29–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 112–727 

EARLY STAGE SMALL BUSINESS CONTRACTING ACT 

OF 2012 

DECEMBER 21, 2012.—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. 4121] 

[Including cost estimate of the Congressional Budget Office] 

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

(H.R. 4121) to provide for a program to provide Federal contracts 

to early stage small businesses, and for other purposes, having considered the same, report favorably thereon with an amendment and 

recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. Amendment ................................................................................................. 1 

II. Purpose of the Bill and Summary ............................................................. 3 

III. Background and the Need for Legislation ................................................ 3 

IV. Hearings ....................................................................................................... 4 

V. Committee Consideration ........................................................................... 4 

VI. Committee Votes ......................................................................................... 4 

VII. Section-by-Section Analysis of H.R. 4121 .................................................. 5 

VIII. Congressional Budget Cost Estimate ........................................................ 5 

IX. Unfunded Mandates .................................................................................... 6 

X. New Budget Authority, Entitlement Authority, and Tax Expenditures 6 

XI. Oversight Findings ...................................................................................... 7 

XII. Statement of Constitutional Authority ...................................................... 7 

XIII. Congressional Accountability Act .............................................................. 7 

XIV. Federal Advisory Committee Statement ................................................... 7 

XV. Statement of No Earmarks ........................................................................ 7 

XVI. Performance Goals and Objectives ............................................................ 7 

XVII. Changes in Existing Law Made by the Bill, as Reported ........................ 7 

I. AMENDMENT

The amendment is as follows: 


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Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Early Stage Small Business Contracting Act of 

2012’’. 

SEC. 2. IN GENERAL. 

The Small Business Act (15 U.S.C. 631 et seq.) is amended by adding at the end 

the following: 

‘‘SEC. 46. PROGRAM TO PROVIDE FEDERAL CONTRACTS TO EARLY STAGE SMALL BUSINESSES. 

‘‘(a) ESTABLISHMENT.—The Administrator shall establish and carry out a program 

in accordance with the requirements of this section to provide improved access to 

Federal contract opportunities for early stage small business concerns. 

‘‘(b) PROCUREMENT CONTRACTS.— ‘‘(1) IN GENERAL.—In carrying out subsection (a), the Administrator, in consultation with other Federal agencies, shall identify procurement contracts of 

Federal agencies for award under the program. 

‘‘(2) CONTRACT AWARDS.—Under the program established pursuant to this section, the award of a procurement contract of a Federal agency identified by the 

Administrator pursuant to paragraph (1) shall be made by the agency to an eligible program participant selected, and determined to be responsible, by the 

agency. 

‘‘(3) COMPETITION.— 

‘‘(A) SOLE SOURCE.—A contracting officer may award a sole source contract under this program if such concern is determined to be a responsible 

contractor with respect to performance of such contract opportunity and the 

contracting officer does not have a reasonable expectation that 2 or more 

early stage small business concerns will submit offers for the contracting 

opportunity and in the estimation of the contracting officer, the contract 

award can be made at a fair and reasonable price. 

‘‘(B) RESTRICTED COMPETITION.—A contracting officer may award contracts on the basis of competition restricted to early stage small business 

concerns if the contracting officer has a reasonable expectation that not less 

than 2 early stage small business concerns will submit offers and that the 

award can be made at a fair market price. 

‘‘(4) CONTRACT VALUE.—Contracts shall be awarded under this program if its 

value is greater than $3,000 and less than half the upper threshold of section 

15(j)(1) of the Small Business Act. 

‘‘(c) ELIGIBILITY.—Only an early stage small business concern shall be eligible to 

compete for a contract to be awarded under the program. The Administrator shall 

certify that a small business concern is an early stage small business concern, or 

the Administrator shall approve a Federal agency, a State government, or a national 

certifying entity to certify that the business meets the eligibility criteria of an early 

stage small business concern. 

‘‘(d) TECHNICAL ASSISTANCE.—The Administrator shall provide early stage small 

business concerns with technical assistance and counseling with regard to— 

‘‘(1) applying for and competing for Federal contracts; and 

‘‘(2) fulfilling the administrative responsibilities associated with the performance of a Federal contract. 

‘‘(e) ATTAINMENT OF CONTRACT GOALS.—All contract awards made under the program shall be counted toward the attainment of the goals specified in section 15(g) 

of the Small Business Act. 

