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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3893 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 3893

  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

_______________________________________________________________________

                                 A BILL

 
  To amend the Small Business Act with respect to subcontracting and 
                  insourcing, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Subcontracting 
Transparency and Reliability Act of 2012''.
    (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.

                 TITLE I--LIMITATIONS ON SUBCONTRACTING

SEC. 101. LIMITATIONS ON SUBCONTRACTING.

    The Small Business Act (15 U.S.C. 631 et seq.) is amended--
            (1) by redesignating section 45 as section 47; and
            (2) by inserting after section 44 the following:

``SEC. 45. LIMITATIONS ON SUBCONTRACTING.

    ``(a) In General.--If awarded a contract under section 8(a), 8(m), 
15(a), 31, or 36, a covered small business concern--
            ``(1) in the case of a contract for services (except 
        construction), may not expend on subcontractors more than 50 
        percent of the amount paid to the concern under the contract;
            ``(2) in the case of a contract for general construction, 
        may not expend on subcontractors more than 85 percent of the 
        amount, less the cost of materials, paid to the concern under 
        the contract;
            ``(3) in the case of a contract for construction by a 
        special trade contractor, may not expend on subcontractors more 
        than 75 percent of the amount, less the cost of materials, paid 
        to the concern under the contract;
            ``(4) in the case of a contract for supplies (other than 
        from a regular dealer in such supplies), may not expend on 
        subcontractors more than 50 percent of the amount, less the 
        cost of materials, paid to the concern under the contract;
            ``(5) in the case of a contract described in more than 1 of 
        paragraphs (1) through (4)--
                    ``(A) shall determine for which category of 
                services or supplies, described in 1 of paragraphs (1) 
                through (4), the greatest percentage of the contract 
                amount is awarded;
                    ``(B) shall determine the amount awarded under the 
                contract for that category of services or supplies; and
                    ``(C) may not expend on subcontractors, with 
                respect to the amount determined under subparagraph 
                (B), more than--
                            ``(i) 50 percent of that amount, if the 
                        category of services or supplies applicable 
                        under subparagraph (A) is described in 
                        paragraph (1);
                            ``(ii) 85 percent of that amount, if the 
                        category of services or supplies applicable 
                        under subparagraph (A) is described in 
                        paragraph (2);
                            ``(iii) 75 percent of that amount, if the 
                        category of services or supplies applicable 
                        under subparagraph (A) is described in 
                        paragraph (3); and
                            ``(iv) 50 percent of that amount, if the 
                        category of services or supplies applicable 
                        under subparagraph (A) is described in 
                        paragraph (4); and
            ``(6) in the case of a contract for supplies from a regular 
        dealer in such supplies, shall supply the product of a domestic 
        small business manufacturer or processor, unless a waiver of 
        such requirement is granted--
                    ``(A) by the Administrator, after reviewing a 
                determination by the applicable contracting officer 
                that no small business manufacturer or processor can 
                reasonably be expected to offer a product meeting the 
                specifications (including period for performance) 
                required by the contract; or
                    ``(B) by the Administrator for a product (or class 
                of products), after determining that no small business 
                manufacturer or processor is available to participate 
                in the Federal procurement market.
    ``(b) Similarly Situated Entities.--Contract amounts expended by a 
covered small business concern on a subcontractor that is a similarly 
situated entity shall not be considered subcontracted for purposes of 
determining whether the covered small business concern has violated a 
requirement established under subsection (a) or (d).
    ``(c) Modifications of Percentages.--
            ``(1) In general.--The Administrator may change, by rule 
        (after providing notice and an opportunity for public comment), 
        a percentage specified in paragraphs (1) through (4) of 
        subsection (a) if the Administrator determines that such change 
        is necessary to reflect conventional industry practices among 
        business concerns that are below the numerical size standard 
        for businesses in that industry category.
            ``(2) Uniformity.--A change to a percentage under paragraph 
        (1) shall apply to all covered small business concerns.
    ``(d) Other Contracts.--
            ``(1) In general.--With respect to a category of contracts 
        to which a requirement under subsection (a) does not apply, the 
        Administrator is authorized to establish, by rule (after 
        providing notice and an opportunity for public comment), a 
        requirement that a covered small business concern may not 
        expend on subcontractors more than a specified percentage of 
        the amount paid to the concern under a contract in that 
        category.
            ``(2) Uniformity.--A requirement established under 
        paragraph (1) shall apply to all covered small business 
        concerns.
    ``(e) Definitions.--In this section, the following definitions 
apply:
            ``(1) Covered small business concern.--The term `covered 
        small business concern' means a business concern that--
                    ``(A) with respect to a contract awarded under 
                section 8(a), is a small business concern eligible to 
                receive contracts under that section;
                    ``(B) with respect to a contract awarded under 
                section 8(m)--
                            ``(i) is a small business concern owned and 
                        controlled by women (as defined in that 
                        section); or
                            ``(ii) is a small business concern owned 
                        and controlled by women (as defined in that 
                        section) that is not less than 51 percent owned 
                        by 1 or more women who are economically 
                        disadvantaged (and such ownership is determined 
                        without regard to any community property law);
                    ``(C) with respect to a contract awarded under 
                section 15(a), is a small business concern;
                    ``(D) with respect to a contract awarded under 
                section 31, is a qualified HUBZone small business 
                concern; or
                    ``(E) with respect to a contract awarded under 
                section 36, is a small business concern owned and 
                controlled by service-disabled veterans.
            ``(2) Similarly situated entity.--The term `similarly 
        situated entity' means a subcontractor that--
                    ``(A) if a subcontractor for a small business 
                concern, is a small business concern;
                    ``(B) if a subcontractor for a small business 
                concern eligible to receive contracts under section 
                8(a), is such a concern;
                    ``(C) if a subcontractor for a small business 
                concern owned and controlled by women (as defined in 
                section 8(m)), is such a concern;
                    ``(D) if a subcontractor for a small business 
                concern owned and controlled by women (as defined in 
                section 8(m)) that is not less than 51 percent owned by 
                1 or more women who are economically disadvantaged (and 
                such ownership is determined without regard to any 
                community property law), is such a concern;
                    ``(E) if a subcontractor for a qualified HUBZone 
                small business concern, is such a concern; or
                    ``(F) if a subcontractor for a small business 
                concern owned and controlled by service-disabled 
                veterans, is such a concern.''.

