IB 

Union Calendar No. 534 

112TH CONGRESS 

2D SESSION H. R. 3893 

[Report No. 112–731, Part I] 

To amend the Small Business Act with respect to subcontracting and 

insourcing, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 2, 2012 

Mr. MULVANEY introduced the following bill; which was referred to the Committee on Small Business, and in addition to the Committee on Oversight 

and Government Reform, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

DECEMBER 27, 2012 

Additional sponsors: Mr. HANNA, Mr. WALSH of Illinois, Mr. CHABOT, Mr. 

GRAVES of Missouri, Mr. WEST, Mr. SCHILLING, Mr. TIPTON, Mrs. 

ELLMERS, and Mr. KINGSTON

DECEMBER 27, 2012 

Reported from the Committee on Small Business with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

DECEMBER 27, 2012 

The Committee on Oversight and Government Reform discharged; committed 

to the Committee of the Whole House on the State of the Union and ordered to be printed 

[For text of introduced bill, see copy of bill as introduced on February 2, 2012] 


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A BILL 

To amend the Small Business Act with respect to 

subcontracting and insourcing, and for other purposes. 


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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Subcontracting Transparency and Reliability Act of 

6 2012’’. 

7 (b) TABLE OF CONTENTS.— 

Sec. 1. Short title; table of contents. 

TITLE I—LIMITATIONS ON SUBCONTRACTING 

Sec. 101. Limitations on subcontracting. 

Sec. 102. Penalties. 

Sec. 103. Conforming amendments. 

Sec. 104. Guidance. 

TITLE II—SUBCONTRACTING PLANS 

Sec. 201. Subcontracting plans. 

Sec. 202. Notices of subcontracting opportunities. 

TITLE III—INSOURCING 

Sec. 301. Definitions relating to procurement protest system. 

Sec. 302. Insourcing. 

8 TITLE I—LIMITATIONS ON 

9 SUBCONTRACTING 

10 SEC. 101. LIMITATIONS ON SUBCONTRACTING. 

11 The Small Business Act (15 U.S.C. 631 et seq.) is 

12 amended— 

13 (1) by redesignating section 45 as section 47; 

14 and 

15 (2) by inserting after section 44 the following: 


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1 ‘‘SEC. 45. LIMITATIONS ON SUBCONTRACTING. 

2 ‘‘(a) IN GENERAL.—If awarded a contract under sec3 tion 8(a), 8(m), 15(a), 31, or 36, a covered small business 

4 concern— 

5 ‘‘(1) in the case of a contract for services, may 

6 not expend on subcontractors more than 50 percent of 

7 the amount paid to the concern under the contract; 

8 ‘‘(2) in the case of a contract for supplies (other 

9 than from a regular dealer in such supplies), may not 

10 expend on subcontractors more than 50 percent of the 

11 amount, less the cost of materials, paid to the concern 

12 under the contract; 

13 ‘‘(3) in the case of a contract described in more 

14 than 1 of paragraphs (1) through (4)— 

15 ‘‘(A) shall determine for which category of 

16 services or supplies, described in 1 of paragraphs 

17 (1) through (4), the greatest percentage of the 

18 contract amount is awarded; 

19 ‘‘(B) shall determine the amount awarded 

20 under the contract for that category of services or 

21 supplies; and 

22 ‘‘(C) may not expend on subcontractors, 

23 with respect to the amount determined under 

24 subparagraph (B), more than— 

25 ‘‘(i) 50 percent of that amount, if the 

26 category of services or supplies applicable 


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1 under subparagraph (A) is described in 

2 paragraph (1); and 

3 ‘‘(ii) 50 percent of that amount, if the 

4 category of services or supplies applicable 

5 under subparagraph (A) is described in 

6 paragraph (2); and 

7 ‘‘(4) in the case of a contract for supplies from 

8 a regular dealer in such supplies, shall supply the 

9 product of a domestic small business manufacturer or 

10 processor, unless a waiver of such requirement is 

11 granted— 

12 ‘‘(A) by the Administrator, after reviewing 

13 a determination by the applicable contracting of14 ficer that no small business manufacturer or 

15 processor can reasonably be expected to offer a 

16 product meeting the specifications (including pe17 riod for performance) required by the contract; 

18 or 

19 ‘‘(B) by the Administrator for a product (or 

20 class of products), after determining that no 

21 small business manufacturer or processor is 

22 available to participate in the Federal procure23 ment market. 

