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[House Report 113-409]
[From the U.S. Government Publishing Office]

113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-409

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          GREATER OPPORTUNITIES FOR SMALL BUSINESS ACT OF 2014

                                _______
                                

 April 9, 2014.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Graves of Missouri, from the Committee on Small Business, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 4093]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 4093) to amend the Small Business Act to raise the 
prime and subcontract goals, and for other purposes, having 
considered the same, report favorably thereon and recommend 
that the bill do pass.

                                CONTENTS

                                                                   Page
   I. Amendment.......................................................1
  II. Purpose of the Bill and Summary.................................2
 III. Background and the Need for Legislation.........................3
  IV. Hearings........................................................4
   V. Committee Consideration.........................................5
  VI. Committee Votes.................................................5
 VII. Section-by-Section Analysis of H.R. 4093........................8
VIII. Unfunded Mandates...............................................9
  IX. New Budget Authority, Entitlement Authority, and Tax Expenditure9
   X. Oversight Findings..............................................9
  XI. Statement of Constitutional Authority...........................9
 XII. Congressional Accountability Act................................9
XIII. Federal Advisory Committee Statement...........................10
 XIV. Statement of No Earmarks.......................................10
  XV. Statement of Duplication of Federal Programs...................10
 XVI. Disclosure of Directed Rule Makings............................10
XVII. Performance Goals and Objectives...............................10
XVIII.Changes in Existing Law Made by the Bill, as Reported..........10

                              I. Amendment

    The amendment is as follows:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Greater Opportunities for Small 
Business Act of 2014''.

SEC. 2. SMALL BUSINESS PRIME AND SUBCONTRACT PARTICIPATION GOALS 
                    RAISED.

  (a) Goals in Subcontracting Plans.--Section 8(d)(6)(A) of the Small 
Business Act (15 U.S.C. 637(d)(6)(A)) is amended by inserting after 
``percentage goals'' the following: ``of not less than 40 percent''.
  (b) Prime Contracting Goals.--Section 15(g)(1)(A)(i) of the Small 
Business Act (15 U.S.C. 644(g)(1)(A)(i)) is amended by striking ``23 
percent'' and inserting ``25 percent''.
  (c) Delayed Effective Date.--The amendment made by subsection (a) of 
this section shall take effect only beginning on the date on which the 
Administrator of the Small Business Administration has promulgated any 
regulations necessary, and the Federal Acquisition Regulation has been 
revised, to implement section 1614 of the National Defense 
Authorization Act for Fiscal Year 2014 and the amendments made by such 
section.

SEC. 3. REPEAL OF CERTAIN PROVISION PERTAINING TO ACCOUNTING OF 
                    SUBCONTRACTORS.

  Section 15(g) of the Small Business Act (15 U.S.C. 644(g)) is amended 
by striking paragraph (3).

                      II. Purpose and Bill Summary

    The purpose of H.R. 4093, the ``Greater Opportunities for 
Small Business Act of 2014,'' is to amend the Small Business 
Act (the Act)\1\ to increase prime contracting and 
subcontracting opportunities for small businesses. Small 
business contractors bring necessary competition to the 
government marketplace, add innovation, and create new jobs. 
Contracting officers, however, generally prefer contractors 
with whom they have experience; typically, this preference 
hampers the ability of small businesses to obtain federal 
contracts. Thus, the top 100 contractors to the federal 
government routinely receive 25 percent of the total value of 
contracts awarded in a fiscal year, whereas the over 350,000 
small businesses competing for federal contracts struggle to 
eclipse the 20 percent mark. This overreliance on a limited 
corps of contractors is not good for the industrial base, 
competition, innovation, job creation, or the needs of the 
federal government.
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    \1\Originally, title II of the Act of July 30, 1953, c. 282, 67 
Stat. 232 was designated as the Small Business Act of 1953. A plethora 
of amendments in subsequent Congresses led to a rewrite in 1958. Pub. 
L. No. 85-536, Sec. 1, 72 Stat. 384 (1958). The Act is codified at 15 
U.S.C. Sec. Sec. 631-657s.
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    H.R. 4093 seeks to promote small business contracting in 
three ways. First, it increases the prime contracting goal for 
small business concerns\2\ from 23 percent of all federal prime 
contract dollars to 25 percent.\3\ Second, it establishes a 
government-wide small business subcontracting goal of 40 
percent, which is necessary due to the continued decline in the 
administratively set goals for small businesses. Finally, it 
ensures that no department or agency is allowed to count 
subcontract awards toward the prime contracting goal.
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    \2\The Act uses the term ``small business concern.'' However, this 
report will use the terms ``small business'' and ``small business 
concern'' interchangeably unless the context requires a specific 
reference to the term ``small business concern.''
    \3\If contract spending remains constant, this will result in 
approximately $10 billion in new contracts being awarded to small 
businesses each year, and if contract spending declines, it will ensure 
that small businesses are not the first to have their contracts cut.
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                       III. Need for Legislation

