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[House Report 112-720]
[From the U.S. Government Printing Office]


112th Congress                                            Rept. 112-720
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
  GOVERNMENT EFFICIENCY THROUGH 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. 3850]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 3850) to amend the Small Business Act with respect 
to goals for procurement contracts awarded to small business 
concerns, 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..................................5
III. Background and the Need for Legislation..........................6
 IV. Hearings.........................................................9
  V. Committee Consideration..........................................9
 VI. Section-by-Section Analysis of H.R. 3850........................10
VII. Unfunded Mandates...............................................16
VIII.New Budget Authority, Entitlement Authority, and Tax Expenditure16

 IX. Oversight Findings..............................................17
  X. Statement of Constitutional Authority...........................17
 XI. Congressional Accountability Act................................17
XII. Federal Advisory Committee Statement............................17
XIII.Statement of No Earmarks........................................17

XIV. Performance Goals and Objectives................................17
 XV. Changes in Existing Law Made by the Bill, as Reported...........00

                              I. Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Government Efficiency through Small 
Business Contracting Act of 2012''.

SEC. 2. GOALS FOR PROCUREMENT CONTRACTS AWARDED TO SMALL BUSINESS 
                    CONCERNS.

  (a) In General.--Section 15(g) of the Small Business Act (15 U.S.C. 
644(g)) is amended by striking the subsection enumerator and inserting 
the following:
  ``(g) Goals for Procurement Contracts Awarded to Small Business 
Concerns.--''.
  (b) Governmentwide Goals.--Paragraph (1) of section 15(g) of such Act 
(15 U.S.C. 644(g)) is amended to read as follows:
          ``(1) Governmentwide goals.--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:
                  ``(A) The Governmentwide goal for participation by 
                small business concerns shall be established at not 
                less than 25 percent of the total value of all prime 
                contract awards for each fiscal year and 40 percent of 
                the total value of all subcontract awards for each 
                fiscal year.
                  ``(B) The Governmentwide goal for participation by 
                small business concerns owned and controlled by 
                service-disabled veterans shall be established at not 
                less than 3 percent of the total value of all prime 
                contract and at not less than 3 percent of the total 
                value of all subcontract awards for each fiscal year.
                  ``(C) The Governmentwide goal for participation by 
                qualified HUBZone small business concerns shall be 
                established at not less than 3 percent of the total 
                value of all prime contract and at not less than 3 
                percent of the total value of all subcontract awards 
                for each fiscal year.
                  ``(D) 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 at not less than 
                5 percent of the total value of all subcontract awards 
                for each fiscal year.
                  ``(E) The Governmentwide 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 at not less than 
                5 percent of the total value of all subcontract awards 
                for each fiscal year.''.
  (c) Agency Goals.--Paragraph (2) of section 15(g) of such Act (15 
U.S.C. 644(g)) is amended to read as follows:
          ``(2) Agency goals.--
                  ``(A) Establishment.--The head of each Federal agency 
                shall annually establish, for the agency that 
                individual heads, 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.
                  ``(B) Relationship to governmentwide goals.--
                          ``(i) Scope.--The goals established by the 
                        head of a Federal agency under subparagraph (A) 
                        shall be in the same format as the goals 
                        established by the President under paragraph 
                        (1) and shall address both prime contract and 
                        subcontract awards.
                          ``(ii) Requirement to meet or exceed 
                        governmentwide goals.--With respect to each 
                        goal for a fiscal year established under 
                        subparagraph (A) for a category of small 
                        business concern, the participation percentage 
                        applicable to such goal may not be less than 
                        the participation percentage applicable to the 
                        Governmentwide goal for such fiscal year 
                        established under paragraph (1) for such 
                        category.
                  ``(C) Consultation required.--
                          ``(i) In general.--In establishing goals 
                        under subparagraph (A), the head of each 
                        Federal agency shall consult with the 
                        Administrator.
                          ``(ii) Disagreements.--If the Administrator 
                        and the head of a Federal agency fail to agree 
                        on a goal established under subparagraph (A), 
                        the disagreement shall be submitted to the 
                        Administrator for Federal Procurement Policy 
                        for final determination.
                  ``(D) Plan for achieving goals.--After establishing 
                goals under subparagraph (A) for a fiscal year, the 
                head of each Federal agency shall develop a plan for 
                achieving such goals, which shall apportion 
                responsibilities among the employees of such agency 
                having procurement powers.
                  ``(E) Expanded participation.--In establishing goals 
                under subparagraph (A), the head of each Federal agency 
                shall make a consistent effort to annually expand 
                participation by small business concerns from each 
                industry category in procurement contracts of such 
                agency, including participation by 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.
                  ``(F) Consideration.--The head of each Federal 
                agency, in attempting to attain expanded participation 
                under subparagraph (E), shall consider--
                          ``(i) contracts awarded as the result of 
                        unrestricted competition; and
                          ``(ii) contracts awarded after competition 
                        restricted to eligible small business concerns 
                        under this section and under the program 
                        established under section 8(a).
                  ``(G) Communication regarding goals.--
                          ``(i) Importance of achieving goals.--Each 
                        procurement employee or program manager 
                        described in clause (ii) shall communicate to 
                        the subordinates of the procurement employee or 
                        program manager the importance of achieving 
                        goals established under subparagraph (A).
                          ``(ii) Procurement employees or program 
                        managers described.--A procurement employee or 
                        program manager described in this clause is a 
                        senior procurement executive, senior program 
                        manager, or Director of Small and Disadvantaged 
                        Business Utilization of a Federal agency having 
                        contracting authority.''.
  (d) Enforcement; Determinations of the Total Value of Contract 
Awards.--Section 15(g) of the Small Business Act (15 U.S.C. 644(g)), as 
amended by this Act, is further amended by adding at the end the 
following:
          ``(3) Enforcement.--If the Administrator does not issue the 
        report required in subsection (h)(2) on or before the date that 
        is 120 days after the end of the prior fiscal year, the 
        Administrator may not carry out or establish any pilot program 
        until the date on which the Administrator issues the report.
          ``(4) Determinations of the total value of contract awards.--
        For purposes of the goals established under paragraphs (1) and 
        (2), the total value of contract awards for a fiscal year may 
        not be determined in a manner that excludes the value of a 
        contract based on--
                  ``(A) where the contract is awarded;
                  ``(B) where the contract is performed;
                  ``(C) whether the contract is mandated by Federal law 
                to be performed by an entity other than a small 
                business concern;
                  ``(D) whether funding for the contract is made 
                available in an appropriations Act, if the contract is 
                subject to the Competition in Contracting Act of 1984; 
                or
                  ``(E) whether the contract is subject to the Federal 
                Acquisition Regulation.''.

SEC. 3. REPORTING ON GOALS FOR PROCUREMENT CONTRACTS AWARDED TO SMALL 
                    BUSINESS CONCERNS.