24 ‘‘(b) SIMILARLY SITUATED ENTITIES.—Contract 

25 amounts expended by a covered small business concern on 


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1 a subcontractor that is a similarly situated entity shall not 

2 be considered subcontracted for purposes of determining 

3 whether the covered small business concern has violated a 

4 requirement established under subsection (a) or (d). 

5 ‘‘(c) MODIFICATIONS OF PERCENTAGES.— 

6 ‘‘(1) IN GENERAL.—The Administrator may 

7 change, by rule (after providing notice and an oppor8 tunity for public comment), a percentage specified in 

9 paragraphs (1) through (4) of subsection (a) if the 

10 Administrator determines that such change is nec11 essary to reflect conventional industry practices 

12 among business concerns that are below the numerical 

13 size standard for businesses in that industry category. 

14 ‘‘(2) UNIFORMITY.—A change to a percentage 

15 under paragraph (1) shall apply to all covered small 

16 business concerns. 

17 ‘‘(d) OTHER CONTRACTS.— 

18 ‘‘(1) IN GENERAL.—With respect to a category of 

19 contracts to which a requirement under subsection (a) 

20 does not apply, the Administrator is authorized to es21 tablish, by rule (after providing notice and an oppor22 tunity for public comment), a requirement that a cov23 ered small business concern may not expend on sub24 contractors more than a specified percentage of the 


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1 amount paid to the concern under a contract in that 

2 category. 

3 ‘‘(2) UNIFORMITY.—A requirement established 

4 under paragraph (1) shall apply to all covered small 

5 business concerns. 

6 ‘‘(3) CONSTRUCTION PROJECTS.—The Adminis7 trator shall establish, through public rulemaking, re8 quirements similar to those specified in paragraph 

9 (1) to be applicable to contracts for general and spe10 cialty construction and to contracts for any other in11 dustry category not otherwise subject to the require12 ments of such paragraph. The percentage applicable 

13 to any such requirement shall be determined in ac14 cordance with paragraph (2). 

15 ‘‘(e) DEFINITIONS.—In this section, the following defi16 nitions apply: 

17 ‘‘(1) COVERED SMALL BUSINESS CONCERN.—The 

18 term ‘covered small business concern’ means a busi19 ness concern that— 

20 ‘‘(A) with respect to a contract awarded 

21 under section 8(a), is a small business concern 

22 eligible to receive contracts under that section; 

23 ‘‘(B) with respect to a contract awarded 

24 under section 8(m)— 


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1 ‘‘(i) is a small business concern owned 

2 and controlled by women (as defined in that 

3 section); or 

4 ‘‘(ii) is a small business concern owned 

5 and controlled by women (as defined in that 

6 section) that is not less than 51 percent 

7 owned by 1 or more women who are eco8 nomically disadvantaged (and such owner9 ship is determined without regard to any 

10 community property law); 

11 ‘‘(C) with respect to a contract awarded 

12 under section 15(a), is a small business concern; 

13 ‘‘(D) with respect to a contract awarded 

14 under section 31, is a qualified HUBZone small 

15 business concern; or 

16 ‘‘(E) with respect to a contract awarded 

17 under section 36, is a small business concern 

18 owned and controlled by service-disabled vet19 erans. 

20 ‘‘(2) SIMILARLY SITUATED ENTITY.—The term 

21 ‘similarly situated entity’ means a subcontractor 

22 that— 

23 ‘‘(A) if a subcontractor for a small business 

24 concern, is a small business concern; 


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1 ‘‘(B) if a subcontractor for a small business 

2 concern eligible to receive contracts under section 

3 8(a), is such a concern; 

4 ‘‘(C) if a subcontractor for a small business 

5 concern owned and controlled by women (as de6 fined in section 8(m)), is such a concern; 

7 ‘‘(D) if a subcontractor for a small business 

8 concern owned and controlled by women (as de9 fined in section 8(m)) that is not less than 51 

10 percent owned by 1 or more women who are eco11 nomically disadvantaged (and such ownership is 

12 determined without regard to any community 

13 property law), is such a concern; 

14 ‘‘(E) if a subcontractor for a qualified 

15 HUBZone small business concern, is such a con16 cern; or 

17 ‘‘(F) if a subcontractor for a small business 

18 concern owned and controlled by service-disabled 

19 veterans, is such a concern.’’. 

