gress to see to it that the existing capabilities of small-business concerns are utilized to the full in the meeting of those requirements. Any "assist" that the Small Business Administration can provide will be gratefully received, you may be sure.

We are working closely and harmoniously with that agency in the fields of small-business set-asides and certificates of competency. Last fall we participated directly, as well as indirectly through our major prime contractors, in a series of some 20 small business opportunity clinics which the Small Business Administration had scheduled in various parts of the country. I believe that these clinics have largely fulfilled their purpose. However, we have had some difficulties in that each of the many chambers of commerce across the country have wanted to have its own small business opportunity clinic with, of course, the active participation on the part of the military departments and their prime contractors through the furnishing of exhibits and speakers. When such exhibits are properly conducted, considerable expense is incurred by the Air Force. In the aggregate this amounts to quite a sum. I mention this merely as an example of the type of problem that constantly arises and which must be solved by cooperative effort. This situation is under discussion with Mr. Wendell Barnes, and we hope that in the not too distant future a solution satisfactory to all concerned will be reached.

Now, I would like to touch on the question of statistics, which is a matter of great interest to all of us. Certainly, in the field of smallbusiness interests, I feel-and I hope we can all agree-that statistics can never be a completely adequate measure of accomplishment. We should be careful in their evaluation and use to be sure that we know the pertinent factors that resulted in the bare statistics. We cannot, intelligently, approach statistics cold.

Small business concerns are essentially holding their own in our direct purchases. Whatever slight falloff there has been is due to the increasing complexity of the type of items we buy which tends to move them out of the competitive range of small concerns. On the other hand, small business participation in the subcontracting field has been increasing. On balance, I believe that small business is getting a greater share of the Government's dollars than it is getting in regular commercial competition when Government action is not involved. This, of course, would not be surprising in view of the detailed programs of Government procuring agencies. The small business committees of the Congress are, of course, in the best position to make a proper evaluation.

You may be assured that we in the Air Force have constantly studied our procurement policies and procedures to insure that they are not detrimental to small business. On the contrary we have tried very hard, and we believe successfully, to obtain the opposite results in our procurements, including procurement of weapon systems. As to the latter, I am well aware of the controversy going on as to the effect of the weapon system concept on small business. I believe that this controversy is due to incomplete understanding of what the weapon system concept really is, both in its nature and in its application.

Some of the statements and recommendations that have been made to your committee during the course of these hearings are based on the quite erroneous premise that under the weapon system concept,

the Air Force selects a particular contractor and looks to him to develop and produce the weapon system, including its assemblies and many components. This is simply not the case. At hearings before the Senate Select Committee on Small Business, conducted on March 13, 1957, I went to some length to describe what the concept in fact is, and how it operates. I would appreciate the opportunity of submitting a similar paper for your record.

In brief, may I say that under the weapon system concept as used in the Air Force, there are as many prime contractors for the components that make up the complete weapon system, and as many items procured and furnished by the Air Force as there were before. The only change that has been made, and the growing complexity of our weapons has progressively made this change vitally necessary, has been the designation of one particular member of this team of prime contractors as the one having management responsibility for the design requirements, the planning and the time scheduling of all critical elements in the weapon system. The selection of the prime contractors involved is retained by the Air Force.

This matter has had my utmost attention, and I do not find that the weapon system concept has had any adverse effect on the ability of small business to secure contracts directly from the Air Force, or to serve as subcontractors or suppliers to our weapon system contractors or associated contractors.

You have already been given a report on the small business subcontracting statistics submitted to the Department of Defense for the period July 1 to December 31, 1956. This report showed purchases from small businesses of 20.9 percent of the amount received by the prime contractors. I am gratified that every one of our weapon system contractors having management responsibility for weapon systems involving air vehicles were including in that report. I have here a separate compilation of their performance during this same 6-month period. These weapons system contractors showed receipts of $3,153,633,000 and payments of $1,754,320,000, or 55.6 percent to outside business concerns not affiliated with them. Payments amounting to $644,787,000 were made to small business subcontractors and suppliers which was 20.4 percent of the amount received by the large weapon system contractors. In a report submitted to the Congress in March 1953, 12 airframe contractors of the Air Force showed 13 percent of the dollar value of their prime contracts as being placed directly by them with small business concerns. This new figure of 20.4 percent is a healthy increase.

In the important task you have before you, it is our desire to provide whatever factual information we have that may be of assistance. I have, therefore, asked Mr. Kennard Weddell, who for 6 years has served as small-business advisor to the Assistant Secretary of the Air Force, to present to you additional information as to our program which I trust will be of value to you.

Thank you for the opportunity to appear before you.

Mr. MULTER. Thank you, sir.

Mr. Riehlman has suggested that we would like to have, as you have offered, the statement you submitted to the Senate, which you refer to on page 5. We would be very happy to receive that if you will supply it for our record.

Mr. SHARP. We will be glad to do that.