‘‘(f) REGULATIONS.—The Administrator shall— 

‘‘(1) issue proposed regulations to carry out this section not later than 180 

days after the date of enactment of this Act; and 

‘‘(2) issue final regulations to carry out this section not later than 270 days 

after the date of enactment of this Act. 

‘‘(g) REPORT TO CONGRESS.—Not later than April 30, 2015, the Administrator shall 

transmit to the Congress a report on the performance of the program. 

‘‘(h) DEFINITIONS.—For purposes of this section, the following definitions shall 

apply: 

‘‘(1) PROGRAM.—The term ‘program’ means a program established pursuant to 

subsection (a). 

‘‘(2) EARLY STAGE SMALL BUSINESS CONCERN.—The term ‘early stage small 

business concern’ means a small business concern that— 

‘‘(A) has not more than 15 employees; and 

‘‘(B) has average annual receipts that total not more than $1,000,000, except if the concern is in an industry with an average annual revenue standVerDate Mar 15 2010 06:28 Dec 28, 2012 Jkt 029006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6621 E:\HR\OC\HR727.XXX HR727

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1Originally, 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, § 1, 72m Stat. 384 (1958). The Act is codified at 15 U.S.C. 

§§ 631–657q. 2 Id. at 644(a). 3Small Business Administration Reauthorization and Amendments Act of 1994, Pub. L. No. 

103–403 § 304, 108 Stat. 4175, 4188 (1994). 

ard that is less than $1,000,000, as defined by the North American Industry 

Classification System.’’. 

SEC. 3. REPEAL OF SIMILAR PROGRAM. 

Section 304 of the Small Business Administration Reauthorization and Amendments Act of 1994 (15 U.S.C. 644 note) is repealed. 

II. PURPOSE AND BILL SUMMARY

The purpose of H.R. 4121, the ‘‘Early Stage Small Business Contracting Act of 2012,’’ is to amend the Small Business Act (the 

Act) 1 to reestablish in a slightly different format a successful program to help very small businesses win federal government contracts. The original program’s authorization has lapsed, and H.R. 

4121 rectifies that situation. 

Specifically, this bill changes the program’s name from the Very 

Small Business Pilot Program to the Early Stage Small Business 

Contracting Program. Additionally, this bill allows for sole source 

contracts and contracts to be restricted to competition between 

early stage small business concerns under certain circumstances. 

Finally, the bill requires a report to Congress by the Administrator 

of the Small Business Administration (SBA) by April 30, 2015 on 

the performance of the program. 

III. NEED FOR LEGISLATION

The Act iterates Congress’s belief in the importance of small 

business participation in federal prime contracts and the resultant 

subcontracts. Specifically, the Act directs that: 

To effectuate the purpose of this Act, small-business concerns within the meaning of this Act shall receive any 

award or contract or any part thereof, and be awarded any 

contract for the sale of Government property, as to which 

it is determined by the Administration and the contracting 

procurement or disposal agency (1) to be in the interest of 

maintaining or mobilizing the Nation’s full productive capacity, (2) to be in the interest of war or national defense 

programs, (3) to be in the interest of assuring that a fair 

proportion of the total purchase and contracts for property 

and services for the Government in each industry category 

are placed with small-business concerns, or (4) to be in the 

interest of assuring that a fair proportion of the total sales 

of Government be made to small-business concerns.2

To effectuate these objectives, Congress has enacted six different 

contract programs overseen by the SBA’s Office of Government 

Contracting and Business Development. Previously, under section 

304 of the Small Business Administration Reauthorization and 

Amendments Act of 1994 3 the Small Business Administration 

(SBA) was authorized to administer a federal contracting pilot program for very small business concerns. Under this program, a very 

small business concern was defined as a small business which had 


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4 Very Small Business Pilot Program, 48 C.F.R. 19.901(b) (repealed by in 2005 as the program 

failed to be reauthorized.) 5The Very Small Business Program,—Final Rule (repeal), 70 Fed. Reg. 56,815 (Sept. 29, 

2005). 

