always figure you do not learn anything by talking, so I would like to listen. Mr. CORMAN. Let the record show it is the gentleman's business, not the gentleman himself, who is small. Mr. Addabbo? Mr. ADDABBO. I am happy that these hearings are started. I know this has been a serious problem and many of us on the committee have received much correspondence from the small business community, and I look forward to listening, as Mr. Kluczynski, to what our experts from AID have to say. Mr. CORMAN. Mr. Broyhill? Mr. BROYHILL. Thank you. I do have a statement I would like to have included in the record, Mr. Chairman. (Mr. Broyhill's statement follows:) OPENING STATEMENT BY CONGRESSMAN JAMES T. BROYHILL I would like to take this opportunity to welcome you, Dr. Hannah, in your new role as Administrator of the Agency for International Development. Dr. Hannah comes to this position following a long illustrious career as the president of Michigan State University. You have assumed a very difficult and demanding position, Dr. Hannah, a position for which you are eminently well qualified. On behalf of the Republican members of this committee I would like to offer you our best wishes for success. As you know, Dr. Hannah, our procurement subcommittee is extremely interested in seeing that small businessmen throughout the Nation receive their fair and equitable share of the huge market which results from Government expenditures. This position furthermore is not just based on our own views about the matter; it is a position which represents the views of Congress as set forth in any number of enacted laws. The role of the small businessman is not an easy one in our society today. It is enormously difficult for him to compete with the ever-growing large corporate structures which today dominate our economy. It is a great deal harder for him to obtain the financing he needs. It is exceedingly difficult for him to have his voice heard relative to the voices of larger and more powerful interests. Yet, we in Congress firmly believe that the small businessman continues to have a vital role to play in our society just as he has had since this Nation first began. The existence and the work of our committee furthermore are a clear representation on this belief. Our Subcommittee on Government Procurement has asked your Agency to appear before us, Mr. Administrator, for two basic reasons. First, we are very interested in determining what role AID is presently playing in providing opportunities for small businessmen in this country. Second, we want to determine what, if any, new steps and actions on the part of AID might be appropriate to increase these small business opportunities. We are aware, Dr. Hannah, that AID is not directly a procuring agency-on the other hand AID does provide large resources to foreign government agencies and foreign importers which in turn are used to procure goods and services in the United States. We are also aware that AID has certain primary missions and goals which must be given first consideration in determining how AID's operations will be carried out. Accepting this principle, however, I believe that policies and procedures can and should exist which do not interfere with AID's goals and missions and which do maximize the opportunity for small business to obtain an equitable share of the market created by AID-financed purchases. I look forward to your testimony, Dr. Hannah, and to these hearings which I believe will prove to be very valuable for both AID and the small businessmen of the country. Mr. BROYHILL. I join in welcoming Dr. Hannah here in his new role as Administrator of the Agency. Certainly he comes to these new responsibilities after an illustrious career in government and education. I would just like to make this point. I know you realize that this committee is very seriously interested in finding out what the Agency is doing to help the small businessman. I am most interested in hearing your testimony and exploring what policies and procedures can be developed in the future to assure that the small business segment of our economy participates fairly in the procurement activities of your Agency. Mr. CORMAN. Thank you very much. (The following are the subcommittee's letters of invitation to the Administrator of the Agency for International Development to testify, and his response:) Hon. JOHN A. HANNAH, SELECT COMMITTEE ON SMALL BUSINESS, Administrator, Agency for International Development, DEAR MR. ADMINISTRATOR: The Subcommittee on Government Procurement of the House Select Committee on Small Business has scheduled public hearings to review various programs and practices of the Agency for International Development to determine whether American small business is afforded an equitable opportunity to participate in the procurement of goods and services financed with AID funds. A preliminary study conducted by our Subcommittee staff indicates that direct purchases by AID for administrative requirements and on behalf of certain foreign interests averaged $30 million annually in the past three years and that the small business share of such procurements rose from 32 percent in fiscal year 1966 to 46 percent in fiscal year 1968. However, with respect to the bulk of AID financed procurements averaging $1.4 billion annually in the same period, information needed to determine the extent and the growth or decline of small business participation appears