SEC. 102. PENALTIES.

    Section 16 of the Small Business Act (15 U.S.C. 645) is amended by 
adding at the end the following:
    ``(g) Subcontracting Limitations.--
            ``(1) In general.--Whoever violates a requirement 
        established under section 45 shall be subject to the penalties 
        prescribed in subsection (d), except that, for an entity that 
        exceeded a limitation on subcontracting under such section, the 
        fine described in subsection (d)(2)(A) shall be treated as the 
        greater of--
                    ``(A) $500,000; or
                    ``(B) the dollar amount expended, in excess of 
                permitted levels, by the entity on subcontractors.
            ``(2) Monitoring.--Not later than 1 year after the date of 
        enactment of this subsection, the Administrator shall take such 
        actions as are necessary to ensure that an existing Federal 
        subcontracting reporting system is modified to notify the 
        Administrator, the appropriate Director of the Office of Small 
        and Disadvantaged Business Utilization, and the appropriate 
        contracting officer if a requirement established under section 
        45 is violated.''.

SEC. 103. CONFORMING AMENDMENTS.

    (a) HUBZones.--Section 3(p)(5) of the Small Business Act (15 U.S.C. 
632(p)(5)) is amended--
            (1) in subparagraph (A)(i) by striking subclause (III) and 
        inserting the following:
                                    ``(III) with respect to any 
                                subcontract entered into by the small 
                                business concern pursuant to a contract 
                                awarded to the small business concern 
                                under section 31, the small business 
                                concern will ensure that the 
                                requirements of section 45 are 
                                satisfied; and'';
            (2) by striking subparagraphs (B) and (C); and
            (3) by redesignating subparagraph (D) as subparagraph (B).
    (b) Entities Eligible for Contracts Under Section 8(a).--Section 
8(a) of such Act (15 U.S.C. 637(a)) is amended by striking paragraph 
(14) and inserting the following:
    ``(14) Limitations on Subcontracting.--A concern may not be awarded 
a contract under this subsection as a small business concern unless the 
concern agrees to satisfy the requirements of section 45.''.
    (c) Small Business Concerns.--Section 15 of such Act (15 U.S.C. 
644) is amended by striking subsection (o) and inserting the following:
    ``(o) Limitations on Subcontracting.--A concern may not be awarded 
a contract under subsection (a) as a small business concern unless the 
concern agrees to satisfy the requirements of section 45.''.

