Rept. No. 639, 82d Cong., 1st Sess. 31 (1951). The Report found that the current problems of small business fell into four broad categories: 1) inability to obtain a fair share of defense contracts; 2) inability to obtain a fair share of scarce materials; 3) inability to obtain adequate financing; and 4) special difficulties in complying with price and wage ceilings and credit controls. H.R. Rept. No. 639 at 31-32. Concerning the small business share of defense contracts, the Report noted that "the path of least resistance is that of loading defense contracts on to large corporations and allowing small business to fall by the wayside. This is the path which was followed in the early years of World War II, when 100 large corporations received 67 per cent of prime contracts. During this same period, one-sixth of the small businesses in the nation closed their doors." The Report went on to state that this mistake must not be repeated. It proposed a Small Defense Plants Corporation with authority to certify qualified small businesses for prime contracts, and to take other prime contracts and subdivide them among small manufacturers. The Report concluded that this provision "would give small businesses definite assurance of a fair share of prime contracts." H.R. Rep. No. 639 at 31. The Report also noted that existing authorities had |