to be unavailable. In this connection, you and appropriate members of your staff are invited to appear and testify on April 23 at 9:00 a.m. in room 2359, Rayburn House Office Building, regarding your policies and plans to assure that a fair proportion of AID financed procurements is placed with U.S. small business firms. The following additional information is requested regarding: (1) direct Government agency procurements during fiscal year 1968 and in the first half of fiscal year 1969–— (a) total for AID administration purposes; (b) total on behalf of foreign interests; (c) small business share in dollars and percentages of each ; (d) procedures followed by the procuring agencies to encourage small business participation; (e) determinations to establish, class, total, or partial small business set asides; (f) criteria applied to determining when direct purchases are to be made for foreign interests; and (g) description and dollar value of various items procured as per your classification or grouping; (2) procurements financed with AID funds (a) total expenditures during fiscal year 1968 and in the first half of fiscal 1969; (b) amount and portion procured in the United States in each period; (c) dollar value and percentages applicable in each period to each class or commodity group of goods and services procured in the United States; (d) procedures followed or monitored by AID in the procurement process, including determinations relating to negotiated versus advertised procurements, solicitation and evaluation of bids and quotations, non-responsible bids and irresponsible low bidders, waivers of notifica tion, name-brand, sole-source, proprietary, and emergency procurements; and (e) AID rules and regulations designed to encourage and protect U.S.. small business participation. 3. such other comments as you may wish to make. It will be appreciated if you would furnish the names of other witnesses and twelve copies of all statements by April 18. Sincerely yours, Hon. JAMES C. CORMAN, JAMES C. CORMAN, M.C., Chairman, Procurement Subcommittee. DEPARTMENT OF STATE, AGENCY FOR INTERNATIONAL DEVELOPMENT, Chairman, Procurement Subcommittee, Select Committee on Small Business, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: This is to acknowledge your letter of April 8, inviting me and members of my staff to testify before your Committee on April 23, regarding our policies and plans to assure that a fair proportion of A.I.D.-financed procurements are placed with U.S. small business firms. As we explained to your staff, I will be out of the country on April 23, but I certainly will be willing to appear at another convenient time. My staff had suggested May 13 as an appropriate date and I thought at the time that I would be available then. Subsequently, we discovered that the only available air connections back to Washington from Southeast Asia will have me arrive in Washington the evening of the 12th, and I do not believe that the morning of the 13th would provide the best opportunity for me to testify. We have suggested that we could be available on the morning of the 15th, and I hope that this date is still agreeable to you and your committee. I regret these last minute changes and hope that they were of no inconvenience to you and your Subcommittee. Sincerely, JOHN A. HANNAH. SELECT COMMITTEE ON SMALL BUSINESS, Hon. JOHN A. HANNAH, Administrator, Agency for International Development, DEAR MR. ADMINISTRATOR: This will acknowledge receipt of your April 18 letter regarding the hearings scheduled by our Procurement Subcommittee to review your Agency's small business policies and programs in AID financed procurements. We are pleased to confirm the arrangements concluded by members of your staff and ours to postpone your appearance before the Subcommittee to May 15 at 9:00 a.m. in room 2359, Rayburn House Office Building. I understand that copies of the prepared statements will be furnished to the Subcommittee by May 2. Your cooperation is appreciated. JAMES C. CORMAN, M.C. Chairman, Procurement Subcommittee. Mr. CORMAN. Dr. Hannah, we are indeed pleased to have you here. If you would care to introduce the gentlemen with you for the record, you may then proceed however you would like. We would want to observe initially that the AID program has been a long and, I think, valiant effort on the part of the American people to assist, first, the wartorn nations of Europe, and secondly, the developing nations. We would not anticipate that you would have substantially corrected any flaws that may have existed over the past 20 years in your present short time in office. The purpose of getting together with you early in your assignment is to explore together the somewhat limited but very important role that small business can and must play and how we can expand that role. TESTIMONY OF DR. JOHN A. HANNAH, ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT, DEPARTMENT OF STATE, ACCOMPANIED BY EDWARD E. KUNZE, SPECIAL ASSISTANT FOR SMALL BUSINESS: PATRICK M. O'LEARY, DIRECTOR, OFFICE OF PROCUREMENT; AND HARRY L. FREEMAN, DIRECTOR, INSURANCE DIVISION, OFFICE OF PRIVATE RESOURCES Dr. HANNAH. Mr. Chairman, members of the committee, first of all I am happy to introduce Mr. Ed Kunze, sitting on my right, who is our Special Assistant for Small Business, and on my left is Mr. Patrick O'Leary, Director of our Office of Procurement, and Mr. Harry Freeman, over here on the right, who