  Subsection (h) of section 15 of the Small Business Act (15 U.S.C. 
644) is amended to read as follows:
  ``(h) Reporting on Goals for Procurement Contracts Awarded to Small 
Business Concerns.--
          ``(1) Agency reports.--At the conclusion of each fiscal year, 
        the head of each Federal agency shall submit to the 
        Administrator a report describing--
                  ``(A) the extent of the participation by small 
                business concerns, small business concerns owned and 
                controlled by veterans (including 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 the procurement contracts of such agency 
                during such fiscal year;
                  ``(B) whether the agency achieved the goals 
                established for the agency under subsection (g)(2)(A) 
                with respect to such fiscal year; and
                  ``(C) any justifications for a failure to achieve 
                such goals.
          ``(2) Reports by administrator.--Not later than 60 days after 
        receiving a report from each Federal agency under paragraph (1) 
        with respect to a fiscal year, the Administrator shall submit 
        to the President and Congress, and to make available on a 
        public website, a report that includes--
                  ``(A) a copy of each report submitted to the 
                Administrator under paragraph (1);
                  ``(B) a determination of whether each goal 
                established by the President under subsection (g)(1) 
                for such fiscal year was achieved;
                  ``(C) a determination of whether each goal 
                established by the head of a Federal agency under 
                subsection (g)(2)(A) for such fiscal year was achieved;
                  ``(D) the reasons for any failure to achieve a goal 
                established under paragraph (1) or (2)(A) of subsection 
                (g) for such fiscal year and a description of actions 
                planned by the applicable agency to address such 
                failure, except that the Administrator must concur with 
                each remediation plan;
                  ``(E) for the Federal Government and each Federal 
                agency, an analysis of the number and dollar amount of 
                prime contracts awarded during such fiscal year to--
                          ``(i) small business concerns--
                                  ``(I) in the aggregate;
                                  ``(II) through sole source contracts;
                                  ``(III) through competitions 
                                restricted to small business concerns; 
                                and
                                  ``(IV) through unrestricted 
                                competition;
                          ``(ii) small business concerns owned and 
                        controlled by service-disabled veterans--
                                  ``(I) in the aggregate;
                                  ``(II) through sole source contracts;
                                  ``(III) through competitions 
                                restricted to small business concerns;
                                  ``(IV) through competitions 
                                restricted to small business concerns 
                                owned and controlled by service-
                                disabled veterans; and
                                  ``(V) through unrestricted 
                                competition;
                          ``(iii) qualified HUBZone small business 
                        concerns--
                                  ``(I) in the aggregate;
                                  ``(II) through sole source contracts;
                                  ``(III) through competitions 
                                restricted to small business concerns;
                                  ``(IV) through competitions 
                                restricted to qualified HUBZone small 
                                business concerns;
                                  ``(V) through unrestricted 
                                competition where a price evaluation 
                                preference was used; and
                                  ``(VI) through unrestricted 
                                competition where a price evaluation 
                                preference was not used;
                          ``(iv) small business concerns owned and 
                        controlled by socially and economically 
                        disadvantaged individuals--
                                  ``(I) in the aggregate;
                                  ``(II) through sole source contracts;
                                  ``(III) through competitions 
                                restricted to small business concerns;
                                  ``(IV) through competitions 
                                restricted to small business concerns 
                                owned and controlled by socially and 
                                economically disadvantaged individuals;
                                  ``(V) through unrestricted 
                                competition; and
                                  ``(VI) by reason of that concern's 
                                certification as a small business owned 
                                and controlled by socially and 
                                economically disadvantaged individuals;
                          ``(v) small business concerns owned by an 
                        Alaska Native Corporation--
                                  ``(I) in the aggregate;
                                  ``(II) through sole source contracts;
                                  ``(III) through competitions 
                                restricted to small business concerns;
                                  ``(IV) through competitions 
                                restricted to small business concerns 
                                owned and controlled by socially and 
                                economically disadvantaged individuals; 
                                and
                                  ``(V) through unrestricted 
                                competition; and
                          ``(vi) small business concerns owned and 
                        controlled by women--
                                  ``(I) in the aggregate;
                                  ``(II) through competitions 
                                restricted to small business concerns;
                                  ``(III) through competitions 
                                restricted using the authority under 
                                section 8(m)(2);
                                  ``(IV) through competitions 
                                restricted using the authority under 
                                section 8(m)(2) and in which the waiver 
                                authority under section 8(m)(3) was 
                                used; and
                                  ``(V) through unrestricted 
                                competition; and
                  ``(F) for the Federal Government and each Federal 
                agency, the number, dollar amount, and distribution 
                with respect to the North American Industry 
                Classification System of subcontracts awarded during 
                such fiscal year 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.''.

SEC. 4. SENIOR EXECUTIVES.

  (a) Training.--Programs established for the development of senior 
executives under section 3396(a) of title 5, United States Code, shall 
include training with respect to Federal procurement requirements, 
including contracting requirements under the Small Business Act (15 
U.S.C. 631 et seq.).
  (b) Sabbaticals.--If a Federal agency does not achieve, with respect 
to a fiscal year, a goal established by the head of such agency under 
section 15(g)(2)(A) of the Small Business Act (15 U.S.C. 644(g)(2)(A)), 
a senior executive within that agency may not be granted, during the 
succeeding fiscal year, a sabbatical under section 3396(c) of title 5, 
United States Code.
  (c) Incentive Awards.--If a Federal agency does not achieve, with 
respect to a fiscal year, a goal established by the head of such agency 
under section 15(g)(2)(A) of the Small Business Act (15 U.S.C. 
644(g)(2)(A)), a senior executive within that agency may not receive, 
during the succeeding fiscal year, any incentive award under subchapter 
I of chapter 45 of title 5, United States Code.
  (d) Senior Executive Defined.--In this section, the term ``senior 
executive'' has the meaning given that term in section 3132(a) of title 
5, United States Code.

SEC. 5. SENSE OF CONGRESS.

  It is the sense of Congress that the contracting provisions of the 
Small Business Act shall apply to the leasing of buildings and office 
space by the United States, and shall not apply to any leasing 
transaction between private parties.