15 employees or fewer and whose average annual receipts were 

below $1 million. The purpose of the program was ‘‘to improve access to government contract opportunities for concerns that are 

substantially below SBA’s size standards by reserving certain acquisitions for competition among such concerns.’’ 4 Although the 

pilot was originally set to expire in 1998, a number of Congressional actions extending all SBA programs were enacted which extended the authorization of the pilot program. However, when Congress enacted changes to the Small Business Act in 2004, it did not 

include the extension of this pilot program.5 H.R. 4121 reestablishes the program with stronger certification requirements and 

changes the program’s name to ‘‘early stage small business concerns’’ rather than ‘‘very small business concerns,’’ because the program is being reoriented to assist new businesses rather than longestablished very small businesses. 

IV. HEARINGS

Since H.R. 4121 is reauthorizing a program with a lapsed reauthorization, the findings of previous Congresses with respect to the 

matter raised in this legislation were determined still valid. As a 

result, no hearings were held on H.R. 4121. 

V. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session, with a 

quorum being present, on March 07, 2012, and ordered H.R. 4121 

reported, as amended, to the House by a voice vote at 3:10 pm. 

During the markup, one amendment was offered and adopted. Disposition of the amendment is addressed below. 

Amendment Number One filed by Mr. Graves (R–MO) makes a 

technical correction to the bill and clarifies a reference to a statute 

which would be obsolete under H.R. 4121. Amendment Number 

One was adopted by a voice vote at 3:10 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. No recorded 

votes were taken in consideration of H.R. 4121. 

AMENDMENT TO H.R. 4121 

OFFERED BY MR. GRAVES OF MISSOURI

Page 5, insert after line 14 the following: 

SEC. 3. REPEAL OF SIMILAR PROGRAM. 

Section 304 of the Small Business Administration Reauthorization and Amendments Act of 1994 (15 U.S.C. 644 note) is repealed. 


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VII. SECTION-BY-SECTION ANALYSIS OF H.R. 4121 

SECTION-BY-SECTION ANALYSIS OF H.R. 4121 AS AMENDED

Section 1—Short title 

This section provides that the bill may be cited as the ‘‘Early 

Stage Small Business Contracting Act of 2012.’’ 

Section 2—In general 

This section reauthorizes a federal contract program, previously 

known as the Very Small Business Program, as the Early Stage 

Small Business Contracting Program. This section defines ‘‘early 

stage small business concerns’’ as a firm with 15 or fewer employees and average annual receipts under $1 million, except in an industry where the average annual revenue standard is less than $1 

million. There is an expectation that if the program is successful, 

businesses will quickly lose eligibility. The Committee expects that 

most businesses that would utilize the program are in their formative stages. 

In order to participate in the program, this section requires the 

Small Business Administrator to certify the firm as an early stage 

small business concern or approve another Federal Agency, State 

government, or nationwide certification entity to certify the firm as 

such. This section allows for restricted competition if two or more 

early stage small businesses would compete and the contract award 

will be at fair and reasonable price. Further, it allows sole-source 

contracts to be awarded if the contracting officer does not have a 

reasonable expectation that two or more early stage small businesses will compete for the contract and the contract award will be 

at a fair and reasonable price. Additionally, this section requires 

the Small Business Administrator to issue a report on the performance of the program by April 30, 2015. 

VIII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, June 1, 2012. 

Hon. SAM GRAVES, 

Chairman, Committee on Small Business, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4121, the Early Stage 

Small Business Contracting Act of 2012. 

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

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

H.R. 4121—Early Stage Small Business Contracting Act of 2012 

H.R. 4121 would require the Small Business Administration to 

establish a program to provide access to federal contracts to certain 

small businesses. Specifically, the legislation would give the first 

opportunity to obtain federal contracts valued between $3,000 and 


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$75,000 to businesses that employ fewer than 16 people and have 

annual receipts of $1 million or less. (The bill defines such firms 

as early-stage small businesses.) Under the bill, the SBA would 

certify the status of such businesses. 

Based on information from the SBA and the General Services 

Administration, CBO estimates that implementing H.R. 4121 

would cost about $20 million over the 2013–2017 period, assuming 

appropriation of the necessary amounts. Those costs include about 

$3 million a year for the SBA to administer the program and provide certifications and technical assistance to small businesses that 

meet the bill’s definition. In addition, CBO estimates that $5 million in start-up costs would be needed to train contract officers 

throughout the government to work with SBA and those small 

businesses to find appropriate opportunities and to help agencies 

meet their goals for contracting with small businesses. Enacting 

the legislation would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply. 

