[House Report 113-409]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 113-409
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GREATER OPPORTUNITIES FOR SMALL BUSINESS ACT OF 2014
_______
April 9, 2014.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Graves of Missouri, from the Committee on Small Business, submitted
the following
R E P O R T
[To accompany H.R. 4093]
The Committee on Small Business, to whom was referred the
bill (H.R. 4093) to amend the Small Business Act to raise the
prime and subcontract goals, and for other purposes, having
considered the same, report favorably thereon and recommend
that the bill do pass.
CONTENTS
Page
I. Amendment.......................................................1
II. Purpose of the Bill and Summary.................................2
III. Background and the Need for Legislation.........................3
IV. Hearings........................................................4
V. Committee Consideration.........................................5
VI. Committee Votes.................................................5
VII. Section-by-Section Analysis of H.R. 4093........................8
VIII. Unfunded Mandates...............................................9
IX. New Budget Authority, Entitlement Authority, and Tax Expenditure9
X. Oversight Findings..............................................9
XI. Statement of Constitutional Authority...........................9
XII. Congressional Accountability Act................................9
XIII. Federal Advisory Committee Statement...........................10
XIV. Statement of No Earmarks.......................................10
XV. Statement of Duplication of Federal Programs...................10
XVI. Disclosure of Directed Rule Makings............................10
XVII. Performance Goals and Objectives...............................10
XVIII.Changes in Existing Law Made by the Bill, as Reported..........10
I. Amendment
The amendment is as follows:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Greater Opportunities for Small
Business Act of 2014''.
SEC. 2. SMALL BUSINESS PRIME AND SUBCONTRACT PARTICIPATION GOALS
RAISED.
(a) Goals in Subcontracting Plans.--Section 8(d)(6)(A) of the Small
Business Act (15 U.S.C. 637(d)(6)(A)) is amended by inserting after
``percentage goals'' the following: ``of not less than 40 percent''.
(b) Prime Contracting Goals.--Section 15(g)(1)(A)(i) of the Small
Business Act (15 U.S.C. 644(g)(1)(A)(i)) is amended by striking ``23
percent'' and inserting ``25 percent''.
(c) Delayed Effective Date.--The amendment made by subsection (a) of
this section shall take effect only beginning on the date on which the
Administrator of the Small Business Administration has promulgated any
regulations necessary, and the Federal Acquisition Regulation has been
revised, to implement section 1614 of the National Defense
Authorization Act for Fiscal Year 2014 and the amendments made by such
section.
SEC. 3. REPEAL OF CERTAIN PROVISION PERTAINING TO ACCOUNTING OF
SUBCONTRACTORS.
Section 15(g) of the Small Business Act (15 U.S.C. 644(g)) is amended
by striking paragraph (3).
II. Purpose and Bill Summary
The purpose of H.R. 4093, the ``Greater Opportunities for
Small Business Act of 2014,'' is to amend the Small Business
Act (the Act)\1\ to increase prime contracting and
subcontracting opportunities for small businesses. Small
business contractors bring necessary competition to the
government marketplace, add innovation, and create new jobs.
Contracting officers, however, generally prefer contractors
with whom they have experience; typically, this preference
hampers the ability of small businesses to obtain federal
contracts. Thus, the top 100 contractors to the federal
government routinely receive 25 percent of the total value of
contracts awarded in a fiscal year, whereas the over 350,000
small businesses competing for federal contracts struggle to
eclipse the 20 percent mark. This overreliance on a limited
corps of contractors is not good for the industrial base,
competition, innovation, job creation, or the needs of the
federal government.
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\1\Originally, title II of the Act of July 30, 1953, c. 282, 67
Stat. 232 was designated as the Small Business Act of 1953. A plethora
of amendments in subsequent Congresses led to a rewrite in 1958. Pub.
L. No. 85-536, Sec. 1, 72 Stat. 384 (1958). The Act is codified at 15
U.S.C. Sec. Sec. 631-657s.