20 SEC. 102. PENALTIES. 

21 Section 16 of the Small Business Act (15 U.S.C. 645) 

22 is amended by adding at the end the following: 

23 ‘‘(g) SUBCONTRACTING LIMITATIONS.— 

24 ‘‘(1) IN GENERAL.—Whoever violates a require25 ment established under section 45 shall be subject to 


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1 the penalties prescribed in subsection (d), except that, 

2 for an entity that exceeded a limitation on subcon3 tracting under such section, the fine described in sub4 section (d)(2)(A) shall be treated as the greater of— 

5 ‘‘(A) $500,000; or 

6 ‘‘(B) the dollar amount expended, in excess 

7 of permitted levels, by the entity on subcontrac8 tors. 

9 ‘‘(2) MONITORING.—Not later than 1 year after 

10 the date of enactment of this subsection, the Adminis11 trator shall take such actions as are necessary to en12 sure that an existing Federal subcontracting reporting 

13 system is modified to notify the Administrator, the 

14 appropriate Director of the Office of Small and Dis15 advantaged Business Utilization, and the appropriate 

16 contracting officer if a requirement established under 

17 section 45 is violated.’’. 

18 SEC. 103. CONFORMING AMENDMENTS. 

19 (a) HUBZONES.—Section 3(p)(5) of the Small Busi20 ness Act (15 U.S.C. 632(p)(5)) is amended— 

21 (1) in subparagraph (A)(i) by striking subclause 

22 (III) and inserting the following: 

23 ‘‘(III) with respect to any sub24 contract entered into by the small busi25 ness concern pursuant to a contract 


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1 awarded to the small business concern 

2 under section 31, the small business 

3 concern will ensure that the require4 ments of section 45 are satisfied; and’’; 

5 (2) by striking subparagraphs (B) and (C); and 

6 (3) by redesignating subparagraph (D) as sub7 paragraph (B). 

8 (b) ENTITIES ELIGIBLE FOR CONTRACTS UNDER SEC9 TION 8(a).—Section 8(a) of such Act (15 U.S.C. 637(a)) 

10 is amended by striking paragraph (14) and inserting the 

11 following: 

12 ‘‘(14) LIMITATIONS ON SUBCONTRACTING.—A 

13 concern may not be awarded a contract under this 

14 subsection as a small business concern unless the con15 cern agrees to satisfy the requirements of section 45.’’. 

16 (c) SMALL BUSINESS CONCERNS.—Section 15 of such 

17 Act (15 U.S.C. 644) is amended by striking subsection (o) 

18 and inserting the following: 

19 ‘‘(o) LIMITATIONS ON SUBCONTRACTING.—A concern 

20 may not be awarded a contract under subsection (a) as a 

21 small business concern unless the concern agrees to satisfy 

22 the requirements of section 45.’’. 

23 SEC. 104. REGULATIONS. 

24 Not later than 180 days after the date of enactment 

25 of this Act, the Administrator of the Small Business AdminVerDate Mar 15 2010 22:43 Dec 27, 2012 Jkt 029200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3893.RH H3893

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1 istration shall issue guidance with respect to compliance 

2 with the changes made to the Small Business Act by the 

3 amendments in this Act, with opportunities for notice and 

4 comment. 

5 TITLE II—SUBCONTRACTING 

6 PLANS 

7 SEC. 201. SUBCONTRACTING PLANS. 

8 (a) SUBCONTRACTING REPORTING REQUIREMENTS.— 

9 (1) IN GENERAL.—Section 8(d)(6) of the Small 

10 Business Act (15 U.S.C. 637(d)(6)) is amended— 

11 (A) by striking ‘‘(6) Each subcontracting 

12 plan’’ and inserting the following: 

13 ‘‘(6) SUBCONTRACTING PLAN REQUIREMENTS.— 

14 Each subcontracting plan’’; 

15 (B) by amending subparagraph (E) to read 

16 as follows: 

17 ‘‘(E) assurances that the offeror or bidder 

18 will— 

19 ‘‘(i) submit— 

20 ‘‘(I) not later than 180 days after 

21 the date on which performance under 

22 the applicable contract begins, and 

23 every 180 days thereafter until con24 tract performance ends, a report that 

25 describes all subcontracting activities 


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1 under the contract during the pre2 ceding 180-day period; 

3 ‘‘(II) not later than 1 year after 

4 the date on which performance under 

5 the applicable contract begins, and an6 nually thereafter until contract per7 formance ends, a report that describes 

