S. 918, THE SMALL BUSINESS DEVELOPMENT CENTER ACT OF 1979 THURSDAY, APRIL 5, 1979 U.S. SENATE, SUBCOMMITTEE ON ECONOMIC Development, MARKETING, AND THE FAMILY FARMER, SELECT COMMITTEE ON SMALL BUSINESS, The subcommittee met, pursuant to call, at 2:05 p.m., in room 424, Russell Senate Office Building, Hon. Sam Nunn (chairman of the subcommittee) presiding. Present: Senators Nunn, Huddleston, and Schmitt. Also present: William B. Cherkasky, executive director; Alan L. Chvotkin, Esq., legal counsel; Allen W. Neece, Jr., Esq., legislative counsel; Robert J. Dotchin, minority staff director; Stanley A. Twardy, Jr., Esq., minority counsel; Robert W. Santy, professional staff member (minority); and Sandra K. Klatt, professional staff member. STATEMENT OF HON. SAM NUNN, A U.S. SENATOR FROM THE STATE OF GEORGIA Senator NUNN. Today is the fifth hearing held by the Senate Small Business Committee to consider a Small Business Development Center bill. Four hearings were conducted during the 95th Congress to consider S. 972. That bill was later made a part of H.R. 11445 which passed the Congress last fall, but was pocket vetoed because of other titles contained in the omnibus small business measure. The Small Business Development Center Act has therefore been introduced once again. It is our purpose this afternoon to review the operation to date of the administratively created Small Business Development Center program and hear the views of witnesses in the academic and business sectors regarding the bill now pending before the committee. Before introducing our first witness I would like to briefly review the purpose of the Small Business Development Center legislation and how it might be funded in the next 3 or 4 years. Modeled after the Agricultural Extension Service, the SBDC program is designed to provide an array of management and technical consulting services through locally based centers located throughout the State. Although affiliated with universities and colleges, it is intended that only personnel with business backgrounds will staff and manage the centers. As a matter of fact, the bill directs that a statewide center must employ on a full-time basis a director, business analysts, technology transfer agents and information specialists. Faculty and student resources will be utilized only when one of the center personnel believes such involvement will be productive and appropriate. The SBDC legislation directs that the program be a "hands on" type of service in that small businesses should be able to obtain specific advice on a one-to-one basis in such areas as: Operations, manufacturing, engineering, technology exchange and development, personnel administration, marketing, sales, merchandising, financial management, accounting, and business strategy development. Both manufacturing, service and retail firms would be eligible to receive assistance from the full service centers. It is expected that private management consultants and other professional people will find the program advantageous. The centers will not only contract with such people to provide counseling and assistance in selected instances, but will refer small businesses to professional consultants if the case is either beyond the scope of the center's expertise or there is need for additional followup assistance. It is intended that approximately 15 States will be selected to participate in a pilot program for a period of 3 to 4 years to test the validity of the SBDC concept. Funds will probably be authorized on the following basis: $8 million in fiscal year 1980; $18 million in fiscal year 1981, and $20 million in fiscal year 1982. Only after the program has undergone a comprehensive evaluation would the Congress, after consulting with the small business community, make a decision as to whether the program should be terminated or expanded to other States. It is now my pleasure to call our first witness, Dr. Patricia Burr, Associate Administrator for Management Assistance, Small Business Administration. I wish to welcome you here this afternoon. You may proceed in any manner you wish, Dr. Burr. STATEMENT OF DR. PATRICIA L. BURR. ASSISTANT ADMINISTRATOR FOR MANAGMENT ASSISTANCE, U.S. SMALL BUSINESS ADMINISTRATION, ACCOMPANIED BY JOSEPH KNIGHT, EX OFFICIO MEMBER, NATIONAL SCORE COUNCIL, U.S. SMALL BUSINESS ADMINISTRATION, REGION I, DISTRICT OFFICE, PROVIDENCE, R.I. Dr. BURR. Mr. Chairman, thank you for the opportunity to appear here today and provide you with the status report on the Small Business Development Center activities. I have with me Mr. Joseph Knight, past chariman of the National SCORE Council who is on the Board of Directors of SCORE. Senator NUNN. Delighted to have you. Dr. BURR. He has several comments that he will be making as the time is appropriate. In the interest of time, I would