Fewer than 40 of approximately 2,400 companies that received federal contracts through a 10-year program to stimulate minority business are known to be in operation now, the program's administrator said yesterday.
Vernon Weaver, who heads the Small Business Administration, told a Senate committee that his agency has failed to keep track of companies that participated in its business development program.
Some 18,000 contracts worth $2.9 billion have been handed out since the program began in 1967, Weaver told the Senate's Select Committee on Small Business. More than 4,000 firms have been involved in the program during the past 10 years and 1,649 of them still are in the program, he added.
But he said the SBA has not kept up with businesses that took part in the program, then left it because they were considered "economically viable." Weaver said the SBA knows that of those that left the program, "30-something are in business and doing a good job." He added: "We're not saying that those are the only ones by any means."
He said the SBA is starting a review to try to determine the success rate of the controversial minority business program.
Later asked about the apparent short lifespan of firms involved in the program, Weaver said he could not guess whether the attempt to trace its participants will show more of them still in business.
When the SBA program began, its object was to offer government contracts on a noncompetitive basis to companies promising to locate in inner city areas and hire the unemployed or underemployed.
In the early 1970s, the program known as 8(a) also began helping develop profit-oriented small businesses that were owned, controlled and operated by persons considered socially or economically disadvantaged.
Yesterday's hearing was the second in which the Senate committee attempted to spotlight problems with the SBA's advance payments program in which interest-free loans from the government are used to enable the minority program contractors to begin work on the contract they are awarded.
The advance payments are to be repaid by the time the contract is completed. But the Senate committee has found that in some cases, advance payments are being used for purposes having nothing to do with the federal contracts.
Many abuses have been documented in the New York region. But Weaver said the agency expects to turn up more problems in its Atlanta and San Francisco regions. But he described the advance payments problem as one of limited scope.
A variety of other problems with the agency over the years has led for calls for its abolition.
But Rep. Parren Mitchell (D-Md.), who heads the Congressional Black Caucus, said the SBA should get a chance to solve its problems.
"I don't want fraud and abuse. I don't want these programs that are designed for minorities to be smeared in any way," Mitchell told the committee. "I would think we would be very prudent and wise to proceed with caution."