The Carter administration has agreed to overturn longstanding policy requiring key federal agencies to earmark specified portions of their procurement business for domestic firms, small business, minority enterprises and other groups.
The new procedures, which are expected to provoke a storm of controversy, are part of a long-sought provision in the multilateral trade agreement, which is in the final stages of negotiation.
As part of that trade pact, the United States has agreed to allow foreign producers greater access to bidding on federal contracts here in return for a pledge by European governments and Japan to open up more of their procurement business to American exporters.
To carry out its part of the agreement, the administration has pledged to relax current restrictions in federal procurement policies that have required key agencies to grant special preferences to domestic firms, small business and minority companies.
Sources said the changes will allow foreign manufacturers to bid on an estimated $10 billion in added business. In exchange, European governments have promised to lift restrictions on about $25 billion worth of business to allow U.S. firms to bid.
The difficuity domestically is that, while the changes will help U.S. exporters, they will hurt the very firms that four previous presidents had tried to protect. As a result, although the liberalization has been long sought by U.S. policymakers, it may spark some ire.
Rep. Joseph P. Addabbo (D-N.Y.), chairman of the House minority enterprises subcommittee, is expected to make a speech on the House floor today denouncing the provision as a setback for longtime efforts to encourage black-owned businesses.
According to the administration's own figures, the shift would affect approximately $9 billion worth of the $18 billion in federal procurement contracts now awarded to small business. Officials yesterday had no separate breakdown for minority firms.
However, administration officials stressed that the tradeoff also would enable U.S. firms, both large and small, for the first time to crack the lucrative foreign government procurement market.
In general, the easing of restrictions would apply only to government purchases whose value exceeded 150,000 "special drawing rights," an accepted international measure that currently translates into about $190,000. That figure would rise if the dollar declined.
However, the liberalization would apply only to selected government agencies. It would not affect entities such as the Tennessee Valley Authority, or Defense Department purchases of shoes, steel, textiles and a spate of other specifically exempted items.
Officials said the United States still is negotiating for broader Japanese concessions. The administration wants Tokyo to allow bids on purchases by the Nippon Telephone and Telegraph Corp. and other big firms.
Critics of the administration's action contended that relaxing the small business preferences would in effect leave most government procurement here in the hands of large corporations. Small business now provides about 20 percent of Washington's $90 billion yearly burchases.
The current "Buy America" order requires federal agencies to award purchase orders to U.S.-based firms unless foreign companies underbid them by at least 6 percent -- or up to 12 percent in the case of small businesses and 50 percent in the case of Defense Department contracts.