H.R. 4121 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. 

The CBO staff contact for this estimate is Matthew Pickford. 

This estimate was approved by Theresa Gullo, Deputy Assistant 

Director for Budget Analysis. 

IX. UNFUNDED MANDATES

H.R. 4121 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. 

X. 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. 

The Committee does not adopt as its own the estimate of new 

budget authority contained in the cost estimate prepared by the Director of the Congressional Budget Office (CBO) pursuant to § 402 

of the Congressional Budget Act of 1974. CBO estimates that implementing H.R. 4121 would cost about $20 million over the five 

years. Those costs include $3 million a year for the SBA to administer the program and provide certifications and technical assistance to small businesses that meet the bill’s definition, and $5 million in start-up costs to train contracting officers throughout the 

government. The Committee disagrees with these costs. H.R. 4121 

allows the Administrator to accept certifications from third parties, 

so the Administrator need not establish an elaborate certification 

process. Furthermore, Congress already appropriates funds to train 

contracting officers. Including information on the Early Stage 

Small Business Contracting Program in this training will not require any additional appropriations. 


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XI. 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. 4121 are incorporated into the descriptive portions 

of this report. 

XII. 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, § 8, cls. 1, 3, and 18 and Art. IV, § 3, cl. 2 of 

the Constitution of the United States. 

XIII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 4121 does not relate to the terms and conditions of employment or access to public services or accommodations within the 

meaning of § 102(b)(3) of Pub. L. No. 104–1. 

XIV. FEDERAL ADVISORY COMMITTEE ACT STATEMENT

H.R. 4121 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. 

XV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 4121 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. 

XVI. 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. 4121 includes provisions to reauthorize a federal contract program, previously known as the Very Small Business 

Program, as the Early Stage Small Business Contracting Program, in order to improve early stage small businesses access 

to federal contracts. 

XVII. 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 

* * * * * * * 


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SEC. 46. PROGRAM TO PROVIDE FEDERAL CONTRACTS TO EARLY 

STAGE SMALL BUSINESSES. 

(a) ESTABLISHMENT.—The Administrator shall establish and 

carry out a program in accordance with the requirements of this section to provide improved access to Federal contract opportunities for 

early stage small business concerns. 

(b) PROCUREMENT CONTRACTS.— 

(1) IN GENERAL.—In carrying out subsection (a), the Administrator, in consultation with other Federal agencies, shall identify procurement contracts of Federal agencies for award under 

the program. 

(2) CONTRACT AWARDS.—Under the program established pursuant to this section, the award of a procurement contract of a 

Federal agency identified by the Administrator pursuant to 

paragraph (1) shall be made by the agency to an eligible program participant selected, and determined to be responsible, by 

the agency. 

(3) COMPETITION.— 

(A) SOLE SOURCE.—A contracting officer may award a 

sole source contract under this program if such concern is 

determined to be a responsible contractor with respect to 

performance of such contract opportunity and the contracting officer does not have a reasonable expectation that 

2 or more early stage small business concerns will submit 

offers for the contracting opportunity and in the estimation 

of the contracting officer, the contract award can be made 

at a fair and reasonable price. 

(B) RESTRICTED COMPETITION.—A contracting officer may 

award contracts on the basis of competition restricted to 

early stage small business concerns if the contracting officer 

has a reasonable expectation that not less than 2 early 

stage small business concerns will submit offers and that 

the award can be made at a fair market price. 

(4) CONTRACT VALUE.—Contracts shall be awarded under this 

program if its value is greater than $3,000 and less than half 

the upper threshold of section 15(j)(1) of the Small Business 

Act. 

(c) ELIGIBILITY.—Only an early stage small business concern shall 

be eligible to compete for a contract to be awarded under the program. The Administrator shall certify that a small business concern 

is an early stage small business concern, or the Administrator shall 

approve a Federal agency, a State government, or a national certifying entity to certify that the business meets the eligibility criteria 

of an early stage small business concern. 

(d) TECHNICAL ASSISTANCE.—The Administrator shall provide 

early stage small business concerns with technical assistance and 

counseling with regard to— 

(1) applying for and competing for Federal contracts; and 

(2) fulfilling the administrative responsibilities associated 

with the performance of a Federal contract. 