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H.R. 4093 seeks to promote small business contracting in
three ways. First, it increases the prime contracting goal for
small business concerns\2\ from 23 percent of all federal prime
contract dollars to 25 percent.\3\ Second, it establishes a
government-wide small business subcontracting goal of 40
percent, which is necessary due to the continued decline in the
administratively set goals for small businesses. Finally, it
ensures that no department or agency is allowed to count
subcontract awards toward the prime contracting goal.
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\2\The Act uses the term ``small business concern.'' However, this
report will use the terms ``small business'' and ``small business
concern'' interchangeably unless the context requires a specific
reference to the term ``small business concern.''
\3\If contract spending remains constant, this will result in
approximately $10 billion in new contracts being awarded to small
businesses each year, and if contract spending declines, it will ensure
that small businesses are not the first to have their contracts cut.
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III. Need for Legislation
The Act finds that awarding prime contracts to small
businesses serves the nation in three ways. First, small
business contracting is in ``the interest of maintaining or
mobilizing the Nation's full productive capacity.''\4\ Second,
small business contracting is ``in the interest of war or
national defense programs.''\5\ Third, it serves ``the interest
of assuring that a fair proportion of the total purchases and
contracts for property and services for the government in each
industry category are placed with small-business concerns.''\6\
To fulfill these three objectives, statutorily based small
business goals have been used for approximately thirty-six
years.
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\4\Small Business Act, Sec. 15(a), 15 U.S.C. Sec. 644(a).
\5\Id.
\6\Id.
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Since the enactment of Public Law 95-507\7\ in 1978, the
SBA has been responsible for negotiating small business
contracting and subcontracting goals with federal departments
and agencies. A decade later, President Reagan signed the
Business Opportunity Development Reform Act of 1988 (BODRA),
which for the first time established a statutorily mandated
government-wide small business goal of ``not less than 20
percent of the total value of all prime contract awards for
each Fiscal Year.''\8\ This goal was increased to 23 percent by
the Small Business Reauthorization Act of 1997 (SBRA).\9\
According to the SBA, in Fiscal Year 2010, small businesses
received 22.7 percent of all prime contract dollars, and the
Federal Procurement Database currently indicates that the
federal government surpassed the 23 percent prime contract goal
in FY 2013, with 23.4 percent of prime contract dollars.
Therefore, this bill continues the work of the past 36 years by
gradually increasing the goal to 25 percent. Each time the goal
has previously been increased, small business contracting, with
its inherent benefits, has increased. Additionally, given
declines in federal contract spending, this expansion will
protect small businesses against losing hard-won gains. Thus,
after 17 years of a 23 percent goal, the bill will provide
additional support for small business contractors.
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\7\This Act has no common name and is simply An Act of October 24,
1978.
\8\Pub. L. No. 100-656, Sec. 502, 102 Stat. 3853, 3881 (1988).
\9\Pub. L. No. 105-135, Sec. 603, 111 Stat. 2592, 2632 (1997).
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Public Law 95-507 also sought to increase subcontracting
opportunities for small businesses by requiring that other-
than-small businesses receiving prime contracts negotiate
subcontracting plans with the federal government that would
incorporate goals for the use of small businesses.\10\
According to Committee reports, this requirement was added
because small businesses were receiving only 37.5 percent of
subcontract dollars.\11\ Since that time, it has been the
responsibility of the SBA to establish a government-wide
subcontracting goal. However, the current SBA-established goal
is 35.9 percent, a 1.6 percent decrease from the actual results
thirty-seven years ago that spurred the creation of government-
wide subcontracting goals. To prevent further backsliding, the
bill establishes the government-wide goal at 40 percent, which
like the rise in prime contract dollars represents the
Committee's incremental approach to reform, in this area.
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\10\Pub. L. No. 95-107, Sec. 211, 92 Stat. 1757, 1767 (codified at
15 U.S.C. Sec. 637(d)).
\11\H.R. Rep. No. 95-949, at 5 (1978).
