A Small Business Administration program intended to strengthen minority businesses by awarding them non-competitive government contracts has not achieved its goals, and is not well managed, a special review committee said yesterday.
The committee said the $2.2 billion program, known as "8(a)" from the section of the law that created it, was supposed to develop minority-owned firms to the point where they could compete without any special assistance.
Instead, it proved more effective at placing the contracts than in developing the companies, the committee said.
From fiscal 1969 through fiscal 1974, SBA awarded 6,961 subcontracts under the program, but only 37 of the recipient businesses grew strong enough to compete on their own, the report said.
According to SBA figures, 3,726 firms took part in the 8(a) program through fiscal 1977.
The review committee began looking at the program after reports last July that white entrepreneurs siphoned off millions of dollars in lucrative, non-competitive contracts by setting up captive companies that had blacks in phony executive positions.
Public hearings conducted by Sen. Lawton Chiles Jr. (D-Fla.) revealed that one company listed as secretary-treasurer a man who actually was an illiterate janitor, and who admitted that his real job was "to clean up around the office."
SBA Administrator A. Vernon Weaver halted the program from early July until November, pending an overhaul to prevent further abuses.
The report said an earlier reorganization, in 1974, did not work: "Existing staff . . . were not retrained for implementing new goals; nor were any significant organizational changes made . . ."
Sen. Dewey Bartlett (R-Okla), chairman of the Senate committee on small business, called the program "a failure" in its overall goal of expanding the ownership of productive capital among groups that have almost none.
"In our capitalist system, it is essential that productive capital be broadly owned in order to assure that we all feel that we have a vital stake in our economic system," Bartlett said.
" . . . Racial minorities own only 3 per cent of all American businesses, and that 3 percent have sales of only $16.6 billion, just 0.65 percent of total business sales in the U.S."
Patricia M. Cloherty, deputy administrator of SBA and head of the review committee, said about 1,500 companies, mostly owned by male minorites, are in the program now.
Last year, she said, 34 percent of them were non-professional services contracting businesses, which tend to be low profit and highly competitive.
Only 10.5 percent, she said, were in manufacturing, "which of course has a greater protential for profitability."
In addition, the report said, some of the non-competitive contracts awarded are for types of work in which there are no commercial markets, or in which new contractors cannot compete successfully.