ment, and Construction Contractor Assistance Center network should be utilized; fourth, upon enactment of the legislation, efforts must be made to assure that the authority which SBA already has to provide startup funds, assure prompt payment, and smooth our interagency redtape and snafus be fully utilized to the benefit of the Minority Business Enterprise.

Now, let us examine these observations:

First, the General Accounting Office's report to, or on the 8(a) program found inadequate program management with too few staff, and that staff being poorly trained. No management and technical assistance is available to program clientele, and there was an inefficient process for determining which contracts would be available.

This bill would give legislative basis to a Federal minority business development program, something that neither SBA nor OMBE presently have; it would provide for comprehensive business services; establish regular reporting requirements; establish an information center to identify MBE opportunities, convene meetings of Federal department heads, set aside any Federal contract and permit SBA to waive bonding requirements.

These authorities, properly administered, would go a long way toward developing viable minority businesses that will help the overall economic development of minority communities.

In the area of procurement, it has been estimated that the Federal Government spends more than $60 billion annually for goods and services purchased by private contractors. Yet, purchases from minority firms represents less than seven tenths of 1 percent of all Federal procurement, despite the fact the minorities own 5 percent of all American businesses.

Moreover, the combined purchases of Federal, State, and local governments exceed $120 billion. Firms owned by minorities receive less than 1 percent of the total dollar value of all Government contracts.

To put the problem in a slightly different light, consider this-of all Federal contracts awarded, 74 percent of them went to big business. Only 26 percent were awarded to small business firms, despite the fact that the small business community represents 97 percent of all business firms in the country. Yet, of the percentage that went to small business firms, only seven tenths of 1 percent went to minorities.

Second, considerable furor has been raised concerning who would and who would not be program beneficiaries. Some would exclude ethnic minorities above a certain level economically or educationally thereby eliminating some of the best prospects for developing strong profitable enterprises.

Some would dilute the minute resources that will be available under this program by classifying females as a minority, a burden SBA surely cannot shoulder with its limited resources.

Congressman Addabbo, in his bill, clearly designated who the recipients of the program's benefits ought to be; namely, socially and economically disadvantaged groups and group members to include, but not be limited to, American Negroes, Hispanic Americans, Ar in Orientals, American Indians, American Eskimos,

and American Aleuts. It is strongly urged that his bill adopt the same type language.

Third, SBA admits that it is understaffed and it has been accursed of having untrained, inexperienced, and indifferent staff assigned to the 8(a) program.

In order to overcome these deficiencies, SBA must be given greater resources to hire additional staff and to contract for management and technical services with outside entities.

It is particularly necessary to contract with outside entities, both profitmaking and nonprofit, if the program is to get off the ground immediately so as to minimize the loss of aid and assistance to the MBE's that have already suffered under the moratorium declared by Administrator Weaver.

NBL would propose that since OMBE has already in place a network of business development organizations and business and trade associations that have specialists who are trained and experienced in developing business plans, loan packaging, providing technical assistance and management assistance, et cetera, that the contracting by SBA with these entities would be the quickest and most effective method of getting this program into operation.

It should be noted that these BDC's, BDO's, CCAC's, "Call Contractors," and business and trade associations have already developed a rapport with the clientele that would help dispell the accusation of "callous and indifferent employees.'

99

They also are knowledgeable of SBA and its systems and have developed some rapport with SBA employees which could be beneficial to the clientele.

Senator NUNN. I would like the staff to discuss this with you. I find this point very interesting. I think it is a good suggestion. Mr. O'NEAL. Thank you, sir.

Fourth, SBA already has the authority, though seldom used, to expend "business development funds" under the 8(a) program to help offset the higher price that many MBE's must charge to carry out a contract due to their inability to effect economies of scale in their purchasing. It has the authority under section 406 to expend funds to contract for accounting and other services for its clientele. It has a Management Assistance Division and a Financial Assistance Division, each of which has all kinds of ways that they could help the development of budding minority owned businesses.

The trouble is that there is no effective system of coordinating these services for the benefit of the MBE's. Each of those division personnel do not speak to the other people in the other divisions.

It has been our contention that one of the major obstacles to effective development of small businesses has been the lack of timely and accurate records being kept and utilized as a management tool by the MBE. SBA requires recipients of EOL loans and 8(a) contracts now in force to supply quarterly financial statements to SBA, however, it has no effective method of enforcing this requirement.

This bill, as designed, can overcome this deficiency by its required reporting system if it assures that the MBE's are set up on a computerized system, subsidized initially if necessary, with a copy of the output going to the Business Development Specialist monthly to help train the MBE on:

First. The value of time accurate records;

Second. How to interpret and analyze the financial statements; and

Third. How to make decisions based upon the analysis.

It should be stressed that if this program is to be truly an MBE development tool then every effort should be made to contract with minority firms to provide services that are contracted for by SBA under their "406" authority and the authorities given them by this bill.

In too many instances what has happened, the big 8, the larger majority owned consultant firms are getting contracts to provide technical assistance to minority business that small minority firms and consulting firms could easily supply.

We are aware, of course, that this bill cannot solve all the problems confronting the minority business community. Yet, it touches upon three fundamental issues confronting our community and its relationship with the Federal Government-the vast and growing disparity in capital ownership between majority and minority Americans; the need for greater participation by the minority business sector in the fabric of our Nation's economy, and the direct relationship between minority business expansion and job creation.