(The statement reads as follows:)

STATEMENT OF MR. DUDLEY C. SHARP, ASSISTANT SECRETARY OF THE AIR FORCE (MATERIEL) ON WEAPON SYSTEM CONCEPT OF PROCUREMENT AND ITS EFFECT ON SMALL BUSINESS

I welcome this opportunity to discuss with your committee your concern that the weapon system concept of the Air Force may have an adverse effect on small business. You may be assured that I, as well as my predecessors, have constantly studied Air Force procurement policies and procedures to ensure that they are not detrimental to small business. On the contrary, we have tried very hard to obtain the opposite result in our procurements, including the procurement of weapon systems. So, to my mind, a frank discussion of this matter is desirable and I should perhaps begin by saying that we believe procurement of complete weapon systems is not just sensible procurement; it is vital to our getting into the operational inventory, in the shortest possible time, complete weapon systems with built-in performance reliability.

It seems clear to me that much of the controversy that has sprung up regarding the weapon system concept is due to incomplete understanding both of its nature and of its application. For that reason I would like now briefly to explain what the concept is, and what weapon systems consist of. We have with us today General Irvine, Deputy Chief of Staff, Materiel, and other members of the Air Staff and the Air Research and Development Command. They will help answer any detailed questions you gentlemen may have.

First, what is a weapon system? Usually it has one type or another air vehicle as its major element, with its communications, fire control, and armament. The complete system also includes all related ground support equipment, and specialized services and personnel required for the operation of the air vehicle as an effective instrument of combat. However, air vehicles are not necessarily involved. There are some weapon systems, often called support systems, which are not instruments of combat but nevertheless perform a clearly defined function in support of an Air Force mission. For example, air-sea rescue or early warning systems. For our purposes we will consider them all as weapon systems.

It must be obvious that if any part of a modern air vehicle, or if any part of the composite which makes it an instrument of combat, is lacking, or malfunctions, the combat effectiveness is zero. The unit becomes inoperable. To pinpoint the responsibility for the integration of such a complex, and for the proper phasing of all the elements into an effective end product for the inventory at the time it is needed, the Air Force has found it necessary to employ a competent weapon system contractor. It then becomes the responsibility of this contractor to see that all elements of the weapon system are adequately designed, tested, and produced on schedule to meet the Air Force needs. The weapon system contractor is primarily a coordinator, although he usually assembles the components and may produce some of the parts himself. This overall plan of action is known as the weapon system concept.

The concept itself merely recognizes that effective procurement policies anu practices must be geared to, and keep pace with, the evolution taking place over the years in the complexity of the weapons we require. I am sure there is no need for us here today to trace this evolution. I am also confident we are in agreement that the great technological advances already made, and those that must be made in the future, require the use of the best possible available talent. The management responsibility for the development of design requirements and the planning and scheduling of the composite which forms a complete and selfsufficient single instrument of combat must be placed with the best qualified sources that can be found in this country. Such high management skills, ability, and continuing experience are not available, in adequate quantity, to the Air Force in its own personnel, military plus civilian; nor can they be. They are available to us in industry, and so we contract for this management responsibility with a single weapon system contractor.

Although the weapon system contractor has management responsibility, it is the Air Force which still is responsible to the Congress and the Nation for its ability successfully to perform its vital mission. Therefore, the weapon system contractor is under the supervision and final authority of the Air Force. The Air Force monitors and controls the weapons system contractor through the medium of the weapon system project office, composed of representatives of our research and development and materiel activities.

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This concept in no way whatsoever gives to the weapon system contractor the right to concentrate the work in his own plant, nor does it in any way preclude subcontracting. In almost every weapon system there are many associate contractors for the development or production of subsystems, equipments, or components. They receive their contracts directly from the Air Force, and operate under specifications prepared or furnished by the weapon system contractor and approved by the Air Force. In every weapon system there are many items of Government furnished equipment also contracted for directly by the Air Force. Now that I have briefly described the concept, I will turn to its effect on small business. The weapon system contractor, associate contractors, and contractors supplying Government furnished equipment items, are required to submit their proposed subcontracting structures for critical or other major items for Air Force review and approval during negotiations and prior to award of their contracts. A sound and reliable subcontracting structure is essential in order for the prime contractor to be able to do his part. He must rely on supporting industries, including small businesses, to the maximum feasible extent, and the Air Force, by the exercise of every power within its means, actively discourages prime contractors as well as their major subs from expanding their facilities in order to selfproduce what they could subcontract.

Our small business prime contracting program applies to all procurements made directly by the Air Force for any items which are within the capabilities of small-business concerns. This is true whether or not the item is a part of a weapon system. Some of the subsystems, equipments, or components for which associate prime contractors are selected for development or production may well be within the capabilities of highly specialized small-business concerns. When this is found to be the case, such concerns are given as full consideration as any other qualified company for the role of the associate prime contractor. Many of the Government furnished equipment items are within the development and production capabilities of small businesses. In these cases such small businesses are used to the maximum extent possible. In this total effort we must have the best that industry, all industry, can provide, and the "best" is found in small as well as in medium and large size concerns.

