SMALL BUSINESS AND LABOR SURPLUS AREAS PROCUREMENT THURSDAY, OCTOBER 6, 1977 U.S. SENATE, SELECT COMMITTEE ON SMALL BUSINESS, The committee met pursuant to notice, at 8:30 a.m., in room 424, Russell Senate Office Building, Hon. William D. Hathaway presiding. Present: Senator Hathaway. Also present: Kay Klatt, professional staff member; and John Doyle, assistant to Senator Hathaway. OPENING STATEMENT OF HON. WILLIAM D. HATHAWAY, A U.S. SENATOR FROM THE STATE OF MAINE Senator HATHAWAY. The committee will come to order. The purpose of today's hearing is to examine the measures by which the executive agencies intend to implement section 502 of Public Law 95-89. This section of the Small Business Act amendments, which I was privileged to introduce and manage for the Senate, specifically authorizes the placement by procuring agencies of entire contracts into labor surplus areas. This legislation also mandates that for all Federal procurement, small business receive highest priority for the award of such total labor surplus area set-asides. Thus there now exists a mechanism to properly implement Defense Manpower Policy No. 4, which has as its basic aim the efficient use of existing manpower and resources in the interest of our national security. In fulfillment of this basic objective, our national manpower policy has the potential of attacking today's stubborn and persistent unemployment problems. In August, unemployment in this country reached 7.1 percent. Yet figures do little to describe the human costs of unemployment. Few people today were adults at the onset of the Great Depression of the 1930's. Few have memories of the devastating impact of that period on human morale-the misery, the deterioration of skills, the degrading deprivation for the unemployed and their families. Fortunately, we are not faced with the ravages of a Great Depression in today's economy; yet for 6,926,000 Americans, the hardships of joblessness are as real as they were to the jobless of that era. People need to work, and not only for survival. A witness at a Small Business Committee hearing put it this way: A man or a woman would rather have a job under almost any circumstances than not to have a job at all. Even though an individual (is) being supported by the State, a job confers status. It tells you who you are. It enables you to walk tall. It enables you to be a decent father and husband. And without it, you are pretty much nobody. The unemployment problem has but one ultimate solution, and that is jobs. Periodically, the Federal Government gears up special jobscreating programs, and certainly this helps. But at the same time, we need continuing mechanisms to stimulate jobs in areas that are hardest hit by unemployment. Today's hearing concerns one mechanism that has great potential to do just that. The labor surplus area procurement program has been around for the past 25 years. Heretofore, because of a General Accounting Office interpretation of language annually placed into the Defense Appropriations Act, only partial procurements could be placed into labor surplus areas. Accordingly, less than 1 percent of the $50 billion Federal procurement budget has gone to areas where Government contracts could greatly help shore up the local economy and put the unemployed back to work. Further, the benefits which would flow from channeling contracts to those areas which are most in need are substantial in terms of cost savings from lowered welfare payments, unemployment compensation, and other Federal aid programs. Civilian agencies, of course, never had the so-called Maybank prohibition placed against their procurements; however, in the absence of a specific authorization for making total set-asides for labor surplus areas, they followed the lead of the Department of Defense in making only partial set-asides. That policy has now been changed by Public Law 95-89 which gives the Federal Government the tools by which to significantly impact unemployment. It is time that we use the tremendous purchasing power of the Federal Government to help resolve one of our most pressing social and economic problems. It is indeed time that we remember that, no matter what the particular mission of any government agency might be, it is still the overall goal of the Federal Government to respond to the needs of American citizens. In other words, we must look at the big picture, and at this time there are over 6 million jobless Americans in that picture. Today we will hear from Congressman Michael Harrington, who has contributed much careful thought and guidance to solutions for the unemployment problem. We will also hear representatives of the Department of Labor testify on new labor surplus area classifications and their responsibilities for implementing this program. Witnesses from the General Services Administration will tell us about proposed revisions to Defense Manpower Policy No. 4, as well as how their procurement procedures will be altered to accommodate a revitalized labor surplus area procurement program. Because of the heavy press of Senate business at this time, we have asked representatives of the Office of Federal Procurement Policy, the Small Business Administration, and the General Accounting Office to testify at a later date. I call my good friend, Congressman Michael Harrington from Massachusetts. Mike, it is a pleasure to have you with us. You may proceed in any fashion you wish, and your entire statement will be made a part of the record. We want to commend you for getting up so early in the morning to come to the hearing. I am sorry we had to schedule it so early, but there is a Finance Committee markup on the energy bill at 10 o'clock, and I have got to get to that. In addition, I think the Senate is coming in at 9 o'clock. STATEMENT OF HON. MICHAEL J. HARRINGTON, A U.S. Representative HARRINGTON. I will heed those words about time. I welcome the chance to testify before this matter gets distracted over the day. I would like to read