like to submit my testimony for the record and simply highlight several key sections. Senator NUNN. Very will. [The prepared statement of Dr. Burr follows:] STATEMENT OF DR. PATRICIA L. BURR, ASSISTANT ADMINISTRATOR FOR Mr. Chairman and members of this committee, thank you for this opportunity to appear here today to provide you with a status report on the Small Business Development Center activities. Through the years there have been a number of pieces of legislation which have dealt with the SBDC program. The Agency has repeatedly stressed the fact the the SBDC program is still in a pilot stage and that an evaluation of the program should be completed in June of 1979. At that point, additional review of the Evaluation, if appropriate, would be undertaken with the Administration. The President's Budget calls for the continuation of the pilot program in fiscal year 1980 with funding of $2.30 million which would allow for the creation of several more centers. The Adminstration continues to feel the program should continue on an expanded pilot basis and undergo continued evaluation and modification where necessary before authorizing the program on a permanent basis. The original eight pilot Centers are continuing to operate and have been funded for fiscal year 1979. Building on the initial program started years earlier at California State Polytechnic University at Pomona, SBA designated this site of the first Small Business Development Center in December 1976. Eight additional counseling centers are located in Pomona at the Chamber of Commerce Office, San Bernardino, Riverside, Corona, Banning, Pasadena, Colton, and Victorville, all in the metropolitan area East of Los Angeles. Over the 2-year period (fiscal year 1977 and 1978), SBA has contracted for services amounting to $130,000 and approximately $200,000 had been contributed by the University in inkind funds. There are 40 faculty members participating in the program plus 25 members of the Service Corps of Retired Executives (SCORE). Some 131 small businesses have received in-depth counseling with the total counseled numbering 995. Fifty training programs have been presented with 1,500 participants. Students and faculty have worked together on 100 Small Business Institute (SBI) cases. The university brought in new management for this SBDC in April 1978, resulting in an increase in service to small business. From October 1978, to the middle of March 1979, 600 small businesses have been counseled, 70 in-depth. Seventy-five training programs have been presented to 2,000 individuals. The second SBDC was designated in January 1977, at Rutgers, the State University of New Jersey at Newark and New Brunswick. A third center was later established at Camden. Since 1970, the Rutgers Minority Small Business Investment Company had invested in 136 small businesses, with approximately $2 million in venture capital. This amount attracted an additional $18 million from banks and insurance companies. The businesses assisted have gross sales of $27 million and employ more than 1,000 people. Over a 2-year period (fiscal year 1977 and 1978), SBA had contracted for services amounting to $240,000. Grants have been secured from the city and state amounting to $100,000, from EDA amounting to $150,000. The University had contributed $50,000 in in-kind funds. The Rutgers SBDC has a staff of 12 profesionals operating a Women's Division, a Technical Center, and a Center for International Trade. Some 1,000 small businesses have been counseled with 150 receiving in-depth assistance. Over 100 training programs have been presented with 1,600 participants. In addition to the $240,000, SBA made a call contract ageement for $70,000 for training of socially and economically disadvantaged persons. This resulted in a number of training programs. Last October, more than 3,000 women attended these training sessions. In March 1977, three more SBDC's were officially designated at the University of California at Chico, the University of Nebraska at Omaha, and the University of Maine at Portland. The SBDC and Chico, 200 miles East of San Francisco, serves 12 countries, about 500,000 people and covers approximately 30,000 square miles. SBA has contracted for counseling and training services amounting to $130,000 over a 2-year period (fiscal years 1977 and 1978). EDA has granted $460,000 over a 3-year period for the purpose of saving and/or creating employment. The University has made its research center with computer facilities available to the Center. Eighteen faculty members participate in the SBDC, along with 6 members of SCORE. Outreach centers are located at four community colleges and one chamber of commerce. Some 500 small businesses have been counseled, with 110 receiving in-depth counseling. In addition, 60 training programs have been