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Memorable Achievement Or Hollow Victory?

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On July 22, 1982, President Reagan signed Public Law 97-219, the Small Business Innovation Development Act. He was in good form as he made this strong statement:

"Small Business is a tonic for what ails this country. By passing and signing this Act, we're showing our resolve to unleash this most innovative sector.

"The Small Business Innovation Development Act recognizes that we in government must work in partnership with small business to ensure that technologies and processes are readily transferred to commercial applications.

"Now we face the difficult task of implementing this program in several agencies of the government. Let me assure you of this Administration's strong commitment to this program. We will direct the rest of the government to cooperate fully and speedily in putting it into effect."

Good words for a good new law on a good occasion. But how will they be read years from now, on October, 1, 1988, when Public Law 97-219 expires? Will this law stand as one of the memorable achievements of the Reagan Administration, the Republican Senate, and the Democratic House? Or will it prove -- courtesy of the federal bureaucracy -- to be just another hollow victory for small business?

To answer these questions I thought of two simple phrases in Article II of the Constitution that lay the basis for Presidential duty: "The executive power shall lie vested in a President of the United States of America. . . . He shall take care that the laws lie faithfully executed. . . ."

How often I have wished that every office in the executive branch had that statement framed on its wall with the words faithfully executed underscored. How many times I have seen the bureaucracy first "interpret" the spirit and guts out of a law, then kill it, by "proving" that it couldn't work or by simply turning it into a dead letter. If the bureaucracy likes a new law, it receives it with open arms: "How much can we do under it and how fast?" it asks. But if it dislikes a law, the question becomes, "How little can we do, how slowly can we drag out implementation and still look like we're obeying it?"

There are already well-founded rumors that the procurement bureaucracy is up to its old tricks, that major agencies are "revising" their plans and their estimates of how large a program the law requires. Why are these bureaucrats trying to shrink the program? As has been the case many times before, what they fear is not the program's failure, but its success. If it works too well and becomes too important, it may change many of the preferred ways of doing business.

The dollar estimates for the program suggest the difference strong Presidential support can make in the amount of money available for small business. The biggest dollar impact of the new program will lie on those agencies that spend more than $100 million a year on extramural research and development. They are ordered to earmark specific percentages of their R&D budgets for small business R&D. Those agencies that spend at least $20 million are simply required to spend as much as or more than they did previously on small business. In general, more than $40 billion of federal spending is counted as R&D. About 75% of that ($30 billion) is counted as "extramural budget," that is, work not done by the federal agencies themselves. The new law requires the percentage for small business innovation research to lie applied only to the lesser amount. James Sanders, SBA administrator, made public the following figures at a press conference several days after the White House ceremony:

Fiscal year<1> 1983 1984 1985 1986 1987

Civilian

agencies,<2> 0.2 0.6 1.0 1.25 1.25

Defense

Department<2> 0.1 0.3 0.5 1.00 1.25

Millions of dollars 30-50 100-150 170-250 250-400 275-450

<1>Federal fiscal years end on September 30.

<2>Percentage of extramural R&D expendtures

If you add the lows and highs on the "millions of dollars" line, you get a five-year range of $825 million to $1.3 billion. That is a difference of about a half-billion dollars in the amount available to small business. And at this stage, these figures can only be estimates.

Even as the President was signing the bill into law, agency procurement people were frantically playing the ancient bureaucratic shell game with statistics. One big agency was rumored to be reclassifying and redefining R&D, in order to propose innovation program numbers that would be 20% of those estimated by administrator Sanders. Another was said to be burning the midnight oil "reclassifying" as much "extramural" expenditure as possible into "intramural" accounts to shrink the base of the program.

The law will be a test of the President in his capacity as head of his Administration. Some of his key people have made their hostility to the program clear. Others hope to get away with just going through the motions of implementation. And few of the career procurement people in either the executive office of the President or the various Cabinet departments and agencies have records of fairness to small business.

We believe the President needs and deserves help in making this vital program a success. Here is what small businesspeople can do.

The nation's best technology entrepreneurs must inform themselves as fully as possible about the details of the program as soon as these details become available.

Equally important, a visible, fair, and effective monitoring program must be established quickly. Congressional committees must and will be involved in this process as part of their oversight responsibility. Eight of the bill's leading congressional champions have already written to budget director David Stockman, asking him to require the agencies to adhere to Congress's intent. The law also gives specific evaluating responsibilities to several federal agencies. Unfortunately, in at least one or two instances, this may be a case of setting foxes to guard hen houses. That is why accurate and timely appraisals of each federal agency's performance from outside the government will be indispensable.

Individuals in the private sector who will be most valuable in helping monitor the program's implementation are those with extensive experience in dealing with federal agencies on R&D procurement. They know the difference between lip service and real effort, between prudence and timidity, between deliberateness and procrastination. If you think your background qualifies you to help in this monitoring effort, let us hear from you.

We enthusiastically agree with the President that small business is a tonic for what ails this country. But the bureaucrats, like other wayward children, will keep the dosage as small as possible. A nongovernmental monitor can help ensure that the tonic is taken and that its effects on the patient are carefully observed. TWe enthusiastically agree with the President that small business is a tonic for what ails this country. But the bureaucrats, like other wayward children, will keep the dosage as small as possible. A nongovernmental monitor can help ensure that the tonic is taken and that its effects on the patient are carefully observed.

Last updated: Oct 1, 1982




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