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Finally, when the concept of goals was introduced through
the 1978 and 1988 legislation, none of the Congressional
authors believed that the phrase ``the total value of all prime
contract awards for each fiscal year'' needed further
explanation. However, in 1991, the Office of Federal
Procurement Policy (OFPP) began permitting\12\ the Department
of Energy (DOE) to count subcontracts awarded by its management
and operations (M&O) contractors as if they were prime
contracts awarded by the DOE.\13\ This allowed DOE to count 18
percent of its prime contract dollars as being awarded to small
businesses until 1999, when OFPP reversed its decision on the
M&O contracts,\14\ and it became apparent that DOE had only
been awarding 3 percent of its prime contract dollars to small
businesses. Over a decade later, DOE has shown little
inclination to change its contracting processes to allow for
small business competition, and in FY 2012 awarded only 5.15
percent of its prime contract dollars to small business
concerns.\15\
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\12\OFPP Policy Letter 91-1 (1991).
\13\See, e.g., Acquisition Regulation: Implementation of Section
3021 of the Energy Policy Act of 1992, Notice of Proposed Rulemaking,
60 Fed. Reg. 22,298, 22,302 (May 5, 1995).
\14\OFPP Policy Letter 99-1 (1999) rescinding OFPP Policy Letter
91-1.
\15\SBA, Department of Energy FY2012 Small Business Procurement
Scorecard (2013) available at http://www.sba.gov/sites/default/files/
files/FY12-Final-Scorecard-DOE-2013-06-24.pdf.
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A provision was recently inserted in the Act to allow DOE
to revert to its practice of counting M&O subcontracts towards
the prime contracting goal.\16\ Authorizing an agency to count
contracts towards the incorrect goal distorts the goaling
process. Furthermore, the types of goods and services obtained
through subcontracts are often not the same as those bought at
the prime contract level, thus undermining Congress' intent to
ensure that a ``fair proportion of the total purchases and
contracts for property and services for the government in each
industry category are placed with small-business
concerns.''\17\
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\16\Consolidated Appropriations Act, 2014, Pub. L. No. 113-76
Division D Title III, 318, __ Stat. ___, (2014) available at http://
docs.house.gov/billsthisweek/20140113/CPRT-113-HPRT-RU00-h3547-
hamdt2samdt_xml.pdf.
\17\Small Business Act, Sec. 15(a), 15 U.S.C. Sec. 644(a).
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Ideally, the changes to the Act will result in $10 billion
in new contracting opportunities for small businesses. However,
based on President Obama's projected defense spending cuts and
cuts that may occur as a result of the Budget Control Act of
2011, small business contracts at the Department of Defense
(DoD) are expected to decrease.\18\ This does not account for
spending cuts at civilian agencies, or the fact that
contracting officers find it easier to cut small business
contracts than those held by large businesses simply because
small businesses lack the clout or resources to contest the
decisions of contracting officers. If similar cuts occur at
agencies other than DoD, the increased goal in this bill should
simply mitigate the effect of the reduced contract spending.
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\18\Center for Security Policy, The National Defense Breakdown
Economic Impact Report (2012) available at http://
forthecommondefense.org/reports/National%202%20pager%20pdf.pdf.
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IV. Hearings
In the 112th Congress, the Committee held two hearings that
examined the prime contract and subcontract goals. On September
14, 2011, the Committee held a hearing titled, ``Beyond the
Size Standards: The Sustainability of Small Businesses
Graduates.'' At the hearing, witnesses testified that the small
business goals are not being met, that there are no
consequences for this failure, and that the numbers being
reported exclude approximately $100 billion in contracts. The
Subcommittee on Contracting and the Workforce then met on
October 6, 2011, for a hearing titled ``Subpar Subcontracting:
Challenges for Small Businesses Contractors.'' In this hearing,
the witnesses told the Committee about the declining
subcontracting goals, and the lack of commitment to meeting the
goals by agencies and some subcontractors. At each hearing, the
small business witnesses and the trade associations
representing them were adamant that the goals needed to be
strengthened.
Since H.R. 4093 is quite similar to H.R. 3850, passed out
of Committee in the 112th Congress, the findings of the last
Congress are still valid. As a result, no hearings were held on
H.R. 4093 during the 113th Congress.
V. Committee Consideration
The Committee on Small Business met in open session, with a
quorum being present, on March 5, 2014 and ordered H.R. 4093
reported to the House by a voice vote at 2:24 pm. During the
markup, two amendments were offered, neither of which was
adopted. Disposition of the amendments is addressed below and
is based on the order amendments were filed with the Clerk of
the Committee and not necessarily in the order that they were
considered at the markup.