8 all subcontracting activities under the 

9 contract that have occurred before the 

10 date on which the report is submitted 

11 (except that, with respect to the De12 partment of Defense and the National 

13 Aeronautics and Space Administra14 tion, a report under this subclause 

15 shall be submitted not later than 180 

16 days after the date on which contract 

17 performance begins and every 180 days 

18 thereafter until contract performance 

19 ends); and 

20 ‘‘(III) not later than 30 days after 

21 the date on which performance under 

22 the applicable contract ends, a report 

23 that describes all subcontracting activi24 ties under the contract; and 


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1 ‘‘(ii) cooperate with any study or sur2 vey required by the applicable Federal agen3 cy or the Administration to determine the 

4 extent of compliance by the offeror or bidder 

5 with the subcontracting plan;’’; and 

6 (C) by moving the margins for subpara7 graphs (A), (B), (C), (D), and (F) 2 ems to the 

8 right (so that the align with subparagraph (E), 

9 as amended by subparagraph (B) of this para10 graph). 

11 (2) REPORTING SYSTEM MODIFICATION.— 

12 (A) IN GENERAL.—Not later than 1 year 

13 after the date of enactment of this Act, the Ad14 ministrator of the Small Business Administra15 tion shall take such actions as are necessary to 

16 ensure that the Federal subcontracting reporting 

17 system to which covered reports are submitted is 

18 modified to notify the Administrator, the appro19 priate contracting officer, and the appropriate 

20 Director of Small and Disadvantaged Business 

21 Utilization if an entity fails to submit a re22 quired covered report. If the Administrator does 

23 not modify the subcontracting reporting system 

24 on or before the date that is 1 year after the date 

25 of enactment of this Act, the Administrator may 


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1 not carry out or establish any pilot program 

2 until the date the Administrator modifies the re3 porting system. 

4 (B) COVERED REPORT DEFINED.—In this 

5 paragraph, the term ‘‘covered report’’ means a 

6 report submitted in accordance with assurances 

7 provided under section 8(d)(6)(E) of the Small 

8 Business Act (15 U.S.C. 637(d)(6)(E)). 

9 (b) FAILURE TO SUBMIT SUBCONTRACTING REPORTS

10 AS BREACH OF CONTRACT.—Section 8(d)(8) of such Act (15 

11 U.S.C. 637(d)(8)) is amended— 

12 (1) by striking ‘‘(8) The failure’’ and inserting 

13 the following: 

14 ‘‘(8) MATERIAL BREACH.—The failure’’; 

15 (2) in subparagraph (A) by striking ‘‘subsection, 

16 or’’ and inserting ‘‘subsection,’’; 

17 (3) in subparagraph (B) by striking ‘‘sub18 contract,’’ and inserting ‘‘subcontract, or’’; 

19 (4) by inserting after subparagraph (B) the fol20 lowing: 

21 ‘‘(C) assurances provided under paragraph 

22 (6)(E),’’; and 

23 (5) by moving the margins of subparagraphs 

24 (A), (B), and the matter following subparagraph (B) 

25 2 ems to the right. 


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1 (c) AUTHORITY OF SMALL BUSINESS ADMINISTRA2 TION.—Section 8(d)(10) of such Act (15 U.S.C. 637(d)(10)) 

3 is amended— 

4 (1) by striking ‘‘(10) In the case of’’ and insert5 ing the following: 

6 ‘‘(10) AUTHORITY OF ADMINISTRATION.—In the 

7 case of’’; 

8 (2) in subparagraph (B) by striking ‘‘, which 

9 shall be advisory in nature,’’; 

10 (3) in subparagraph (C) by striking ‘‘, either on 

11 a contract-by-contract basis, or in the case contrac12 tors’’ and inserting ‘‘as a supplement to evaluations 

13 performed by the contracting agency, either on a con14 tract-by-contract basis or, in the case of contractors’’; 

15 and 

16 (4) by moving the margins of subparagraphs (A) 

17 through (C) 2 ems to the right. 

18 (d) APPEALS.—Section 8(d) of such Act (15 U.S.C. 

19 637(d)) is amended by adding at the end the following: 

20 ‘‘(13) APPEALS.— 

21 ‘‘(A) IN GENERAL.—If a procurement center 

22 representative or commercial market representa23 tive determines that a subcontracting plan re24 quired under paragraph (4) or (5) fails to pro25 vide the maximum practicable opportunity for 


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1 covered small business concerns to participate in 

2 the performance of the contract to which the plan 

3 applies, such representative may delay accept4 ance of the plan in accordance with subpara5 graph (B). 