                      II. Purpose and Bill Summary

    The purpose of H.R. 3850, the ``Government Efficiency 
through Small Business Contracting Act of 2012,'' 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 spent 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, 72m Stat. 384 (1958). The Act is codified at 15 
U.S.C. Sec. Sec. 631-657q.
---------------------------------------------------------------------------
    H.R. 3850 seeks to promote small business contracting in 
five 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 because the administratively set goals for small 
businesses have been decreasing. Third, it ensures that no 
department or agency is allowed to have a small business prime 
contracting goal that is less than the government-wide small 
business prime contracting goal of 25 percent. Fourth, it 
defines the universe of contracts that are to be used to 
calculate achievement of procurement goals, in order to counter 
the Small Business Administration's (SBA) decision (which 
contradicts the plain language of the Act) to exclude 
approximately 20 percent of contract dollars from the goal 
calculation.\4\ Finally, H.R. 3850 creates an incentive for 
executives to ensure that the small business goals are met by 
denying them performance awards or sabbaticals should an agency 
fail to meet those goals.
---------------------------------------------------------------------------
    \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 $11 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.
    \4\A discussion of which contracts are excluded may be found in 
Section 2(d) of the section-by-section analysis.
---------------------------------------------------------------------------

                III. Background and 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.''\5\ Second, 
small business contracting is ``in the interest of war or 
national defense programs.''\6\ 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.''\7\ 
To fulfill these three objectives, statutorily based small 
business goals have been used for approximately thirty-four 
years.
---------------------------------------------------------------------------
    \5\Small Business Act, Sec. 15(a), 15 U.S.C. Sec. 644(a).
    \6\Id. 
    \7\Id. 
---------------------------------------------------------------------------
    Since the enactment of Public Law 95-507\8\ 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.'' This goal was increased to 23 percent by 
the Small Business Reauthorization Act of 1997 (SBRA). 
According to the SBA, in Fiscal Year 2010, small businesses 
received 22.7 percent of all prime contract dollars. Therefore, 
this bill continues the work of the past 34 years by 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 decreases in 
federal contract spending, this increase will protect small 
businesses against losing hard gotten gains. Thus, after 15 
years of a 23 percent goal, the bill will provide additional 
support for small business contractors.
---------------------------------------------------------------------------
    \8\This Act has no common name and is simply An Act of October 24, 
1978.
---------------------------------------------------------------------------
    The bill also furthers the goals of Public Law 95-507, 
BODRA and SBRA by mandating that no agency have a goal less 
than the government-wide goal. Agencies, due to their varying 
missions, contract for different goods and services. However, 
if the intention of the Act is to ensure that a fair portion 
all government contracts ``in each industry category'' are 
placed with small businesses, then no agency should be allowed 
to shirk its responsibility towards small businesses.
    In the recent past, SBA has allowed some agencies to have 
goals that are lower than the government-wide goal, which means 
that small businesses may not have the same opportunities in 
some industries as they do in others. Thus, by failing to honor 
the third purpose of the Act in respect to contracting, 
agencies neuter the first two objectives--maintaining the full 
productive capacity and supporting national defense programs. 
This is particularly the case with the Department of Defense 
(DoD) and the Department of Energy (DOE). For fiscal year 2010, 
SBA and DoD negotiated a DoD goal of 22.8 percent,\9\ and SBA 
and DOE negotiated a goal of only 6 percent.\10\ Combined, 
these two agencies accounted for nearly 75 percent of 
government-wide contracting dollars spent that year.\11\ Even 
if DoD and DOE had met their respective goals, this still would 
have meant that each of the other agencies needed to contract 
at least 30 percent of their spend to small businesses to meet 
the overall goal. Moreover, the lower goals for DoD and DOE 
would have further denied small businesses opportunities in the 
very areas most crucial to the war and defense programs the Act 
is meant to address.\12\
---------------------------------------------------------------------------
    \9\SBA, Department of Defense Procurement Scorecard FY 2010 (2011) 
available at http://www.sba.gov/sites/default/files/files/
FY10%20SB%20Procurement%20Scorecard_FINAL_DoD.pdf.
    \10\SBA, Department of Energy Procurement Scorecard FY 2010 (2011) 
available at http://www.sba.gov/sites/default/files/files/
FY10%20SB%20Procurement%20Scorecard_FINAL_ ENERGY.pdf.
    \11\DoD spent $375.5 billion on contracts, DOE $25 billion out of a 
federal total of $536 billion. See http://usaspending.gov/.
    \12\15 U.S.C. Sec. 644(a).
---------------------------------------------------------------------------
    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 to define the types of contracts to which the goal 
applied, or that agencies needed encouragement to reach the 
goals. However, in 1991 the Office of Federal Procurement 
Policy (OFPP) began allowing\13\ DOE to count subcontracts 
awarded by its management and operations (M&O) contractors as 
if they were prime contracts awarded by the DOE.\14\ 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,\15\ and it became 
apparent that DOE had only been awarding 3 percent of its prime 
contract dollars to small businesses. As previously noted, over 
a decade later, DOE only has a goal of 6 percent small business 
participation, so the goals are clearly not motivating the 
agency to improve its performance.
---------------------------------------------------------------------------
    \13\OFPP Policy Letter 91-1 (1991)
    \14\See, e.g., Acquisition Regulation: Implementation of Section 
3021 of the Energy Policy Act of 1992, Notice of Proposed Rulemaking, 
59 Fed. Reg. 35,294, 35,295 (July 11, 1994).
    \15\OFPP Policy Letter 99-1 (1999) rescinding OFPP Policy Letter 
91-1.
---------------------------------------------------------------------------
    After OFPP changed course on the inclusion of M&O 
subcontracts, SBA in rules published in 2003\16\ began allowing 
agencies to exclude certain types of contracts from 
consideration before the goal achievements were calculated. 
Under this method, approximately 20 percent of all prime 
contract dollars are excluded from the contracting base before 
the goals are calculated, thus inflating the performance of all 
agencies. Even with these exclusions, agencies are failing to 
meet their goals, and the government-wide goal has not been met 
since 2005.
---------------------------------------------------------------------------
    \16\SBA, Goaling Guidelines for the Small Business Preference 
Programs for Prime and Subcontract Federal Procurement Goals and 
Achievements, 68 Fed. Reg. 43,566 (July 23, 2003).
---------------------------------------------------------------------------
    To make the goals themselves more meaningful, the 
Government Efficiency Though Small Business Contracting Act of 
2012 does three things. First, it defines what types of 
contracts must be included in the goaling base. Examining 
Fiscal Year 2010 data, this essentially adds $100 billion to 
the denominator and $10 billion to the numerator when 
calculating small business goal achievement. Recalculating 
using the more appropriate universe of contracts indicates that 
the federal government achievement is only 20.3 percent. 
Second, the bill holds senior executives in agencies 
accountable for meeting the goals, and imposes consequences for 
the failure to do so. Specifically, these senior executives 
will not be eligible for performance awards, commonly referred 
to as bonuses, nor will they be allowed to take paid 
sabbaticals if the goals are not met. This will encourage 
senior executives to remove barriers to small business 
participation and will finally give teeth to the achievement of 
the goals. Finally, the bill also adds granularity to the 
report on goal achievement currently provided by the SBA. 
Instead of simply reporting a dollar value and percentage for 
each category of goals, as SBA currently does, the new reports 
will be more nuanced, explaining whether a small business 
concern won a contract through full and open+ competition or as 
the result of a contracting program established in the Act. 
This data will be invaluable as the Committee assesses the 
health of the small business contracting programs.
    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.\17\ 
According to Committee reports, this requirement was added 
because small businesses were receiving only 37.5 percent of 
subcontract dollars.\18\ 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, which is 1.6 percent less than the actual 
results thirty-five 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.
---------------------------------------------------------------------------
    \17\15 U.S.C. Sec. 637(d).
    \18\H.R. Rep. No. 95-949, at 5 (1978).
---------------------------------------------------------------------------
    Ideally, the changes to the Act will result in $11 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 DoD alone are expected to 
fall by approximately $7.5 billion per year.\19\ 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 to complain. However, DoD 
contracting accounts for approximately 70 percent of federal 
contract spending, so if similar cuts occur in other agencies, 
the increased goal in this bill should simply mitigate the 
effect of the reduced contracting on small businesses.
---------------------------------------------------------------------------
    \19\Center for Security Policy, The National Defense Breakdown 
Economic Impact Report, (Feb. 2012). The full report can be found 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 
looked at 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 case, 
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.