With recognition of the effect of all these forces, and the problems they generate, I would like to say most emphatically that throughout the Air Force, including top officials, small-business specialists, contracting officers, and buyers, our small-business policy and implementing programs are being aggressively carried out. I am impressed that we have as many small plants operating today on prime contracts for items that must be produced to Air Force specifications, in other words, noncommercial items, as we had at the height of the Korean buildup. On December 31, 1956, these small concerns that I have just described were operating on prime contracts totaling $560,136,000, an average of $311,000 per plant. It may interest the committee to know that approximately two-thirds of these plants have even fewer than 100 employees.

In summing up this prime contracting picture, I can find no evidence, Mr. Chairman, that the weapon system concept, as used in the Air Force, has any adverse effect on the ability of small business to secure contracts directly from the Air Force.

In addition to our own small business prime contracting program we have a very aggressive small business subcontracting program. This has been carried on for 6 years now in cooperation with our large prime contractors. Recently it was augmented by the Department of Defense subcontracting smallbusiness program, which stemmed from the activities of the Air Force Small Business Advisory Group. All of our large prime contractors, including those connected with weapon systems, have subscribed to this Defense subcontracting small-business program and are actively engaged in carrying it out in their purchasing departments. Our small-business specialists in the air procurement district offices worked closely with the small business liaison officer of our prime contractors in the establishment of these programs. We have made it the specific responsibility of our administrative contracting officers to follow through on the program ot insure effective implementation on the part of the contractor. These contracting officers are charged with reporting any substantial deviations to established policy.

These many and intensive activities assure that equitable opportunities and full consideration for small business are being extended by our prime contractors, both those within and without the weapon-system concept.

We are currently receiving figures from our large prime contractors showing, as to the 6-month period, July 1, 1956-December 31, 1956, the dollars which they,

in the performance of their defense contracts, paid out to small-business concerns in relation to the Government dollars these large contractors received, and they show a decided upward trend in the participation of small-business concerns as subcontractors and suppliers. Six Air Force weapon-system contractors in that period received defense dollars amounting to $1,494,510,000, and in that same 6-month period made payments amounting to $813,052,000 to outside business concerns, large and small. Of this amount paid to outside concerns, $346,777,000 went to small-business concerns, which was 23.2 percent of the dollars received by the weapon-system contractors. Reports received from these same contractors in the years prior to their becoming weapon-system contractors, and which were included in the figures we submitted to your committee at the 1953 hearings, show that, of the amount they received in defense contracts at that time, they paid out 16 percent to small-business concerns. The percentages I have given you are properly related to each other, and refer to subcontracts placed only by the prime contractors themselves. In neither case do they include contracts placed in turn by their major subcontractors with smallbusiness concerns, although they are known to be considerable.

I naturally do not wish to leave the impression with the committee that we have reached the height of perfection in our small-business activities, or that our present concept of weapon-system procurement is the answer to all of our problems. As the technological evolution of air weapons continues, our procurement practices must be watched to determine their adequacy under new circumstances, and changed, if need be. In the same way our small-business program in both the prime contracting and subcontracting fields is under continual evaluation by my Office and the Air Staff, with a view to determining practical ways and means of making it more effective.

In the development of this small-business program we have always had the valued assistance of this committee, and your views and continuing interest and guidance will be of aid to us in meeting our responsibilities in this important area. Mr. MULTER. Mr. Weddell.

STATEMENT OF J. KENNARD WEDDELL, CHIEF, OFFICE OF SMALL BUSINESS AT HEADQUARTERS, UNITED STATES AIR FORCE

Mr. WEDDELL. Mr. Chairman and members of the committee, I am Kennard Weddell, Chief of the Office of Small Business at Headquarters, United States Air Force, and as such I serve as small-business adviser to the Assistant Secretary of the Air Force, Materiel; to the Deputy Chief of Staff, Materiel; to the Deputy Chief of Staff, Development; and as assistant to the Director of Procurement and Production at this headquarters. I have held this position since March 1951, coming into the Air Force as a civilian directly from industry and at the invitation of the Air Force for the sole purpose of developing and supervising a small-business program nationwide. Prior to that time, I had been a small-business manufacturer for 28 years, except for 3 years during World War II, when I served as Deputy Chief of Operations of the Smaller War Plants Corporation with direction of its procurement activities with all military departments and civilian agencies of the Government. I can assure you that I know to some extent from first hand experience the problems met by very small industrial concerns in the give-and-take of commerce, and the problems they encounter in undertaking to serve as prime contractors and subcontractors, and it has been my good fortune to serve the legitimate interest of small business in responsible positions, first with a civilian agency somewhat similar to the Small Business Administration of today and then with the largest procurement agency, the Air Force.

In May 1951, I appeared with the Under Secretary of the Air Force at a joint hearing of the House and Senate Small Business Committees, Representative Evins, of the present House committee, being one of