I 

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. 

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 


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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. 

1 TITLE I—LIMITATIONS ON 

2 SUBCONTRACTING 

3 SEC. 101. LIMITATIONS ON SUBCONTRACTING. 

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

5 amended— 

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

7 and 

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

9 ‘‘SEC. 45. LIMITATIONS ON SUBCONTRACTING. 

10 ‘‘(a) IN GENERAL.—If awarded a contract under sec11 tion 8(a), 8(m), 15(a), 31, or 36, a covered small business 

12 concern— 

13 ‘‘(1) in the case of a contract for services (ex14 cept construction), may not expend on subcontrac15 tors more than 50 percent of the amount paid to the 

16 concern under the contract; 

17 ‘‘(2) in the case of a contract for general con18 struction, may not expend on subcontractors more 


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1 than 85 percent of the amount, less the cost of ma2 terials, paid to the concern under the contract; 

3 ‘‘(3) in the case of a contract for construction 

4 by a special trade contractor, may not expend on 

5 subcontractors more than 75 percent of the amount, 

6 less the cost of materials, paid to the concern under 

7 the contract; 

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

9 (other than from a regular dealer in such supplies), 

10 may not expend on subcontractors more than 50 

11 percent of the amount, less the cost of materials, 

12 paid to the concern under the contract; 

13 ‘‘(5) 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 para17 graphs (1) through (4), the greatest percentage 

18 of the contract amount is awarded; 

19 ‘‘(B) shall determine the amount awarded 

20 under the contract for that category of services 

21 or supplies; and 

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

23 with respect to the amount determined under 

24 subparagraph (B), more than— 


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

2 category of services or supplies applicable 

3 under subparagraph (A) is described in 

4 paragraph (1); 

5 ‘‘(ii) 85 percent of that amount, if the 

6 category of services or supplies applicable 

7 under subparagraph (A) is described in 

8 paragraph (2); 

9 ‘‘(iii) 75 percent of that amount, if 

10 the category of services or supplies applica11 ble under subparagraph (A) is described in 

12 paragraph (3); and 

13 ‘‘(iv) 50 percent of that amount, if the 

14 category of services or supplies applicable 

15 under subparagraph (A) is described in 

16 paragraph (4); and 

17 ‘‘(6) in the case of a contract for supplies from 

18 a regular dealer in such supplies, shall supply the 

19 product of a domestic small business manufacturer 

20 or processor, unless a waiver of such requirement is 

21 granted— 

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

23 a determination by the applicable contracting 

24 officer that no small business manufacturer or 

25 processor can reasonably be expected to offer a 


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1 product meeting the specifications (including 

2 period for performance) required by the con3 tract; or 

4 ‘‘(B) by the Administrator for a product 

5 (or class of products), after determining that no 

6 small business manufacturer or processor is 

7 available to participate in the Federal procure8 ment market. 

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

10 amounts expended by a covered small business concern on 

11 a subcontractor that is a similarly situated entity shall not 

12 be considered subcontracted for purposes of determining 

13 whether the covered small business concern has violated 

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

15 ‘‘(c) MODIFICATIONS OF PERCENTAGES.— 

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

17 change, by rule (after providing notice and an oppor18 tunity for public comment), a percentage specified in 

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

20 Administrator determines that such change is nec21 essary to reflect conventional industry practices 

22 among business concerns that are below the numer23 ical size standard for businesses in that industry 

24 category. 


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

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

3 business concerns. 

4 ‘‘(d) OTHER CONTRACTS.— 

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

6 of contracts to which a requirement under sub7 section (a) does not apply, the Administrator is au8 thorized to establish, by rule (after providing notice 

9 and an opportunity for public comment), a require10 ment that a covered small business concern may not 

11 expend on subcontractors more than a specified per12 centage of the amount paid to the concern under a 

13 contract in that category. 

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

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

16 business concerns. 

17 ‘‘(e) DEFINITIONS.—In this section, the following 

18 definitions apply: 

19 ‘‘(1) COVERED SMALL BUSINESS CONCERN.— 

20 The term ‘covered small business concern’ means a 

21 business concern that— 

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

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

24 eligible to receive contracts under that section; 


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

2 under section 8(m)— 

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

4 and controlled by women (as defined in 

5 that section); or 

6 ‘‘(ii) is a small business concern 

7 owned and controlled by women (as de8 fined in that section) that is not less than 

9 51 percent owned by 1 or more women 

10 who are economically disadvantaged (and 

11 such ownership is determined without re12 gard to any community property law); 

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

14 under section 15(a), is a small business con15 cern; 

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

17 under section 31, is a qualified HUBZone small 

18 business concern; or 

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

20 under section 36, is a small business concern 

21 owned and controlled by service-disabled vet22 erans. 

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

24 ‘similarly situated entity’ means a subcontractor 

25 that— 


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1 ‘‘(A) if a subcontractor for a small busi2 ness concern, is a small business concern; 

3 ‘‘(B) if a subcontractor for a small busi4 ness concern eligible to receive contracts under 

5 section 8(a), is such a concern; 

6 ‘‘(C) if a subcontractor for a small busi7 ness concern owned and controlled by women 

8 (as defined in section 8(m)), is such a concern; 

9 ‘‘(D) if a subcontractor for a small busi10 ness concern owned and controlled by women 

11 (as defined in section 8(m)) that is not less 

12 than 51 percent owned by 1 or more women 

13 who are economically disadvantaged (and such 

14 ownership is determined without regard to any 

15 community property law), is such a concern; 

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

17 HUBZone small business concern, is such a 

18 concern; or 

19 ‘‘(F) if a subcontractor for a small busi20 ness concern owned and controlled by service21 disabled veterans, is such a concern.’’. 

22 SEC. 102. PENALTIES. 

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

24 is amended by adding at the end the following: 

25 ‘‘(g) SUBCONTRACTING LIMITATIONS.— 


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1 ‘‘(1) IN GENERAL.—Whoever violates a require2 ment established under section 45 shall be subject to 

3 the penalties prescribed in subsection (d), except 

4 that, for an entity that exceeded a limitation on sub5 contracting under such section, the fine described in 

6 subsection (d)(2)(A) shall be treated as the greater 

7 of— 

8 ‘‘(A) $500,000; or 

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

10 of permitted levels, by the entity on subcontrac11 tors. 

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

13 the date of enactment of this subsection, the Admin14 istrator shall take such actions as are necessary to 

15 ensure that an existing Federal subcontracting re16 porting system is modified to notify the Adminis17 trator, the appropriate Director of the Office of 

18 Small and Disadvantaged Business Utilization, and 

19 the appropriate contracting officer if a requirement 

20 established under section 45 is violated.’’. 

21 SEC. 103. CONFORMING AMENDMENTS. 

22 (a) HUBZONES.—Section 3(p)(5) of the Small Busi23 ness Act (15 U.S.C. 632(p)(5)) is amended— 

24 (1) in subparagraph (A)(i) by striking sub25 clause (III) and inserting the following: 


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1 ‘‘(III) with respect to any sub2 contract entered into by the small 

3 business concern pursuant to a con4 tract awarded to the small business 

5 concern under section 31, the small 

6 business concern will ensure that the 

7 requirements of section 45 are satis8 fied; and’’; 

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

10 (3) by redesignating subparagraph (D) as sub11 paragraph (B). 

12 (b) ENTITIES ELIGIBLE FOR CONTRACTS UNDER

13 SECTION 8(a).—Section 8(a) of such Act (15 U.S.C. 

14 637(a)) is amended by striking paragraph (14) and insert15 ing the following: 

16 ‘‘(14) LIMITATIONS ON SUBCONTRACTING.—A con17 cern may not be awarded a contract under this subsection 

18 as a small business concern unless the concern agrees to 

19 satisfy the requirements of section 45.’’. 

20 (c) SMALL BUSINESS CONCERNS.—Section 15 of 

21 such Act (15 U.S.C. 644) is amended by striking sub22 section (o) and inserting the following: 

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

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


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1 a small business concern unless the concern agrees to sat2 isfy the requirements of section 45.’’. 

3 SEC. 104. REGULATIONS. 

4 Not later than 180 days after the date of enactment 

5 of this Act, the Administrator of the Small Business Ad6 ministration shall issue guidance with respect to compli7 ance with the changes made to the Small Business Act 

8 by the amendments in this Act, with opportunities for no9 tice and comment. 

10 TITLE II—SUBCONTRACTING 

11 PLANS 

12 SEC. 201. SUBCONTRACTING PLANS. 

13 (a) SUBCONTRACTING REPORTING REQUIRE14 MENTS.— 

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

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

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

18 plan’’ and inserting the following: 

19 ‘‘(6) SUBCONTRACTING PLAN REQUIREMENTS.— 

20 Each subcontracting plan’’; 

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

22 as follows: 

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

24 will— 

25 ‘‘(i) submit— 


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1 ‘‘(I) not later than 180 days after the 

2 date on which performance under the ap3 plicable contract begins, and every 180 

4 days thereafter until contract performance 

5 ends, a report that describes all subcon6 tracting activities under the contract dur7 ing the preceding 180-day period; 

8 ‘‘(II) not later than 1 year after the 

9 date on which performance under the ap10 plicable contract begins, and annually 

11 thereafter until contract performance ends, 

12 a report that describes all subcontracting 

13 activities under the contract that have oc14 curred before the date on which the report 

15 is submitted (except that, with respect to 

16 the Department of Defense and the Na17 tional Aeronautics and Space Administra18 tion, a report under this subclause shall be 

19 submitted not later than 180 days after 

20 the date on which contract performance 

21 begins and every 180 days thereafter until 

22 contract performance ends); and 

23 ‘‘(III) not later than 30 days after the 

24 date on which performance under the ap25 plicable contract ends, a report that deVerDate Mar 15 2010 20:20 Feb 03, 2012 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3893.IH H3893

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1 scribes all subcontracting activities under 

2 the contract; and 

3 ‘‘(ii) cooperate with any study or survey 

4 required by the applicable Federal agency or 

5 the Administration to determine the extent of 

6 compliance by the offeror or bidder with the 

7 subcontracting plan;’’; and 

8 (C) by moving subparagraph (G), including 

9 each clause therein, 2 ems to the left. 

10 (2) REPORTING SYSTEM MODIFICATION.— 

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

12 after the date of enactment of this Act, the Ad13 ministrator of the Small Business Administra14 tion shall take such actions as are necessary to 

15 ensure that the Federal subcontracting report16 ing system to which covered reports are sub17 mitted is modified to notify the Administrator, 

18 the appropriate contracting officer, and the ap19 propriate Director of Small and Disadvantaged 

20 Business Utilization if an entity fails to submit 

21 a required covered report. If the Administrator 

22 does not modify the subcontracting reporting 

23 system on or before the date that is 1 year 

24 after the date of enactment of this Act, the Ad25 ministrator may not carry out or establish any 


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1 pilot program until the date the Administrator 

2 modifies the reporting system. 

3 (B) COVERED REPORT DEFINED.—In this 

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

5 report submitted in accordance with assurances 

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

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

8 (b) FAILURE TO SUBMIT SUBCONTRACTING RE9 PORTS AS BREACH OF CONTRACT.—Section 8(d)(8) of 

10 such Act (15 U.S.C. 637(d)(8)) is amended— 

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

12 the following: 

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

14 (2) in subparagraph (A) by striking ‘‘sub15 section, or’’ and inserting ‘‘subsection,’’; 

16 (3) in subparagraph (B) by striking ‘‘sub17 contract,’’ and inserting ‘‘subcontract, or’’; and 

18 (4) by inserting after subparagraph (B) the fol19 lowing: 

20 ‘‘(C) assurances provided under paragraph 

21 (6)(E),’’. 

22 (c) AUTHORITY OF SMALL BUSINESS ADMINISTRA23 TION.—Section 8(d)(10) of such Act (15 U.S.C. 

24 637(d)(10)) is amended— 


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1 (1) by striking ‘‘(10) In the case of’’ and insert2 ing the following: 

3 ‘‘(10) AUTHORITY OF ADMINISTRATION.—In the case 

4 of’’; 

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

6 shall be advisory in nature,’’; and 

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

8 a contract-by-contract basis, or in the case contrac9 tors’’ and inserting ‘‘as a supplement to evaluations 

10 performed by the contracting agency, either on a 

11 contract-by-contract basis or, in the case of contrac12 tors’’. 

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

14 637(d)) is amended by adding at the end the following: 

15 ‘‘(13) APPEALS.— 

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

17 representative or commercial market representative 

18 determines that a subcontracting plan required 

19 under paragraph (4) or (5) fails to provide the max20 imum practicable opportunity for covered small busi21 ness concerns to participate in the performance of 

22 the contract to which the plan applies, such rep23 resentative may delay acceptance of the plan in ac24 cordance with subparagraph (B). 


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1 ‘‘(B) PROCESS.—A procurement center rep2 resentative or commercial market representative who 

3 makes the determination under subparagraph (A) 

4 with respect to a subcontracting plan may delay ac5 ceptance of the plan for a 30-day period by pro6 viding written notice of such determination to appro7 priate personnel of the contracting agency. Such no8 tice shall include recommendations for altering the 

9 plan to provide the maximum practicable oppor10 tunity described in that subparagraph. 

11 ‘‘(C) DISAGREEMENTS.—If a procurement cen12 ter representative or commercial market representa13 tive delays the acceptance of a subcontracting plan 

14 under subparagraph (B) for a 30-day period and, 

15 during such period, does not reach agreement with 

16 appropriate personnel of the contracting agency to 

17 alter the plan to provide the maximum practicable 

18 opportunity described in subparagraph (A), the dis19 agreement shall be submitted to the head of the con20 tracting agency by the Administrator for a final de21 termination. 

22 ‘‘(D) COVERED SMALL BUSINESS CONCERNS

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

24 small business concerns’ means small business con25 cerns, qualified HUBZone small business concerns, 


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1 small business concerns owned and controlled by vet2 erans, small business concerns owned and controlled 

3 by service-disabled veterans, small business concerns 

4 owned and controlled by socially and economically 

5 disadvantaged individuals, and small business con6 cerns owned and controlled by women.’’. 

7 SEC. 202. NOTICES OF SUBCONTRACTING OPPORTUNITIES. 

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

9 637(k)(1)) is amended by striking ‘‘in the Commerce 

10 Business Daily’’ and inserting ‘‘on the appropriate Fed11 eral Web site (as determined by the Administrator)’’. 

12 SEC. 203. REGULATIONS. 

13 Not later than 180 days after the date of enactment 

14 of this Act, the Administrator of the Small Business Ad15 ministration shall issue guidance with respect to the 

16 changes made to the Small Business Act, with opportunity 

17 for notice and comment. 

18 TITLE III—INSOURCING 

19 SEC. 301. DEFINITIONS RELATING TO PROCUREMENT PRO20 TEST SYSTEM. 

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

22 States Code, is amended by adding at the end the fol23 lowing: 


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

2 performed by a private sector entity to perform3 ance by a Federal employee.’’. 

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

5 title is amended— 

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

7 the end; 

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

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

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

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

12 in paragraph (1)(F), includes any small busi13 ness concern (as that term is defined in section 

14 3(a) of the Small Business Act) whose economic 

15 interest would be affected by the conversion.’’. 

16 SEC. 302. INSOURCING. 

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

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

19 section 45 the following: 

20 ‘‘SEC. 46. INSOURCING. 

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

22 is being performed by a small business concern to per23 formance by a Federal employee if— 

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

25 after providing notice and an opportunity for public 


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1 comment, the procedures of the agency with respect 

2 to decisions to convert a function being performed 

3 by a small business concern to performance by a 

4 Federal employee; and 

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

6 include that all decisions described in such para7 graph are reviewed by any appropriate— 

8 ‘‘(A) Office of Small and Disadvantaged 

9 Business Utilization; and 

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

Æ 


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