(e) ATTAINMENT OF CONTRACT GOALS.—All contract awards made 

under the program shall be counted toward the attainment of the 

goals specified in section 15(g) of the Small Business Act. 

(f) REGULATIONS.—The Administrator shall— 


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(1) issue proposed regulations to carry out this section not 

later than 180 days after the date of enactment of this Act; and 

(2) issue final regulations to carry out this section not later 

than 270 days after the date of enactment of this Act. 

(g) REPORT TO CONGRESS.—Not later than April 30, 2015, the Administrator shall transmit to the Congress a report on the performance of the program. 

(h) DEFINITIONS.—For purposes of this section, the following definitions shall apply: 

(1) PROGRAM.—The term ‘‘program’’ means a program established pursuant to subsection (a). 

(2) EARLY STAGE SMALL BUSINESS CONCERN.—The term ‘‘early 

stage small business concern’’ means a small business concern 

that— 

(A) has not more than 15 employees; and 

(B) has average annual receipts that total not more than $1,000,000, except if the concern is in an industry with an 

average annual revenue standard that is less than 

$1,000,000, as defined by the North American Industry 

Classification System. 

SECTION 304 OF THE SMALL BUSINESS ADMINISTRATION REAUTHORIZATION AND AMENDMENTS ACT OF 

1994 

øSEC. 304. PILOT PROGRAM FOR VERY SMALL BUSINESS CONCERNS. 

ø(a) ESTABLISHMENT.—The Administrator shall establish and 

carry out a pilot program in accordance with the requirements of 

this section to provide improved access to Federal contract opportunities for very small business concerns. 

ø(b) PROCUREMENT CONTRACTS.— ø(1) IN GENERAL.—In carrying out subsection (a), the Administrator shall identify procurement contracts of Federal agencies for award under the program. 

ø(2) CONTRACT AWARDS.—Under the program established 

pursuant to this section, the award of a procurement contract 

of a Federal agency identified by the Administration pursuant 

to paragraph (1) shall be made by the agency to an eligible program participant selected, and determined to be responsible, by 

the agency. 

ø(3) COMPETITION.—All contract opportunities offered for 

award under the program shall be awarded on the basis of 

competition among eligible very small business concerns. 

ø(c) ELIGIBILITY.—Only a very small business concern shall be eligible to compete for a contract to be awarded under the program. 

A contracting officer may rely in good faith on a written certification that a small business concern is a very small business concern. 

ø(d) DELEGATION OF AUTHORITY.—The authority of the Administrator under subsections (b)(1) and (c) shall be delegated to not less 

than 5 and not more than 10 districts of the Administration to promote the award of contracts that can be performed by very small 

business concerns. 

ø(e) FINANCIAL ASSISTANCE.—In order to assist very small business concerns receiving contract awards under the program, the 


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Administrator shall establish a preauthorization program for such 

concerns for the purpose of receiving financial assistance under section 7(a) of the Small Business Act. 

ø(f) ATTAINMENT OF CONTRACT GOALS.—All contract awards 

made under the program shall be counted toward the attainment 

of the goals specified in section 15(g) of the Small Business Act. 

ø(g) REGULATIONS.—The Administrator shall— 

ø(1) issue proposed regulations to carry out this section not 

later than 180 days after the date of enactment of this Act; and 

ø(2) issue final regulations to carry out this section not later 

than 270 days after the date of enactment of this Act. 

ø(h) REPORT TO CONGRESS.—Not later than April 30, 1997, the 

Administrator shall transmit to the Congress a report on the results of the program, together with such recommendations as the 

Administrator deems appropriate. 

ø(i) PROGRAM TERM.—Implementation of the program shall begin 

not later than August 30, 1995. The program authorized by this 

section shall expire on September 30, 2003. 

ø(j) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

ø(1) ADMINISTRATION.—The term ‘‘Administration’’ means 

the Small Business Administration. 

ø(2) ADMINISTRATOR.—The term ‘‘Administrator’’ means the 

Administrator of the Small Business Administration. 

ø(3) PROGRAM.—The term ‘‘program’’ means a program established pursuant to subsection (a). 

ø(4) VERY SMALL BUSINESS CONCERN.—The term ‘‘very small 

business concern’’ means a small business concern that— 

ø(A) has not more than 15 employees; and 

ø(B) has average annual receipts that total not more than $1,000,000.¿ 

Æ 


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