6 ‘‘(B) PROCESS.—A procurement center rep7 resentative or commercial market representative 

8 who makes the determination under subpara9 graph (A) with respect to a subcontracting plan 

10 may delay acceptance of the plan for a 30-day 

11 period by providing written notice of such deter12 mination to appropriate personnel of the con13 tracting agency. Such notice shall include rec14 ommendations for altering the plan to provide 

15 the maximum practicable opportunity described 

16 in that subparagraph. 

17 ‘‘(C) DISAGREEMENTS.—If a procurement 

18 center representative or commercial market rep19 resentative delays the acceptance of a subcon20 tracting plan under subparagraph (B) for a 30- 

21 day period and, during such period, does not 

22 reach agreement with appropriate personnel of 

23 the contracting agency to alter the plan to pro24 vide the maximum practicable opportunity de25 scribed in subparagraph (A), the disagreement 


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1 shall be submitted to the head of the contracting 

2 agency by the Administrator for a final deter3 mination. 

4 ‘‘(D) COVERED SMALL BUSINESS CONCERNS

5 DEFINED.—In this paragraph, the term ‘covered 

6 small business concerns’ means small business 

7 concerns, qualified HUBZone small business 

8 concerns, small business concerns owned and 

9 controlled by veterans, small business concerns 

10 owned and controlled by service-disabled vet11 erans, small business concerns owned and con12 trolled by socially and economically disadvan13 taged individuals, and small business concerns 

14 owned and controlled by women.’’. 

15 SEC. 202. NOTICES OF SUBCONTRACTING OPPORTUNITIES. 

16 Section 8(k)(1) of the Small Business Act (15 U.S.C. 

17 637(k)(1)) is amended by striking ‘‘in the Commerce Busi18 ness Daily’’ and inserting ‘‘on the appropriate Federal Web 

19 site (as determined by the Administrator)’’. 

20 SEC. 203. REGULATIONS. 

21 Not later than 180 days after the date of enactment 

22 of this Act, the Administrator of the Small Business Admin23 istration shall issue guidance with respect to the changes 

24 made to the Small Business Act, with opportunity for notice 

25 and comment. 


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1 TITLE III—INSOURCING 

2 SEC. 301. DEFINITIONS RELATING TO PROCUREMENT PRO3 TEST SYSTEM. 

4 (a) PROTEST.—Section 3551(1) of title 31, United 

5 States Code, is amended by adding at the end the following: 

6 ‘‘(F) Conversion of a function that is being 

7 performed by a small business concern to per8 formance by a Federal employee.’’. 

9 (b) INTERESTED PARTY.—Section 3551(2) of such title 

10 is amended— 

11 (1) in subparagraph (A) by striking ‘‘and’’ at 

12 the end; 

13 (2) in subparagraph (B) by striking the period 

14 at the end and inserting ‘‘; and’’; and 

15 (3) by adding at the end the following: 

16 ‘‘(C) with respect to a conversion described 

17 in paragraph (1)(F), means a small business 

18 concern (as that term is defined in section 3(a) 

19 of the Small Business Act) whose economic inter20 est would be affected by the conversion.’’. 

21 SEC. 302. INSOURCING. 

22 The Small Business Act (15 U.S.C. 631 et seq.), as 

23 amended by this Act, is further amended by inserting after 

24 section 45 the following: 


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1 ‘‘SEC. 46. INSOURCING. 

2 ‘‘A Federal agency may only convert a function that 

3 is being performed by a small business concern to perform4 ance by a Federal employee if— 

5 ‘‘(1) the agency has made publicly available, 

6 after providing notice and an opportunity for public 

7 comment, the procedures of the agency with respect to 

8 decisions to convert a function being performed by a 

9 small business concern to performance by a Federal 

10 employee; and 

11 ‘‘(2) the procedures described in paragraph (1) 

12 include that all decisions described in such paragraph 

13 are reviewed by any appropriate— 

14 ‘‘(A) Office of Small and Disadvantaged 

15 Business Utilization; and 

16 ‘‘(B) procurement center representative.’’. 


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Union Calendar No. 534 

112TH CONGRESS 

2D SESSION H. R. 3893 

[Report No. 112–731, Part I] 

A BILL 

To amend the Small Business Act with respect to 

poses. subcontracting and insourcing, and for other purDECEMBER 27, 2012 

Reported from the Committee on Small Business with an 

amendment 

DECEMBER 27, 2012 

The Committee on Oversight and Government Reform 

printed House on the State of the Union and ordered to be discharged; committed to the Committee of the Whole 


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