the test, and make a comment that would sort of piece together the northern tier of New England, and the fringe of the farm belt of Iowa, and Minnesota, with heavy emphasis on the industrial sector, and I refer to one of the things we have gotten into, and one of the things that sort of dead-ended is the question of attempting to use just numbers, the numbers being unemployment, the numbers being dollars and cents. Senator Moynihan had a recent occasion to point out in New York the concerns that have prompted several hundred members of the House and similar members of a Senate coalition to come together and this, perhaps is illustrative of where our thinking has gone about this concern. I think it does everyone a distinctive disservice to allow payments, which are the welfare, unemployment relief variety, which unfortunately have been the mainstay of recovery in many of the industrial States. I know in Massachusetts this is the case, to be confused with other programs, whether it be military construction programs, economic development programs, permanent placement of additional civilian or additional personnel in the military, in the Federal Government, because the latter category is where the substantial Government contribution toward regional relief or prosperity, or something in between is going to come, and the fact that they have been enhanced or lodged in HEW as Labor Department payments. I guess, just to summarize, I think the subject area you are covering this morning is the core of our concern, and ought to be carefully differentiated from what the level of unemployment benefits have been given to States we have talked about, what the level of additional welfare relief have been given the States we have talked about, and ask some basic questions about those other areas of the Federal budget when it comes to the procurement practices which are the subject of concern because those are the areas which will make a substantial difference, and those are the areas where we have been disadvantaged by the Federal Government practices over the course of the last generation. So, this morning we have begun to address something which we have begun to address in the House, largely because of your own historic initiative, in attempting to rectify policies which as early as the 1950's were recognized as significant in how the Government uses its resources to help areas hurt by substantial unemployment, and that is the sort of thing I hope we can see and clear away some of the debris that goes to those other areas that are essentially social and welfarelike relief programs that all areas have been getting, but do not leave in their wake either Federal installations or permanent Federal jobs that I think hurts. Let me concentrate this morning on DMP-4 as a long neglected means of targeting Federal procurement dollars to areas of substantial economic need. Let me say at the outset that I view this as a subject of larger Federal concern that is the marshaling of all Federal resources to serve the needs of those regions in this country that require the greatest economic stimulus. In this sense, DMF-4 is a model of the strategy we might employ, not the strategy in its entirety. Federal expenditures create jobs-this fact is incontestable and with the possible exception of some bureaucratic dead-ends, they are real jobs. This is most important when we consider the number of public service and public works jobs that the Congress has labored to create and target. By comparison, we are foolish to ignore the substantial regional economic contribution that targeted procurement contracts make. Thus, the first point I would like to emphasize is that Federal procurement programs create real jobs in the mainstream of the American economy and as such deserve to be targeted with as much precision as possible certainly with as much care and consideration as the public works and public service jobs that we created in recent years. The impetus for the formation of the Northeast-Midwest Economic Advancement Coalition, which I chair, was the realization on the part of the leaders from the older, urban States that the bitter realities associated with the pervasive stagnation of the regional economy can be countered only through a concerted effort at the Federal level. Too many people have been economically immobilized, victims of long-term unemployment and governmental policies which are not designed to meet their needs. These intertwined aspects of recession have not abated despite the recently reported upswing in the business cycle; rather the situation has reached chronic, multi-State proportions. It demands a sophisticated, sustained governmental response. Rather than receiving such a response, however, the Northwestern and Midwestern sections of the country have been allowed to reach a state of advanced decay. The Government's response to the mass exodus of manufacturing jobs out of our region has been to supplant these jobs with emergency funding programs CETA, welfare, unemployment compensation-programs which provide little relief to the recipients and almost none to the economies of the affected regions. Rather than funding an urban bank to stimulate investment opportunities or developing alternative business tax incentives, the Government has further exacerbated the problem by reducing the number of Federal civilian employees in the Northeast and Midwest by 47,000 jobs between 1966 and 1976 while increasing those jobs in the South and West by 100,000 and 20,000 jobs, respectively. Similarly with Defense Department employment, between 1950 and 1976, the States of the Northeast and Midwest lost 11,500 jobs while other regions realized substantial gains. Those jobs as opposed to the emergency funding programs described above-bring in the hard, long-term dollars and jobs so vital to economic development. It is unconscionable for the Government to be removing them from regions as economically hard pressed as the Northeast and Midwest. |