Amendment Number One filed by Ms. Chu (D-CA) raised the
prime contracting goal for women-owned small businesses from 5
percent to 6 percent. The amendment failed by a vote of 10 ayes
to 12 nos at 2:16 pm.
Amendment Number Two filed by Ms. Clarke (D-NY) raised the
prime contracting goal for socially and economically
disadvantaged businesses from 5 percent to 8 percent. The
amendment failed by a vote of 10 ayes to 12 nos at 2:24 pm.
VI. Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report the legislation and amendments
thereto.
VII. Section-by-Section Analysis of H.R. 4093
Section 1. Short title
This Section designates the bill as the ``Greater
Opportunities for Small Business Act of 2014.''
Section 2. Small business prime and subcontract participation goals
raised
Subsection (a) Goals in subcontracting plans
Section 8(d)(6)(A) of the Small Business Act (15 U.S.C. 637
Sec. (d)(6)(A)) currently requires that all prime contracts
exceeding $650,000 ($1.5 million in the case of construction)
that are awarded to firms that are other-than-small businesses
include negotiated subcontracting plans addressing how the
prime contractor will use small businesses. Specifically, it
requires that covered prime contractors commit to making a good
faith effort to award a certain percentage of subcontract
dollars to small business concerns, and that they require the
same of any other-than-small subcontractor receiving a
subcontract in excess of the aforementioned thresholds.
Subsection (a) amends section 8(d) to set a minimum
subcontracting goal of at least 40 percent. This is necessary
because the voluntary subcontracting goal established by the
Executive Branch has been declining, from 40 percent in fiscal
year 2003 to 33.6 percent in fiscal year 2012.\19\
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\19\SBA, Government-wide 2012 Small Business Procurement Scorecard
(2013). Interestingly, in 2003, the goal was 40 percent. See also SBA,
Goaling Guidelines for the Small Business Preference Programs for Prime
and Subcontract Federal Procurement Goals and Achievements 6 (2003).
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Subsection (b)--Prime contracting goals
Section 15(g)(1)(A)(i) of the Act currently requires the
President to annually establish a government-wide goal of
awarding at least 23 percent of the total value of prime
contracts awards for each fiscal year to small business
concerns. This section increases the government-wide goal from
23 percent of the total value of prime contracts awards for
each fiscal year to 25 percent of the total value of prime
contract awards. It represents the first change in the
percentage since 1997. This is necessary to encourage sustained
or increased use of small businesses as federal spending
decreases, and is further required by the growth of small
businesses in the overall economy.
Subsection (c)--Delayed effective date
This section delays implementation of subsection (a) until
after the Administrator of the Small Business Administration
(Administrator) has promulgated regulations necessary to
implement section 1614 of the National Defense Authorization
Act for Fiscal Year 2014\20\ and the Federal Acquisition
Regulation has been revised to reflect those changes. This will
allow agencies to capture lower tier contract awards on
individual subcontracts.\21\
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\20\National Defense Authorization Act for Fiscal Year 2014, Pub.
L. No. 113-66 Title XVI Subtitle B Sec. 1614 127 Stat. 672 (2013).
\21\While goals are normally apportioned on a contract-by-contract
basis, they may also be negotiated at a division or corporate level if
the company only sells commercial goods and services, as defined in 48
C.F.R Sec. 2.101, and implemented in 48 C.F.R Sec. 19.7, They may also
be set at the division or corporate level for certain large DoD
contractors pursuant to the Test Program for Negotiation of
Comprehensive Small Business Subcontracting Plans, as authorized in the
National Defense Authorization Act for Fiscal Years 1990 and 1991, 103
Stat. 1352, Pub. L. 101-189 Part E Sec. 834, 103 Stat. 1352, 1509
(1989) and most recently reauthorized in the National Defense
Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, Title VIII
Sec. 866, 125 Stat. 1298, 1526 (2011).