presented with 2,510 people attending, and there have been 100 SBI cases. For presentation to banks and the SBA, 23 complete business plans have been put together by the staff which have resulted on $3.5 million loans. A staff of six fulltime, five part-time individuals plus consultants operate the International Trade Center, Capital Formation Center, and a Special Group Emphasis Program for minorities. In the rural counties this SBDC serves, there are no State of Federal government offices; as a result, this Center acts as a referral service for a variety of client needs. The University of Nebraska at Omaha has received $150,000 in SBA funds over a 2-year period (fiscal year 1977 and 1978). A Business Information Bulletin is circulated once a month to 23,000 Chamber of Commerce members throughout the state. Seventy-five faculty members participate at seven other colleges in Nebraska, besides 80 training programs. More than 5,400 small businesses have been counseled. Of the 300 SBI cases, 150 have been subcontracted to seven colleges. There are five outreach centers in Omaha, Lincoln, Kearney, Wayne, and Chadron/Scotsbluff. Over 80 Chambers of Commerce participate in this program, with services available in all geographic regions of the state, covering some 80,000 square miles. A program of intensive analysis and assistance to small business in rural communities outside the geographic scope of the University is conducted every summer. This fiscal year five universities are participating in the Rural Nebraska Communities Program: University of Nebraska at Omaha, Creighton University, Kearney State College, Colorado State University, and the University of Wyoming. Funding to the University of Southern Maine at Portland was in 1976, with a $580,000 5-year grant from the Kellogg Foundation. The New Enterprise Institute which resulted has been primarily concerned with achieving a long-term positive impact on the state's economic health through the creation of new jobs. SBA has provided over a 2 year (fiscal year 1977 and 1978) period $140,000. There are two members on the staff; and with a change in management, there has resulted an increase in service to small business. Currently 15 members of SCORE are participating in the program, with faculty members beginning to be involved. An additional center has been established at Farmington, with two more in the process of development. Three more SBDC's were designated in April 1977 at the University of Georgia at Athens, the University of Missouri at St. Louis, and the University of West Florida at Pensacola. There are presently three additional centers at Georgia Southern University at Statesboro-Albany Junior College at Albany, and in Atlanta-Georgia State and Clayton Junior College. Georgia Tech will be operating shortly in the North Atlanta area. There are eight additional centers that are partially operating in Columbus, Savannah, Valdosta, Rome, Augusta, Macon, Carrollton and North Atlanta. SBA has contracted for services in the 2-year period amounting to $170,000. The state has provided $450,000 in direct funding; $150,000 has been provided by HEW, the Department of Energy, and the Department of Transportation. A staff of 18 plus 35 graduate students, working 20 hours a week, conduct international trade, minority business, and economic forecasting programs. One-third of the budget is spent on faculty support, providing teaching and counseling services. Eighty-five faculty members participate in the program, and indepth counseling, up until March 19, has been provided to 783 clients. The amount of time spent with the client is 34.5 hours each. If we were to include preparation and travel time, the average per in-depth-client-counseled is 56 hours. At 30 locations throughout the state, some 400 training programs have been presented to 10,000 participants, covering 60 different subjects. Also participating in this program are 40 volunteers who provide at least 2 days per month to this program. At the University of Missouri at St. Louis, SBA has contracted for services amounting to $170,000 over the 2-year period (fiscal year 1977 and 1978). EDA has provided grants amounting to $200,000 for 200 small business cases located in 44 impacted counties within the state. Seventy-five faculty members are involved in the program and 25 members of SCORE participate. This SBDC covers the entire state, with other centers located in Kansas City, Rolla, and two in Columbia. The Rolla Center specializes in engineering and technical assistance services to small business. All the centers are tied in to the National Technical Information Service, enabling the transfer of information developed by NASA to small businesses. In addition, this SBDC is tied to the seventeen business and industry field representatives of the university. |
