An agency's new chief gets down to business - Erskine Bowles; Small Business Administration - includes biographical and family information and his fundraising efforts for diabetes research - Cover Story

0 Comments | Insight on the News, Nov 1, 1993 | by Betsy Pisik

Summary: As leader of the Small Business Administration, Erskine Bowles has pledged to tackle head-on the myriad problems plaguing the agency. But some critics say that even if the savvy Bowles succeeds in streamlining the agency and focusing its mission, the government could find wiser and more effective ways to help businesses than through the SBA.

The hearing before the House committee started on time and turned harsh in a hurry: A new government report was in, and it was deeply critical of the Small Business Administration.

In a weary voice, the chairman of the House Small Business Committee summarized the findings: The SBA had failed again to adequately advise and supervise the companies that come to it for help; the agency's computer systems are inadequate, despite a 1988 law requiring that they be updated by 1990; onerous paperwork requirements discourage potential clients; and processing of applications - required by law to be completed in 90 days - is taking more than 170 days.

And, an irate congressman added, the staff is indefensibly rude.

"We have a long, long way to go conceded Erskine Bowles, the new administrator of the SBA, who calls his job "the opportunity of a lifetime."

Sitting calmly at the witness table behind stacks of notes and a bound speech, Bowles met complaints with a simple acknowledgment of failure and a detailed plan for improvement. He would reduce paperwork from quarterly to annual reports, oversee completion of a new computer system and - potentially most important - reorganize the administration's 4,000 employees to better serve the nation's 21 million small businesses.

Impassioned yet polite, he vowed to take responsibility: "If we fail to meet the challenge, I'll replace the management. And if we fail to meet the challenge, I'll replace the management. And if we fail a second time, the president should replace me."

The occasion of the September hearing - a report by the General Accounting Office that harshly criticized the SBA's efforts to clean up its vaunted minority contracting program - was not the first time Bowles found himself apologizing. Nominated in May by Bill Clinton, the self-described small-business president, and unanimously confirmed by Congress, Bowles has inherited an organization so riddled with problems that a decade ago, Ronald Reagan's budget director, David Stockman, referred to it as "a billion-dollar rat-hole."

But as it nears the end of its 40th year, this complex organization with a $407 million annual administrative budget, more than 100 offices and a $25 billion loan portfolio may have found a new lease on life. Indeed, the agency Reagan tried to kill and George Bush largely ignored has become a linchpin of Clinton's administration.

First, there are some kinks to work out.

* Bad management: The 7(a) loan program, which guarantees bank loans to small business counts for 75 percent of the organization's loan effort, ran out of money for two months this past spring, requiring a $175 million emergency appropriation from Congress. Managers had been approving loans as they came in, rather than budgeting against an immobile bottom line.

* Bad direction: Many critics say the agency is stretched too thin by tangential missions ranging from disaster relief to tree planting. Concentrate on the larger needs of small business, they say, and let the other tasks go to agencies better equipped to handle them.

* Bad organization: About 40 percent of the staff works in Washington or at the 10 regional offices - leaving field offices so understaffed that they can't gather and assess information. Bowles has said this is the root of extreme inefficiencies and has made streamlining the SBA a priority.

* Bad technology: Many loan applications are processed by hand, which, given the SBNS jigsaw structure, takes months instead of an afternoon. "We're going to join the 20th century before it ends," promised Bowles, who estimates that the magic moment is two years and $900,000 away.

* Bad image: The loan guarantee program is reputed to be so tortuous that many small-business owners put off expansion plans rather than deal with it. The dread is not limited to applicants: One banker has confided, "I told my boss to make a character loan for one guy, because he'd threatened to go for an SBA guarantee."

* Bad diet: The agency has a reputation for serving pork, often directing lucrative projects, Small Business Development Centers and college subsidies toward the home districts of supportive members of Congress.

Amid the movement to "reinvent" government and trim costs, critics describe the SBA as a welfare program for small business, and they claim the federal government can spend its money more intelligently and with better results. But even those hostile to the program agree that Bowles, 48, is the man to run it. The question is, can he save it?

A savvy investment banker and entrepreneur from Charlotte, N.C., Bowles is the first businessman to sit in the agency's comer office in more than a decade, and the first modem administrator to actually seek the job. His three immediate predecessors - Patricia Saiki, Susan Engeleiter and Jim Abdnor - were each handed the SBA as a consolation prize after losing a Senate bid.