SEC. 104. REGULATIONS.

    Not later than 180 days after the date of enactment of this Act, 
the Administrator of the Small Business Administration shall issue 
guidance with respect to compliance with the changes made to the Small 
Business Act by the amendments in this Act, with opportunities for 
notice and comment.

                     TITLE II--SUBCONTRACTING PLANS

SEC. 201. SUBCONTRACTING PLANS.

    (a) Subcontracting Reporting Requirements.--
            (1) In general.--Section 8(d)(6) of the Small Business Act 
        (15 U.S.C. 637(d)(6)) is amended--
                    (A) by striking ``(6) Each subcontracting plan'' 
                and inserting the following:
    ``(6) Subcontracting Plan Requirements.--Each subcontracting 
plan'';
                    (B) by amending subparagraph (E) to read as 
                follows:
            ``(E) assurances that the offeror or bidder will--
                    ``(i) submit--
                            ``(I) not later than 180 days after the 
                        date on which performance under the applicable 
                        contract begins, and every 180 days thereafter 
                        until contract performance ends, a report that 
                        describes all subcontracting activities under 
                        the contract during the preceding 180-day 
                        period;
                            ``(II) not later than 1 year after the date 
                        on which performance under the applicable 
                        contract begins, and annually thereafter until 
                        contract performance ends, a report that 
                        describes all subcontracting activities under 
                        the contract that have occurred before the date 
                        on which the report is submitted (except that, 
                        with respect to the Department of Defense and 
                        the National Aeronautics and Space 
                        Administration, a report under this subclause 
                        shall be submitted not later than 180 days 
                        after the date on which contract performance 
                        begins and every 180 days thereafter until 
                        contract performance ends); and
                            ``(III) not later than 30 days after the 
                        date on which performance under the applicable 
                        contract ends, a report that describes all 
                        subcontracting activities under the contract; 
                        and
                    ``(ii) cooperate with any study or survey required 
                by the applicable Federal agency or the Administration 
                to determine the extent of compliance by the offeror or 
                bidder with the subcontracting plan;''; and
                    (C) by moving subparagraph (G), including each 
                clause therein, 2 ems to the left.
            (2) Reporting system modification.--
                    (A) In general.--Not later than 1 year after the 
                date of enactment of this Act, the Administrator of the 
                Small Business Administration shall take such actions 
                as are necessary to ensure that the Federal 
                subcontracting reporting system to which covered 
                reports are submitted is modified to notify the 
                Administrator, the appropriate contracting officer, and 
                the appropriate Director of Small and Disadvantaged 
                Business Utilization if an entity fails to submit a 
                required covered report. If the Administrator does not 
                modify the subcontracting reporting system on or before 
                the date that is 1 year after the date of enactment of 
                this Act, the Administrator may not carry out or 
                establish any pilot program until the date the 
                Administrator modifies the reporting system.
                    (B) Covered report defined.--In this paragraph, the 
                term ``covered report'' means a report submitted in 
                accordance with assurances provided under section 
                8(d)(6)(E) of the Small Business Act (15 U.S.C. 
                637(d)(6)(E)).
    (b) Failure To Submit Subcontracting Reports as Breach of 
Contract.--Section 8(d)(8) of such Act (15 U.S.C. 637(d)(8)) is 
amended--
            (1) by striking ``(8) The failure'' and inserting the 
        following:
    ``(8) Material Breach.--The failure'';
            (2) in subparagraph (A) by striking ``subsection, or'' and 
        inserting ``subsection,'';
            (3) in subparagraph (B) by striking ``subcontract,'' and 
        inserting ``subcontract, or''; and
            (4) by inserting after subparagraph (B) the following:
            ``(C) assurances provided under paragraph (6)(E),''.
    (c) Authority of Small Business Administration.--Section 8(d)(10) 
of such Act (15 U.S.C. 637(d)(10)) is amended--
            (1) by striking ``(10) In the case of'' and inserting the 
        following:
    ``(10) Authority of Administration.--In the case of'';
            (2) in subparagraph (B) by striking ``, which shall be 
        advisory in nature,''; and
            (3) in subparagraph (C) by striking ``, either on a 
        contract-by-contract basis, or in the case contractors'' and 
        inserting ``as a supplement to evaluations performed by the 
        contracting agency, either on a contract-by-contract basis or, 
        in the case of contractors''.
    (d) Appeals.--Section 8(d) of such Act (15 U.S.C. 637(d)) is 
amended by adding at the end the following:
    ``(13) Appeals.--
            ``(A) In general.--If a procurement center representative 
        or commercial market representative determines that a 
        subcontracting plan required under paragraph (4) or (5) fails 
        to provide the maximum practicable opportunity for covered 
        small business concerns to participate in the performance of 
        the contract to which the plan applies, such representative may 
        delay acceptance of the plan in accordance with subparagraph 
        (B).
            ``(B) Process.--A procurement center representative or 
        commercial market representative who makes the determination 
        under subparagraph (A) with respect to a subcontracting plan 
        may delay acceptance of the plan for a 30-day period by 
        providing written notice of such determination to appropriate 
        personnel of the contracting agency. Such notice shall include 
        recommendations for altering the plan to provide the maximum 
        practicable opportunity described in that subparagraph.
            ``(C) Disagreements.--If a procurement center 
        representative or commercial market representative delays the 
        acceptance of a subcontracting plan under subparagraph (B) for 
        a 30-day period and, during such period, does not reach 
        agreement with appropriate personnel of the contracting agency 
        to alter the plan to provide the maximum practicable 
        opportunity described in subparagraph (A), the disagreement 
        shall be submitted to the head of the contracting agency by the 
        Administrator for a final determination.
            ``(D) Covered small business concerns defined.--In this 
        paragraph, the term `covered small business concerns' means 
        small business concerns, qualified HUBZone small business 
        concerns, small business concerns owned and controlled by 
        veterans, small business concerns owned and controlled by 
        service-disabled veterans, small business concerns owned and 
        controlled by socially and economically disadvantaged 
        individuals, and small business concerns owned and controlled 
        by women.''.