    The Act finds that awarding prime contracts to small 
businesses serves the nation in three ways. First, small 
business contracting is in ``the interest of maintaining or 
mobilizing the Nation's full productive capacity.''\4\ Second, 
small business contracting is ``in the interest of war or 
national defense programs.''\5\ Third, it serves ``the interest 
of assuring that a fair proportion of the total purchases and 
contracts for property and services for the government in each 
industry category are placed with small-business concerns.''\6\ 
To fulfill these three objectives, statutorily based small 
business goals have been used for approximately thirty-six 
years.
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    \4\Small Business Act, Sec. 15(a), 15 U.S.C. Sec. 644(a).
    \5\Id.
    \6\Id.
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    Since the enactment of Public Law 95-507\7\ in 1978, the 
SBA has been responsible for negotiating small business 
contracting and subcontracting goals with federal departments 
and agencies. A decade later, President Reagan signed the 
Business Opportunity Development Reform Act of 1988 (BODRA), 
which for the first time established a statutorily mandated 
government-wide small business goal of ``not less than 20 
percent of the total value of all prime contract awards for 
each Fiscal Year.''\8\ This goal was increased to 23 percent by 
the Small Business Reauthorization Act of 1997 (SBRA).\9\ 
According to the SBA, in Fiscal Year 2010, small businesses 
received 22.7 percent of all prime contract dollars, and the 
Federal Procurement Database currently indicates that the 
federal government surpassed the 23 percent prime contract goal 
in FY 2013, with 23.4 percent of prime contract dollars. 
Therefore, this bill continues the work of the past 36 years by 
gradually increasing the goal to 25 percent. Each time the goal 
has previously been increased, small business contracting, with 
its inherent benefits, has increased. Additionally, given 
declines in federal contract spending, this expansion will 
protect small businesses against losing hard-won gains. Thus, 
after 17 years of a 23 percent goal, the bill will provide 
additional support for small business contractors.
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    \7\This Act has no common name and is simply An Act of October 24, 
1978.
    \8\Pub. L. No. 100-656, Sec. 502, 102 Stat. 3853, 3881 (1988).
    \9\Pub. L. No. 105-135, Sec. 603, 111 Stat. 2592, 2632 (1997).
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    Public Law 95-507 also sought to increase subcontracting 
opportunities for small businesses by requiring that other-
than-small businesses receiving prime contracts negotiate 
subcontracting plans with the federal government that would 
incorporate goals for the use of small businesses.\10\ 
According to Committee reports, this requirement was added 
because small businesses were receiving only 37.5 percent of 
subcontract dollars.\11\ Since that time, it has been the 
responsibility of the SBA to establish a government-wide 
subcontracting goal. However, the current SBA-established goal 
is 35.9 percent, a 1.6 percent decrease from the actual results 
thirty-seven years ago that spurred the creation of government-
wide subcontracting goals. To prevent further backsliding, the 
bill establishes the government-wide goal at 40 percent, which 
like the rise in prime contract dollars represents the 
Committee's incremental approach to reform, in this area.
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    \10\Pub. L. No. 95-107, Sec. 211, 92 Stat. 1757, 1767 (codified at 
15 U.S.C. Sec. 637(d)).
    \11\H.R. Rep. No. 95-949, at 5 (1978).
