II 

117TH CONGRESS 

1ST SESSION S. 2402 

To establish a pilot program to incentivize employee ownership in defense 

contracting. 

IN THE SENATE OF THE UNITED STATES 

JULY 20, 2021 

Ms. WARREN (for herself and Mr. TILLIS) introduced the following bill; which 

was read twice and referred to the Committee on Armed Services 

A BILL 

To establish a pilot program to incentivize employee 

ownership in defense contracting. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. PILOT PROGRAM TO INCENTIVIZE EMPLOYEE 

4 OWNERSHIP IN DEFENSE CONTRACTING. 

5 (a) DEFINITIONS.—In this section: 

6 (1) APPROPRIATE COMMITTEES OF CON7 GRESS.—The term ‘‘appropriate committees of Con8 gress’’ means— 


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1 (A) the Committee on Armed Services and 

2 the Committee on Homeland Security and Gov3 ernmental Affairs of the Senate; and 

4 (B) the Committee on Armed Services and 

5 the Committee on Oversight and Government 

6 Reform of the House of Representatives. 

7 (2) QUALIFIED BUSINESS WHOLLY-OWNED

8 THROUGH AN ESOP.—The term ‘‘qualified businesses 

9 wholly-owned through an ESOP’’ means an S cor10 poration (as defined in section 1361(a)(1) of the In11 ternal Revenue Code of 1986) for which 100 percent 

12 of the outstanding stock is held through an employee 

13 stock ownership plan (as defined in section 

14 4975(e)(7) of the Internal Revenue Code). 

15 (b) AUTHORITY TO USE NONCOMPETITIVE PROCE16 DURES FOR FOLLOW-ON CONTRACTS TO QUALIFIED

17 BUSINESSES WHOLLY-OWNED THROUGH AN ESOP.— 

18 Notwithstanding the requirements of section 2304 of title 

19 10, United States Code, in the case of a follow-on contract 

20 for the continued development, production, or provision of 

21 products or services that are the same as or substantially 

22 similar to the products or services procured by the Depart23 ment of Defense under a prior contract held by a qualified 

24 business wholly-owned through an ESOP, such products 

25 or services may be deemed to be available only from the 


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1 holder of the prior contract and may be procured by the 

2 Department of Defense through procedures other than 

3 competitive procedures if the performance of the qualified 

4 business wholly-owned through an ESOP on the prior con5 tract was rated as satisfactory (or the equivalent) or better 

6 in the applicable past performance database. 

7 (c) VERIFICATION AND REPORTING OF QUALIFIED

8 BUSINESSES WHOLLY-OWNED THROUGH AN ESOP.— 

9 The Secretary of Defense shall prescribe such procedures 

10 as may be necessary for— 

11 (1) businesses to verify that they are qualified 

12 businesses wholly-owned through an ESOP for the 

13 purposes of subsection (b); 

14 (2) a qualified businesses wholly-owned through 

15 an ESOP to certify that not more than 25 percent 

16 of the amount paid under the contract will be ex17 pended on subcontracts, subject to such necessary 

18 and reasonable waivers as the Secretary may pre19 scribe; and 

20 (3) recording information on each use of the 

21 authority under subsection (b), including details rel22 evant to the nature of the contract and the qualified 

23 business wholly-owned through an ESOP, and pro24 viding such information to the Comptroller General 

25 of the United States. 


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1 (d) SUNSET.—The authority under subsection (b) 

2 shall expire on the date that is three years after the date 

3 of the enactment of this Act. 

4 (e) COMPTROLLER GENERAL OF THE UNITED

5 STATES REPORT.— 

6 (1) IN GENERAL.—Not later than two years 

7 after the date of the enactment of this Act, the 

8 Comptroller General of the United States shall sub9 mit to the appropriate committees of Congress a re10 port on the individual and aggregate uses of the au11 thority under subsection (b), using such data as may 

12 be available up to that time. 

13 (2) ELEMENTS.—The report under paragraph 

14 (1) shall include the following elements: 

15 (A) An assessment of the frequency and 

16 nature of the use of the authority under sub17 section (b). 

18 (B) The tendency of businesses to become 

19 qualified businesses wholly-owned through an 

20 ESOP in order to qualify for the authority 

21 under subsection (b). 

22 (C) Acquisition authorities that could 

23 incentivize businesses to become qualified busi24 nesses wholly-owned through an ESOP, includVerDate Sep 11 2014 01:24 Jul 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2402.IS S2402

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1 ing the extension of the authority under sub2 section (b). 

3 (D) Any related matters the Comptroller 

4 General considers appropriate. 

Æ 


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