                       V. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on March 7, 2012 and ordered H.R. 3850 
reported, as amended, to the House by a voice vote at 3:50 pm. 
During the markup, five amendments were offered. Three 
amendments were adopted and two amendments were withdrawn. 
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. Hahn (D-CA) requires the 
annual report issued by the SBA on goaling achievement be made 
publicly available using the Internet, and made technical 
amendments. The amendment was adopted by voice vote at 1:20 pm.
    Amendment Number Two filed by Ms. Chu (D-CA) requires that 
the annual goaling report subdivide the portion of the report 
on achievement of the goal for contracts awarded to small 
business concerns owned and controlled by socially and 
economically disadvantaged individuals (SDB) goal by socio-
economic category. The amendment was adopted by voice vote at 
1:24 pm.
    Amendment Number Three filed by Mr. Peters (D-MI) will 
increase the government-wide prime contracting and 
subcontracting goals for SDB from 5 percent to 7.5 percent for 
each fiscal year. The amendment was withdrawn by unanimous 
consent.
    Amendment Number Four filed by Ms. Ellmers (R-NC) expressed 
a sense of Congress that the contracting provisions of the 
Small Business Act shall apply to commercial leasing services. 
The amendment was withdrawn by unanimous consent.
    Amendment Number Five filed by Ms. Ellmers (R-NC) expressed 
a sense of Congress that the contracting provisions of the 
Small Business Act shall apply to the leasing of commercial 
buildings and office space by the federal government but not to 
transactions between private parties. The amendment was adopted 
by voice vote at 3:49 pm.

                         Amendment to H.R. 3850


                   Offered by Ms. Hahn of California

  Page 8, line 5, strike ``paragraph (2)'' and insert 
``subsection (h)(2)''.

  Page 8, beginning on line 23, strike ``competition in the 
Contract Act'' and insert ``the Competition in Contracting Act 
of 1984''.

  Page 10, line 11, insert after ``President and Congress'' the 
following: ``, and to make available on a public website,''.

                         Amendment to H.R. 3850


                    Offered by Ms. Chu of California

  Page 13, line 9, strike ``and''.

  Page 13, line 11, insert ``and'' at the end.

  Page 13, insert after line 11 the following (and redesignate 
provisions accordingly):
                                  (VI) by reason of that 
                                concern's certification as a 
                                small business owned and 
                                controlled by socially and 
                                economically disadvantaged 
                                individuals;

                         Amendment to H.R. 3850


                   Offered by Mr. Peters of Michigan

  Page 3, line 18, strike ``5 percent'' and insert ``7.5 
percent''.

  Page 3, line 19, strike ``5 percent'' and insert ``7.5 
percent''.

        VI. Section-by-Section Analysis of H.R. 3850 as Amended


Section 1. Short Title

    This Section designates the bill as the ``Government 
Efficiency through Small Business Contracting Act of 2012.''

Section 2. Goals for Procurement Contracts Awarded to Small Business 
        Concerns