It has long been our view that the ultimate aim of minority business development is to stimulate economic development activities which can address some of the major domestic problems in our national life.

The vitality of a minority business sector is central to the stability of our national economy as well as to improvements in its rate of productivity growth. That is why the National Business League is committed to the goal of economic parity for minority enterprise.

Economic stability and productivity growth are obviously longrange objectives. To achieve them, we must correct an historic imbalance in our national economic system; namely, the failure to stimulate and utilize productive resources lodged in minority communities across this country.

The minority business community represents a resource that must be fully integrated into the American economic system if we are to generate the kind of economic activity necessary for national economic growth.

The bill before this committee recognizes the important role minority enterprise can and should play in this area. Moreover, it takes several essential steps toward defining SBA's role in strengthening the minority business sector. The establishment of a small business and capital development program is significant for both administrative and policy reasons.

Administratively, it clarifies the purpose of the Agency's 8(a) program as a business development tool and centralizes diverse activities into a single unit.

The program director's authority and accountability are both clearly defined. On the policy level, the program is elevated to a position of visibility and chartered with a scope of work that is meaningful and constructive.

While we support these efforts, we nevertheless emphasize that the program must receive the necessary resources, financial and manpower, to implement its charter effectively.

Further, in centralizing various activities within the program, SBA officials must be careful not to compartmentalize minority business interests in such a way that they ignore valuable resources scattered throughout SBA, and indeed, throughout the Federal establishment.

Mr. Chairman, if your intent and the intent of your excellent staff, as drafted in this proposed legislation is adopted into law, NBL's job as developers of small and disadvantaged businesses will be greatly enhanced, the disparity between minority and majority owned businesses will be lessened and the economic development of a major sector of our economy will be greatly strengthened. Thank you for your time and consideration.

Senator NUNN. Thank you, very much. I am sorry that I do not have time to ask all of you more questions. I have a 12:30 meeting that I was supposed to go to but they are excellent statements and will be of great assistance to us.

Our next speaker is Mr. Joe Hudson, Atlanta Business Group. Mr. HUDSON. Mr. Chairman I am Joseph R. Hudson, vice president for administration for Gourmet Services, Inc., a minority contract catering firm and president of the Atlanta Business Group, an organization of minority businessmen doing business in Atlanta, Ga.

Also, I am a former banker and minority business developer having 5 years banking experience and more than 10 years in the minority business programs of SBA, OMBE, private foundations, and private businesses.

As a minority person I have felt and seen what the absence of productive capital has meant to black business and to the total communities of America. The historical deprivation of blacks in all areas of society has blighted the cities we call home. This deprivation along with an economic structure that is maintained and perpetuated by those "that have" coupled with minority business development programs that never work has caused an absence of wealth in the black community which, in turn, has caused these communities to rapidly become the "eye sores" of our country. Mr. Chairman, there is an old economic axiom that says wealth is accumulated and perpetuated by:

First. Savings;

Second. Asset appreciation; and

Third. By intergenerational transfers.

When one looks at the black community you see little, if any, of the aforementioned attributes for jobs bring savings, savings bring assets, and assets bring intergenerational transfers.

With an absence of jobs, the black community does not have the initial ingredient to begin the chain.

The only mechanism available is the creation and substance of a viable minority enterprise program which will not only create jobs but create assets which have intergenerational mobility. Therefore, I am here in support of the concept of a bill to amend the Small Business Act to create a small business and capital ownership development program.

I say "concept" because several elements of the bill, as it is now written, are not totally supportive of minority business enterprise though its intent is.

As I reviewed this proposed legislation, I found its assumption to be true. I agree with its expansion of the procurement authority under 8(a) of the Small Business Act.

I also agree with its power to let sole source Federal contracts with a Director "Appointed by the President, by and with the consent of the Senate.'

The objectives of the program are needy expansions of present day programs and laudable. The methodology employed to meet objectives is also noteworthy.

I was happy to see the procurement powers as well as a definition of socially economically disadvantaged small business concerns that has teeth. However, the term socially or economically disadvantaged would not properly address the black community. The word "or" should be stricken and the functionally connecting word "and" substituted wherever the alternatively functional word "or" is used in the description of eligibility.

This program should be used for the overall development of the black and minority_communities through black and minority business development. It should not be left to interpretation as to its eligibility provisions.

Due and through proper cause many groups and types of people consider themselves minorities. This is especially true of women, and, though it is true black women may have a double advantage, they will never have the double advantage of white women.

In today's America 1 in 3 minority women head a household while 1 in 10 white women do. In our cities the unemployment rate for minority women is over 14 percent while it is 8 percent for white women.

Black and other minority women face the same historical deprivation and have not had the advantage of business exposure except through advance schooling and even with this education they may be the first generation to get a degree or a decent job.

Black and minority women have not had the support of mentors offered through white families and friends. Even when you consider their presence in politics, it is a new exposure and not an opportunity of heritage.

Black women are socially economically disadvantaged and I am concerned about the relationship of a director appointed by the President and an SBA Administrator also appointed by the President. There appears to be a management problem as to who reports to whom.

Also, what safeguards will prevent this program from winding up like present programs?

Additionally, it will apparently need massive funding and since it is my understanding the OMB is presently withholding funds from SBA, how can we assure its proper funding?

Though these are important questions to me, the Atlanta Business Group and other minorities, I am supportive of the bill and hope it will be strengthened to correct these problem areas.

I strongly recommend the bill include language that will insure: