69–006 

110TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 110–400 

SMALL BUSINESS CONTRACTING PROGRAM 

IMPROVEMENTS ACT 

OCTOBER 22, 2007.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Ms. VELA ́ ZQUEZ, from the Committee on Small Business, 

submitted the following 

R E P O R T 

[To accompany H.R. 3867] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Small Business, to whom was referred the bill 

(H.R. 3867) to update and expand the procurement programs of the 

Small Business Administration, and for other purposes, having considered the same, report favorably thereon without amendment and 

recommend that the bill do pass. 

CONTENTS 

Page 

I. Purpose of the Bill and Summary ................................................................ 2 

II. Background and Need for Legislation .......................................................... 3 

III. Hearings ......................................................................................................... 11 

IV. Committee Consideration .............................................................................. 14 

V. Committee Votes ............................................................................................ 14 

VI. Section-by-Section Analysis of H.R. 3867 .................................................... 17 

VII. Congressional Budget Office Cost Estimate ................................................ 22 

VIII. Committee Estimate of Costs ....................................................................... 24 

IX. Oversight Findings ........................................................................................ 24 

X. Statement of Constitutional Authority ........................................................ 24 

XI. Compliance With Public Law 104–4 ............................................................ 25 

XII. Congressional Accountability Act ................................................................. 25 

XIII. Federal Advisory Committee Statement ...................................................... 25 

XIV. Statement of No Earmarks ........................................................................... 25 

XV. Performance Goals and Objectives ............................................................... 25 

XVI. Changes in Existing Law Made by the Bill, as Reported ........................... 25 


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1The Small Business Act, P.L. 85–536 (as amended), 15 U.S.C.§ 631 et. seq. 2 § 15(a) of the Small Business Act 15 U.S.C. § 644(a). 3 Executive Order 13360 regarding Service Disable Veterans, The White House, October 20, 

2004. 

I. PURPOSE AND SUMMARY

The purpose of H.R. 3867, the Small Business Contracting Program Improvements Act (The Act) is to encourage participation by 

qualified small businesses, particularly veteran owned businesses, 

in the appropriate contracting programs offered under the supervision of the Small Business Administration. The Act amends key 

sections of the Small Business Act 1 to assist small business participation, prevent fraud and bring consistency to the operation of the 

main contract assistance programs. 

The Small Business Administration was preceded by federal 

agencies developed during wartime to help small businesses adjust 

to and compete for federal contracts. The predecessors to the Small 

Business Administration (SBA) can be traced back to World War 

II and efforts to ensure that small businesses contributed to the 

maintenance of a robust defense industrial base. The foundation of 

the agency in government procurement is reflected in the Small 

Business Act’s dictate that small business concerns receive a ‘‘fair 

proportion of the total purchases and contracts for the Government 

in each industry category ***. ’’ 2 Despite this clear mandate in 

existence for more than 50 years, small businesses in certain key 

groups, including those owned by service-disabled veterans, women 

entrepreneurs and certain socially disadvantaged businesses’ owners have not received their fair share of federal government contracts. In addition, certain programs that are offered by the SBA 

have grown so complex and removed from SBA oversight that they 

have become susceptible to misuse to a significant degree, by unqualified businesses. Although there are many reasons for these 

failures, H.R. 3867 adopts a measured approach to addressing some 

of the underlying problems. The Committee intends to dramatically 

improve on the capability of small businesses to earn their fair 

share of federal government contracts within the letter and spirit 

of the Small Business Act’s goals. 

The bill rectifies significant contracting problems in two main 

areas: strengthening and modernizing these programs and setting 

standards to protect the integrity and consistency in the application of contract assistance programs so they will be used as Congress intended. Title I expands procurement opportunities for service-disabled veteran-owned businesses; a group that currently receives only a small fraction of their contracting goal. Further, it 

creates penalties for misrepresentation of a service-disabled veteran owned business classification and adopts a roadmap for providing information, advice and training to service-disabled veterans 

as prescribed by President.3 Finally, contracting officers who under 

current law must set aside certain contracts for HUBZones, would 

now have discretion to award such contracts to be used for servicedisable veteran-owned businesses. Title II provides that the Administrator perform the necessary checks on applicants for participation in the various contracting assistance programs to ensure their 

business integrity and qualifications. This is already required by 

most programs but this establishes uniformity in all of the small 


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4 15 U.S.C. § 631(a). 

business contracting programs. Title III sets out requirements for 

the SBA to implement the Women’s Procurement Program immediately. Title IV strengthens the HUBZone program by verifying 

that small businesses receiving contracts under its authority are 

qualified. Finally Title V modernizes the 8(a) program to update 

and revise the qualification requirements, extend and realign the 

program term for participation and ensure that contracts issued 

under the authority of 8(a) go only to 8(a) qualified companies. 

The Committee does not expect that these changes will alleviate 

all the problems associated with small business access to federal 

government contracts. Nevertheless, this bill eliminates some of 

the more egregious barriers to small business participation in a 

measured and balanced way. These barriers have been preventing 

some deserving businesses from achieving the goal of full participation and a fair share of federal contracts as set forth in the Small 

Business Act. This bill will help direct federal contracts to qualified 

small businesses furthering Congresses goals. 

II. BACKGROUND AND NEED FOR LEGISLATION

In 2006, the federal government spent over $417 billion on goods 

and services in 8.3 million separate contracting actions. There is no 

reason to believe that the federal marketplace will not continue to 

grow at a record pace. Small businesses won approximately $80 billion in contracts which is about 21.5 percent of the remaining 

prime contracts. The opportunity for free and predominantly fair 

competition for those contracts is an immensely important benefit 

for small businesses. 

Congress acknowledged the value of small business participation 

in federal contracting and has established federal policies to promote that objective for over 60 years. During World War II it was 

found to be in our national interest to ensure a strong and diverse 

industrial base. In Section 2 of the Small Business Act 4 procurement goals are established as follows: ‘‘it is the declared policy of 

the Congress that the Government should aid, counsel, assist and 

protect * * * the interests of small business concerns in order to 

preserve free competitive enterprise and to insure that a fair proportion of the total purchases and contracts or subcontracts for 

property and services for the Government * * * be placed with 

small business enterprises.’’ Without competition, industrial concentration occurs and the government’s purchasing options are dramatically reduced. 

Through a series of laws and procurement requirements Congress established a benchmark to give small businesses every opportunity to compete fairly for the award of federal contracts. The 

foundation for these efforts is the Small Business Act, passed in 

1953, which has been steadily amended to adapt to meet the demands of the marketplace, to support important social and technological goals, and to conform to an increasingly sophisticated procurement system. Unfortunately, in recent years, as the number of 

contracts grew and competition for lucrative federal contracts intensified, the process became still more complex. To a certain extent, it has undermined the ability of small firms to compete for 

contracts. 


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FEDERAL CONTRACTING AND BARRIERS FOR SMALL BUSINESS

PARTICIPATION

Since 2000, the U.S. government’s buying has expanded by nearly 60 percent. The federal-wide goal is currently 23 percent but 

SBA establishes individual agency goals that they then aggregate 

to obtain the overall 23 percent goal. In many cases, small businesses can handily fulfill the basic requirements of federal contracts and beat their competition; in fact, lower overhead, nimbler 

production and structural efficiencies often mean they can rise to 

provide services or products at the best price. While small firms 

often succeed in the private market, the structure of federal contracting creates institutional barriers that prevent smaller firms 

from participating. As such, competition is not always straightforward in the federal marketplace. 

The primary public policy rationale for small business contracting programs is the positive economic benefits they provide, as 

well as assisting small businesses overcome the complexities of the 

system. The economic benefits of these programs can be seen in 

two primary areas—market competition and local economic development. First, programs that are designed to increase and diversify 

small contractors with the intent of expanding the federal supplier 

base. This leads to increased competition, which results in higher 

quality, greater product variety, and lower prices. Second, these 

contracting initiatives lower barriers to entry in a wide range of 

markets for small businesses. This provides greater market access 

for small firms’ goods and services. From an economic perspective, 

such access is critical to generating positive macroeconomic benefits, including higher job creation, wage growth, and greater income 

distribution. 

Of the government contracting dollars that are awarded through 

competition, nearly three-quarters are awarded through ‘‘full and 

open competition.’’ Through this mechanism, small businesses compete directly with large corporations. Unfortunately, all but the 

most successful small firms are ill-equipped to go head-to-head 

with a much bigger company who can overcome the complexities of 

federal contracting. 

As a result, the Small Business Act allows agencies to limit competition—or to ‘‘set aside’’ contracts for bidding only by small firms. 

Almost half of all contracting dollars awarded to small businesses 

use small business set-asides. If this mechanism did not exist, 

small firms, which account for 50% of our gross domestic product, 

would receive only 11 percent of all government contracting dollars. 

While these programs have assisted many small firms, there is 

need for improvement. Even in those cases where the law requires 

that certain contracts be set aside for competition between capable 

small businesses, there are often barriers for smaller firms. In 

some cases, firms representing themselves as qualified to compete 

for a set-aside do not meet participation eligibility requirement. In 

other cases, a small bidder wins an award and turns it over to a 

much larger subcontractor or joint-venturer; in effect a backdoor 

award to a large bidder. This undermines the goal of these programs. 

Most of the SBA’s procurement initiatives are based on the theory that restricting competition to certain segments of the small 


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5 As revised, in the Veteran’s Benefits Act of 2003 PL 108–183, Section 308. 

business community is acceptable as long as two or more firms are 

expected to bid on a particular contract. In the same way that 

small firms have difficulty competing directly against large businesses, certain sectors of small businesses have unique challenges 

in competing against their more successful counterparts. Using setasides, each category of small firms bids for contracts against other 

similarly situated businesses. 

Federal contracting assistance programs 

The SBA is charged with administering a number of procurement 

initiatives targeting various sectors of the small business community. These programs have historically been effective in increasing 

the likelihood that small firms are able to obtain federal contracts. 

Service Disabled Veteran Procurement Program 

This initiative was created in 2003 to increase contracting opportunities for companies owned by service-disabled veterans, given 

that agencies were unable to accomplish the three percent procurement goal established as part of the Veterans Entrepreneurship 

and Small Business Development Act of 1999.5 It was implemented 

within 6 months thereafter. Agencies are allowed to limit competition for a contract among service-disabled veteran-owned businesses. If there are not at least two qualified businesses to compete 

for the contract, an agency is able to enter into a contract with a 

service-disabled veteran-owned business without competition from 

other companies, thereby increasing the likelihood that these companies will access government contracts. 

Despite these initiatives, small firms owned by service-disabled 

veterans (SDVBs) continue to lag well behind the 3 percent goal 

that was enacted in 1999. In large part, this is due to the limited 

authority agencies have to enter into sole source contracts with 

SDVBs. In fiscal year 2006, these businesses received less than 1 

percent of federal government contracting dollars. SDVBs are the 

only business category which allows companies who falsely represent their status as SDVBs to avoid penalty. Finally, it is clear 

that the SBA has not fulfilled its obligations under Executive 

Order 13360 dated October 21, 2004 that orders all agencies to assist Service disabled veteran-owned small businesses in obtaining 

government contract and subcontract opportunities. 

HUBZone program 

This program’s purpose is to provide community development for 

low-income and high unemployment areas through the award of 

federal contracting dollars to businesses that are located in these 

areas and employ local residents. The program allows federal contract preferences for firms that locate their primary business operations in a designated HUBZone. Further, 35 percent of the company’s employees must reside in a HUBZone area. HUBZone companies must be certified as such by the SBA. HUBZone companies 

can get price credits; have competition limited to only HUBZone 

firms, and the availability of sole source contracts. 

As the HUBZone program has matured, questions have been 

raised about whether the program is accomplishing its goals and 


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6 Audit Report of the Eligibility of 15 HUBZone Companies and a Review of the HUBZone 

Empowerment Contracting Program’s Internal Controls; Inspector General, Small Business Administration, Audit Report #3–05, January 22, 2003. The IG’s report stated that ‘‘(w)e also found 

that the Office of HUBZone Empowerment’s internal controls were inadequate to ensure that 

only eligible firms are certified and remain certified. Therefore, there is little assurance that 

the program will provide increased employment, investment and economic development for depressed areas. Since ineligible companies could receive HUBZone contracts, the program is also 

vulnerable to contracting fraud.’’ 7 HUBZone Program Examination and Recertification Processes; Inspector General, Small 

Business Administration Report #6–2—May 23, 2006. 8 Equity in Contracting for Women Act, PL 106–554. 9The Utilization of Women-Owned Small Business in Federal Contracting; Rand Corporation, 

April 2007. 

whether it has been subject to fraud and abuse. Two SBA Inspector 

General reports have uncovered problems with assuring that firms 

were properly certified in the program and have remained eligible 

for future awards. The first report found that SBA did not have the 

internal controls to guarantee that only certified firms participated.6 The second report issued by the SBA IG found that 80 percent of the companies in the program were not eligible three years 

after they were approved.7 Small business witnesses expressed concern about how this could happen, the impact this has on small 

business contracts and what SBA intends to do to rectify the problem. 

Another concern about the program has been the parameters of 

a ‘‘low-income’’ area for the purposes of the HUBZone program designation. In an analysis of these areas, it appears the designation 

of HUBZone has been applied to some relatively affluent communities. Additionally, in a sampling by the Committee of 132 

HUBZone contract awards, the Committee found that 4 of the contracts went to large companies, one contract was to a non-profit 

and 40 percent of the rest went to companies that had never been 

certified as a HUBZone company, as required under the statutes. 

The analysis revealed that federal agencies were not checking the 

accuracy of bidders claims to be HUBZone qualified to the detriment of deserving HUBZone participants. All these issues have 

led the Committee to take a stronger look at the rules surrounding 

HUBZones and the legislation reflects these concerns. 

Women’s Federal Procurement Program 

This program was created to correct the imbalance in the number of women-owned businesses nationally when compared to their 

presence in the federal marketplace. The Women’s Procurement 

Program was enacted as part of the Equity In Contracting For 

Women Act 8 in 2000 but it has yet to be implemented by the SBA. 

It was to allow for restricted competition for federal contracts by 

women-owned businesses in federal contract involving work within 

industry sectors needed by the federal government that have historically underutilized them. 

The first requirement for this program was a study to determine 

what industries are underutilized by women-owned businesses. 

After a failed attempt to bring forth a meaningful study in 2001, 

and a court order directing SBA to get moving on implementing the 

program, the SBA entered into a contract in 2006 to complete the 

study and results were released in April 2007. The Rand Study 9

had mixed results. Briefly, they found that if the number of contracts awarded was the criteria, women-owned businesses looked 

under-represented in a number of categories; however, if the dollar 


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value of the contracts was used as a measure, the underutilization 

was less clear. Since that time, the SBA has promised to promulgate regulations to implement the program but no proposals have 

been forthcoming. 

Both the House and Senate have called repeatedly for the SBA 

to move to implement the program anyway. Women business owners, whose representatives have gone to court numerous times to 

compel the SBA to move forward with the program, believe they 

have missed contracting opportunities worth billions of dollars. 

They testified that SBA’s actions have thwarted the statutory procurement goal that five percent of contracting dollars go to women 

entrepreneurs which was established in 1994. They are concerned 

that the program passed by Congress for their benefit is being 

stalled to death. 

8(a) program 

This program is the primary way that minority-owned businesses 

enter the federal marketplace. Established in the late 1960s, the 

8(a) program was designed to promote individual minority entrepreneurship through federal contracts awards. Its purpose was to 

expand economic opportunities for minority individuals and to correct imbalances in the number of minority individuals compared to 

the number of minority entrepreneurs. Throughout its history, the 

program has developed more than 20,000 companies that have received in excess of $100 billion in federal contracts. 

Due to changes in federal procurement policy and agency neglect, 

there have been no significant updates to the 8(a) program since 

1988. As a result, the program is seen by many federal agencies 

as an antiquated contracting option. Over the past six years, SBA 

has requested significant reductions in funding, staffing and technical assistance for participant businesses, which has resulted in 

the 8(a) program moving away from its goal of providing business 

development to minority entrepreneurs. Particularly out of date is 

the net worth limitation that prohibits owners of 8(a) companies 

from having a net worth of over $250,000. This nearly 20 year old 

ceiling severely inhibits the ability of the owner to raise capital or 

even purchase necessary equipment. Though it may seem adequate 

when contemplating the wealth of a private citizen, the fact is that 

business owners require more access to capital than others to be 

able to maintain and grow their businesses. Witnesses as well as 

SBA officials recognized that the net worth threshold had not been 

adjusted adequately to reflect the current dollar values of running 

a business. 

Another concern has been the significant reduction in the proportion of eligible 8(a) companies that actually receive contracts. In FY 

2006, only seven percent of companies that were participating in 

the 8(a) program during that year received a contract. This compares to thirty-one percent, seven years earlier. Contracts have also 

become exceedingly concentrated among the top contract recipients. 

In FY 2006, the top 10 companies (measured in terms of contract 

volume) received more than 40 percent of the contract dollars 

awarded to companies in the program. Compare that to FY 1999, 

when the top 10 recipients of 8(a) contract dollars received only 13 

percent of the contract dollars. 


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10The five factors historically considered for affiliation are (1) whether the franchise owner 

bears the entire risk of financial loss from its business operations; (2) the ability of the franchise 

owner to retain the majority of the profits from its business; (3) whether the franchise owner 

maintains day-to-day control over its operations; (4) whether the franchise owner must provide 

significant amounts of financing without any recourse for indebtedness repayment to the 

franchisor; and (5) whether any commonality in ownership or management exists between the 

franchise owner and the franchisor. See 13 C.F.R. 121.103. 

Certain other problems were mentioned during the Committee’s 

review of this important program. The 8(a) program is subject to 

a nine year time limit—divided between a five year developmental 

phase and a four year transitional phase. This has reinforced the 

focus of the program on transitioning companies out, rather than 

on the goal of business development. In 1995, a two-year moratorium was imposed on the ability of agencies to limit competition for 

contracts to only minority entrepreneurs, but was never lifted. This 

has resulted in minority entrepreneurs being the only segment of 

the small business community—comprised of women entrepreneurs, service-disabled veteran businesses, and small firms located in low income or high unemployment areas—without a limited competition option available to them. In December of 2004, legislation was enacted to allow companies that were approved into 

the 8(a) program—because of its rigorous application process—to be 

deemed eligible for other federally-funded programs for small disadvantaged businesses without having to reapply. To this date, the 

implementation of this provision has been inconsistent at best. All 

of these flaws, particularly in combination, have tended to make 

the 8(a) program far less effective than it once was. 

General contracting assistance policy concerns 

Size determination rules can exclude small businesses 

SBA utilizes ‘‘size standards’’ to determine whether a business 

entity is small and thus, eligible for government programs and 

preferences reserved for ‘‘small business’’ concerns. In establishing 

size, SBA will determine if the business is affiliated with another 

company. SBA uses five balancing tests in determining if companies are affiliated.10 SBA’s regulations provide that restraints imposed on a franchisee relating to standardized quality, advertising, 

accounting format and other similar provisions, generally will not 

be considered in determining affiliation provided that the 

franchisee has the right to profit from its efforts and bears the risk 

of loss commensurate with ownership. Affiliation may arise, however, through other means, such as common ownership, common 

management or excessive restrictions upon the sale of the franchise 

interest. See 13 CFR 121.103 (i). 

The Garvin Enterprises case, No. SIZ–4544 (April 4, 2003), involved a temporary employment agency operating under a franchise agreement, where the franchisor finances and processes the 

payroll of the temporary workers (not the employees of the 

franchisee) and invoices and collects customer accounts receivable 

in order to ensure payment to the temporary workers. In this case 

the SBA decided that the franchisee and franchisor are affiliated, 

thus disqualifying the independent franchisee from eligibility for 

small business programs. SBA also acknowledged in the case that 

‘‘this type of arrangement is customary for many firms in the temVerDate Aug 31 2005 04:05 Oct 23, 2007 Jkt 069006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR400.XXX HR400

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porary employment industry * * *. This is a policy question, and 

thus beyond this Office’s jurisdiction.’’ The temporary staffing industry has experienced problems with 

agencies not paying, or underpaying, those who they place as temporary workers. As a result, franchisors in the industry have adopted a practice of handling the administrative responsibilities and 

advancing the payment of salaries and withholding the taxes for 

temporary employees for franchisees. 

Franchisees that satisfy all of the criteria that qualify them as 

independent small businesses should not be penalized simply because the franchisor has assumed responsibility for the administration and financing of the payroll and associated costs for the temporary employees to assure that the temporary employees are properly paid and that all withholding and other tax requirements are 

met. 

H.R. 3867, Legislation addresses significant contract assistance 

problems 

Most of the SBA’s procurement programs have not been updated 

since their creation. For some initiatives, it has been nearly 20 

years. During that time, the federal government has changed the 

way it buys, relegating many of these initiatives to second tier options for contracting officers. The Small Business Contracting Programs Improvements Act (H.R. 3867) addresses problems that have 

surfaced in these programs and modernizes provisions that are out 

of date. 

H.R. 3867 removes the barriers that have prevented agencies 

from entering into contracts without competition to service-disabled 

veteran-owned small businesses, placing these businesses at the 

highest priority for small business contracting. It will also provide 

penalties if a company falsely represents itself as service-disabled 

veteran-owned. The measure directs SBA to implement and carry 

out certain obligations that were assigned to it by Executive Order 

13360, codifying portions of that order into the Small Business Act. 

These responsibilities include providing information to service disabled veteran-owned businesses on contracting, advising agencies 

on how to expand procurements from service disabled veterans, 

and making assistance available to them on contract law and procedures. As a result of these provisions, the Committee expects to 

see an immediate and substantial increase in contracting opportunities for companies owned by service-disabled veterans. 

Contracting fraud reduces the effectiveness of the SBA’s contracting programs. It is important that bad actors are weeded out 

so that the programs can reach their intended beneficiaries. Participating in an SBA procurement program should be a privilege 

not a right. These contract assistance programs provide preferences 

over and above those received by other small businesses and are 

designed to level the playing field for a number of segments of the 

small business community that have historically been left behind. 

Given this, company owners should be of the highest integrity. 

Unfortunately, the agency has not implemented safeguards for 

any of the contracting programs. This raises substantial concern 

that owners found to be ineligible because of character issues for 

one SBA program, could participate in others that do not have the 

same integrity restrictions. The bill ensures that prior to the award 


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of a contract, the agency will have verified business integrity of 

participants. 

The Committee believes that the contract assistance programs 

should be operated consistently and predictably. As it is now, each 

program is administered inconsistently by the SBA. For example, 

some of the programs have goals, others do not. All of the initiatives should have both prime and subcontracting goals. Subcontracting can be an effective alternative for small companies seeking 

to participate in the $410 billion federal marketplace. The bill requires each SBA procurement program to have both a prime contracting and a subcontracting goal. 

Three of the programs have a sole source contracting option. 

Each is subject to dollar limitations, above which, competition is required. However, the limitations which apply to all initiatives have 

not been modified since 1988 with the exception of a small increase 

in October of 2006. The legislation provides an inflationary adjustment to the sole source threshold to $5.1 million for contracts other 

than manufacturing for all SBA procurement programs. For manufacturing, the legislation comports the statute with the SBA’s regulatory increase from October of 2006 to $5.5 million. Over this 

limit, contracts will require competition among each program’s participants. 

H.R. 3867 ensures the implementation of the women’s procurement program. It sets forth parameters the SBA must use to evaluate the under-representation of women entrepreneurs in federal 

contracting. This provision will implement the program upon enactment and sets out how the SBA should run the program. Companies receiving contracts awarded through the women’s procurement 

program will be subject to eligibility protests by other small businesses that would otherwise have been eligible to receive the contract but for the contract being awarded using this program. 

The Act requires the SBA to perform on-site verifications of a 

HUBZone company’s eligibility prior to the award of the company’s 

second contract obtained with a HUBZone preference. This is designed to ensure that those HUBZones who are meeting the requirements of the programs will no longer have to compete with 

businesses fraudulently participating in the programs. The bill also 

limits the award of construction contracts with benefits provided by 

the program if the contract is more than 150 miles from the principal office HUBZone. Companies receiving contracts awarded 

through the HUBZone program will be subject to eligibility protests 

by other small businesses that would otherwise have been eligible 

to receive the contract but for the contract being awarded to a 

HUBZone program participant. This will maximize the intent of 

the program in achieving local economic development. 

H.R. 3867 will modernize the 8(a) program in several ways. It 

will address the 8(a) net worth limitation raising it to $550,000 and 

raise the personal net worth provisions once a small business is in 

the program allowing for growth. This is an inflationary adjustment to update the program to meet current business operations. 

It will also encourage growth among these businesses. It will also 

add one year to the 8(a) program time, and divide the program into 

a six year developmental phase and a four year transitional phase. 

This program also allows for small businesses concerns who are not 


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8(a) participants to protest section 8(a) awards. This integrity 

measure will further the goal of eliminating fraud and abuse. 

The problem of the treatment of franchises in the temporary employee industry is resolved by recognizing that the industry practice of franchisors financing the payroll of the temporary workers 

which protects the temporary workers from being underpaid. The 

Committee believes that such industry practice should not be given 

any probative weight in applying the traditional affiliation factors 

for business size determinations. 

H.R. 3867, the Small Business Contracting Program Improvements Act continues the Committee’s work on reauthorizing programs administered by the U.S. Small Business Administration. 

The Act takes several steps to modify and update the SBA’s procurement programs and to reduce contracting fraud. Tens of thousands of small firms rely on these programs to provide entre ́e to 

the federal marketplace. Given that each of the contract assistance 

programs is currently experiencing higher rates of participation 

than ever, it is crucial that these initiatives are structured to provide these companies with the maximum opportunity to receive 

benefits. 

III. HEARINGS

During the 110th Congress the Committee has held a number of 

hearings which touched on various aspects of the SBA’s contracting 

assistance programs and three hearings to address this subject directly. 

On March 21, 2007 the Subcommittee on Contracting and Technology held a hearing on the Implementation of the Women’s Procurement Program and Federal Government Efforts in Contracting 

with Women-Owned Businesses. The first panel of federal agency 

witnesses included the Honorable Jovita Carranza, the Deputy Administrator for the Small Business Administration; Dr. Frank 

Spampinato, Chief Acquisition Officer for the Department of Energy; Mr. Larry Warder, Chief Financial Officer for the Department 

of Education; and, Thomas Luedtke, Assistant Administrator for 

Procurement at the National Aeronautic and Space Administration. 

All reviewed the status of their agencies efforts to meet their goals 

with regard to contracting with women-owned businesses and individual successes within their programs. They went over their reports and data related to their accomplishments and their plans to 

support and include women-owned businesses in contract efforts in 

the future. Under questioning, Deputy Carranza went through the 

current status of the implementation of the Women’s Procurement 

Program. The report had been completed and regulations were 

being prepared. Other agency representatives explained why they 

had fallen short of their women-owned business contracting goals. 

During the second panel on March 21, 2007, Ms. Margot 

Dorfman the CEO of the U.S. Women’s Chamber of Commerce reviewed the history of women-owned business ‘‘goaling’’ and the 

Women’s Federal Procurement Program. Her group had filed suit 

in federal court to force SBA to implement the program and prevailed with the Court declaring that the SBA ‘‘had sabotaged, 

whether intentional or not, the implementation of a procurement 

program * * *.’’ She testified that Congress should step in and demand the immediate implementation of the program and that each 


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year of delay costs women-owned businesses billions of dollars in 

contract award opportunities. Ms. Christina Lomasney, the President and CEO of Isotron Corporation, explained that her company 

performs research for the federal government under a contract with 

the Department of Defense. Isotron has performed well and other 

women-owned businesses could perform well if they were more 

fully utilized. She urged more programs that could benefit womenowned high tech businesses such as SBIR, Mentor-Prote ́ge ́ and the 

implementation of the Women’s Federal Procurement Program. The 

next witness, Ms. Karyl Smith of Iowa Valley Appraisal has done 

work with the U.S. Department of Agriculture but believes there 

are many other federal agencies that should be trying harder to 

use women-owned businesses like hers. Federal Emergency Management Agency, Homeland Security and Housing and the Department of Housing and Urban Development all have massive appraisal duties and are all not meeting their goals. The final business owner to testify was Ms. Sheryl Mendenhall-Roberts, CEO of 

CCS Holdings, a company that is a third party administrator for 

worker’s compensation claims and risk management services. They 

are capable of saving the country millions in unnecessary and mistaken payments of claims that could be negotiated or eliminated 

with some professional review. She believes small business programs, including the Women’s Federal Procurement Program 

would force agencies to look harder for these kinds of money saving 

services that are well-used in the private sector. 

On September 19, 2007 the Committee on Small Business held 

a hearing on The Effectiveness of the SBA’s Contracting Programs 

and the Challenges They Face. The Honorable Jovita Carranza, the 

Deputy Administrator of the SBA reviewed the administration’s 

plans for the future of these programs as well as facts and data on 

the program’s accomplishments. SBA indicated they supported the 

programs but acknowledged some difficulty in ensuring that the 

programs were delivered to appropriate parties, a problem that had 

been reported from a number of sources including the General Accountability Office and the SBA Inspector General. Also, she was 

unable to specify a date when the Women’s Procurement Program 

would finally be implemented now seven years after passage. The 

Deputy pointed out that they were working on regulations. This 

program allows contracting officers to steer contracts to women 

business owners in industry sectors where they were being underutilized in federal contracts. 

The non-government witnesses appearing at the September 19, 

2007 hearing included Mr. Harry Alford on behalf of the National 

Black Chamber of Commerce who testified strongly in favor of 

modernizing the 8(a) program, updating its net-worth provisions 

and extending the term. Mr. Ronald F. Chamrin appeared for the 

American Legion and urged the committee to take action to increase the participation in contract assistance programs by servicedisabled, veteran owned firms. Ms. Margot Dorfman, of the U.S. 

Women’s Chamber of Commerce addressed the administration’s 

failure thus far, after seven years and in spite of specific orders 

from the U.S. District Court, to implement the Women’s Procurement program. She urged Congress to act to make sure such delays 

did not continue. Mr. Ron Newlan speaking for the HUBZone Contractors National Council pointed out the success of the HUBZone 


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in providing contracts and employment in low income HUBZone 

areas when it was used appropriately. His concern was that the 

program had been poorly implemented and underutilized by federal 

contracting agencies which resulted in lost opportunities for businesses and low-income communities. He asked the Committee to 

remind federal agencies to use the HUBZones more and acknowledged that fraud should not be allowed in the program. Mr. P.J. 

Goel, President, Goel Services, Inc., Washington, D.C. testified on 

behalf of the Associated General Contractors and pointed out that 

SBA and the participating federal agencies no longer have the 

funds for proper oversight and management of contracting assistance programs. AGC would like to see some of the programs consolidated and their requirements be consistent. Finally Dr. Trevor 

Brown, Assistant Professor, John Glenn School of Public Affairs, 

The Ohio State University felt that government contracting was becoming burdensome and unwieldy. He was concerned that the Congress not lose focus of the ultimate goal to purchase goods and 

services at the lowest possible price. Any new legislation should 

search for ways to achieve Congress’s goals with the least imposition on federal agencies trying to do their job. Complexity, in his 

view, has become the biggest barrier to small business participation in contract assistance programs. 

On October 4, 2007 the full Committee held a legislative hearing 

on the Committee draft of the Small Business Contracting Programs Improvement Act which had been circulated for discussion. 

The hearing was attended by the Honorable Steven Preston, the 

Administrator for the Small Business Administration. Mr. Preston 

expressed the Administration’s concerns over a number of portions 

of the bill. He pointed out that SBA was introducing in the near 

future a regulation that would reduce fraud in the HUBZone program by requiring strong review of HUBZone status recipients. 

They also oppose on-site inspections of HUBZone recipients because 

of costs and logistics. Likewise SBA believes the 150 mile construction limit for a HUBzone company is overly restrictive. SBA is trying to improve the processes that eliminate backlogs that exist in 

the 8(a) program. The agency says it plans to hold other participating agencies accountable to meeting SBA regulations on 8(a) 

contracts. SBA does not see that the $250,000 net worth requirement has been a barrier to entry to the 8(a) program. Also testifying was Mr. Joseph Sharpe on behalf of the American Legion who 

supported the legislation to establish a firm set-aside for servicedisabled veteran-owned businesses and veteran-owned businesses. 

He also requested that more help be given to those groups and suggested that the Committee move to codify the Executive Order 

13360. They would ultimately like to see the program for servicedisabled veteran-owned businesses have parity with the 8(a) preferences. 

On a follow-up panel of small business organizations, Ms. Margot 

Dorfman representing the U.S. Women’s Chamber of Commerce 

supported the quick implementation of the Women’s Procurement 

Program and the increased attention to the utilization of the 8(a) 

program. Ms. Dorfman also wanted action taken to ensure integrity 

of the participants in the contract assistance programs to ensure 

that all businesses that won awards were qualified and worthy of 

performing contracts for the government. Finally she asked that 


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the Committee keep in mind the current technical difficulty and 

cost in bidding and participating in federal contracting. Mr. Todd 

McCracken, the Executive Director of the National Small Business 

Association, urged stronger enforcement against fraud and more attention to the complexity in participating in small business programs. NSBA feels that both are significant barriers to full small 

business participation. Mr. Steven Denlinger, U.S. Hispanic Chamber of Commerce, discussed the problems that have arisen since 

the SBA delegated their authority in contracting under the 8(a) 

program in 1993. He also pointed out that anything that slows the 

8(a) contracting process will divert contracting officers away from 

the program and thus takes contracts away from small and disadvantaged businesses. The Hispanic Chamber asks the Committee 

to consider this if it adds requirements to the programs that are 

to be done by either small businesses or contract officers. He also 

felt that special incentives in the program that benefit Alaska Native Corporation contracts were hurting the 8(a) program. Finally 

Ms. Angela Styles of the law firm of Crowell & Moring, but also 

a former director of the Office of Federal Procurement Policy of the 

Office of Management and Budget, felt that part of the problems 

with fraud were caused by the complexity of the system. It is hard 

to comply with and hard to check. The Committee should consider 

things that make the systems easier for small businesses, not harder. She shared the view that complexity in itself is a significant 

barrier to entry for some businesses who might otherwise be successful contractors. 

IV. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session on October 18, 2007 to consider H.R. 3867 and any amendments. 

V. COMMITTEE VOTES

The bill, H.R. 3867, the Small Business Contracting Program Improvement Act was marked up by the Committee on Small Business on October 18, 2007 at 10 a.m. An amendment was offered by 

Representative Akin to strike Section 501 but was withdrawn by 

unanimous consent. An amendment was offered by Mr. Bartlett to 

strike Section 101(b) but it was defeated on a rollcall vote of 8 yea 

and 16 nay at 11:15 a.m. An amendment was offered by Mr. Bartlett to strike Section 201 but the amendment was withdrawn by 

unanimous consent. An amendment was offered by Mr. Bartlett to 

strike Section 502 but was withdrawn by unanimous consent. No 

further amendments were offered. The Committee on Small Business adopted and ordered H.R. 3867 reported to the House of Representatives by a recorded vote of 21 yeas and 4 nays at 11:27 a.m. 


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VI. SECTION-BY-SECTION ANALYSIS OF THE SMALL BUSINESS

CONTRACTING PROGRAMS IMPROVEMENT ACT—H.R. 3867 

Title I. Ensuring Government Contract Opportunities for Small 

Businesses Owned and Controlled by Service-Disabled Veterans 

Section 101. Expanding procurement opportunities 

This provision will require agencies to enter into contracts with 

service-disabled veteran-owned companies without first requiring 

that agencies ensure that only one company can perform a contract. The provision also ensures that the procurement program for 

service-disabled veteran-owned small businesses has parity with 

the 8(a) program. The provision gives discretion to contracting officers whether or not to set aside contracts where two HUBZones 

qualified companies could compete for the contract. This is intended to open up more contracts for service-disabled, veteranowned companies that are qualified to perform the contract. This 

section will provide an immediate, substantial and measurable increase in both the number and dollar amount of contracts awarded 

to companies owned and controlled by service-disabled veterans. 

Section 102. Penalties for misrepresentation 

This section provides for the assessment of civil penalties against 

any company that falsely represents itself as a service-disabled veteran-owned company for the purpose of obtaining federal contracts. 

The Committee believes that the SBA must ensure that businesses 

that misrepresent their status as small, small disadvantaged, 

women-owned, 8(a), or service-disabled veteran-owned are held accountable for these false statements. This protects certified participants in the programs from having to compete against businesses 

unfairly being awarded contracts. In particular, the Committee believes that false representation in the Central Contractor Registry 

(CCR) fulfills the requirement in Section 16(d) that a company is 

misrepresenting its status in order to obtain a prime contract. 

Section 103. Implementation of Executive Order 13360 

This provision requires the SBA to comply with the requirements 

set forth in the President’s Executive Order 13360 dated October 

20, 2004. Under this Order, the Administrator of the SBA is required to designate an appropriate entity within the SBA to provide service-disabled veteran-owned companies (SDVBs) with information and assistance concerning participation in federal contracting; advise and assist other agencies in their strategies to expand procurement opportunities for SDVBs; and make training assistance on federal contract law, procedures and practices available 

to SDVBs. 

Title 2. Protecting Taxpayers and Ensuring Program Consistency 

Section 201. Requiring business integrity of small business concerns 

This provision prevents a company from receiving benefits under 

these contracting programs if the business owner has been shown 

not to have integrity. This codifies that SBA shall have a greater 

role in ensuring this integrity. If an applicant is found to lack character, the application shall be rejected. 


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If a business is found to lack character as a result of these investigations, the Committee intends that the SBA make proper notification to agencies awarding contracts. The Committee further intends that investigations regarding business integrity under this 

section shall be conducted in the same manner as indicated in SOP 

80 05 3 or successor agency procedures. 

Improving the integrity of these contracting programs serves the 

interest of program participants. It eliminates those businesses 

that are unfairly participating in the programs at a minimal cost 

to those businesses properly in the program. 

Section 202. Establishment of goals 

This provision ensures that each agency is subject to a goal for 

contracting with small firms participating in all of SBA’s contracting programs. The Committee intends that the goal for companies participating in the 8(a) program shall be, at a minimum, 70 

percent of the separate goal for small disadvantaged businesses. 

Section 203. Small business concern subcontracting policy 

This section sets forth the policy that while prime contracts 

awarded by an agency to a small business are important, it is 

equally important for small firms in SBA’s procurement programs 

to participate as subcontractors on large projects. 

Section 204. Increased size of available contracts 

This provision provides an inflationary adjustment to the limitation on contracts—other than for manufacturing—awarded without 

competition to $5.1 million. Over this amount, competition will be 

required. The section also comports the statutory limitation for 

manufacturing contracts of $5.5 million to the existing SBA regulation. 

Title 3. Expanding opportunities for women entrepreneurs 

Section 301. Implement the women’s procurement program 

This provision will allow agencies to limit competition for federal 

contracts only to women business owners, in industries that have 

been closed to them. It also provides parameters for requiring the 

SBA to evaluate industry under-representation to ensure that the 

program will be implemented upon the legislation’s enactment. In 

order to be eligible for restricted competition contracts, women entrepreneurs must be economically disadvantaged. The Administrator will have the authority to waive this requirement in industries that are substantially under-represented by women-owned 

businesses. This section also allows small businesses who would 

otherwise be able to receive a contract but for the fact that the contract was placed in the Women’s Procurement Program, to protest 

the eligibility of a particular company as woman-owned. 

The Committee intends that the following industries be deemed 

as under-represented by women-owned businesses for the purpose 

of this section. The Committee does not intend any further finding 

by an agency or department head that the agency has overtly or 

inadvertently discriminated against women entrepreneurs. Rather, 

the Committee intends that, upon enactment, agencies act immeVerDate Aug 31 2005 04:05 Oct 23, 2007 Jkt 069006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\HR400.XXX HR400

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diately at their discretion to enter into contracts with womenowned businesses in these industries. 

2-Digit (NAICS) Code Industry 

11 .................................. Forestry. 

21 .................................. Mining. 

22 .................................. Utilities. 

23 .................................. Construction. 

31 .................................. Manufacturing. 

32 .................................. Manufacturing. 

33 .................................. Manufacturing. 

42 .................................. Wholesale Trade. 

44 .................................. Retail Trade. 

45 .................................. Retail Trade. 

48 .................................. Transportation. 

49 .................................. Transportation. 

51 .................................. Information. 

52 .................................. Finance and Insurance. 

53 .................................. Real Estate and Rental and Leasing. 

54 .................................. Professional, Scientific and Technical Services. 

56 .................................. Administrative and Support, Waste Management and Remediation Services. 

61 .................................. Educational Services. 

62 .................................. Health Care and Social Assistance. 

71 .................................. Arts, Entertainment and Recreation. 

72 .................................. Accommodation and Food Services. 

81 .................................. Other Services. 

Title 4. Strengthening Community Development 

Section 401. On-site verification 

This section will require an on-site inspection by the SBA of 

HUBZone-approved companies prior to the award of their second 

contract obtained with a HUBZone contracting preference. It also 

requires the SBA, within 90 days of enactment, to develop procedures to ensure that HUBZone companies notify the SBA prior to 

their award of a HUBZone contract subject to an inspection. The 

SBA will have 30 days to review the eligibility of the company for 

the award. If the company is found not to be eligible, the contract 

will be terminated. This section does not require multiple on-site 

inspections of a company, nor does it require a review prior to 

every HUBZone contract award. This provision will address the 

long-standing concerns of fraud in the HUBZone program expressed by the SBA’s Inspector General. 

The Committee intends that the SBA conduct an investigation of 

the principal office of a HUBZone small business concern prior to 

the award of the second contract received by that concern as a direct result of an award under Section 31 of the Act. If a company 

has previously received a contract award prior to enactment of this 

language, the Committee intends that the next contract received 

after enactment is treated as the second contract for the purpose 

of this section. The Committee further intends that this section 

does not require multiple on-site inspections of a company, nor does 

it require a review prior to every HUBZone contract award. The 

Committee intends that the Administrator act expeditiously to develop standards through which HUBZone small business concerns 

can notify the Administrator of pending awards. The Committee 

also intends that on-site investigations occur within 30 days of the 

award of a contract under section 31 of the Small Business Act. If 

a company is found not to be eligible as a HUBZone small business 


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concern, the Committee intends that the contract is terminated and 

that the company is assessed penalties under section 16(d) of the 

Small Business Act. The Committee intends that the Administrator 

place a high priority on ensuring this provision is administered as 

intended. 

Section 402. Limitation on construction contracts 

This section will limit the award of construction contracts with 

the HUBZone preference if the work will be performed in excess of 

150 miles of the primary office location of the HUBZone-approved 

company. This will ensure that HUBZone benefits are provided to 

the local economy. 

Section 403. Allowing small business concerns that are not 

HUBZone program participants to protest HUBZone awards 

This provision allows small businesses who would otherwise have 

been able to receive a contract but for the fact that the contract 

was placed in the HUBZone program, to protest the eligibility of 

a particular HUBZone company to receive the award. 

The Committee intends this provision to allow small business 

concerns in similar industries to be able to protest to the SBA the 

eligibility of a company to receive a contract under section 31 of the 

Small Business Act. The Committee does not intend this provision 

to allow small business concerns to protest the discretion or authority of an agency to enter into contracts under the authority provided by Section 31 of the Act. 

Title 5. Modernizing the 8(a) Program 

Section 501. Modernizing the section 8(a) program net worth limitations 

This section provides for an inflationary adjustment in the net 

worth limitations to 8(a) program participants. At the time of program entry a company owner will be required to have a personal 

net worth less than $550,000—subtracting equity in the owner’s 

primary residence and in their business. Once a company has been 

approved into the program, the net worth limitation will no longer 

apply. The Committee intends that this provision modify not only 

the net worth limitations in place for the SBA’s 8(a) program, but 

also for programs that rely on this definition including the SBA’s 

Small Disadvantaged Business certification program and the Department of Transportation’s Disadvantaged Business Enterprise 

program. The Committee also intends that the $550,000 personal 

net worth limitation only apply to the 8(a) program and not to any 

program that already has a personal net worth limitation that exceeds $550,000. 

The Committee also intends that the current personal net worth 

ceiling for the 8(a) program be lifted once a company is approved 

into the 8(a) program. The Committee further intends that personal net worth ceilings in place for the SBA’s Small Disadvantaged Business certification program and the Department of Transportation’s Disadvantaged Business Enterprise program are lifted 

once a company is approved into these programs. These changes 

will promote growth and expansion for program participants. It removes the current disincentive to expand. 


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Section 502. Extension of the section 8(a) program term 

The provision extends the amount of time a company may participate in the 8(a) program term by one year. This adjustment was 

made to reflect the current trend that shows small businesses are 

not able to participate in the first few years they enter the program. The program will also be divided into a 6–year developmental phase and a 4 year transitional phase. 

Section 503. Report on implementation 

This provision will require the SBA to annually report to Congress on progress towards implementing Section 155 of Division K 

of P.L. 108–447. This section allows participants in the SBA’s 8(a) 

program eligibility for other federally funded programs for small 

disadvantaged businesses without having to reapply. 

Section 504. Allowing small business concerns that are not section 

8(a) program participants to protest section 8(a) awards 

This provision allows small businesses who would otherwise have 

been able to receive a contract but for the fact that the contract 

was placed in the 8(a) program, to protest the eligibility of a particular 8(a) company to receive the award. 

The Committee intends this provision to allow small business 

concerns in similar industries to be able to protest to the SBA the 

eligibility of a company to receive a contract under Section 8(a) of 

the Small Business Act. The Committee does not intend this provision to allow small business concerns to protest the discretion or 

authority of an agency to enter into contracts under the authority 

provided by Section 8(a) of the Act. This provision is designed to 

further the integrity of the 8(a) program. 

Title 6. Other Matters 

Section 601. Affiliation for certain franchises 

Section 601 of the bill provides that in determining whether a 

franchisee is affiliated with a franchiser in the temporary employee 

services industry, the SBA will not consider whether or not the 

franchisor finances the payroll of the temporary staffing personnel 

(including billing, collecting, and remitting client fees), nor the tax 

status of the temporary staffing personnel. The Committee intends 

that the SBA continue to apply its historically-considered affiliation 

factors in determining whether a business is affiliated with another 

business or the franchisor in the temporary staffing industry. However, the Committee acknowledges the industry practice of 

franchisors financing the payroll of the temporary workers which 

protects the temporary workers from being underpaid. The Committee believes that such industry practice should not be given any 

probative weight in applying the traditional affiliation factors. 


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VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, October 22, 2007. 

Hon. NYDIA M. VELA ́ ZQUEZ, 

Chairwoman, Committee on Small Business, 

House of Representatives, Washington, DC. 

DEAR MADAM CHAIRWOMAN: The Congressional Budget Office 

has prepared the enclosed cost estimate for H.R. 3867, the Small 

Business Contracting Program Improvements Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

ROBERT A. SUNSHINE

(For Peter R. Orszag, Director). 

Enclosure. 

H.R. 3867—Small Business Contracting Program Improvements Act 

Summary: H.R. 3867 would make several changes to programs 

administered by the Small Business Administration (SBA) that 

help small businesses compete for government contracts. The bill 

would expand contracting opportunities for certain veterans and increase the size limits on federal contracts that would be eligible for 

small business preferences. 

In addition, H.R. 3867 would require background checks for participants in several contracting-preference programs, require SBA 

personnel to visit contractors participating in its HUBZone program, and expand the population of businesses that can protest the 

award to certain contracts. The bill also would impose penalties on 

small businesses that misrepresent the owner’s status as a veteran 

disabled through military service. 

Based on information from SBA, CBO estimates that imple- menting H.R. 3867 would cost $11 million in 2008 and $72 million 

over the 2008–2012 period, subject to the availability of appropriated funds. Enacting H.R. 3867 would increase civil penalties 

and thus could affect revenues, but CBO estimates that such effects would not be significant. Enacting the bill would not affect direct spending. 

H.R. 3867 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 3867 is shown in the following table. The costs 

of this legislation fall within budget function 370 (commerce and 

housing credit). 

By fiscal year, in millions of dollars— 

2008 2009 2010 2011 2012 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Background Checks: 

Estimated Authorization Level ............................................................. 1 1 1 1 1 

Estimated Outlays ................................................................................ 1 1 1 1 1 

Study on Representation of Women: 

Estimated Authorization Level ............................................................. 0 0 0 0 1 

Estimated Outlays ................................................................................ 0 0 0 0 1 


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By fiscal year, in millions of dollars—

2008 2009 2010 2011 2012 

On-Site Verification: 

Estimated Authorization Level ............................................................. 13 13 13 14 14 

Estimated Outlays ................................................................................ 10 12 13 13 14 

Award Protests: 

Estimated Authorization Level ............................................................. 1 1 1 1 1 

Estimated Outlays ................................................................................ 0 1 1 1 1 

Total: 

Estimated Authorization Level .................................................... 15 15 15 16 17 

Estimated Outlays ....................................................................... 11 14 15 15 17 

Basis of estimate: For this estimate, CBO assumes that the bill 

will be enacted early in fiscal year 2008 and that the necessary 

funds would be appropriated in that and each subsequent fiscal 

year. 

Spending subject to appropriation 

Under current law, SBA’s 8(a) program offers business development and technical assistance as well as small business preferences for federal contracting and procurement. The HUBZone 

program provides federal contracting and procurement preferences 

to small businesses operating in historically underutilized business 

zones (HUB zones). H.R. 3867 would make changes to those programs as well as others that assist small businesses in competing 

for contracts with federal agencies. Subject to appropriation of the 

necessary amounts, CBO estimates that implementing H.R. 3867 

would cost $11 million in 2008 and $72 million over the 2008–2012 

period. 

Background Checks. Section 201 of the bill would require SBA to 

perform background checks on owners of small businesses who 

apply to the 8(a) program and on participants in the HUBZone program that would be entering into a second federal contract. Based 

on information from SBA, CBO estimates that about 300 8(a) applicants and about 1,300 HUBZone applicants would be subject to this 

provision each year. The bill also would require SBA to perform 

background checks on a random sample of small-business owners 

participating in contracting-preference programs who are women or 

veterans disabled in military service. CBO estimates that implementing this provision would cost about $1 million in 2008 and $5 

million over the 2008–2012 period, subject to appropriation of the 

necessary amounts. 

Study on Representation of Women in Federal Contracting. Section 301 would require SBA to conduct a study every five years to 

identify industries in which women-owned small businesses are 

under-represented in federal contracting. Based on information 

from SBA, CBO estimates that implementing this provision would 

cost $1 million over the 2008–2012 period. 

On-Site Verification. Section 401 would require SBA to perform 

an on-site inspection to determine whether a HUBZone participant 

is, in fact, qualified to participate in the program. Such inspections 

would occur only when a HUBZone participant notifies SBA that 

it is to be awarded a second contract under the program. Based on 

information from SBA, CBO estimates that approximately 5,000 

on-site visits would be performed each year. Subject to appropriation of the necessary amounts, CBO estimates that implementing 


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this provision would cost about $10 million in 2008 and $62 million 

over the 2008–2012 period. 

Award Protests. The bill would expand the parties eligible to protest the award of government contracts to participants in the 8(a) 

and HUBZone programs as well as programs that give preference 

to small businesses owned by women. Under current law, only parties with a direct stake in the outcome of the protest are eligible 

to lodge a protest. The bill would allow any small business to challenge the eligibility of a program participant to receive a contract 

award. Based on information from SBA, CBO expects that SBA 

would need four additional full-time equivalent investigators to 

handle the additional protests. We estimate that implementing this 

provision would cost $4 million over the 2008–2012 period. 

Revenues 

Section 102 could result in the collection of additional civil penalties, which are recorded on the budget as revenues, from small 

businesses that misrepresent the owner’s status as a veteran disabled through military service. CBO estimates that any additional 

revenues would not be significant because of the relatively small 

number of cases likely to be affected. 

Intergovernmental and private-sector impact: H.R. 3867 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would not affect the budgets of state, local, or tribal 

governments. 

Estimate prepared by: Federal Costs: Susan Willie; Impact on 

State, Local, and Tribal Governments: Elizabeth Cove; Impact on 

the Private Sector: MarDestinee Perez. 

Estimate approved by: Theresa Gullo, Deputy Assistant Director 

for Budget Analysis. 

VIII. COMMITTEE ESTIMATE OF COSTS

Clause 3(d)(2) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison by the Committee of the costs that would be incurred in carrying out H.R. 

1867. However, clause 3(d)(3)(B) of that rule provides that this requirement does not apply when the Committee has included in its 

report a timely submitted cost estimate of the bill prepared by the 

Director of the Congressional Budget Office under section 402 of 

the Congressional Budget Act. 

IX. OVERSIGHT FINDINGS

In accordance with clause (2)(b)(1) of rule X of the Rules of the 

House of Representatives, the oversight findings and recommendations of the Committee on Small Business with respect to the subject matter contained in H.R. 3867 are incorporated into the descriptive portions of this report. 

X. STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in Article I, Section 8, clause 18, of the Constitution of the 

United States. 


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XI. COMPLIANCE WITH PUBLIC LAW 104–4 

H.R. 3867 contains no unfunded mandates. 

XII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 3867 does not relate to the terms and conditions of employment or access to public services or accommodations with the 

meaning of section 102(b)(3) of P.L. 104–1. 

XIII. FEDERAL ADVISORY COMMITTEE STATEMENT

H.R. 3867 does not establish or authorize the establishment of 

any new advisory committees. 

XIV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of Rule XXI, H.R. 3867 does not contain any 

congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI. 

XV. PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

H.R. 3867 includes a number of provisions designed to update 

and to improve the Small Business Administration’s contracting assistance programs including the Disabled Veterans Contracting 

Program, the HUBZone Program, the Women’s Procurement Program, and the 8(a) program. 

XVI. 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. 3. (a)(1) * * * 

* * * * * * * 

(5) SPECIAL RULE RELATING TO FRANCHISES IN THE TEMPORARY

EMPLOYEE SERVICES INDUSTRY.—In determining whether a 

franchisee is affiliated with a franchisor in the temporary employee 

services industry, the Administrator shall—

(A) disregard—

(i) whether the franchisor finances the payroll of the temporary staffing personnel (including billing, collecting, and remitting client fees); and 

(ii) whether the temporary staffing personnel are treated as 

employees or independent contractors of the franchisor for tax 

or other purposes; and 


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(B) consider the processing of payroll and billing by a franchisor 

as customary and common practice in the temporary employee services industry that does not provide probative weight. 

* * * * * * * 

SEC. 8. (a)(1) It shall be the duty of the Administration and it 

is hereby empowered, whenever it determines such action is necessary or appropriate—

(A) * * * 

* * * * * * * 

(D)(i) A contract opportunity offered for award pursuant to this 

subsection shall be awarded on the basis of competition restricted 

to eligible Program Participants if—

(I) * * * 

(II) the anticipated award price of the contract (including options) will exceed ø$5,000,000¿ $5,500,000 in the case of a contract 

opportunity assigned a standard industrial classification code for 

manufacturing and ø$3,000,000¿ $5,100,000 (including options) in 

the case of all other contract opportunities. 

* * * * * * * 

(22) Rules similar to the rules of paragraphs (5) and (6) of subsection (m) shall apply for purposes of this subsection. 

* * * * * * * 

(d)(1) øIt is the policy of the United States that 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, shall have the maximum practicable opportunity to participate in the performance of contracts 

let by any Federal agency, including contracts and subcontracts for 

subsystems, assemblies, components, and related services for major 

systems.¿ It is the policy of the United States that small business 

concerns, small business concerns owned and controlled by veterans, 

small business concerns owned and controlled by service-disabled 

veterans, qualifying HUBZone small business concerns, small business concerns owned and controlled by socially and economically 

disadvantaged individuals, small business concerns participating in 

the program established by section 8(a), and small business concerns owned and controlled by women, shall have the maximum 

practicable opportunity to participate in the performance contracts 

let by any Federal agency, including contracts and subcontracts for 

subsystems, assemblies, components, and related services for major 

systems. It is further the policy of the United States that its prime 

contractors establish procedures to ensure the timely payment of 

amounts due pursuant to the terms of their subcontracts with 

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 


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27 

and economically disadvantaged individuals, and small business 

concerns owned and controlled by women. 

* * * * * * * 

(m) PROCUREMENT PROGRAM FOR WOMEN-OWNED SMALL BUSI- NESS CONCERNS.— ø(1) DEFINITIONS.—In this subsection, the following definitions apply: 

ø(A) CONTRACTING OFFICER.—The term ‘‘contracting officer’’ has the meaning given such term in section 27(f)(5) of 

the Office of Federal Procurement Policy Act (41 U.S.C. 

423(f)(5)). 

ø(B) SMALL BUSINESS CONCERN OWNED AND CONTROLLED

BY WOMEN.—The term ‘‘small business concern owned and 

controlled by women’’ has the meaning given such term in 

section 3(n), except that ownership shall be determined 

without regard to any community property law. 

ø(2) AUTHORITY TO RESTRICT COMPETITION.—In accordance 

with this subsection, a contracting officer may restrict competition for any contract for the procurement of goods or services 

by the Federal Government to small business concerns owned 

and controlled by women, if— ø(A) each of the concerns is not less than 51 percent 

owned by one or more women who are economically disadvantaged (and such ownership is determined without regard to any community property law); 

ø(B) the contracting officer has a reasonable expectation 

that two or more small business concerns owned and controlled by women will submit offers for the contract; 

ø(C) the contract is for the procurement of goods or services with respect to an industry identified by the Administrator pursuant to paragraph (3); 

ø(D) the anticipated award price of the contract (including options) does not exceed— ø(i) $5,000,000, in the case of a contract assigned an 

industrial classification code for manufacturing; or 

ø(ii) $3,000,000, in the case of all other contracts; 

ø(E) in the estimation of the contracting officer, the contract award can be made at a fair and reasonable price; 

and 

ø(F) each of the concerns— ø(i) is certified by a Federal agency, a State government, or a national certifying entity approved by the 

Administrator, as a small business concern owned and 

controlled by women; or 

ø(ii) certifies to the contracting officer that it is a 

small business concern owned and controlled by 

women and provides adequate documentation, in accordance with standards established by the Administration, to support such certification. 

ø(3) WAIVER.—With respect to a small business concern 

owned and controlled by women, the Administrator may waive 

subparagraph (2)(A) if the Administrator determines that the 

concern is in an industry in which small business concerns 

owned and controlled by women are substantially underrepresented. 


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28 

ø(4) IDENTIFICATION OF INDUSTRIES.—The Administrator 

shall conduct a study to identify industries in which small 

business concerns owned and controlled by women are underrepresented with respect to Federal procurement contracting.¿ 

(1) DEFINITION.—In this subsection, the term ‘‘small business 

concern owned and controlled by women’’ has the meaning 

given such term in section 3(n), except that ownership shall be 

determined without regard to any community property law. 

(2) AUTHORITY TO RESTRICT COMPETITION.— (A) IN GENERAL.—In accordance with this subsection, a 

contracting officer may restrict competition for any contract 

for the procurement of goods or services by the Federal Government to small business concerns owned and controlled 

by women, if— (i) each of the concerns 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); 

(ii) the contracting officer has a reasonable expectation that 2 or more small business concerns owned and 

controlled by women will submit offers for the contract; 

(iii) the contract is for the procurement of goods or 

services with respect to an industry identified pursuant 

to paragraph (4); 

(iv) in the estimation of the contracting officer, the 

contract award can be made at a fair and reasonable 

price; and 

(v) each concern is certified in a manner described in 

subparagraph (B). 

(B) ACCEPTANCE OF CERTIFICATION.—For purposes of 

subparagraph (A)(v), a contracting officer is required to accept a small business concern’s certification as a small 

business concern owned and controlled by women when 

such certification is made by— (i) a Federal agency or a State or local government; 

(ii) a national certifying entity approved by the Administrator; or 

(iii) the small business concern, when such concern 

certifies to the contracting officer that it is a small 

business concern owned and controlled by women and 

provides adequate documentation in accordance with 

standards established by the Administrator to support 

such certification. 

(3) WAIVER.—With respect to a small business concern owned 

and controlled by women, the Administrator may waive paragraph (2)(A)(i) if—

(A) such concern is in an industry identified pursuant to 

paragraph (4); and 

(B) the Administrator determines that such concern is in 

an industry in which small business concerns owned and 

controlled by women are substantially under-represented in 

Federal contracting. 

(4) IDENTIFICATION OF INDUSTRIES.—

(A) IN GENERAL.—Not less often than every five years, the 

Administrator shall conduct a study to identify, for purVerDate Aug 31 2005 04:05 Oct 23, 2007 Jkt 069006 PO 00000 Frm 00028 Fmt 6659 Sfmt 6603 E:\HR\OC\HR400.XXX HR400

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poses of paragraphs (2)(A)(iii) and (3)(A), industries in 

which small business concerns owned and controlled by 

women are under-represented in Federal contracting. The 

parameters for the study shall be as follows: 

(i) For purposes of this paragraph, the Administrator 

shall identify an industry if, and only if, the share of 

Federal contracts awarded to small business concerns 

owned and controlled by women in such industry is 

small relative to the prevalence of business concerns 

owned and controlled by women in the pool of business 

concerns in such industry that have at least one employee. 

(ii) The study shall measure utilization and availability by—

(I) using the two best available data sources; 

(II) including only business concerns that have 

at least one employee; and 

(III) measuring only Federal contracts awarded 

for amounts over $25,000. 

(iii) The study shall include four sets of disparity 

measurement tables to compute disparity ratios. The 

four sets are—

(I) all business concerns in the United States relative to the number of Federal contracts awarded 

to small business concerns owned and controlled 

by women; 

(II) small business concerns owned and controlled by women that have demonstrated an interest in or that have secured Federal contracts relative to the number of Federal contracts awarded 

to small business concerns owned and controlled 

by women; 

(III) all business concerns in the United States 

relative to the dollar amounts of Federal contracts 

awarded to small business concerns owned and 

controlled by women; and 

(IV) small business concerns owned and controlled by women that have demonstrated an interest in or that have secured government contracts 

relative to the dollar amounts of Federal contracts 

awarded. 

(B) DETERMINATION BY HEAD OF DEPARTMENT OR AGENCY.—Until such time as the Administrator completes the 

identification of industries required by subparagraph (A), 

the determination as to whether an industry is one in 

which small business concerns owned and controlled by 

women are under-represented in Federal contracting shall 

be made by the head of the department or agency for which 

the contract is to be performed. 

(C) DEADLINE.—Not later than 90 days after the date of 

the enactment of this subparagraph, the Administrator 

shall—

(i) ensure the completion of the first study required 

by subparagraph (A); 


hmoore on PRODPC68 with HMRPT
30 

(ii) approve national certifying entities for the purposes of paragraph (2)(B)(ii); 

(iii) establish procedures required by paragraph 

(5)(A); and 

(iv) establish standards described in paragraph 

(2)(B)(iii). 

(5) ENFORCEMENT; PENALTIES.— (A) VERIFICATION OF ELIGIBILITY.—In carrying out this 

subsection, the Administrator shall establish procedures 

relating to— (i) the filing, investigation, and disposition by the 

Administration of any challenge to the eligibility of a 

small business concern to receive assistance under this 

subsection (including a challenge, filed by an interested party, relating to the veracity of a certification 

made or information provided to the Administration 

by a small business concern under paragraph ø(2)(F)¿ 

(2)(B)); and 

(ii) verification by the Administrator of the accuracy 

of any certification made or information provided to 

the Administration by a small business concern under 

paragraph ø(2)(F)¿ (2)(B). (B) EXAMINATIONS.—The procedures established under 

subparagraph (A) may provide for program examinations 

(including random program examinations) by the Administrator of any small business concern making a certification 

or providing information to the Administrator under paragraph ø(2)(F)¿ (2)(B). 

* * * * * * *. 

(D) PROTESTS BY SMALL BUSINESS CONCERNS.—For purposes of this paragraph, the term ‘‘interested party’’ shall 

include any small business concern. 

* * * * * * * 

SEC. 15. (a) * * * 

* * * * * * * 

(g)(1) øThe President shall annually establish Government-wide 

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.¿ The President shall annually establish Government-wide 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, small business 

concerns participating in the program established by section 8(a), 

and small business concerns owned and controlled by women. The 

Government-wide goal for participation by small business concerns 

shall be established at not less than 23 percent of the total value 

of all prime contract awards for each fiscal year. The Governmentwide goal for participation by small business concerns owned and 


hmoore on PRODPC68 with HMRPT
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controlled by service-disabled veterans shall be established at not 

less than 3 percent of the total value of all prime contract and subcontract awards for each fiscal year. The Governmentwide goal for 

participation by qualified HUBZone small business concerns shall 

be established at not less than 1 percent of the total value of all 

prime contract awards for fiscal year 1999, not less than 1.5 percent of the total value of all prime contract awards for fiscal year 

2000, not less than 2 percent of the total value of all prime contract 

awards for fiscal year 2001, not less than 2.5 percent of the total 

value of all prime contract awards for fiscal year 2002, and not less 

than 3 percent of the total value of all prime contract awards for 

fiscal year 2003 and each fiscal year thereafter. The Governmentwide goal for participation by small business concerns owned and 

controlled by socially and economically disadvantaged individuals 

shall be established at not less than 5 percent of the total value 

of all prime contract and subcontract awards for each fiscal year. 

The Government-wide goal for participation by small business concerns owned and controlled by women shall be established at not 

less than 5 percent of the total value of all prime contract and subcontract awards for each fiscal year. Notwithstanding the Government-wide goal, each agency shall have an annual goal that presents, for that agency, the maximum practicable opportunity for 

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 to participate in the 

performance of contracts let by such agency. The Administration 

and the Administrator of the Office of Federal Procurement Policy 

shall, when exercising their authority pursuant to paragraph (2), 

insure that the cumulative annual prime contract goals for all 

agencies meet or exceed the annual Government-wide prime contract goal established by the President pursuant to this paragraph. 

* * * * * * * 

(3) Each agency shall, in consultation with the Administrator, establish goals for the usage, as prime contractors, of small business 

concerns that participate in the program under section 8(a). 

(h)(1) * * * 

* * * * * * * 

(4) Each prime contractor shall, in consultation with the Administrator, establish goals for the usage, as subcontractors, of small 

business concerns that participate in the program under section 

8(a). 

* * * * * * * 

SEC. 16. (a) * * * 

* * * * * * * 

(d)(1) Whoever misrepresents the status of any concern or person 

as a ‘‘small business concern’’, a ‘‘qualified HUBZone small business concern’’, a ‘‘small business concern owned and controlled by 

socially and economically disadvantaged individuals’’, a ‘‘small 

business concern owned and controlled by service-disabled veterans’’, or a ‘‘small business concern owned and controlled by 

women’’, in order to obtain for oneself or another any—


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(A) * * * 

* * * * * * * 

SEC. 31. HUBZONE PROGRAM. 

(a) * * * 

(b) ELIGIBLE CONTRACTS.— (1) * * * 

(2) AUTHORITY OF CONTRACTING OFFICER.—Notwithstanding 

any other provision of law— (A) a contracting officer may award sole source contracts 

under this section to any qualified HUBZone small business concern, if— (i) * * * 

(ii) the anticipated award price of the contract (including options) will not exceed— (I) ø$5,000,000¿ $5,500,000, in the case of a contract opportunity assigned a standard industrial 

classification code for manufacturing; or 

(II) ø$3,000,000¿ $5,100,000, in the case of all 

other contract opportunities; and 

* * * * * * * 

(B) a contract opportunity øshall¿ may be awarded pursuant to this section on the basis of competition restricted 

to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less 

than 2 qualified HUBZone small business concerns will 

submit offers and that the award can be made at a fair 

market price; and 

* * * * * * * 

(5) ON-SITE VERIFICATION OF STATUS.— (A) VERIFICATION.—When a small business concern that 

has previously been awarded a contract under paragraph 

(2)(A) or (2)(B) is to be awarded a second contract under 

paragraph (2)(A) or (2)(B), the Administrator shall perform 

an on-site inspection to determine whether such small business concern is a qualified HUBZone small business concern. This paragraph does not require such an inspection 

before the award of a third or subsequent contract. This 

paragraph does not prevent a second contract from being 

awarded before such inspection is completed. 

(B) NOTIFICATION BY SMALL BUSINESS CONCERN.—The 

Administrator shall require a small business concern to notify the Administrator, prior to being awarded a second 

contract under paragraph (2)(A) or (2)(B), of such business 

concern’s attempt to be awarded a second contract under 

paragraph (2)(A) or (2)(B). Not later than 90 days after the 

date of the enactment of this subparagraph, the Administrator shall establish procedures to implement this subparagraph. 

(6) LIMIT HUBZONE PROGRAM CONSTRUCTION CONTRACTS IN

OR NEAR A HUBZONE.—A small business concern may not obtain 

a construction contract by reason of the HUBZone program unless the construction project is located in or near the HUBZone 

in which the small business concern has its principal place of 


hmoore on PRODPC68 with HMRPT
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business. The Administrator shall prescribe standards for determining when a project is located ‘‘near’’ a HUBZone for purposes of this paragraph, except that under no circumstances can 

a project located more than 150 miles from a HUBZone be located ‘‘near’’ that HUBZone. 

(c) ENFORCEMENT; PENALTIES.— (1) * * * 

* * * * * * * 

(5) PROTESTS BY SMALL BUSINESS CONCERNS.—For purposes 

of this subsection, the term ‘‘interested party’’ shall include any 

small business concern. 

* * * * * * * 

SEC. 36. PROCUREMENT PROGRAM FOR SMALL BUSINESS CONCERNS 

OWNED AND CONTROLLED BY SERVICE-DISABLED VETERANS. 

(a) SOLE SOURCE CONTRACTS.—In accordance with this section, a 

contracting officer ømay¿ shall award a sole source contract to any 

small business concern owned and controlled by service-disabled 

veterans if— (1) such concern is determined to be a responsible contractor 

with respect to performance of such contract opportunity øand 

the contracting officer does not have a reasonable expectation 

that 2 or more small business concerns owned and controlled 

by service-disabled veterans will submit offers for the contracting opportunity¿; 

(2) the anticipated award price of the contract (including options) will not exceed— (A) ø$5,000,000¿ $5,500,000, in the case of a contract opportunity assigned a standard industrial classification code 

for manufacturing; or 

(B) ø$3,000,000¿ $5,100,000, in the case of any other 

contract opportunity; and 

* * * * * * * 

(f) IMPLEMENTATION OF EXECUTIVE ORDER 13360.—The Administrator shall— (1) provide small business concerns owned and controlled by 

service-disabled veterans with information and assistance concerning participation in Federal contracting; 

(2) advise and assist other agencies in their strategies to expand procurement opportunities for such concerns; and 

(3) make training assistance on Federal contract law, procedures, and practices available to such concerns. 

* * * * * * * 

SEC. 38. REQUIRING BUSINESS INTEGRITY OF SMALL BUSINESS CONCERNS. 

(a) SECTION 8(a) PROGRAM BACKGROUND CHECK.—No applicant 

may be approved for participation in the section 8(a) program unless the Administrator first performs a background check on the applicant and determines that the applicant does not lack business integrity. 

(b) HUBZONE PROGRAM BACKGROUND CHECK.—No award of a second contract under the authority of section 31(b)(2)(A) or 31(b)(2)(B) 

may be made unless the Administrator first performs a background 


hmoore on PRODPC68 with HMRPT
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check on the applicant and determines that the applicant does not 

lack business integrity. 

(c) RANDOM BACKGROUND CHECK.—The Administrator shall have 

random background checks performed on owners and officers of 

small business concerns that have been awarded a contract under 

section 8(m), 36(a), or 36(b) to determine whether such owners and 

officers lacks business integrity. 

SECTION 155 OF THE SMALL BUSINESS REAUTHORIZATION AND MANUFACTURING ASSISTANCE ACT OF 2004 

SEC. 155. PARTICIPATION IN FEDERALLY FUNDED PROJECTS. 

Any small business concern that is certified, or otherwise meets 

the criteria for participation in any program under section 8(a) of 

the Small Business Act (15 U.S.C. 637(a)), shall not be required by 

any State, or political subdivision thereof, to meet additional criteria or certification, unrelated to the capability to provide the requested products or services, in order to participate as a small disadvantaged business in any program or project that is funded, in 

whole or in part, by the Federal Government. Annually, concurrent 

with the submission of the Small Business Administration’s budget 

request to the Congress, the Administrator shall submit to the Committee on Small Business and Entrepreneurship of the Senate and 

the Committee on Small Business of the House of Representatives 

a report detailing progress the Administrator has made towards the 

implementation of this section. 

Æ 


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