The administration is considering a change in federal reporting requirements that would eliminate a major source of data about how much federal grant and contract money goes to minority firms.
Administration officials said that the Office of Management and Budget and the Commerce Department may adopt a reporting form similar to one now used by the Commerce Department to track how federal grants are spent.
Like forms used by some other federal agencies, the Commerce questionnaire asks about funds spent with minority contractors. But unlike some of the other forms, it requires no data on how money is spent with subcontractors. Subcontracting is a major source of federal funds for minority businesses, which often are too small to bid for the overall contract.
"Minority businesses are dependent to a large extent on subcontracts" for a share of federal contracts and grants, said Ralph C. Thomas III, executive director of the National Association of Minority Contractors. Dropping reporting requirements on subcontractors "would discourage the use of minority subcontractors because grantees would know they wouldn't have to report it. So there's no real incentive to hire minority subs." Making such a change could "whittle away" the chief source of survival for minority businesses, he said.
Rejection of data-collection plans and the move toward a standardized, abbreviated information-gathering form have led critics to charge that the administration wants to do away with most racial data gathering. "On its own, OMB cannot eliminate the federal policy of awarding a 'fair share' of government business to minority firms, but it can eliminate the data needed to enforce it," according to a report from OMB Watch, a group that monitors the OMB.
Federal law and two executive orders require government agencies to encourage the use of small and disadvantaged businesses, a majority of which are minority-owned, in carrying out work under federal grants and contracts. Funding for minority businesses through federal grants, loans and guarantees amounted to $10.2 billion for the first three quarters of 1985. Federal agencies use a variety of forms, which OMB wants to replace with a standard form, to monitor how well those efforts are working.
Although there is debate within the administration about whether to weaken enforcement of the executive orders, issued by President Reagan in 1983 and by Richard Nixon in 1971, the OMB initiative would not alter the overall policy. But it would make it harder to judge how well the policy works, say OMB Watch and other critics.
"Without those numbers [of minority subcontractors], a program can't be monitored properly and that, in effect, kills it," said David C. Rice, vice president of the Cooperative Assistance Fund, a national organization that makes loans to minority businesses.
"There's blatant disregard already for the public policy mandate requiring minority subcontractors be given an opportunity with major federal contracts," said Anthony Robinson, president of the Minority Business Enterprise Legal Defense and Education Fund. A change in reporting that excluded information about subcontractors "would be a devastating blow to minority and small businesses."
In addition to the absence of subcontractor reporting, the Commerce Department form fails to show whether grantees and contractors are living up to goals for minority-business participation in federally financed work. These goals are agreed on by grantees and the agencies giving out the money. Although many questionnaires used by federal agencies ask for the goal and the actual amount of money going to minorities, the Commerce Department form requests no information about the goal and therefore has no benchmark against which to measure performance.
The Commerce Department form being considered as a model was approved by OMB last year. "We are hopeful that this form, [perhaps] with some modification, could be used" as the standard reporting document for all government agencies, said Alfred Roma, chief of the Commerce Department's public programs division.
"If you're dealing with a lot of small grantees, there's a limit to how much information you want to require from them," he said about the absence of subcontractor data. "If you're dealing with large recipients, you might want to go to second- or third-tier contracts," he said. Roma and other officials said no final decision has been made about what the form will include.
The administration would like to use a standard form for any federal agency that collects minority business information about direct procurement contracts as well as grants, said James MacRae, chief of the OMB branch that deals with several departments, including Treasury, Health and Human Services, Labor, Housing and Urban Development and Education.
Officials from OMB and the Minority Business Development Agency, a Commerce Department division that coordinates governmentwide compliance with minority business requirements, will meet "in the very near future" to work on ways to standardize the reporting, said Hector DeLeon, an MBDA spokesman. The Paperwork Reduction Act of 1980 empowers the OMB to review and approve or disapprove the use of information-collection forms used by most federal agencies.
OMB spokesman Edwin L. Dale said the administration's aim "is keeping the paperwork burden to a minimum," not reducing collection of data on minority contracting.
The administration believes that, by making the information gathering consistent, a governmentwide reporting system would provide better information about minority businesses than MBDA now gets, according to DeLeon.
The administration has taken the position in the past that recipients of federal grants only must be encouraged, not required, to distribute a portion of the government-financed work to minorities. In denying the Department of Housing and Urban Development permission to use a form intended to collect data about the race of contractors and subcontractors hired for the agency's housing programs, OMB gave as part of its reason that Executive Order 12432, issued by President Reagan in July 1983, "specified that grantees were to be encouraged, not pressured or compelled, to utilize minority business." HUD Secretary Samuel R. Pierce Jr. appealed this decision, and a final decision has not been made.
OMB's desire to create a standard reporting form for minority contracting by federal grant recipients came up when the agency initially rejected extension of a reporting form used by the Interior Department. The request later was withdrawn. Explaining its disapproval, OMB noted that an administration circular on federal grants "only asks federal agencies to encourage the awarding of subagreements to small business and minority business. In addition, the circular prohibits additional procurement requirements on state/local grantees. The Interior Department form can easily be interpreted as constituting an additional grant requirement."