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    Finally, when the concept of goals was introduced through 
the 1978 and 1988 legislation, none of the Congressional 
authors believed that the phrase ``the total value of all prime 
contract awards for each fiscal year'' needed further 
explanation. However, in 1991, the Office of Federal 
Procurement Policy (OFPP) began permitting\12\ the Department 
of Energy (DOE) to count subcontracts awarded by its management 
and operations (M&O) contractors as if they were prime 
contracts awarded by the DOE.\13\ This allowed DOE to count 18 
percent of its prime contract dollars as being awarded to small 
businesses until 1999, when OFPP reversed its decision on the 
M&O contracts,\14\ and it became apparent that DOE had only 
been awarding 3 percent of its prime contract dollars to small 
businesses. Over a decade later, DOE has shown little 
inclination to change its contracting processes to allow for 
small business competition, and in FY 2012 awarded only 5.15 
percent of its prime contract dollars to small business 
concerns.\15\
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    \12\OFPP Policy Letter 91-1 (1991).
    \13\See, e.g., Acquisition Regulation: Implementation of Section 
3021 of the Energy Policy Act of 1992, Notice of Proposed Rulemaking, 
60 Fed. Reg. 22,298, 22,302 (May 5, 1995).
    \14\OFPP Policy Letter 99-1 (1999) rescinding OFPP Policy Letter 
91-1.
    \15\SBA, Department of Energy FY2012 Small Business Procurement 
Scorecard (2013) available at http://www.sba.gov/sites/default/files/
files/FY12-Final-Scorecard-DOE-2013-06-24.pdf.
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    A provision was recently inserted in the Act to allow DOE 
to revert to its practice of counting M&O subcontracts towards 
the prime contracting goal.\16\ Authorizing an agency to count 
contracts towards the incorrect goal distorts the goaling 
process. Furthermore, the types of goods and services obtained 
through subcontracts are often not the same as those bought at 
the prime contract level, thus undermining Congress' intent to 
ensure that a ``fair proportion of the total purchases and 
contracts for property and services for the government in each 
industry category are placed with small-business 
concerns.''\17\
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    \16\Consolidated Appropriations Act, 2014, Pub. L. No. 113-76 
Division D Title III, 318, __ Stat. ___, (2014) available at http://
docs.house.gov/billsthisweek/20140113/CPRT-113-HPRT-RU00-h3547-
hamdt2samdt_xml.pdf.
    \17\Small Business Act, Sec. 15(a), 15 U.S.C. Sec. 644(a).
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    Ideally, the changes to the Act will result in $10 billion 
in new contracting opportunities for small businesses. However, 
based on President Obama's projected defense spending cuts and 
cuts that may occur as a result of the Budget Control Act of 
2011, small business contracts at the Department of Defense 
(DoD) are expected to decrease.\18\ This does not account for 
spending cuts at civilian agencies, or the fact that 
contracting officers find it easier to cut small business 
contracts than those held by large businesses simply because 
small businesses lack the clout or resources to contest the 
decisions of contracting officers. If similar cuts occur at 
agencies other than DoD, the increased goal in this bill should 
simply mitigate the effect of the reduced contract spending.
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    \18\Center for Security Policy, The National Defense Breakdown 
Economic Impact Report (2012) available at http://
forthecommondefense.org/reports/National%202%20pager%20pdf.pdf.
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                              IV. Hearings