            Subsection (a)--Subsection Enumerator
    This subsection designates section 15(g) of the Small 
Business Act (the Act), 15 U.S.C. Sec. 644(g), as ``Goals for 
Procurement Contracts Awarded to Small Business Concerns.'' 
            Subsection (b)--Government-wide Goals
    Paragraph (1) of subsection 15(g) 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. The Act also established goals for various 
subcategories of small businesses: small business concerns 
owned and controlled by service disabled veterans (SDVOSBs); 
qualified HUBZone small business concerns (HUBZone firms); 
small businesses owned by socially and economically-
disadvantaged individuals (SDBs); and small business concerns 
owned and controlled by women (WOSBs). It further requires the 
President to establish a minimum goal of awarding 3 percent of 
the total value of all prime contract and subcontract awards 
for each fiscal year to SDVOSBs. The current statutory goal for 
HUBZone firms is 3 percent of the total value of all prime 
contract and subcontract awards. The government-wide goals for 
SDBs and WOSBs are each established as at least 5 percent of 
the total value of all prime contract and subcontract awards 
for each fiscal year.
    Section 2(b) of the bill modifies the structure of section 
15(g)(1) of the Act by creating separate subparagraphs for each 
specific goal. Unless specified below, the change is made to 
provide clarity rather than make substantive changes.
    Subparagraph (A) 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. Subparagraph (A) also establishes a government-wide 
goal of awarding small business concerns 40 percent of the 
total value of subcontract awards for each fiscal year. This is 
necessary because the voluntary subcontracting goal established 
by the Executive Branch has been declining, from 40 percent in 
fiscal year 2003 to 35.9 in fiscal year 2010.\20\ Given that 
the Executive Branch has failed to institute goals leading to 
an increase in opportunities for small businesses, this bill 
will legislate a more aspirational goal.
---------------------------------------------------------------------------
    \20\SBA, Governmentwide 2010 Small Business Procurement Scorecard 
(2011). 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).
---------------------------------------------------------------------------
    Subparagraphs (B)-(E) restate the current small business 
goals for SDVOSB, HUBZone, SDBs and WOSBs. However, in 
subparagraph (C), the language pertaining to HUBZone goals no 
longer includes the goals from fiscal years 1999 through 2003. 
Now that the program is fully operational, goals prior to 2003 
clutter an already overcluttered Act.
            Subsection (c)--Agency Goals
    Paragraph (2) of subsection 15(g) of the Act currently 
requires the head of each Federal agency, in consultation with 
the Administrator, to establish agency-specific prime 
contracting and subcontracting goals for small business 
concerns and the subcategories thereof. In cases where the head 
of the Federal agency and the Administrator disagree, the 
Administrator of the Office of Federal Procurement makes the 
final goal determination. The Act also requires each agency to 
continually strive to increase participation by small 
businesses in each industry category, and to increase contracts 
awarded through full and open competition as well as through 
restricted competition. Finally, paragraph (2) requires that 
agency employees with procurement or program management 
functions be educated on the importance of the goals so that 
they will be better prepared to meet those goals.
    Historically, the Administrator refused to negotiate agency 
specific goals that were lower than the government-wide goal. 
Clearly, it is more difficult to achieve the government-wide 
goal if some agencies have lower goals. Allowing some agencies 
to have goals that are lower than the government-wide goal 
means that small businesses may not have the same opportunities 
in some industries as they do in others, which, in turn, 
results in a less vibrant industrial base, as might be the case 
for small businesses providing goods and services to DoD and 
DOE, as already discussed.
    Consequently, subsection (c) of the bill amends paragraph 
(2) to require that each agency has a goal at least as high as 
the government-wide goal. It further requires that each agency 
develop a plan for achieving its goals, and that the plans 
apportion responsibility for the goals among the agency 
employees with procurement powers. These changes will create 
more opportunities for small businesses at the agencies 
responsible for most federal contracting, improve the 
likelihood of achieving the government-wide goal, and require 
that each agency has a plan for how it will achieve the goals. 
It also furthers the aims of the Act regarding the health of 
the industrial base by making sure the federal government has 
access to a diverse group of small businesses ready to assist 
the nation in times of crisis.
            Subsection (d)--Enforcement; Determination of the Total 
                    Value of Contract Awards
    Subsection (d) of the bill adds two new paragraphs to 
section 15(g) of the Act. The first, paragraph (3), requires 
that the Administrator issue the annual report to Congress 
detailing how the government performed in contracting with 
small business concerns no later than 120 days after the end of 
the fiscal year. In fiscal year 2010, this report was not 
issued until June 2011; in prior years the report came out even 
later. A report that is issued after two-thirds of the fiscal 
year has elapsed leaves agencies with very little time to 
adjust their behavior and improve their small business 
performance. Thus, the Administrator issuing the report in a 
timely fashion will enable agencies to meet their goals in 
subsequent years and achieve the objectives set forth in the 
Act.
    Section 15(g)(1) currently requires that the goal is based 
on the ``total value of all prime contract awards for each 
fiscal year.'' Although the term ``all'' seems to be abundantly 
clear, it is not self-evident to the Administrator, who 
currently excludes about 20 percent of all prime contract 
dollars spent in a fiscal year, arguing that these contracts 
are not suitable for award to small businesses based on their 
place of award, performance, use of non-appropriated funds, or 
applicability of the Federal Acquisition Regulation.\21\ In 
addition, the Administrator excludes contracts that are 
required by statute to be performed by entities other than 
small businesses, such as Unicor--the federal prison industries 
program.\22\ In each case, the exclusion is unwarranted because 
there is no statutory basis for the exclusions since the term 
``all'' is not ambiguous.
---------------------------------------------------------------------------
    \21\SBA, Goaling Guidelines for the Small Business Preference 
Programs 3 (2003). Apparently, the Administrator's understanding of the 
word ``all'' is akin to that of the animals in George Orwell's classic 
novel Animal Farm, in which all animals are created equal but some are 
more equal than others.
    \22\Id., see also 18 U.S.C. Sec. 4124.
---------------------------------------------------------------------------
    Even if the term ``all'' does not mean ``all'' as Orwell 
might have concluded, the exclusions still make no sense. For 
those contracts that the Administrator determined were not 
suitable to award to small businesses, Committee staff analysis 
indicates that small businesses won approximately 10 percent of 
such contracts in fiscal year 2010.\23\ For statutory 
exclusions, it simply means that additional contracts must be 
awarded to make up for those prime contracts that must be 
awarded to mandatory sources such as Unicor.
---------------------------------------------------------------------------
    \23\Generated through a report run using the Federal Procurement 
Data System, on file with the Committee.
---------------------------------------------------------------------------
    Consequently, the bill adds a paragraph (4) that seeks to 
clarify what is meant by the words ``total value of all prime 
contract awards for each fiscal year.'' The bill specifies that 
for the purposes of the government-wide and agency-specific 
contracting goals, the total dollar value of contracts awarded 
must include contracts without respect to their place of award, 
place of performance, the applicability of the FAR, or whether 
a mandatory source is used. Furthermore, any contract that is 
subject to the Competition in Contracting Act\24\ (CICA) is 
covered, even if it is awarded using nonappropriated funds. By 
using a reference to CICA, the Committee intends to exclude 
those contracts awarded by non-appropriated funding 
instrumentalities that are not considered contracts with the 
federal government.
---------------------------------------------------------------------------
    \24\98 Stat. 1175 (1984), codified at 41 U.S.C. 3301 et seq.
---------------------------------------------------------------------------

Section 3. Reporting on Goals for Procurement Contracts Awarded to 
        Small Business Concerns

    Section 3 amends section 15(h) of the Act, which addresses 
reporting on goals enumerated in section 15(g). Currently, 
section 15(h)(1) requires that the head of each agency report 
to the Administrator on an annual basis, detailing the agency's 
accomplishments for each of the small business goals, and 
justifying any failure to meet the goals. The Administrator is 
then directed in section 15(h)(2) to analyze and compile the 
diverse reports into an annual report providing the government-
wide goal results to the Committee on Small Business, Committee 
on Small Business and Entrepreneurship (the Committees), and 
the President. In addition to providing the overall goals, the 
report also includes the number and dollar value of contracts 
awarded to firms covered by the goals that are awarded through 
sole source contracts, through SDB set-asides, through HUBZone 
set-asides, and through full and open competition.
    The bill retains the concept of agency-level reports 
consolidated into a government-wide report, but makes one minor 
change to the agency-level reports, and four important changes 
to the government-wide report. For the agency-level reports, 
the Administrator must forward the reports to the Committees 
within 60 days as part of the government-wide report. For the 
government-wide report, the Administrator is directed to 
include a remediation plan for any agency not meeting its 
goals, with such plan to be developed by the head of the 
contracting agency and concurred with by the Administrator. 
Additionally, the government-wide report must provide much 
greater detail regarding how awards to small business concerns 
and the subcategories thereof were made. Specifically, for each 
group, the Administrator must now report the aggregate results 
as well as those using each of the possible procurement 
methods, such as sole source contracting, set-aside 
contracting, or full and open competition. For SDBs, the 
Administrator must also identify which socio-economic 
categories the firms used to qualify for the program. The 
additional detail should not incur extra costs because the data 
already are available through the Federal Procurement Data 
System. This will provide Congress and the federal procurement 
community more granular data on the effectiveness of all the 
contracting programs in the Act.
    The bill requires that the subcontracting data reported to 
the Committees and the President analyze the industry category 
of the subcontractor. This is important because subcontracting 
is often used to mitigate for a lack of prime contracting 
opportunities, but if the subcontracting is in an unrelated or 
only tangentially-related industry, it may not successfully 
accomplish this aim. Again, this will provide greater insight 
into the assistance offered to small businesses through the 
different types of subcontracting plans\25\ and the types of 
businesses that benefit from subcontracts. Finally, the bill 
requires that the goaling report be made publicly available on 
a website. Although the report is made publicly available on 
the website of the Federal Procurement Data System, such 
placement is at the discretion of the Executive Branch. Given 
the importance of the report, public availability should not 
rest on the whims of federal agency officials and codification 
of Internet availability is appropriate.
---------------------------------------------------------------------------
    \25\For example, this should help the Congress assess whether 
different types of small businesses benefit from commercial type 
subcontracting plans than benefit from contract specific subcontracting 
plans of the DoD comprehensive test subcontracting plans.
---------------------------------------------------------------------------

Section 4. Senior Executives

    The issues in section 4 are not currently addressed in the 
Act. Senior executives or members of the Senior Executive 
Service (SES), are federal employees serving in political and 
career managerial, supervisory, and policy positions classified 
above civil service's General Schedule grade 15 or equivalent 
positions in the Executive Branch.\26\ For 2012, these 
positions pay a base salary between $119,554 and $179,700, and 
with bonuses may receive compensation up to $230,700.\27\ 
Additionally, career SES employees may take sabbaticals of up 
to 11 months to pursue study or uncompensated work, during 
which time the employee retains salary, benefits and 
potentially travel and per diem costs.\28\
---------------------------------------------------------------------------
    \26\5 U.S.C. Sec. 3132(a).
    \27\Id. at Sec. 5307.
    \28\Id. at Sec. 3396.
---------------------------------------------------------------------------
    Given their senior role within each agency, the Committee 
recognizes that SES members play a special role in creating 
contracting opportunities for small businesses. First, the 
Chief Acquisition Officer and Senior Procurement Executives 
create the agency's procurement policies and oversee the 
contracting staff, thus creating the initial framework for 
small business participation. Furthermore, all SES members 
create or oversee those developing the actual procurement 
requirements. Contracting personnel only can make purchases to 
fulfill the requirements of the office generating the request 
and have limited ability to change those requirements to make 
the resultant contract suitable for small businesses. It is the 
SES members working in the program office, as the Chief 
Financial Officer, as the Chief Information Officer or the 
like, who oversee the initial determination of the 
requirements. It is the definition of requirements that often 
controls a small business's opportunity to compete.
            Subsection (a)--Training 
    Given the important role of SES, subsection (a) requires 
that the SES development program provide training to SES 
candidates on procurement in general and small business 
contracting in particular. This will ensure that new SES 
members are cognizant of the rules regarding procurement and 
the tools available that allow small business concerns to 
compete in the federal procurement arena.
            Subsection (b)--Sabbaticals 
    As discussed above, sabbaticals are a unique benefit to SES 
members. Such opportunities only should be available to 
successful agencies as a reward and agencies that do not meet 
their small business goals should not be able to reward their 
most senior personnel if they fail to meet the standards 
established by Congress for contracting with small business 
concerns.\29\ Therefore, subsection (b) denies this benefit to 
any SES employed by an agency that failed to meet the agency 
level goals in the revised section 15(g)(2) of the Act.
---------------------------------------------------------------------------
    \29\While it is true that private sector executives receive perks 
and salary increases even when their companies are performing poorly, 
federal employees serve a higher interest (the public good) and should 
not be rewarded for failing to achieve the objectives set by Congress.
---------------------------------------------------------------------------
            Subsection (c)--Incentive Awards 
    SES performance appraisals rate SES members on their fiscal 
year's accomplishments. The rating scale is from Level 1 to 
Level 5, with Level 1 deemed ``unsatisfactory'' and Level 5 as 
``outstanding.''\30\ Only SES employees with a rating above 
Level 3, thereby deemed ``fully successful,'' are eligible for 
incentive awards or bonuses. While each SES employee is rated 
on program specific factors, they are all rated on five 
critical elements as well: leading change, leading people, 
business acumen, building coalitions and results driven.\31\ Of 
these, the results driven factor counts for at least 40 
percent, meaning that an SES employee cannot receive a bonus if 
the employee fails to achieve ``measurable outputs and outcomes 
clearly aligned to organizational goals and objectives'' that 
have a ``transparent alignment to relevant agency or 
organizational goals.''\32\ However, despite this guidance, SES 
employees continue to receive bonuses at agencies that are not 
successfully meeting the relevant agency's small business 
goals.
---------------------------------------------------------------------------
    \30\Memorandum from John Berry, Director, Office of Personnel 
Management and Jeffrey Zients, Chief Performance Officer, Office of 
Management and Budget, ``Senior Executive Service Performance Appraisal 
System'' (Jan. 2012), available at http://www.chcoc.gov/transmittals/
TransmittalDetails.aspx?TransmittalID=4514.
    \31\Id. 
    \32\Id. 
---------------------------------------------------------------------------
    Consequently, Subsection (c) does not allow SES to receive 
bonuses if their agency does not meet the agency level goals in 
the revised section 15(g)(2) of the Act. No agency is fully 
successful, nor is any SES fully successful, if obligations to 
small businesses are not met. Further, the Committee believes 
that this change may have the additional benefit of encouraging 
SES members to embrace the first of their performance 
elements--leading change--to seek out and remove barriers to 
small business participation in federal procurement. While some 
have cautioned that this may lead to the use of small 
businesses that are not qualified to perform contracts, no 
contracting officer would put his or her authority to issue 
contracts in jeopardy by ignoring the requirements of Part 9 of 
the Federal Acquisition Regulations dealing with contractor 
responsibility. Although at first blush this may seem unduly 
punitive, many agencies already meet or exceed their small 
business goals, so the consequences of this section should fall 
only on the most senior and highly compensated employees of a 
few agencies. It will not jeopardize their salaries, only their 
incentive payments, and will lead to a culture of 
accountability as it relates to small business opportunities.

Section 5. Sense of Congress

    Section 5 is sense of Congress that the contracting 
provisions of the Act ``shall apply to the leasing of buildings 
and offices space by the United States, and shall not apply to 
any leasing transaction between private parties.'' The 
Committee has learned that the General Services Administration 
(GSA) has bundled all contracts for real property brokerage 
services to the exclusion of small businesses. While contract 
bundling will be addressed through other legislation, this 
sense of Congress reflects the Committee's frustration that the 
agency with almost exclusive purview over leasing and other 
real estate transaction services for buildings, space, land and 
property would act in a way that excludes small business 
participation as prime contractors. Therefore, this section 
states the opinion of Congress that all the provisions of the 
Act apply to GSA's procurement of real property on behalf of 
the federal government.

                         VII. Unfunded Mandates

    H.R. 3850 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.

 VIII. 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. 
3850. H.R. 3850 does not direct new spending, but instead 
addresses the apportionment of current spending between small 
businesses and other-than-small businesses. Tying senior 
executive bonuses to attainment of the small business goals may 
instead save money that would otherwise have been expended.