is Director of the Insurance Division of our Office of Private Resources. Several weeks ago your committee indicated your interest in the work of the Agency for International Development in its role of encouraging participation by small business in its activities and saggested an earlier date than this for this hearing. Because it seemed to me to be important that as a part of my e lucation I visit personally some of our overseas programs, this hearing was delayed to permit me to spend several days in India and Vietnam where AID has large responsibilities. Before I left on this trip on April 28, the content of my statement today was agreed upon and tentative copies of it were later distributed to your staff. It was then contemplated that President Nixon's mess ge to Congress on the foreign assistance program would have been submitted a few days before this hearing. Because of the President's concern in recent days with last evening's statement to the Nation on the Vietnam war, this message is now planned for next week and, therefore, I am deleting the references in the testimony today to the possible content of his message. Now, we welcome this opportunity to review for the committee the policies and procedures and activities of the Agency which respond to the small business provision of the Foreign Assistance Act. In the short space of time that I have been Administrator, and I was sworn in 6 weeks ago, on April 2, it has not been possible for me to familiarize myself with all of the details of our operations. Following my statement, the gentlemen that I have already introduced will help me respond to any questions which you may have on this important element of our activities. And, in this statement, when I refer to the AID as "we" or "our," it is self-evident that I am reporting on the work of others and claim no credit for the good work or past accomplishments of this Agency. As you know, section 602 of the Foreign Assistance Act requires that, insofar as practicable and to the maximum extent consistent with accomplishment of the purposes of the act, we assist American small business to participate equitably in AID-financed procurement opportunities by: 1. Informing U.S. suppliers, in advance, of proposed purchases; 2. Making information available to prospective purchasers on commodities produced by small independent firms; and 3. Providing additional services to assist small business firms to participate. This provision has been part of the foreign assistance legislation, in virtually its present form, since 1949. It recognizes that AID is a financing rather than a procuring agency and that the great bulk of AID-financed commodity procurement is undertaken by foreign importers through normal commercial channels of trade. This is consistent with the desires of Congress as expressed in section 601 of the Foreign Assistance Act, which provides for the use of private trade channels to the maximum extent practicable. Section 602 also recognizes that most small business firms do not have representation throughout the world and, therefore, require an independent means of learning which foreign importers are buying the products they are interested in selling. To fill this need, AID publishes the details of proposed AIDfinanced purchases in its Small Business Circulars. These are published daily and are distributed free of charge to about 7,500 subscribers. We invite, and welcome, the addition of any U.S. supplier to our mailing list. In its last appearance before this committee in 1963, AID testified that it had published notice of 4,879 individual intended purchases in fiscal year 1962, and 6,158 in fiscal year 1963. We are now pleased to inform the committee that over the past 3 years we have been able to increase substantially the number of items published. In calendar year 1966 the total was 8,236; in calendar year 1967, the total was 7,945 and in calendar year 1968, we published an all-time high of 11,543—an increase of almost 88 percent over fiscal year 1963. We have also published Procurement Information Bulletins which provide potential U.S. suppliers with information of a more general nature than that contained in our Small Business Circulars, about export opportunities under AID loans and grants. Included among these, starting in 1965, have been issuances which list the commodities which are eligible for financing under our loans to Colombia, Chile, Uruguay, and the Dominican Republic, and give the names and addresses: of the importers which have traditionally purchased such items. Similar issuances for Brazil and Indonesia will be made in the very near future. These bulletins provide U.S. suppliers with procurement information which we have heretofore found it impracticable to furnish for our programs in those countries, and should materially assist them in developing export markets for their products in those areas. To satisfy the second requirement of section 602, of seeing that foreign purchasers have knowledge of what U.S. small business firms produce, we have urged suppliers to send copies of their brochures, catalogs, descriptive literature, and price lists to our missions overseas for inclusion in their commercial libraries. These libraries are open to the public and are widely consulted. We have publicized this request in our booklet, "Commercial Exports Under AID Programs"; in our brochure, "AID-Financed Procurement"; in personal consultations |