    In the 112th Congress, the Committee held two hearings that 
examined the prime contract and subcontract goals. On September 
14, 2011, the Committee held a hearing titled, ``Beyond the 
Size Standards: The Sustainability of Small Businesses 
Graduates.'' At the hearing, witnesses testified that the small 
business goals are not being met, that there are no 
consequences for this failure, and that the numbers being 
reported exclude approximately $100 billion in contracts. The 
Subcommittee on Contracting and the Workforce then met on 
October 6, 2011, for a hearing titled ``Subpar Subcontracting: 
Challenges for Small Businesses Contractors.'' In this hearing, 
the witnesses told the Committee about the declining 
subcontracting goals, and the lack of commitment to meeting the 
goals by agencies and some subcontractors. At each hearing, the 
small business witnesses and the trade associations 
representing them were adamant that the goals needed to be 
strengthened.
    Since H.R. 4093 is quite similar to H.R. 3850, passed out 
of Committee in the 112th Congress, the findings of the last 
Congress are still valid. As a result, no hearings were held on 
H.R. 4093 during the 113th Congress.

                       V. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on March 5, 2014 and ordered H.R. 4093 
reported to the House by a voice vote at 2:24 pm. During the 
markup, two amendments were offered, neither of which was 
adopted. Disposition of the amendments is addressed below and 
is based on the order amendments were filed with the Clerk of 
the Committee and not necessarily in the order that they were 
considered at the markup.
    Amendment Number One filed by Ms. Chu (D-CA) raised the 
prime contracting goal for women-owned small businesses from 5 
percent to 6 percent. The amendment failed by a vote of 10 ayes 
to 12 nos at 2:16 pm.
    Amendment Number Two filed by Ms. Clarke (D-NY) raised the 
prime contracting goal for socially and economically 
disadvantaged businesses from 5 percent to 8 percent. The 
amendment failed by a vote of 10 ayes to 12 nos at 2:24 pm.

                          VI. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report the legislation and amendments 
thereto.

             VII. Section-by-Section Analysis of H.R. 4093

Section 1. Short title

    This Section designates the bill as the ``Greater 
Opportunities for Small Business Act of 2014.''

Section 2. Small business prime and subcontract participation goals 
        raised

            Subsection (a) Goals in subcontracting plans
    Section 8(d)(6)(A) of the Small Business Act (15 U.S.C. 637 
Sec. (d)(6)(A)) currently requires that all prime contracts 
exceeding $650,000 ($1.5 million in the case of construction) 
that are awarded to firms that are other-than-small businesses 
include negotiated subcontracting plans addressing how the 
prime contractor will use small businesses. Specifically, it 
requires that covered prime contractors commit to making a good 
faith effort to award a certain percentage of subcontract 
dollars to small business concerns, and that they require the 
same of any other-than-small subcontractor receiving a 
subcontract in excess of the aforementioned thresholds.
    Subsection (a) amends section 8(d) to set a minimum 
subcontracting goal of at least 40 percent. This is necessary 
because the voluntary subcontracting goal established by the 
Executive Branch has been declining, from 40 percent in fiscal 
year 2003 to 33.6 percent in fiscal year 2012.\19\
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    \19\SBA, Government-wide 2012 Small Business Procurement Scorecard 
(2013). Interestingly, in 2003, the goal was 40 percent. See also SBA, 
Goaling Guidelines for the Small Business Preference Programs for Prime 
and Subcontract Federal Procurement Goals and Achievements 6 (2003).
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            Subsection (b)--Prime contracting goals
    Section 15(g)(1)(A)(i) of the Act currently requires the 
President to annually establish a government-wide goal of 
awarding at least 23 percent of the total value of prime 
contracts awards for each fiscal year to small business 
concerns. This section increases the government-wide goal from 
23 percent of the total value of prime contracts awards for 
each fiscal year to 25 percent of the total value of prime 
contract awards. It represents the first change in the 
percentage since 1997. This is necessary to encourage sustained 
or increased use of small businesses as federal spending 
decreases, and is further required by the growth of small 
businesses in the overall economy.
            Subsection (c)--Delayed effective date
    This section delays implementation of subsection (a) until 
after the Administrator of the Small Business Administration 
(Administrator) has promulgated regulations necessary to 
implement section 1614 of the National Defense Authorization 
Act for Fiscal Year 2014\20\ and the Federal Acquisition 
Regulation has been revised to reflect those changes. This will 
allow agencies to capture lower tier contract awards on 
individual subcontracts.\21\
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    \20\National Defense Authorization Act for Fiscal Year 2014, Pub. 
L. No. 113-66 Title XVI Subtitle B Sec. 1614 127 Stat. 672 (2013).
    \21\While goals are normally apportioned on a contract-by-contract 
basis, they may also be negotiated at a division or corporate level if 
the company only sells commercial goods and services, as defined in 48 
C.F.R Sec. 2.101, and implemented in 48 C.F.R Sec. 19.7, They may also 
be set at the division or corporate level for certain large DoD 
contractors pursuant to the Test Program for Negotiation of 
Comprehensive Small Business Subcontracting Plans, as authorized in the 
National Defense Authorization Act for Fiscal Years 1990 and 1991, 103 
Stat. 1352, Pub. L. 101-189 Part E Sec. 834, 103 Stat. 1352, 1509 
(1989) and most recently reauthorized in the National Defense 
Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, Title VIII 
Sec. 866, 125 Stat. 1298, 1526 (2011).
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Section 3. Repeal of certain provision pertaining to accounting of 
        subcontractors

    Section 15(g)(3) of the Act was amended in January 2014, to 
allow DOE to count small business subcontractors on M&O 
contracts towards its prime contract goals. Section 3 of the 
bill strikes this provision in order to maintain a clear 
delineation between prime and subcontracting goals.