                         IX. 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. 3850 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 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.

                  XI. Congressional Accountability Act

    H.R. 3850 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.

             XII. Federal Advisory Committee Act Statement

    H.R. 3850 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.

                     XIII. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 3850 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.

                 XIV. 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. 3850 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.

       XV. 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. 15. (a) * * *

           *       *       *       *       *       *       *

  [(g)(1) 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, 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 Government-wide goal for participation by small 
business concerns owned and 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 and subcontract awards for fiscal year 2003 and 
each fiscal year thereafter. The Government-wide 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 for 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.
  [(2)(A) The head of each Federal agency shall, after 
consultation with the Administration, establish goals for the 
participation by small business concerns, by small business 
concerns owned and controlled by service-disabled veterans, by 
qualified HUBZone small business concerns, by small business 
concerns owned and controlled by socially and economically 
disadvantaged individuals, and by small business concerns owned 
and controlled by women in procurement contracts of such 
agency.
  [(B) Goals established under this subsection shall be jointly 
established by the Administration and the head of each Federal 
agency and shall realistically reflect the potential of 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 perform such 
contracts and to perform subcontracts under such contracts.
  [(C) Whenever the Administration and the head of any Federal 
agency fail to agree on established goals, the disagreement 
shall be submitted to the Administrator for Federal Procurement 
Policy for final determination.
  [(D) For the purpose of establishing goals under this 
subsection, the head of each Federal agency shall make 
consistent efforts to annually expand participation by small 
business concerns from each industry category in procurement 
contracts of the agency, including participation by small 
business concerns owned and controlled by service-disabled 
veterans, by qualified HUBZone small business concerns, by 
small business concerns owned and controlled by socially and 
economically disadvantaged individuals, and by small business 
concerns owned and controlled by women.
  [(E) The head of each Federal agency, in attempting to attain 
the participation described in subparagraph (D), shall 
consider--
          [(i) contracts awarded as the result of unrestricted 
        competition; and
          [(ii) contracts awarded after competition restricted 
        to eligible small business concerns under this section 
        and under the program established under section 8(a).
  [(F)(i) Each procurement employee or program manager 
described in clause (ii) shall communicate to the subordinates 
of the procurement employee or program manager the importance 
of achieving small business goals.
  [(ii) A procurement employee or program manager described in 
this clause is a senior procurement executive, senior program 
manager, or Director of Small and Disadvantaged Business 
Utilization of a Federal agency having contracting authority.
  [(h)(1) At the conclusion of each fiscal year, the head of 
each Federal agency shall report to the Administration on the 
extent of participation by small business concerns, small 
business concerns owned and controlled by veterans (including 
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 procurement 
contracts of such agency. Such reports shall contain 
appropriate justifications for failure to meet the goals 
established under subsection (g) of this section.
  [(2) The Administration shall annually compile and analyze 
the reports submitted by the individual agencies pursuant to 
paragraph (1) and shall submit to the President and the 
Committee on Small Business and Entrepreneurship of the Senate 
and the Committee on Small Business of the House of 
Representatives the compilation and analysis, which shall 
include the following:
          [(A) The Government-wide goals for participation by 
        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 and the 
        performance in attaining such goals.
          [(B) The goals in effect for each agency and the 
        agency's performance in attaining such goals.
          [(C) An analysis of any failure to achieve the 
        Government-wide goals or any individual agency goals 
        and the actions planned by such agency (and approved by 
        the Administration) to achieve the goals in the 
        succeeding fiscal year.
          [(D) The number and dollar value of 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 
        through--
                  [(i) noncompetitive negotiation,
                  [(ii) competition restricted to small 
                business concerns owned and controlled by 
                socially and economically disadvantaged 
                individuals,
                  [(iii) competition restricted to small 
                business concerns, qualified HUBZone small 
                business concerns, and
                  [(iv) unrestricted competitions, for each 
                agency and on a Government-wide basis.
          [(E) The number and dollar value of subcontracts 
        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.
          [(F) The number and dollar value of prime contracts 
        and subcontracts awarded to small business concerns 
        owned and controlled by women.
  [(3) The President shall include the information required by 
paragraph (2) in each annual report to the Congress on the 
state of small business prepared pursuant to section 303(a) of 
the Small Business Economic Policy Act of 1980 (15 U.S.C. 
631b(a)).]
  (g) Goals for Procurement Contracts Awarded to Small Business 
Concerns.--
          (1) Governmentwide goals.--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:
                  (A) The Governmentwide goal for participation 
                by small business concerns shall be established 
                at not less than 25 percent of the total value 
                of all prime contract awards for each fiscal 
                year and 40 percent of the total value of all 
                subcontract awards for each fiscal year.
                  (B) The Governmentwide goal for participation 
                by small business concerns owned and controlled 
                by service-disabled veterans shall be 
                established at not less than 3 percent of the 
                total value of all prime contract and at not 
                less than 3 percent of the total value of all 
                subcontract awards for each fiscal year.
                  (C) The Governmentwide goal for participation 
                by qualified HUBZone small business concerns 
                shall be established at not less than 3 percent 
                of the total value of all prime contract and at 
                not less than 3 percent of the total value of 
                all subcontract awards for each fiscal year.
                  (D) 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 at not less than 5 percent of the 
                total value of all subcontract awards for each 
                fiscal year.
                  (E) The Governmentwide 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 at not less than 5 percent of the 
                total value of all subcontract awards for each 
                fiscal year.
          (2) Agency goals.--
                  (A) Establishment.--The head of each Federal 
                agency shall annually establish, for the agency 
                that individual heads, 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.
                  (B) Relationship to governmentwide goals.--
                          (i) Scope.--The goals established by 
                        the head of a Federal agency under 
                        subparagraph (A) shall be in the same 
                        format as the goals established by the 
                        President under paragraph (1) and shall 
                        address both prime contract and 
                        subcontract awards.
                          (ii) Requirement to meet or exceed 
                        governmentwide goals.--With respect to 
                        each goal for a fiscal year established 
                        under subparagraph (A) for a category 
                        of small business concern, the 
                        participation percentage applicable to 
                        such goal may not be less than the 
                        participation percentage applicable to 
                        the Governmentwide goal for such fiscal 
                        year established under paragraph (1) 
                        for such category.
                  (C) Consultation required.--
                          (i) In general.--In establishing 
                        goals under subparagraph (A), the head 
                        of each Federal agency shall consult 
                        with the Administrator.
                          (ii) Disagreements.--If the 
                        Administrator and the head of a Federal 
                        agency fail to agree on a goal 
                        established under subparagraph (A), the 
                        disagreement shall be submitted to the 
                        Administrator for Federal Procurement 
                        Policy for final determination.
                  (D) Plan for achieving goals.--After 
                establishing goals under subparagraph (A) for a 
                fiscal year, the head of each Federal agency 
                shall develop a plan for achieving such goals, 
                which shall apportion responsibilities among 
                the employees of such agency having procurement 
                powers.
                  (E) Expanded participation.--In establishing 
                goals under subparagraph (A), the head of each 
                Federal agency shall make a consistent effort 
                to annually expand participation by small 
                business concerns from each industry category 
                in procurement contracts of such agency, 
                including participation by 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.