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Section 3. Repeal of certain provision pertaining to accounting of
subcontractors
Section 15(g)(3) of the Act was amended in January 2014, to
allow DOE to count small business subcontractors on M&O
contracts towards its prime contract goals. Section 3 of the
bill strikes this provision in order to maintain a clear
delineation between prime and subcontracting goals.
VIII. Unfunded Mandates
H.R. 4093 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act, Pub.
L. No. 104-4, and would impose no costs on state, local or
tribal governments.
IX. New Budget Authority, Entitlement Authority and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House, the Committee provides the following opinion and
estimate with respect to new budget authority, entitlement
authority and tax expenditures. While the Committee has not
received an estimate of new budget authority contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to Sec. 402 of the Congressional Budget
Act of 1974, the Committee does not believe that any additional
appropriation will be required due to the enactment of H.R.
4093. H.R. 4093 does not direct new spending, but instead
addresses the apportionment of current spending between small
businesses and other-than-small businesses.
X. Oversight Findings
In accordance with clause (2)(b)(1) of rule X of the Rules
of the House, the oversight findings and recommendations of the
Committee on Small Business with respect to the subject matter
contained in H.R. 4093 are incorporated into the descriptive
portions of this report.
XI. Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
authority for this legislation in Art. I, Sec. 8, cls. 1, 3,
and 18 and Art. IV, Sec. 3, cl. 2 of the Constitution of the
United States.
XII. Congressional Accountability Act
H.R. 4093 does not relate to the terms and conditions of
employment or access to public services or accommodations
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.
XIII. Federal Advisory Committee Act Statement
H.R. 4093 does not establish or authorize the establishment
of any new advisory committees as that term is defined in the
Federal Advisory Committee Act, 5 U.S.C. App. 2.
XIV. Statement of No Earmarks
Pursuant to clause 9 of rule XXI, H.R. 4093 does not
contain any congressional earmarks, limited tax benefits or
limited tariff benefits as defined in subsections (d), (e) or
(f) of clause 9 of rule XXI of the Rules of the House.
XV. Statement of Duplication of Federal Programs
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, no provision of H.R. 4093 establishes or reauthorizes a
program of the federal government known to be duplicative of
another Federal program, a program that was included in any
report from the GAO pursuant to Section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
XVI. Disclosure of Directed Rule Makings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, H.R. 4093 does not direct any rulemaking.
XVII. Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House, the Committee establishes the following performance-
related goals and objectives for this legislation:
H.R. 4093 includes a number of provisions designed to
improve the competitive viability of small businesses
as federal prime and subcontractors and to improve
agency compliance with the Small Business Act.
XVIII. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SMALL BUSINESS ACT
* * * * * * *
Sec. 8. (a) * * *
* * * * * * *
(d)(1) * * *
* * * * * * *
(6) Each subcontracting plan required under paragraph (4) or
(5) shall include--
(A) percentage goals of not less than 40 percent for
the utilization as subcontractors of small business
concerns, small business concerns owned and controlled
by veterans, small business concerns owned and
controlled by service-disabled veterans, qualified
HUBZone small business concerns, small business
concerns owned and controlled by socially and
economically disadvantaged individuals, and small
business concerns owned and controlled by women;
* * * * * * *
Sec. 15. (a) * * *
* * * * * * *
(g)
(1) Governmentwide goals.--
(A) Establishment.--The President shall
annually establish Governmentwide goals for
procurement contracts awarded to small business
concerns, small business concerns owned and
controlled by service-disabled veterans,
qualified HUBZone small business concerns,
small business concerns owned and controlled by
socially and economically disadvantaged
individuals, and small business concerns owned
and controlled by women in accordance with the
following:
(i) The Governmentwide goal for
participation by small business
concerns shall be established at not
less than [23 percent] 25 percent of
the total value of all prime contract
awards for each fiscal year.
* * * * * * *
[(3) First tier subcontracts that are awarded by Management
and Operating contractors sponsored by the Department of Energy
to small business concerns, small businesses concerns owned and
controlled by service disabled veterans, qualified HUBZone
small business concerns, small business concerns owned and
controlled by socially and economically disadvantaged
individuals, and small business concerns owned and controlled
by women, shall be considered toward the annually established
agency and Government-wide goals for procurement contracts
awarded.]
* * * * * * *