                        VIII. Unfunded Mandates

    H.R. 4093 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act, Pub. 
L. No. 104-4, and would impose no costs on state, local or 
tribal governments.

  IX. New Budget Authority, Entitlement Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House, the Committee provides the following opinion and 
estimate with respect to new budget authority, entitlement 
authority and tax expenditures. While the Committee has not 
received an estimate of new budget authority contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to Sec. 402 of the Congressional Budget 
Act of 1974, the Committee does not believe that any additional 
appropriation will be required due to the enactment of H.R. 
4093. H.R. 4093 does not direct new spending, but instead 
addresses the apportionment of current spending between small 
businesses and other-than-small businesses.

                         X. Oversight Findings

    In accordance with clause (2)(b)(1) of rule X of the Rules 
of the House, the oversight findings and recommendations of the 
Committee on Small Business with respect to the subject matter 
contained in H.R. 4093 are incorporated into the descriptive 
portions of this report.

               XI. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
authority for this legislation in Art. I, Sec. 8, cls. 1, 3, 
and 18 and Art. IV, Sec. 3, cl. 2 of the Constitution of the 
United States.

                 XII. Congressional Accountability Act

    H.R. 4093 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.

             XIII. Federal Advisory Committee Act Statement

    H.R. 4093 does not establish or authorize the establishment 
of any new advisory committees as that term is defined in the 
Federal Advisory Committee Act, 5 U.S.C. App. 2.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 4093 does not 
contain any congressional earmarks, limited tax benefits or 
limited tariff benefits as defined in subsections (d), (e) or 
(f) of clause 9 of rule XXI of the Rules of the House.

            XV. Statement of Duplication of Federal Programs

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House, no provision of H.R. 4093 establishes or reauthorizes a 
program of the federal government known to be duplicative of 
another Federal program, a program that was included in any 
report from the GAO pursuant to Section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                XVI. Disclosure of Directed Rule Makings

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House, H.R. 4093 does not direct any rulemaking.

                 XVII. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House, the Committee establishes the following performance-
related goals and objectives for this legislation:

          H.R. 4093 includes a number of provisions designed to 
        improve the competitive viability of small businesses 
        as federal prime and subcontractors and to improve 
        agency compliance with the Small Business Act.

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

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SMALL BUSINESS ACT

           *       *       *       *       *       *       *

  Sec. 8. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) * * *

           *       *       *       *       *       *       *

  (6) Each subcontracting plan required under paragraph (4) or 
(5) shall include--
          (A) percentage goals of not less than 40 percent for 
        the utilization as subcontractors of small business 
        concerns, small business concerns owned and controlled 
        by veterans, small business concerns owned and 
        controlled by service-disabled veterans, qualified 
        HUBZone small business concerns, small business 
        concerns owned and controlled by socially and 
        economically disadvantaged individuals, and small 
        business concerns owned and controlled by women;

           *       *       *       *       *       *       *

  Sec. 15. (a) * * *

           *       *       *       *       *       *       *

  (g)
          (1) Governmentwide goals.--
                  (A) Establishment.--The President shall 
                annually establish Governmentwide goals for 
                procurement contracts awarded to small business 
                concerns, small business concerns owned and 
                controlled by service-disabled veterans, 
                qualified HUBZone small business concerns, 
                small business concerns owned and controlled by 
                socially and economically disadvantaged 
                individuals, and small business concerns owned 
                and controlled by women in accordance with the 
                following:
                          (i) The Governmentwide goal for 
                        participation by small business 
                        concerns shall be established at not 
                        less than [23 percent] 25 percent of 
                        the total value of all prime contract 
                        awards for each fiscal year.

           *       *       *       *       *       *       *

  [(3) First tier subcontracts that are awarded by Management 
and Operating contractors sponsored by the Department of Energy 
to small business concerns, small businesses concerns owned and 
controlled by service disabled veterans, qualified HUBZone 
small business concerns, small business concerns owned and 
controlled by socially and economically disadvantaged 
individuals, and small business concerns owned and controlled 
by women, shall be considered toward the annually established 
agency and Government-wide goals for procurement contracts 
awarded.]

           *       *       *       *       *       *       *

                                  
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