                  (F) Consideration.--The head of each Federal 
                agency, in attempting to attain expanded 
                participation under subparagraph (E), shall 
                consider--
                          (i) contracts awarded as the result 
                        of unrestricted competition; and
                          (ii) contracts awarded after 
                        competition restricted to eligible 
                        small business concerns under this 
                        section and under the program 
                        established under section 8(a).
                  (G) Communication regarding goals.--
                          (i) Importance of achieving goals.--
                        Each procurement employee or program 
                        manager described in clause (ii) shall 
                        communicate to the subordinates of the 
                        procurement employee or program manager 
                        the importance of achieving goals 
                        established under subparagraph (A).
                          (ii) Procurement employees or program 
                        managers described.--A procurement 
                        employee or program manager described 
                        in this clause is a senior procurement 
                        executive, senior program manager, or 
                        Director of Small and Disadvantaged 
                        Business Utilization of a Federal 
                        agency having contracting authority.
          (3) Enforcement.--If the Administrator does not issue 
        the report required in subsection (h)(2) on or before 
        the date that is 120 days after the end of the prior 
        fiscal year, the Administrator may not carry out or 
        establish any pilot program until the date on which the 
        Administrator issues the report.
          (4) Determinations of the total value of contract 
        awards.--For purposes of the goals established under 
        paragraphs (1) and (2), the total value of contract 
        awards for a fiscal year may not be determined in a 
        manner that excludes the value of a contract based on--
                  (A) where the contract is awarded;
                  (B) where the contract is performed;
                  (C) whether the contract is mandated by 
                Federal law to be performed by an entity other 
                than a small business concern;
                  (D) whether funding for the contract is made 
                available in an appropriations Act, if the 
                contract is subject to the Competition in 
                Contracting Act of 1984; or
                  (E) whether the contract is subject to the 
                Federal Acquisition Regulation.
  (h) Reporting on Goals for Procurement Contracts Awarded to 
Small Business Concerns.--
          (1) Agency reports.--At the conclusion of each fiscal 
        year, the head of each Federal agency shall submit to 
        the Administrator a report describing--
                  (A) the extent of the participation by small 
                business concerns, small business concerns 
                owned and controlled by veterans (including 
                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 the procurement contracts of such 
                agency during such fiscal year;
                  (B) whether the agency achieved the goals 
                established for the agency under subsection 
                (g)(2)(A) with respect to such fiscal year; and
                  (C) any justifications for a failure to 
                achieve such goals.
          (2) Reports by administrator.--Not later than 60 days 
        after receiving a report from each Federal agency under 
        paragraph (1) with respect to a fiscal year, the 
        Administrator shall submit to the President and 
        Congress, and to make available on a public website, a 
        report that includes--
                  (A) a copy of each report submitted to the 
                Administrator under paragraph (1);
                  (B) a determination of whether each goal 
                established by the President under subsection 
                (g)(1) for such fiscal year was achieved;
                  (C) a determination of whether each goal 
                established by the head of a Federal agency 
                under subsection (g)(2)(A) for such fiscal year 
                was achieved;
                  (D) the reasons for any failure to achieve a 
                goal established under paragraph (1) or (2)(A) 
                of subsection (g) for such fiscal year and a 
                description of actions planned by the 
                applicable agency to address such failure, 
                except that the Administrator must concur with 
                each remediation plan;
                  (E) for the Federal Government and each 
                Federal agency, an analysis of the number and 
                dollar amount of prime contracts awarded during 
                such fiscal year to--
                          (i) small business concerns--
                                  (I) in the aggregate;
                                  (II) through sole source 
                                contracts;
                                  (III) through competitions 
                                restricted to small business 
                                concerns; and
                                  (IV) through unrestricted 
                                competition;
                          (ii) small business concerns owned 
                        and controlled by service-disabled 
                        veterans--
                                  (I) in the aggregate;
                                  (II) through sole source 
                                contracts;
                                  (III) through competitions 
                                restricted to small business 
                                concerns;
                                  (IV) through competitions 
                                restricted to small business 
                                concerns owned and controlled 
                                by service-disabled veterans; 
                                and
                                  (V) through unrestricted 
                                competition;
                          (iii) qualified HUBZone small 
                        business concerns--
                                  (I) in the aggregate;
                                  (II) through sole source 
                                contracts;
                                  (III) through competitions 
                                restricted to small business 
                                concerns;
                                  (IV) through competitions 
                                restricted to qualified HUBZone 
                                small business concerns;
                                  (V) through unrestricted 
                                competition where a price 
                                evaluation preference was used; 
                                and
                                  (VI) through unrestricted 
                                competition where a price 
                                evaluation preference was not 
                                used;
                          (iv) small business concerns owned 
                        and controlled by socially and 
                        economically disadvantaged 
                        individuals--
                                  (I) in the aggregate;
                                  (II) through sole source 
                                contracts;
                                  (III) through competitions 
                                restricted to small business 
                                concerns;
                                  (IV) through competitions 
                                restricted to small business 
                                concerns owned and controlled 
                                by socially and economically 
                                disadvantaged individuals;
                                  (V) through unrestricted 
                                competition; and
                                  (VI) by reason of that 
                                concern's certification as a 
                                small business owned and 
                                controlled by socially and 
                                economically disadvantaged 
                                individuals;
                          (v) small business concerns owned by 
                        an Alaska Native Corporation--
                                  (I) in the aggregate;
                                  (II) through sole source 
                                contracts;
                                  (III) through competitions 
                                restricted to small business 
                                concerns;
                                  (IV) through competitions 
                                restricted to small business 
                                concerns owned and controlled 
                                by socially and economically 
                                disadvantaged individuals; and
                                  (V) through unrestricted 
                                competition; and
                          (vi) small business concerns owned 
                        and controlled by women--
                                  (I) in the aggregate;
                                  (II) through competitions 
                                restricted to small business 
                                concerns;
                                  (III) through competitions 
                                restricted using the authority 
                                under section 8(m)(2);
                                  (IV) through competitions 
                                restricted using the authority 
                                under section 8(m)(2) and in 
                                which the waiver authority 
                                under section 8(m)(3) was used; 
                                and
                                  (V) through unrestricted 
                                competition; and
                  (F) for the Federal Government and each 
                Federal agency, the number, dollar amount, and 
                distribution with respect to the North American 
                Industry Classification System of subcontracts 
                awarded during such fiscal year 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.

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