SEC. 202. NOTICES OF SUBCONTRACTING OPPORTUNITIES.

    Section 8(k)(1) of the Small Business Act (15 U.S.C. 637(k)(1)) is 
amended by striking ``in the Commerce Business Daily'' and inserting 
``on the appropriate Federal Web site (as determined by the 
Administrator)''.

SEC. 203. REGULATIONS.

    Not later than 180 days after the date of enactment of this Act, 
the Administrator of the Small Business Administration shall issue 
guidance with respect to the changes made to the Small Business Act, 
with opportunity for notice and comment.

                         TITLE III--INSOURCING

SEC. 301. DEFINITIONS RELATING TO PROCUREMENT PROTEST SYSTEM.

    (a) Protest.--Section 3551(1) of title 31, United States Code, is 
amended by adding at the end the following:
                    ``(F) Conversion of a function that is being 
                performed by a private sector entity to performance by 
                a Federal employee.''.
    (b) Interested Party.--Section 3551(2) of such title is amended--
            (1) in subparagraph (A) by striking ``and'' at the end;
            (2) in subparagraph (B) by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(C) with respect to a conversion described in 
                paragraph (1)(F), includes any small business concern 
                (as that term is defined in section 3(a) of the Small 
                Business Act) whose economic interest would be affected 
                by the conversion.''.

SEC. 302. INSOURCING.

    The Small Business Act (15 U.S.C. 631 et seq.), as amended by this 
Act, is further amended by inserting after section 45 the following:

``SEC. 46. INSOURCING.

    ``A Federal agency may only convert a function that is being 
performed by a small business concern to performance by a Federal 
employee if--
            ``(1) the agency has made publicly available, after 
        providing notice and an opportunity for public comment, the 
        procedures of the agency with respect to decisions to convert a 
        function being performed by a small business concern to 
        performance by a Federal employee; and
            ``(2) the procedures described in paragraph (1) include 
        that all decisions described in such paragraph are reviewed by 
        any appropriate--
                    ``(A) Office of Small and Disadvantaged Business 
                Utilization; and
                    ``(B) procurement center representative.''.
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